DST, NACI, CSIR, TIA, NRF 2016/17 Annual Report

Meeting report

The Chairperson said that there had been a meeting with the Auditor General (AG) yesterday at which some issues around the audit outcomes of the Department had been raised. She had then met with the Committee and said that the Annual Report had to address the issues raised by the AG. The Committee had made a commitment to intensify their oversight role and had also written a letter to the Speaker in relation to the nature of this Department and the differences to other departments; hence its oversight would differ accordingly.

Department of Science and Technology (DST): Annual Report 2016/17

Dr Phil Mjwara, Director-General (DG): DST, said that the Auditor General (AG) had given the Department a clean financial audit, with a few outstanding issues on supply chain management (SCM). A significant improvement had been acknowledged in the way that supply chain issues were managed, especially with regard to irregular expenditure, where sometimes goods and services were procured and the tender processes were not followed.

Key achievement areas were:

Programme 1: Administration

• An a minimum of 90% alignment of DST planning documents for 2017/18 submitted to Parliament by 31 March 2017; and
• 90% alignment in DST strategic priorities and entities’ annual performance plans (APPs) by 31 March 2017.

Programme 2: Technology Innovation

• 12 evaluation and assessment reports developed and approved by the Executive Committee (Exco) by 31 March 2017; and
• Five technology developments and innovation policy directives developed and adopted by government by 31 March 2017.

Programme 3: International Cooperation and Resources

• R400 million in international funds directly invested in research innovation and Science Technology and Innovation (STI) Human Capital Development (HCD) programmes, as well as research.

Programme 4: Research Development and Support

• 3 136 PhD students awarded bursaries through the National Research Foundation (NRF) and DST-managed programmes as reflected in the NRF and DST project reports; and
• One (first biennial) report on the state of climate change in South Africa finalised and submitted for Cabinet approval.

Programme 5: Socio-Economic Innovation Partnership

• Nine learning interventions (seminars) generated by 31 March 2017; and
• 290 masters and doctoral students fully funded or co-funded in designated niche areas.

Two examples of unachieved targets and partially achieved targets were the 90 days to fill vacancies after the date of advertisements, and pre-approval decisions being provided within 120 days of late receipt of application for the research and development (R&D) tax incentive. The variance classification for both of these targets was ‘process delays.’

The DG said that sustainable growth in South Africa would require a transformed and fully utilised human capital base, and to help meet this goal, the Department had supported a total of 13 722 (5 938 male and 7 784 female) postgraduate students.

Discussion

Mr C Mathale (ANC) said that it was good that the DG had clarified some of the issues that the AG had raised, as the Committee was satisfied with the general leadership in the Department. He was pleased that senior management had signed letters which committed them to better management of matters like data storage and management. He asked for clarity about the issue of bitcoins.

Dr A Lotriet (DA) said that the question about bitcoins had sparked off her interest in blockchain technology, as this was very much part of the fourth industrial revolution. She asked if the Department was looking at anything in this direction.

Mr Imraam Patel, Deputy Director General: Strategic Infrastructure Projects (SIP), DST, replied that the bitcoin was an issue that all government departments had to grapple with, specifically its impact on technology. Banking regulators were looking at bitcoin technology and trying to make sense of it. The biggest miners of bitcoins were the Chinese. They were able to do this because they had large data processing centres and cheap electricity. Whether South Africa had spare resources or capacity to mine in the public space was questionable. There were some policy decisions that had to be taken with regard to bitcoins, because it replaced central banks. More interesting was the area of blockchain technology, where some people were looking at it in terms of managing citizenship. In respect of commercialisation, the Department would work with institutions to build capacity to look at how this technology could be used. In other instances, it was more at the proof of concept stage. The Department was in discussions about how to get involved with blockchain opportunities. All these matters were linked into a fourth industrial revolution process. In government, there was a process where three departments had been asked to look at what this meant in terms of regulations, opportunities and challenges. This work was being led by the Department of Telecommunications and Postal Services (DTPS), and was being done by the Department of Trade and Industry (DTI) and the DST at this stage.

The DST was focussing on trying to understand the research development innovation space in relation to the fourth industrial revolution. The next key stage was that the DST was planning to have a workshop with the National System of Innovation (NSI) to get a feel for what the different-type initiatives surrounding the fourth Industrial revolution were. This was a DG consultation meeting planned for 19 October to look at whether there was a need to begin to create a more coherent framework, because at the moment most efforts were seen as sub-optimal rather than optimal.    

