Department of Agriculture, Forestry and Fisheries; Marine Living Resources Fund: hearings

Meeting report

DAFF annual report and financial statements

Discussion

Ms N Khunou (ANC) said the Framework for Managing Program Performance Information (FMPPI) required entities to have proven systems to collect, collate and store performance information. This had not been the case, and the root cause was a lack of monitoring against source documents. Why was the Department having this problem?

Prof Edith Vries, Director General, DAFF, acknowledged the limitations in non-financial performance information in program three. The issues of concern pertained to support to farmers. Implementation was done via the provinces and there had been lapses in the way the implementation had been managed. It was now managed on a monthly, rather than on a quarterly basis, as had been done before.

The Chairperson asked why systems were not in place already.

Prof Vries said part of the problem was that the Department had had an agreement with the provinces on how the provinces would report, namely 45 days after the end of the quarter. Evidence had been received from the provinces, but this had not correlated with what was required, as per the strategic plan of the Department. She gave as an example that the co-ordinates of project locations were required, and that only 60% of these had been received.

Ms Khunou asked if working via the provinces was not working. How was the provincial implementation being monitored?

Prof Vries replied that there was a monitoring mechanism. A National Transfer Officer, with a team of officials, did the verification. The provinces had a business plan and the provinces had agreed to the indicators and evidence, but the Department still struggled to receive the evidence from the provinces.

Ms Khunou asked if a lack of capacity in the Department was resulting in non-verification and the absence of oversight over projects.

Prof Vries said a team of 25 officials had been introduced to do verification. In the past the Department had relied on the provinces to provide the information.

Ms Khunou said that the programme had amounted to R2.2bn, but there had not been control mechanisms. The matter needed to be checked with the relevant Deputy Director Generals (DDGs).

Mr Xaba Matoba, Director: Monitoring Services, DAFF, said that the Department did have a system, but that it was weak. In the past, the provinces had come together to report back on a quarterly basis. The Department had an official whose responsibility it was to follow up. The only flaw was that the officer reported to the provinces.

The Chairperson said that the Department’s systems had not withstood the test of the Auditor General of South Africa (AGSA).

Mr Senzeni Zokwana, Minister, DAFF, promised that the Department would have its own meeting on the performance of people who were deployed to do the monitoring, so that every cent could be accounted for. He then left to attend another meeting.

Mr Bheki Cele, Deputy Minister, DAFF, said the Department had had meetings to ensure that the issues raised did not happen again. The Department of Performance, Monitoring and Evaluation had said the programme was not giving the results that were expected from it. The Department would be requesting that the funds be moved from schedule 4 funds to schedule 6 funds, as he had heard that some provinces were even paying salaries from these funds. He knew there were weaknesses, but that they were working towards strengthening the system.

Ms Khunou said she was concerned about salaries having been paid from these funds and that worse misuse might be found, and therefore it was important to have systems in place. She asked what happened to people who misused funds or spent them in a non-compliant way.

Prof Vries said that in October 2013, when she had started, there had been quarterly performance meetings, but that monitoring had not been strong and the DDGs were not accountable. Now, however they were held accountable to verify the information that was provided. In addition a company had been appointed to assist with the verification and the Department had taken disciplinary steps against people who had been held accountable.

Ms Khunou then turned to program 5 of the Department, dealing with forestry. She said that 33% of the objectives and 20% of the targets had been found to be not specific, nor measurable, nor verifiable. She said the root causes here were misstatements.

Prof Vries said the root cause lay in planning, of which she had found there had been a lack when taking up her post. The forestry branch had received a disclaimer for the information they had provided. A lot of the problems were inherited ones, stemming from the integration of the Departments of Agriculture, Forests and Fisheries and the existing cultures in the Department of Agriculture .

Ms Khunou said the Department had presented a strategic plan in which only the year date of the plan had changed from a previous version, and the strategic plan and the Annual Performance Plan (APP) were not integrated.

Mr T Brauteseth (DA) said that when one looked at the Auditor General’s (AG’s) report, the Department had spent 100% of the budget but had achieved only 60% of the pre-determined objectives because of a lack of internal controls. What had been done to sort out the controls and the audit committees? In 2007, this same Department had appeared before the Committee and given an undertaking, but the problem of internal controls still existed.

