DSAC 2020/21 Annual Report; Update on NAC PESP Forensic Report

Meeting report

Apologies were received from the Minister and Deputy Minister of Sport, Arts and Culture.

The Department of Sport, Arts and Culture (DSAC) briefed the Committee on its 2020/21 Annual Report, its performance results and its budget and expenditure.

Mr Vusumuzi Mkhize, Director-General (DG), told the Committee how the Covid-19 restrictions had affected the Department’s work.

The budget of the Department was revised downwards by R956 million. This led to the revision of the Annual Performance Plan (APP) and the overall scaling down of the Department’s service delivery mandate. The economic hardship and loss of income for professional athletes and artists led to an increased need for relief. This led to further cuts from the budget allocated to the normal activities of the Department.

Overall, the Department achieved 74 percent of its revised targets. In Programme 1- Administration, 60 percent of targets were achieved. In Programme 2 - Recreation Development and Sport Promotion, 83 percent of targets were achieved. In Programme 3 - Arts and Culture Promotion and Development, 62.5 percent of targets were achieved. In Programme 4 - Heritage Promotion and Preservation, all the targets were achieved.

Ms Sibongile Mondile, acting Chief Financial Officer (CFO), gave a summary of the budget. The Department’s budget was R5.3 billion, of which R5.18 billion (97.5 percent) was spent. The budget was split amongst programmes as follows: Administration - R493.6 million; Recreation Development and Sport Promotion - R1 billion; Arts and Culture Promotion and Development - R1.6 billion; and Heritage Promotion and Preservation - R2.2 billion. Some of the reasons for underspending were a moratorium on filling vacant posts; the cancellation of Departmental events as a result of the declaration of the Covid-19 lockdown which had an impact on travel costs; delays in implementation of the Public Arts Presidential Employment Stimulus Programmes; and delays in the Iziko Museum Courtyard project due to Covid-19 restrictions.

Discussion

Mr T Mhlongo (DA) asked if the Department had done a survey to find out whether people were happy with the entities of the Department. Why was there a discrepancy between the budget spent and the performance of the Department? How many sport federations were there, as different numbers were quoted in the presentations? Did the Department send letters to federations after the closing date for submissions? He wanted sample letters to prove this. Why did the DG agree to meet a group of five protesters but then did not meet them and closed the office of the Department and called the police? Why was there no consequence management for the non-implementation of internal audit controls?

Mr B Madlingozi (EFF) said the Minister and Deputy Minister still found it not important to be at the Committee meeting. He said most of the entities within the Department were riddled with irregularities. What happened to the racism allegations at Cricket SA? What were the consequences? Would justice be done against councillors who embezzled money earmarked for suffering creatives?

Ms V Malomane (ANC) asked if any targets of 2020/21 had been moved to the next financial year. Did the Department have ways of dealing with challenges of non-payment of invoices? Were the challenges around SA geographical name changes that were not achieved resolved? Did the reported non-compliance by three federations have an impact on the sports themselves and on youth development in those sports? How did the Department deal with the challenges surrounding the capacity building project? Was the Western Cape Community Art Centre development project, scheduled to be completed in June, completed?

Ms R Adams (ANC) asked what the current status of implementation was of the Sarah Baartman Remembrance Centre. She asked whether the Department could provide an overview of areas of study in which bursaries were awarded. She said five moral regeneration projects were financially supported but only two were implemented. What happened to the financial resources that were allocated to these projects? Could the Department further elaborate on the areas of study of the heritage bursaries? Would all new modular libraries have internet connectivity? Where were the 10 community gyms and play parks constructed? The Northern Cape had the lowest allocation of R27 000. How were the allocations per province made? Who were the beneficiaries of donations and cash gifts? What was the cause of the underspending on heritage projects? What were the reasons for not completing the Winnie Mandela house project?

Ms V Van Dyk (DA) asked for an updated list for each of the heritage legacy projects and the time to completion. She said the underspending in the Mzansi Golden Economy (MGE) project must be explained. To which financial year did the disciplining of 11 employees for irregular expenditure relate and what was the nature of the disciplinary action undertaken?