Ms C King (DA) said that in the discussion with the AG yesterday, concern had been shown with regard to the information technology (IT) systems of the Department. She asked if this had been sorted out.

The DG replied that a steering committee had been put in place to look at all the problems on the governance side, and to ensure that if anything went wrong there were sites outside the DST where data could be stored. There would also be testing of remote sites, and it was agreed that twice a year there would be an internal audit, with an external company switching off the main server in the Department so it was not even aware that ‘power’ was coming from back data. The Department had just bought software which dealt with people who no longer worked in the Department but who were still ‘connected’; and had a firewall to track attempted intrusions.

Ms King said the AG was also concerned about the slow response from management to address the AG’s findings.

The DG replied that the DDGs had to sign letters of commitment that this year would not have the same problems as last year. Letters had been signed by Chief Directors responsible for contracts to make sure that the data was there and was tracked. The slow response was sometimes because people did not know where the information was. The Department was now putting together a proper filing and tracking system to make sure that when the auditors needed the information, it was known where the information could be found.

Ms King said she was pleased that irregular expenditure had decreased. She expressed concern that the DST had still not commercialised certain products. She asked if consideration had perhaps been given to having a one-stop shop which dealt with all these matters.

The DG said that a sovereign innovation fund had been set up which was supposed to be administered by the DST, the Economic Development Department (EDD) and the Department of Small Business Development (DSBD), with the understanding that there were institutions that were already overseen by the EDD and the Industrial Development Corporation (IDC) that were well positioned to take some of the ideas into the commercial space.

Ms King asked when the Committee would see the biennial report on climate change in South Africa which had been submitted to Cabinet.

The DG said that the biennial report had been approved by Cabinet and the Department was working on finding a slot when it could meet with the Committee about it.

Ms King referred to the commencement of the Business Innovation Survey fieldwork being postponed, and asked when this would be sorted out.

Mr Patel replied that this had been addressed. The reason for the delay was that there were a lot of changes happening in this space globally as well, in the methodology, the R & D survey and the Business Innovation Survey. A month ago, the DST had gone public about this, declaring that it had launched the Business Innovation Survey, so it was now in field and had been sent to businesses. The next phase was getting the survey results back and analysing them.

Mr N Koornhof (ANC) asked if targets were achieved with the Master’s and Doctorates students, saying that it should be recognised that all those with doctorates could not end up in the academic world. Were there plans in place to ensure that they were somehow integrated into society so everyone with a PhD was aware that they would not end up as a professor in an institution?

Dr Mjwara replied that the Minister had asked the Department to think about the institutional landscape in this regard -- for example, were they equipped to absorb the number of masters and doctoral graduates. There was also uncertainty as to how many doctoral candidates were absorbed by the private sector. The Department was working with a service provider to work with the National Research Fund (NRF) to track where the PhD graduates were to get a sense of where they were being absorbed and the fields in which most of the PhD graduates were absorbed.

Mr Patel said that some of this had to be looked at sector by sector and topic by topic to grow some programmes like the DG had said, and this was what the DST was trying to do. Where there was a surplus and good capabilities, research programmes would have to be created to absorb the students like in data sciences, for example, where a shortage of 25 000 PhD candidates existed.

Mr Koornhof asked if the DST had any projects with Poland, which was one of the fastest growing economies in Europe.

Dr Lisa du Toit, Director: Development Partnerships, said that the DST had a long-standing relationship with Poland, especially in engagements through the European Union (EU). Poland was not a formal partner of the Square Kilometer Array (SKA), but they would certainly be welcomed, given their economic role.

Mr N Paulsen (EFF) said asked about the reference to the University of Stellenbosch being in need of funding for potential commercial partners.

The DG replied that the Department would like to work with the University of Stellenbosch to try to ensure that funding would be made available for the Heliolab.

Mr Paulsen said he would like to know more about gender and race in the Department, regardless of how impressive the figures were.

The DG said that this information would be forwarded to the Committee in writing. The Minister had developed guidelines around the funding for postgraduate students that would help in achieving the racial and gender balance.

Dr Daniel Adams, Chief Director: Emerging Research Areas and Infrastructure (ERAI) said that at a high level it was a bit difficult to break down the numbers for this particular year, but the ministerial guideline had been set as 80% blacks and 60% women should be supported. The numbers at the moment were estimated for honours at 59%, master’s at 52% and doctoral at 45%. The analysis had shown that the Department was fairly successful in reaching those numbers.