Prof Vries said that when she was appointed, she had found that there were no audit or risk committees and the first thing she had put in place was an audit committee. It was working in the risk area, where there were serious problems. She was confident that for the current financial year, there would not be repeat findings.

Mr Brauteseth asked if the audit committee that had been put in place could explain where R630m of heavy machinery, given to the provinces in 2013, was. The AG had given adverse findings for the second and third quarters, and things were not improving. How many disciplinary hearings for irregular expenses had taken place?

Prof Vries said tractors purchased for provinces had been handed over as assets to the provinces, but the provinces were not prescribed as to how they had to deploy these tractors. Approximately 72 tractors per province had been allocated, but many were in a state of disrepair. The Department had put in place a framework policy on how the tractors were to be used. This matter was not on the audit committee’s radar. She said 80% of irregular expenses were valid transactions, but had not been below the R30 000 classification threshold.

The Chairperson asked for the Department to send a copy of the condoned transactions to the Committee.

Prof Vries said only three cases still had to be finalised.

Mr Brauteseth said he was uncomfortable with the donations given to provinces, as there had to be control, especially in the light of food security and agrarian reform. Were any disciplinary hearings being held against officials regarding the tractors?

Prof Vries said the tractors were funded as schedule 4 grants, and this was seen as an addition to the equitable grants. The Department did do planning on how the tractors were to be utilised and they did have evidence of the tractors being purchased. The Department did not know about the distribution of the tractors, but provinces had said that the arrangements regarding the tractors would be changed.

Mr Brauteseth felt the DG was being economical with the truth. The budget might have been spent, but the objectives had not been achieved.

Regarding the irregular payments, he asked if any payments had been made to a company called BAWSI (Black Association of the Wine and Spirits Industry), owned by a Mr Pieterse .

Prof Vries said BAWSI was not on the list of irregular payments, although the Department had had a contract with it.

Mr M Booi (ANC) said that all the explanations had been given, but the Department was not saying which laws they were using when dealing with provinces, and the Department did not have systems in place. The AG had said the Department was not using the law, and this was a serious problem. He asked what the total amount staff owed the Department was.

Mr R Lees (DA) asked why there had been no audit committee in place in the past, and who had been responsible. Why was the internal audit not functional and what had happened to the person who was responsible?

Mr E Kekana (ANC) asked what guided the Department if the strategic plan and the APP were not integrated.

Prof Vries apologised for not giving the legislative context in her responses, but she was fully cognisant of the responsibilities of the accounting officer with regard to the PFMA. The Department adhered to the division of revenue when managing conditional grants and the AG’s finding of non-compliance for one of the funds was because it was not doing monthly reporting. As for the rest, the Public Finance Management Act (PFMA) was their bible.

Regarding why there was no audit committee, she said the term of the Audit Committee had ended in July 2014 and the acting DG had not wanted to institute an audit committee, given that the DG would be appointed, and so no disciplinary action had been taken. The internal auditor had been on extended leave due to cancer, and disciplinary action had been taken against that person, as the internal auditor had not worked through the DG. The DG had realised that this was a huge problem and had approached the Treasury, who had seconded officials to the Department. Regarding financial controls, she felt that the financial management was stronger than the non-financial management.

She said there had been no new staff debt in 2013/14. Dishonoured checks were from clients who had insufficient funds, and the Department was following up to get the funds and this had been declared in the financial year.

Regarding the strategic plans, she said that despite the weakness of the APP, she had introduced report-backs by the DDGs.

Mr Kekana said his question had not been answered. What was being done on a daily basis by the Department, because the Department had to report to Parliament according to its strategic plan?

Ms T Chiloane (ANC) asked how disciplined the team monitoring the provinces were. How were the team dispersed to provinces? Were they dispersed as a unit, or were they spread across the provinces? What was the Department doing regarding the credibility of its information?

Ms A Steyn (DA) said the Department had had seven DGs in five years. The Annual Report did not provide specifics, but she had been part of a group who were supposed to visit a project, only to find that a different project was at the location, which the Department had not known about. The Department needed to provide details to the Agricultural Portfolio Committee so that the Committee could assist with oversight.

Prof Vries said there would not be inconsistencies for the current year regarding the strategic plan and the APP. She could not take responsibility for the Annual Report that had been tabled before her time. There would not be repeat findings on inconsistencies between the Strategic Plan and the APP for the Annual Report for this current year.