Ms M Khawula (EFF) said roads should be named after traditional leaders. She said there was a question mark around community gyms for children in parks. Why were there gyms in some places but not in others? The situation was bad in Inanda. Sometimes there was no upgrading of the parks.

Mr D Joseph (DA) said the budget cut of R956 million was too big and the Department must try to get some of this money back. He noted the big increase in sports promotion. He wanted more detail on the heritage legacy projects not implemented. He said the Committee should get reports from provincial departments on the school sports programmes. Why was the Department forcing the Western Cape Community Arts Centre development programme to complete by the end of March when they would only be able to finish the programme in April? Was there a prescribed time frame to transfer funds to provinces to avoid fiscal dumping and what monitoring of these funds was there? He said there should be engagement with the Department about the Auditor General’s findings on claims against the Department.

Mr M Zondi (ANC) asked if the reduction in the budget was because of programmes not undertaken or because the Department was trying to avoid underspending. Were there no variances in the transfers to provinces? How did the Department keep municipalities accountable for the transferred funds?

Responses

Mr Mkhize said the Department had not done a customer satisfaction survey because at the time the focus was on the impact of Covid-19 on the various sectors.

On the variances in performance versus budget, he said the funds were removed from APP targets and reprioritised for Covid-19 relief.

Ms Mondile said that the presentation was on the adjusted budget and R1.1 billion (21 percent) of that budget was spent on compensation of employees and on goods and services. This expenditure was not linked to key performance indicators (KPIs). The rest was spent mainly on transfers outside the Department. For example 46 percent went to the provinces and 41 percent went to other entities. None of these were reflected in the KPIs and that accounted for the skewed figures. Payments were based on timelines in the Division of Revenue Act (DoRA) framework. On provincial allocations, the Department was guided by the equity share allocation based on the population statistics provided by Stats SA.

On the cash awards listed under donations and gifts, she said they were Ministerial awards recognising excellence. In this financial year, it was for Banyana Banyana and other individuals who performed well.

The Department had received an unqualified audit opinion with two matters of emphasis and these had been corrected. The Department was working to clear the five findings on misstatements.

A company had been appointed to investigate irregular and fruitless and wasteful expenditure in the former department. The Department had implemented the recommendations made by the independent company, MORA Inc. Nine final written warning letters were issued, five officials resigned, two were dismissed and four were transferred.

Only one payment was not made within the 30-day requirement. The invoice was paid in 33 days.

Mr Vusithemba Ndima, Deputy Director General (DDG), Heritage Promotion and Preservation, responded  on the challenges around SA geographical names. He said renaming required a lot of consultation on a face-to-face basis, so the target was discontinued.

On the question about the Sarah Baartman Centre, he said there were challenges in the management of the project which started in 2013. Contracts were discontinued and new contracts entered into. The second contractor also left the site, delaying the completion date. The Minister and the Minister of Public Works had met on the issue. To resolve the matter, a technical team of the Department would oversee every stage of the work.

He said the modular libraries did provide internet facilities.

On the question of underspending on heritage projects, he said reliance on external service providers had caused a lot of the problems.

He said the Winnie Mandela House exhibition project had been completed.

Ms Lisa Combrinck, acting DDG: Arts and Culture Promotion and Development, said language bursaries were awarded for various study areas, such as lexicography and translation, at the Wits, Western Cape, Venda, Zululand, Nelson Mandela and North West universities.

Two incubator projects were partially complete. Both were both visual arts projects. A third project was an online portal for creatives to sell their offering through an app. A national poet laureate hub project was nearing completion and a technical services and capacity building conference had been cancelled. The Western Cape Community Arts Centre project was close to completion.

On the MGE question, Mr Mkhize said there were three big programmes - touring ventures, public art and cultural events. There were also academies that were supported under MGE for skills and capacity building in the sector.