The Chairperson said that it might not be easy to provide those numbers now, so they could be sent to the Secretary for distribution to Members.

Mr Paulsen asked how the Department had progressed so far in terms of measuring impact.

The DG said that the Department did not have a mechanism for this, as it was doing it through case studies at the moment. The Committee had requested a presentation on the Green Economy, and climate change would be included in that briefing. This briefing was scheduled to take place in two weeks’ time.

Ms King referred to the irregular expenditure of R176 000, and asked what consequence management procedures had been put in place for the people who had actually incurred the expense.

The DG replied that the R150 000 had been for a service provider who was blacklisted by the National Treasury. There was no way the Department could have known about this, because at the time it did not have a central database. The second amount had been R26 000, where the service provider had declared incorrect information. Although both these instances were not the Department’s fault, it was looking at ways of checking information beforehand.

The Chairperson thanked the DST for their briefing and their attempts at consequence management.

National Advisory Committee on Innovation’s (NACI): Annual Report 2016/17

Professor Cheryl de la Rey, Chairperson: NACI, said that NACI was a unique entity in the national science innovation system. She started by inviting the Committee to an event that the NACI was hosting: The Global Forum of Science Councils. The organisation was very privileged to have won the bid to host the event.

Dr Mlungisi Cele, Acting Chief Executive Officer: NACI, said that a fully developed and functional STI data and information portal would play a critical role in enhancing the monitoring, evaluation and learning capability of the National System of Innovation (NSI). The first phase of developing the STI data and information portal had been completed (www.naci.org.za/nstiip).

Examples of targets achieved as performance against the NACI’s 2016/17 APP were:
Three STI advices submitted to Minister of Science and Technology;
One state of STI report finalised;
2 NSI monitoring and evaluation (M&E) reports finalised; and
Communication plan implemented.

A high-level framework for an STI decadal plan, planned for submission to the Minister of Science and Technology by 30 November 2016, had not been achieved.

NACI’s participation in local events and strategic engagements:

• NACI-DST business symposium on STI investment on 2 June 2016;
• The Minister’s meeting with the chairpersons and chief executive officers of public entities on 21 October 2016; and
• Stakeholder consultation on the National Science Technology and Innovation Information Portal (NSTIIP).

NACI’s participation in international events:
The Organisation of Economic Corporation and Development’s (OECD’s) Working Party of National Experts on Science, Technology and Innovation Indicators (NESTII) in Paris, 16-18 March 2016; and
The Malaysia Joint Committee of South Africa and Malaysia STI Collaboration in Malaysia, 14-16 November 2016.

The NACI’s allocated budget for 2016/17 was R18.8 million, which included compensation of employees. The expenditure on goods and services from the annual budget was R8.2 million, of which NACI had expended R5.7 million, resulting in an under-expenditure of R2.4 million.

Discussion

Ms King (DA) said that she was pleased to hear that the NACI was very active in promoting science and mathematics. She asked if the NACI had been consulted when the Minister of Basic Education was considering lowering the pass rate for mathematics, because this would discourage some school leavers from entering tertiary institutions.

Prof De la Rey replied that the foundation for innovation was not strong, and there had been a number of initiatives over the past 20 or so years to address this. There had been discussions in NACI about this and the time had come to adopt an evidence-based approach. Based on the evidence, it was not necessarily based on maths and science per se, but on investment in early childhood development. This was critical, because it was known from research on brain or cognitive development that the years up to four were critical for later development. It was also known that language development was critical to maths and science, because it affected speed and comprehension in the learning process. The NACI would discuss with the DG and the Minister about whether it could assist in looking at the entire landscape for maths and science development. There was no single answer in the country at this point, as a comprehensive evidence-based view had to be adopted. The NACI was willing to look into that and had noted it.

Dr Cele said that the NACI was not consulted about the move to lower the pass rate. There was a possibility that the DST had been consulted about this.

Mr Koornhof asked for more information on the slide headed ‘Selected Highlights - government support for capital venture fund’, and asked if there was a capital venture fund. If such a fund was in progress, was the NACI the correct organisation to run it, or should the Technology Innovation Agency (TIA) run it?

Dr Cele replied that the NACI was not in a position to run the capital venture fund. It could, however, advise on the best possible interventions the country may need to implement it. In this case, it had provided advice to government on how it could provide support in the form of a venture capital fund. A formal response was still awaited from the Minister. This matter had to remain confidential until the Minister gave the go-ahead to release the results. There had been a positive attitude towards the creation of the fund, and the TIA or any other institution might be approached to implement it.