She said the monitors were spread among the provinces, but Limpopo , the Eastern Cape and KwaZulu-Natal had more because there were more projects in these provinces.

Regarding what would be done about the credibility of information provided to the AG, she said more detail would be provided. In previous years, money had been given to the provinces which had been spent, but now the Department wanted to know on what it had been spent. It wanted details, like what had been planted and where it had been planted. The Minister had directed that schedule 4 grants be changed to schedule 6 or 7 grants, for greater control over the money. For this year, provinces had to provide more detailed information and the Department wanted a location’s co-ordinates and valid ID numbers before signing off on money transfers.

Regarding tractors having been lost, Ms Khunou said that her constituents had said they could be found in Lesotho. Why was a tracking system not installed on the tractors?

Mr Booi wanted details of the agreements with the provinces to be given to the Committee. He asked how many consultants and other outside agencies were being paid.

Mr Lees wanted to know why there had not been a disciplinary hearing against the acting DG for not having an audit committee. The tractors had been handed out without a business plan. The DG had mentioned irregular expenditure being amounts under R30 000, but the AG had talked of irregular expenditure for amounts under R500 000.

Ms Khunou said the AG had said that management had not designed adequate information technology (IT) security management controls, and that this matter was not part of the budget allocation.

Prof Vries said the tractors had been allocated to the provinces in a particular way and that therefore the Department could not account as it was required to. The Department had developed a mechanization policy which would be concluded early in the new financial year. It had also been agreed to fit trackers, to know where these vehicles were at all times. An audit was also being done on all tractors. She would provide the Committee with a copy of the agreement the Department had entered into with provinces regarding the allocation of the tractors

Regarding the use of consultants, she said she had a breakdown of all the consultants used in the financial year. The officials had to do their work, but because of the nature of the Department’s work, it had had to source outside support -- for example, the auditing of a fishing rights allocation process or environmental impact assessments (EIAs), where R21m out of a total of R128m had been spent. Staff debt of R148 000 was written off because staff had died.

In 2013/14 no action had been taken against the DDGs, as she had focused on putting things in place and she did not think that she should take disciplinary action, because the DDG had not appointed an audit committee because a new DG was coming in.

An evaluation of the Comprehensive Agricultural Support Programme (CASP) had been done, and it was not as effective as it should be. There was an evaluation report and a plan on what to do regarding irregular expenditure, which totaled 20 cases. This information would be provided to the Committee. The AG had drawn their attention to serial offenders, and the Department had taken action.

On the IT security policy, she said the Department had developed standard operating procedures and updated its IT security policy, but this was still an area of weakness, as only 12% of its operations were automated.

Mr Ayanda Wakaba, Chairperson of the DAFF audit committee, said the audit committee had been in place for three months in 2013/14 doing planning, controls, monitoring and oversight. The previous year it had focused on monitoring and oversight, as this would identify shortcomings in planning and controls, and he felt that things should improve.

Mr Booi said that the audit committee should not overstep and try to run the Department.

Mr Bothwell Deka, Director: Economic Services, National Treasury, said that if one looked at CASP from the viewpoint of the Treasury, it was meant to support beneficiaries.

The Chairperson said he had heard that the Department had a team of 25 officials verifying the information given by the provinces, yet he had also heard now that an outside company had been appointed to verify projects.

Mr Cele said there were more questions than answers. The SONA had put a lot of pressure on the Department. The DGs of the Departments of Agriculture and Rural Development were working together. The failure of CASP was through not following up on people who needed assistance. Land had been given by the Department of Rural Development and Land Reform (DRDLR), but the provision of skills was the responsibility of the Department of Agriculture. The Minister and his deputy had pushed for activist leadership, and wanted the opportunity to command and control the CASP money. The tractor issue was a bad one, and he himself had visited sites and had seen tractors unused and overgrown by grass.

Regarding leadership stability, he said this was a problem across the board, as witnessed by the recent change in the Eskom executives.

Marine Living Resources Fund (MLRF)

Discussion

Mr M Hlengwe (IFP) said that Operation Phakisa was centre stage yet there was an under-spending in research of R139m, which was 56% of its budget. Was the entity in a position to play its role?