Mr Simphiwe Mncube, Director: Sport Support Services, said the Department supported 68 federations on their books. Of these 61 managed to respond and submit to all compliance requirements. This Number excluded public entities like Boxing SA, SASCOC and the Sports Trust.

On how the Department communicated with federations, he said the Department sent a request for compliance by bulk email. When it came to an allocation letter and agreement being prepared, then individual emails were sent to those who had complied. He acknowledged that historically the timelines for the Department to transfer funds had always been a problematic area. The main hindrance for most of the bodies was the submission of audited financial statements. Most of the bodies had financial year ends in August or October. In the past, the Department had written to them to align their financial year to the end-March year of the government to assist in speeding up the transfer process. While some bodies’ financial year endings were aligned, their annual general meetings were then held late in the year meaning their annual reports and audited financial statements were tabled late. They had been urged to hold their AGMs earlier so that they could comply earlier. Regarding timelines, he said that the system had been revised the previous year. The Department wanted to send allocation letters by June, using historical data. It had seen an improvement in 2019 compliance. By October, all federations had been paid, but because of Covid-19 challenges all these gains had been reversed.

He said non-compliance and delays did have an impact on the rollout of programmes and projects. Sometimes federations went ahead and offset costs against sources. In the current year, some federations could not execute projects and so had applied for the roll -over of funds.

On community gyms and play parks, he said the request for a list would be provided. On areas not having parks and gyms and the monitoring of these, he said there was always a team that did on-site inspection of what was being done. The challenge was after completion when the sites were handed over to municipalities. That was where the problems lay.

He referred to three federations mentioned in a report by the Eminent Persons Group (EPG) on transformation in sport. He said Basketball SA, Chess South Africa and the SA National Boxing Organisation (SANABO) had experienced governance problems. Basketball SA and SANABO were on the road to recovery, but Chess SA was still a problem. The Department wanted it to undergo a similar approach to that applied to Basketball SA and SANABO.

Ms Mandisa Tshikwatamba, DDG: Corporate Services, responded to questions about consequence management. She said ten cases were currently being attended to.

On the allocations to provinces, she said the Department had a compact with the entities on what they should be reporting on and they had quarterly engagements with the CEOs and CFOs.

On the cancelled meeting with artists, Mr Mkhize said the department had met with the sector countless times. There was no evasiveness or fear of meeting them, but it became a problem when threats of a sit-in were made. This could not be allowed as it would have an impact on the sector it was supposed to service. The protestors blocked access to the building but he still met with them to hear their issues and agreed to meet with Ms Sibongile Ngoma. They agreed to meet again in a more all-inclusive manner. However the protestors wanted to meet that day. The building was blockaded and the Police were called in to unblock the Department’s access points. 

On the cricket racism question, he said the process of the hearings by Cricket SA continued. The Department would get a report on their interventions. This would be a landmark exercise as it was relevant to all sporting codes to deal with racism in an organised manner.

On the consequence management implemented to strengthen federations and sporting codes, he said that when the Department’s monitoring exercises found federations were not complying with their business plans or expected performance, the first step was to withhold their funds until they submitted corrective measures.

Update on the NAC PESP forensic report

Mr Mkhize said the National Arts Council (NAC) commissioned a forensic investigation after the Minister had received legal opinion about a conflict of interest by former members of the board who were likely to have benefited from Presidential Employment Stimulus Package (PESP) funds.   After receiving the report from Mazars Forensics, the NAC had to give feedback to the nation because of public interest. On 27 September 2021 the media were addressed by the Minister and the NAC. Afterwards there was an outcry that the report was not published and suspicions were raised on why the full report had not been published.

The Committee had also asked for the report to be handed to it. There was then engagement on how soon the report could be handed to the Committee. The NAC needed to get the full legal implications because the report named people who had to be given a fair chance to have access to the report before publication. The report was released to the public on 13 November.

The NAC committed that they would do everything required to implement the recommendations of the report on restoring strong internal processes and controls to promote good governance. The CEO and CFO of the NAC were being charged. 