Mr Koornhof referred to the payment for financial assets, where there were expenses and an allocated budget which had not been used. He asked what it was budgeted for.

Mr Andries Shila, Director: Budget, DST, said that this issue had been already been explained regarding the delays in foresight which had been responsible. The portal had been developed internally, to forego the use of consultants. On the compensation matter, the understanding was that for the whole Department, R200 000 would be adequate. The budget cuts did not affect all the programmes or units equally. With regard to the financial assets, some of the assets had to be written off.

Ms A Tuck (ANC) said that she had recently heard that the NACI had an Acting chief financial officer (CFO), and asked for how long this position had been held.

Prof De la Rey said the Acting CEO was actually a DST staff member. When the Minister appointed Council, there had been someone in the acting position – not Dr Cele at that time, but someone else – and the NACI had conducted a process of recruitment which was unsuccessful in the first round in finding a suitable candidate. The process was started again and in the second round a suitable candidate had been identified. This recommendation was now with Cabinet in the hope that it would be approved very shortly.

Mr Paulsen said that at a recent innovation conference, he had noted that all innovation took place in formal environments. He asked how it could be communicated that innovation could take place in informal environments, and what role NACI could play in that situation. He asked about the composition of NACI, and if it was in touch with grassroots innovation.

Prof De la Rey said that the composition of NACI was shaped by the applicable Act, as had been pointed out, but some of them were ex-officio members. The members here today were based on availability, and all members had been invited. This was quite a diverse group in terms of portfolio, race ethnicity and gender. But the composition was also influenced by who occupied certain positions in the NSI, such as CEOs of national research performing institutions, such as the Council for Scientific and Industrial Researchj (CSIR) and the Human Sciences Research Council (HSRC), for example. So whoever was the CEO at that time was likely to be a member of NACI. There was diversity in this country, and people’s surnames should not be mistaken for who they were.

Prof De la Rey said that the NACI endeavoured in all the work that it did to look at grassroots innovation. It had even provided advice to the Minister on looking at how people who were outside of large formal organisations could access innovation capacity as it existed in formal incubators across the National System of Innovations. Youth entrepreneurship was an area that NACI had provided advice on. There was not a particular concern about youth innovation at this time, given that Statistics South Africa had reported that there were four million young people who were neither employed nor had any formal education. As her colleague had said, the NACI had provided advice on venture capital and received formal feedback from the Minister on the issue. So this was an area that the NACI was particular concerned about, because it focussed on innovation not for innovation’s sake, but as a means to address inequality.

Ms Jennifer Thompson, NACI Council member, commented on grassroots innovation, saying that she chaired a group on the best use of biomathematics. A lot of this came from the grassroots, and was very innovative.

Mr Sullivan O’ Carroll, NACI Council member, said that at a previous meeting, one of the discussion points was that as NACI or DST, it was one entity in South Africa which had not focussed enough attention on the training of teachers.

Mr Paulsen asked how one could reach out to those innovating in informal settlements.

Prof De la Rey said NACI’s approach was social innovation as a means to redress and address inequality in South Africa. This was really the overarching objective of NACI – not innovation for innovation’s sake, but innovation as a means to produce the national outcomes desired, which was to close the huge inequality gap currently experienced.

The Chairperson said the composition of the Council in the presentation had shown Professor Eberhard from 2014 to 2016; Advocate Lisa Zondo had resigned in 2016; Dr Sibisi had resigned 2016; and Ms N. Nyembezi-Heita from 2014 to 2016. She asked why these people were still listed as Council members if they had resigned.

Prof De la Rey said it reflected the composition on the particular day when the reporting cycle ended, and since then there had been changes. Some of the changes referred to the ex-officio position of the person. So when Dr Sibisi, for example, ended his term of office at the HSRC, his tenure as a NACI councillor also came to an end. Next year the new CEO of the HSRC would be reflected as a member of NACI.

The NACI was thanked for their contribution.

Council for Scientific and Industrial Research (CSIR): Annual Report 2016/17

Mr Thulani Dlamini, CEO: CSIR said that the imperative of the organisation was to:

Respond to the triple challenge of unemployment, inequality and poverty;
Ensure that the research focus supported the government’s programme, such as the National Development Plan (NDP) and the Government’s Programme of Action (including the 9-Point Plan and sector-specific initiatives).