Prof Vries said that since 2010, there had been eight DDGs. In 2010 fisheries had spent only R25m, with the rest of the spending deferred. Each year there had been an accumulation of deferred spending so that by 2013/14, deferred funds totaled R78m while the budget was R71m, giving a total of R149m, of which R89m had been spent. The reasons for the under-expenditure were management issues, like the supply chain processes taking longer to complete.

Mr Hlengwe said it could not be that if there were no DG, the Department ground to a halt, targets were not met, money was not spent, or was spent irregularly.

Prof Vries said the Working for Water funds were earmarked funds and money transfers were late, so each year they had more money than they had the capacity to execute. Management was delegated and the fisheries department, for example, was located in Cape Town. In addition, some projects were multi-year agreements, so those monies would roll over.

Mr Hlengwe moved on to the procurement and contract management of vessels. The AG had said that deviations had not been approved by the accounting officer. Why had there been deviations?

Prof Vries said the Department had entered into an agreement with the Navy to assist with vessel management. Subsequent to the contract being signed, the Navy had had difficulty in meeting the conditions of the agreement resulting in the fleet not being at sea, because the Navy was not rendering proper maintenance services. In 2012, the Department had advertised for a civilian service provider.

The Chairperson said that he could not understand how a Memorandum of Understanding (MOU) could be entered into, but that the Navy could not provide the service.

Mr Hlengwe said a submission had been made to the executive authority. What was this submission, and was this submission in contravention of regulations?

Prof Vries said it was a formal request to tender on vessels. The request had not been approved. The DG at the time had then approved an emergency deviation to do repairs on the fleet for a period of six months.

Mr Hlengwe said an official with a conflict of interest had participated in these contracts. He would have expected therefore that an investigation into the matter had been instigated.

Prof Vries said there was a conflict of interests that had not been declared, and an official and a DDG had left the Department before disciplinary action could be taken. The tender had been cancelled was not continued, so no work had been done and no money was involved. She said the deviation was not with regard to the tender, but to the procurement of services, and the official had not declared his interest in one of those companies..

Mr Cele said more clarity needed to be given by the DG regarding the emergency tender.

Prof Vries said the conflict of interest had been discovered afterwards, so the official had left and the contract had been followed up by the Hawks. The company had rendered services and had been paid and the contract had been terminated in October 2014.

Mr Hlengwe wanted a written report of what had occurred, as he could not see why the contract had been renewed.

Prof Vries said the contract had overlapped the vessel tender.

Mr Hlengwe said the AGSA had made a number of findings with regard to information communication technology (ICT), which were repeat findings that a recovery plan had not been tested. Could the Department give an explanation?

Mr Cele said the ICT executive was with the rest of the Department at a portfolio committee meeting which had insisted that the meeting be set for Tuesday, so the Department had had to split its staff attendance.

Prof Vries said some of the funding for the Marine Living Resources Fund (MLRF) resources came from DAFF, and ICT was one of them, but there had not been adequate controls prioritised by DAFF.

Mr Hlengwe said it was not acceptable that the findings should be taken so lightly that they became repeat findings.

Prof Vries said the APP for the current year had set a target to reduce the root causes of findings by 60% . The change management policy had been approved in October the previous year.

Mr Hlengwe said there were four further ICT issues, like the root causes being the infrequent review of the operating system and database systems because of resource constraints.

Prof Vries said that the Department would always have to deal with the constraints of the budget. In the previous year, a master ICT budget plan had been approved, which was quite costly. While ICT was centralised, there were unique features for the provision of ICT in the fisheries department.

Mr Hlengwe said all was not well with the entity because there were repeated findings all the time with no consequences to the officials involved. Punishment had to meted out.

Mr Booi asked for clarity on the issue of donor funds and on the matter regarding conflict of interest.

With regard to the investigations, Prof Vries said that when the Department became aware of the irregularities like the conflict of interest, it had referred the matters to the Hawks for investigation such as the Smith Amandla Marine expenditure, the allegations made regarding the conduct of officials and the audit of the Fishing Rights Allocation Process (FRAP) process, and allegations community members had made of irregular requests for money in return for fishing rights.