Mr Mkhize said that while he was abroad, he asked that the report be in the hands of the Committee before it was published. This was done, albeit only a few hours before it was published on the NAC website.

Discussion

Mr Mhlongo asked what the legal costs were for the PESP. He said it was uncalled for the Committee to receive the forensic report from the media. He wanted the report on the day the Minister went to the media. Who was Mr Arendse and what was his role and relationship with the NAC? What was the NAC’s response to the report? Why were Mazars given limitations on who they could question? What happened to the Section 111.8a hearing? He said incomplete information was released. What were the reasons? The NAC should account to the Committee as the previous Chairperson of the NAC had raised several issues which were not in the report. Why did the NAC not allocate money for administration purposes and what were the administration purposes?

Ms Van Dyk concurred that it was unacceptable that members received the report through the media. She asked if the NAC had started with the process of getting legal advice concerning the workers and council members who mismanaged R300 million of relief funds. Would steps be taken against these people and were there timeframes for this? What were the reasons for the challenges disputing this funding eight months after the end of the funding process? Why did it take two months to release the Mazars report? How would the fact that five previous members of the NAC took part in the evaluation process, which was against the NAC Act, and while receiving a salary for their work, be addressed?

Ms Adams asked how the NAC would ensure consequence management for staff employed temporarily for the PESP. Was the NAC reporting the transgressions to law enforcement agencies? What action would be taken against officials who failed to supply the investigation with adequate information? How would the Department manage future programmes to enhance accountability?

Ms Malomane said the report threw light on the issues of maladministration. What was the Department intending to do? What did the NAC say on the timeline for implementation of the recommendations? Could the Committee continually be updated on the investigation?

Mr Madlingozi asked why the NAC was allowed to release the report to the public before it was released to the Committee. Was that not showing disrespect to the Committee? Did this conduct not warrant investigation?

Responses

Ms Tshikwatamba said it was an error that the Committee did not get the report before its release, and the NAC had to account for what had happened.

The NAC now had to provide the implementation plan for each recommendation in the report. This process would take time and the NAC should on a monthly basis provide updates on their plan which would be passed on to the Committee.

Mr Mkhize said the Department had asked that the report first be sent to the Committee. It was sent at 5.40pm and the report was released on the website at 8.45pm on that same day as the NAC had felt that the report could not be delayed for another night.

Mr Arendse was a continuity member and currently a council member.

There would be a recouping of money paid out to council members as they were not supposed to be paid.

The legal fees relating to the PESO were R1.8 million. 

The NAC was drawing up a timetable to implement the recommendations and had already started the process.

He said his understanding was that the full report had been released. He was not aware that the report was incomplete.

On why there was a management fee, he said they needed to have the capacity to handle the disbursement of funds, which was an additional responsibility, in terms of a Memorandum of Agreement on project implementation.

He said that the Department’s oversight covered all PESP projects and they had a process to monitor and receive reports on a weekly basis on intended targets, outcomes, jobs created and expenditure incurred by all entities.

On the WhatsApp message that was circulating regarding the former chairperson, he said he could not comment as he had not seen that message.

He said there were a number of lessons learnt. There was not adequate time for planning given the compressed timeline they were working on. They had to use a risk-based analysis to look at potential risk in the execution of the project. The NAC and the National Film and Video Foundation (NFVF) were identified as entities they could work with as they had experience of disbursement of funds and were the Department’s funding agencies. He said the sector faced challenges in accessing funding due to compliance issues. The requirements of the SA Revenue Service (SARS) were more daunting. Most of the sector struggled to meet SARS requirements on documentation. The Department had identified that the need outstripped the available resources by a large margin as the economic shutdown had had a direct effect on the sector.

On how the NAC would ensure it did not repeat the same mistakes, he said that based on the lessons learnt and the review, the NAC would have an improvement plan so that their own Act was not contravened by their own members.

Mr Mhlongo said that when NAC appeared before the Committee, Mazars must also be invited.

The Chairperson thanked the Members

The meeting was adjourned