The CSIR had met or exceeded the annual targets for five of the six indicators in the scientific and technical arena. The five indicators referred to here were the publication equivalents; new technology; new patents granted; contract R&D income; and royalty and licence income.

In the Learning and Growth area, the CSIR had met or exceeded the annual targets for two of the seven indicators in this category. These were the percentage of the science, engineering and technology (SET) base who were black South Africans, and the percentage of the SET base with doctorates.

In the financial and governance category, the CSIR had met or exceeded the annual targets for four of the five indicators in this category. These were: total income; investment in property, plant and equipment; net profit and broad-based black economic empowerment (B-BBEE) rating.

With regard to financial sustainability, the CSIR had achieved 8% growth in total income, with a 5% growth in the Parliamentary grant; 9% growth in public sector contract income; 18% growth in private sector income; 30% growth in royalty income; R108 million investment in property, plant and equipment (PPE); and a net profit target of R64 million.

Mr Dlamini reported that OptimusBio, a CSIR spin-off company launched in 2014, had produced eco-friendly biological products for sanitation, water treatment, and agriculture. It was 100% black owned; had 21 products in the market; had created 10 direct jobs and 16 indirect jobs; and employed 10 interns.

Industrial development challenges were the beneficiation of local resources, an increase in high-tech exports, innovation in the manufacturing sector, bridging the gap between the laboratory bench and industry, translating concept technologies to competitive products and new enterprises, and
limited access to sophisticated infrastructure, especially for smaller enterprises.

Ms Sithembile Bhengu, Group Executive Human Capital Development, CSIR, reported on the challenges experienced in the area of human capital development. These were:

• Scientific leadership development;
• Attraction and retention of key skills;
• Staff transformation, particularly at the middle management level;
• Skills transfer and mentoring; and
• Qualification profiles in the SET base.

Dr Molefi Motuku, Group Executive: Research and Development, CSIR, introduced the Committee to the CSIR Campus Master Plan (CMP). The vision of the plan was to develop a sustainable, smart, modern, forward-looking research campus that met the future needs of South Africa and the African continent. The CMP road map had a 10-year roadmap to guide the development of the Pretoria campus, and required an investment of R3 billion to R5 billion to meet the requirements for the desired campus of the future.                                   

Discussion

The Chairperson congratulated the CSIR on obtaining a clean audit and continuing to shine as an example.

Mr Mathale asked for clarity about the Campus Master Plan, as he did not think that the CSIR would be able to execute this plan on its own.

Mr Dlamini agreed that the CSIR would not be able to execute the Campus Master Plan on its own. The balance sheet of the CSIR was not strong enough to do this, as it needed some kind of support. Here the CSIR was looking at opportunities for public private partnerships. There was no reason why one could not approach private investors for facilities, like accommodation for researchers. The organisation was exploring all options. It had already established a dedicated office to manage this programme. It was getting advice from experts on the matter and looking at the most appropriate financing model.

Dr Molefe said that if one looked at the CSIR investment of R100 million per year on property, plant and equipment, there was a lot that could be done to use this investment to the advantage of the CSIR. It could partner with real estate developers, for example. The organisation was looking at how to best use its investments. Another option it was looking at was a dedicated infrastructure to support small, medium and micro enterprises (SMMEs). The CSIR had engaged with the National Treasury on the Campus Master Plan and they had expressed a willingness to support it.

Ms N Ndongeni (ANC) referred to the challenges for human capital development which had been presented. She asked if the CSIR had any remedies for these challenges.

Ms Bhengu said that the CSIR was currently in the process of developing a human capital development strategy. It was a comprehensive strategy that was going to assist the CSIR in addressing those challenges. The organisation was revisiting its human capital value proposition, as it was very important for the CSIR to attract the right people to the organisation and ensure that it had what would be attractive to those it wanted to attract to the business. It was also looking at a compelling talent strategy, because what the CSIR was grappling with at the moment was that the CSIR had certain systems that had been in place for a long time and which were no longer suitable for the organisation today. Hence it was looking at reviewing the comprehensive talent strategy and asking where the gaps were, and if the strategy could be improved so that the organisation was able to attract the right people and ensure that development was taking place equitably across the board, as well as being able to retain the talent of the CSIR.

Ms Ndongeni referred to the long-term interventions of the CSIR to increase the number of researchers. She asked how many researchers there were at the moment.