Regarding the Public Protector’s report, she said it was received on 5 December 2013 and two recommendations pertained to the DG. These were to correct the management limitations on vessel procurement processes and to take disciplinary action against the official who had compromised the FRAP process. This had been done. It had sought the support and advice from the chief procurement officer in the Treasury. The Department had been required to provide the Public Protector with an implementation plan. Both of these would be provided to the Committee.

Mr Booi said he was speaking about the current liabilities.

Prof Vries said donor funds had been received for multi year research, so they had remained on the books for a number of years .

Regarding contingencies, the Department had stated in the Annual Financial Statements about litigation under way that had not been concluded.

Regarding working for fisheries, R189m contracts were available for the committed funds.

Regarding fruitless and wasteful expenditure, two officials had made fraudulent payments and disciplinary action had been taken against them. They had since left and criminal cases had been entered. They had plea bargained and agreed to pay back the money. The matter would be resolved once all the monies were paid back.

Mr Booi said Operation Phakisa would bring about a turnaround. The Department could not say that the President was misleading the country, so somebody had to be held accountable.

Ms Khunou said the fraud funds amounted to R224 000, of which only R39 000 had been paid back by the two employees, and it would take a long time to recover the money. How did she think the remainder was to be paid?

Mr Lees said the AG had said the deviation could not be justified as an emergency, and thus was irregular. He requested copies of the three cases.

Prof Vries said she disagreed that the Department was unable to spend the research funds, as they had to be spent across a number of years. The Department was excited about Phakisa and the Department’s role was in aquaculture and compliance enforcement. She maintained that the instability in the Department had had an effect on its culture which could take a long time to correct. There had been a disciplinary matter, where a person had brokered a deal with a contractor. The Department did not have the capacity to do lifestyle audits on its employees.

Regarding FRAP 13 and 14, Mr Brauteseth said that there had been significant concern about application fees that had gone missing. He said every year the Department held a abalone auction. Why were there abalone auctions? Why had the auctions been closed? Who were invited? What vetting was done? What happened to the funds that accrued and why were they sold so cheaply when the market value was so high?

Prof Vries said there were no application fees charged for the FRAP 13 process. The fees for 2015/16 would be determined by the Minister in consultation with the Minister of Finance. and be gazetted.

Regarding the abalone auction, she said buyers had to have a fish processing establishment permit to participate. The first bids were closed but after that, if all the goods were not sold, then the process became competitive. Accrued sales funds went to the MLRF. The reserve prices were set in US dollars. The evidence was that the confiscated abalone had been procured illegally by poachers.

Ms Khunou asked where in the financial statements the total confiscated fish products were.

The Chairperson said the year to year figures for confiscated products had dropped from R80m to R6m. Either the Department’s enforcement was good, or the poachers methods of evasion had improved.

Prof Vries said one of the possible reasons for the decline was because abalone stocks were higher and the prices were lower. The stock levels were under threat.

Ms Khunou asked why poaching was still a problem. In the past, cameras had been used to monitor poaching activity.

Mr Kekana asked if the Department had a plan to deal with the poaching.

Prof Vries said it was not just a criminal problem, but also a socio-economic problem. There was an integrated fisheries management plan. The matter was complex, and the Department could not address it on its own.

The Chairperson asked why the abalone reserve pricing at the auction was not competitive.

Mr Cele said there had been a special abalone unit which had worked very closely with Interpol. He said the question was more for the police than for the Fisheries Department. The MLRF was part of DAFF but was also an entity, and its position needed to be clarified so that it could be treated accordingly. Currently it was unclear and operated like a self-governing entity, with MLRF management even refusing to go to the DAFF offices in Pretoria. The MLRF had its own financial manager and their own communications liaison officer. This was an area that needed to be fixed.

He said Operation Phakisa demanded that the budget increase from R54bn in 2010, to R177bn in 2033. This was a huge movement, and DAFF would play a huge and central role. On the matter of skills requirements, he said the aquaculture industry would need one fish doctor for every 50 tons produced, and currently South Africa had one doctor in the whole country. The President wanted change, but the Department did not have the infrastructure. Coastal marine fishing was a big social issue and it could not be right that five big companies owned rights while whole communities could not access the right to fish. People along the coast must be allowed to get food, and the government must assist.

The Chairperson said the Committee should be given the details about where MLRF would be positioned and managed.

The meeting was adjourned.