Ms Bhengu replied that currently there were 20 chief researchers, and the CSIR was looking at developing those numbers by bringing in more females at that level and creating the critical mass that was going to see the organisation developing a leadership team.

Ms King asked what measures had been put in place to ensure the R920 000 in irregular expenditure did not happen again.

Ms Amanda van Tonder, Acting CFO: CSIR. said the R920 000 was related to a payment being made before a contract had been signed, and a full investigation was done as required by the guidelines on irregular expenditure. Internal controls and measures had been put in place to ensure that issues such as this were addressed appropriately.

Mr Paulsen said that it seemed that most of the CSIR’s issues were around transformation. He asked what plans the CSIR had to improve diversity in terms of race and gender at the top levels of the SET base. Did the CSIR have relationships with tertiary institutions?

Ms Bhengu said that the CSIR was already investing a lot in people development. The organisation was asking itself how it could ensure that it had more directed efforts and more directed relationships with other institutions and universities to ensure that it had plans internally that spoke not only to progressing people up the career ladder, but also gave them the skills that they would require to perform at the level of competent leaders as well as research leaders. With regard to its current relationships with universities, the CSIR was questioning how it could focus those to ensure that it developed what was the required skill set, not just for the CSIR, but also for the universities and the industries that it had partnerships with.

Looking at the internal plans of the CSIR, it was working on succession planning, and creating vacancies for people of colour so that it was aware of what vacancies were in the pipeline. It was already looking at developing staff internally through filling those vacancies, as well as ensuring that it was able to fill positions with the right profile.

Mr Paulsen said that the former CEO, Dr Sibisi, had alleged in the Mail and Guardian of 1 July 2016, that the Minister and the DG of the DST had tried to influence the awarding of an ICT contract for the Centre for High Performance Computing. The Committee needed clarity on what had happened with the investigation.

Mr Dlamini replied that as far as he knew, there was never any investigation done about this at the CSIR on the allegations per se, except that after he took over, he had received a report for the supply chain which had looked specifically at the awarding of this contract. The report had indicated that none of the people involved in the adjudication of the tender, and the management of the whole procurement process, had been subjected to any undue influence.

Mr Koornhof said the water problem in Cape Town had been referred to, but did not see the CSIR making an effort to do something about the water problem there. He asked if the City of Cape Town had approached the CSIR formally to assist, or if it was never on the radar of the CSIR to come to Cape Town to assist, because it had been said officially that water would run out in March 2018.

Mr Dlamini said that the CSIR was involved in a number of initiatives through its Natural Resources Environment Unit to look at various ways to support the Western Cape. One example was the possible use of the aquifer that was located below Table Mountain, to look at opportunities to extract that water and charge it back into the aquifer. This was a long term project.

Dr Molefe added that recently a proposal had been signed with the City of Cape Town to work with them on hydrological issues and address the water challenges.

The Chairperson asked about easy access to the CSIR, and what strategies it had to cultivate local innovation.

Mr Dlamini said that this was a critical question and if one reflected on it, one could say that the CSIR was not as accessible as it would like to be. A lot more had to be done to create an environment that was conducive for visitors and for them to receive support from the organisation. It was not that it was not doing anything, but it might just be that it was not achieving the kind of impact that was desired.

The Chairperson congratulated the CSIR on its having achieved a clean audit, and thanked the organisation for its efforts.

Technology Innovation Agency (TIA): Annual Report 2016/17

Mr Barlow Manilal, CEO: TIA said the entity’s objectives were to support the commercialisation of technology innovations, to develop an enabling environment for technological innovation and commercialisation in South Africa, and to develop an enabling internal environment within the TIA to successfully execute it strategy.

He reported that 8 550 SMMEs had been supported in the financial year; R89 million had been received in royalties from projects supported; 44 projects had been taken up by the market; and 205 knowledge products had been developed.

The TIA’s strategic objectives and levels of achievement were:

Strategic Objective 1: to provide technology development funding and support in high impact areas – 75% achieved;
Strategic Objective 2: to provide thought leadership and an enabling environment for technology innovation in collaboration with other role players – 100% achieved;
Strategic Objective 3: to develop an effective and efficient internal environment to successfully execute the strategy – 80% achieved.

Mr Werner van der Merwe, CFO: TIA, reported that the Agency had received an unqualified audit opinion, a clean audit with no findings. There had been a significant improvement in dealing with the audit findings. He was glad to report that for the first time ever, there had been no irregular expenditure.

Prof Edward Kieswetter, Chairperson: TIA Board, said that he wanted to amplify a few matters that would be useful in today’s engagement. The TIA was currently in year three of a five-year programme. The second period reported on was about focussing on delivering -- on using the money wisely, and being able to account for it. The mandate was not only to invest in projects, but to be transformative. The TIA had to do more than just invest in projects -- it had to create a significantly more enabled environment that would have a multiplier effect and make South Africa a far more innovative country. So it was moving from transactional to transformation, and creating an ecosystems approach was very important. Some of the transformational work that was not seen was how one needed to rebuild and ensure the organisational capacity and capability of the organisation. It was important to look not only at the impact of the work done. He wanted to amplify the need for good governance, and audits that were trustworthy and could give assurance. He thanked the Committee for their continued support.

Discussion

Dr Lotriet said the TIA had referred quite a bit to working with small business. She asked in what way the TIA was involved with the Department of Small Business Development.

Mr Manilal replied that there was a relationship with the DSBD. The relationship was not with the Department as such, but extensively with the Swedish International Development Agency (SIDA), the DSBD’s agency. The intention was to focus on small business, and the TIA worked with them on all their incubation programmes as well as their Gazelle Programme. Hence there was a very strong and close working relationship which was monitored strictly around the TIA’s outcomes from the relationship with SIDA.

Dr Lotriet asked about the investigation on TIA’s sale of shares in Kapa Biosystems. It had been on going for more than a year, so she asked for progress with regard to the investigation.

Mr Manilal said that feedback had been provided on the Parliamentary question. The reason why this had taken such a long time was firstly because this matter spanned three jurisdictions -- South African law, United States law and European law. There was Kapa SA in South Africa, Kapa US in the US, and Roche Chemicals in Switzerland. There was a process that had to be followed in terms of evaluating the impact, because of many of the alleged breaches had taken place at Kapa US, so Roche had acquired the company. Legal counsel had to be established in all three countries. Last year, when this matter arose, TIA had had to go back into the archives, knowing that every person involved in that project had left the company a long time ago. People with sketchy memories had to be interviewed. One could not have global litigation against a company like Roche Chemicals without having interrogated all the material facts. Investigations into the matter had been concluded some four months ago. The TIA had to decide if it was going to take legal action against Kapa US. The key person the TIA was working with was at Kapa, and was one of the Board members who had subsequently resigned. Recently a meeting was held to discuss the court papers to be issued to Kapa, and the legal counsel had some reluctance about the way it was worded. A parallel process agreed upon with the Minister was that once ready to initiate legal action, the Minister would then engage with the Swiss Ambassador.

Mr Manilal said that one first had to ensure that the legal demand against Kapa was airtight. A meeting had been scheduled last week to approve the letters of demand, and Adams and Adams had again said they needed some more time based on the complexity of the situation. This did seem like a long time, but there has been a lot of activity along the way, and the TIA was trying to be as diligent as possible so that when it did go into litigation, it could not be exposed with certain loopholes.

The Minister had alleged that certain officials may have colluded. One had to be quite circumspect around this, and had to withhold activity until a certain point had been reached in the legal process. The TIA was now initiating a forensic audit around all past and present people involved. It had got a company to do this independently as well. It was a sensitive matter which required discretion.

Mr M Kekana (ANC) asked for the vacancy rate to be interpreted in numbers, rather than the percentage figures given.

Mr Manilal said that it translated to about 12 people. It was important to note that the vacancy rate was a moving target.

Mr Kekana asked how many consultants were used.

Mr Manilal said that significantly less had been spent on expenses related to consultants. The TIA used them only if it did not have internal staff to do the work. Consultant costs were very low.

Mr Koornhof expressed concern about TIA’s very low exposure to ICT. He asked why TIA was lagging behind, compared to other similar agencies, and whether their criterion was perhaps too conservative when it came to that sector.

Mr Manilal agreed fully that they were too risk averse. The rapid development of ICT had outstripped the processes at the TIA. The TIA was doing a complete review around ICT.

Mr Koornhof asked why interest on loans was so low, and whether this was good or bad.

Mr Van der Merwe said that the interest was reducing, but the TIA had made a policy change that previously it would accrue for the expected income on loans. However, in terms of the new financial statement, it would now show it only as income when there was a high possibility that the income would be received. In a sense it was better, because it was cash received.

Ms Tuck asked why the seed fund programme was only done in seven provinces.

Mr Manilal said that all provinces had been included in the call, but only seven had submitted adequate responses.

The Chairperson asked about start-ups, and what happened afterwards.

Mr Manilal said the TIA had a philosophy called ‘Backward and Forward Integration,’ and it was now using a value chain view. It was looking at the source of these start-ups, and took them only up to the pre-commercialisation stage. The question was how to hand them over to the Industrial Development Corporation (IDC). The TIA was now asking how to have an institutional handshake, so that institutions could look at and vet start-up companies, and individuals did not have to run around. The scope of the process had been broadened, as now there was the MRL (Manufacturing Readiness Level) and BRL (Business Readiness Level).

The Chairperson asked about the alternative resource discussion framework.

Mr Manilal said that the TIA was in constant discussions with the DST around different funding instruments and cost sharing.

Mr Paulsen said the presentation referred to investing R465 million in various technology development projects. He asked what the local stake in projects was once they were commercialised.

Mr Koornhof asked whether, if one compared the TIA model in terms of royalty charges, it was similar to other agencies.

Mr Van der Merwe replied that currently, in terms of what the investment framework policy that was debated every year allowed, the TIA had moved away slightly from other investment instruments. Previously it would look at equity as an investment into those projects that were commercialised, but currently most of TIA’s investments were through a royalty scheme. Investment finance was allowed either through a grant, where something was expected back, or what was called through a conditional grant with a royalty instrument. Now, through its royalty instruments, it would get an investment back as soon as it was commercialised. The TIA made sure that with every conditional grant provided, there was a royalty element written into the contract.

The Chairperson thanked the TIA and wished them all the best for the future.

National Research Foundation (NRF): Annual Report 2016/17

Dr Molapo Qhobela, CEO, National Research Foundation (NRF) said that he had to share with the Committee that 63% of the Foundation’s key performance indicators (KPIs) had been met, which exceeded the previous year by 21%. The age and time to completion of NRF-funded students was increasing.

With regard to progress against the Ministerial guidelines, the factors affecting performance at the higher levels were the level of attrition among black and female students, and the time to completion.

The NRF had increased support for black researcher over the five years from 2013 to 2015by 98%; and increased its support for female researchers by 63%.

Investment in the DST Grand Challenges showed that over the reporting period, the NRF had invested R449 million, in nominal terms, in the area of grand challenges. This constituted a real time investment of R354 million. The investment had supported nine Centres of Excellence (CoEs), 38 research chairs, 141 research grants and 538 postgraduate students.

Discussion

Mr Koornhof thanked the NRF for the presentation, as it had provided a glimpse of excellence. He said that there were always challenges as people tried to better themselves. He wished the NRF well.

Mr Kekana asked how many SMMEs and previously disadvantaged persons were involved in the MeerKAT Square Kilometre Array (SKA) radio telescope, and what their respective roles were.

Prof Murray Leibbrandt, Vice Chancellor, University of Cape Town, apologised that the NRF had not delivered on their responsibility, and promised to forward this information to the Committee.

The Chairperson thanked the NRF for the high-level presentation. However, the AG had found that the NRF had regressed on the audit outcomes. This was in the area of leadership on oversight responsibility -- the area of financial and performance management on regular, accurate and complete financial performance reports, and the review and monitoring of compliance. There had also been a regression in the area of senior staff management. She asked what measures had been put in place to address the regression.

Prof Leibbrandt said that the NRF had slipped on one item. The second item which he would start off with was still a matter for discussion between the NRF and the Auditor General, and it was about the common understanding of a particular practice note that the National Treasury had issued with regard to service providers -- companies that the NRF procured from, having tax clearance certificates from the South African Revenue Service (SARS). Some of the procurement was from international companies and they would not necessarily have tax clearance certificates, so the interpretation was what was being sorted out between the three parties -- the NRF, the National Treasury and SARS.

The second issue was around performance auditing, and here the NRF had taken some serious measures. It was about something that was very innocuous: how many agreements did this business have?  Whether it was 40 or 35, the question could not be answered timeously, so the AG had said the NRF information system was not strong enough to be relied upon. The organisation had taken serious action to beef up the information management system.

The Chairperson thanked the NRF for their intensive presentation and clarifying issues that needed clarity. The Committee was committed to ensuring that the NRF received adequate funding and support so that it could play its role in driving the economy of the country.

The meeting was adjourned.