Market Theatre 2023/24 Annual Performance Plan; with DSAC input; AGSA Briefing on status of records review, material irregularities and APP review

Meeting report

The Chairperson officially opened the meeting by welcoming the Office of the Minister, Members of the Committee and staff, the Market Theatre Foundation (MTF) Council, the Auditor-General South Africa (AGSA), and the Department of Sport, Arts and Culture (DSAC).

The Chairperson provided the DSAC, the Market Theatre Foundation, and the AGSA with an opportunity to present their officials in attendance.

Ms Stella Khumalo, Acting Director-General (DG), DSAC, introduced Mr Israel Mokgwamme, Chief Financial Officer (CFO); Ms Nokubonga Ramalepe, from the office of the DG, Mr Sibusiso Tsanyane, Director: Entity Oversight; Mr Irwin Langeveld, Acting Deputy Director-General (DDG): Heritage Promotion and Preservation; and Mr Emmanuel Masha, Public Liaison Officer from the Office of the Minister. Ms Khumalo would present apologies upon request by the Chairperson.

Ms Andiswa Vikilahle, Deputy Chairperson, Market Theatre Foundation, presented an apology from Mr Phil Molefe, Chairperson of the Foundation, and said she would be presenting on his behalf. Present members of the Theatre’s Council included Ms Tebogo Mosala, Mr Andre le Roux, Ms Zanele Nkosi, Mr Monwabisi Grootboom, Ms Aifheli Makhwanya, Mr Mandla Mbothwe and Ms Lesedi Moche. Management officials present included the Chief Executive Officer (CEO), Ms Tshiamo Mokgadi Sibande, the CFO, Mr Mlungisi Mkhayiphe, and the Chief Operating Officer, Ms Zingisa Jemsana.

Ms Mbali Tsotetsi, Deputy Business Executive, AGSA, introduced herself and a senior manager who was in attendance.  

The Chairperson requested the presentation of apologies, which were duly provided by the entities and accepted by the Committee.

Market Theatre Foundation: DSAC overview

Mr Tsanyane, Director: Entity Oversight, DSAC, said the Market Theatre Foundation derived its mandate from the Cultural Institutions Act of 1998 (Act 119 of 1998), and was a public entity classified according to schedule 3A of the Public Finance Management Act (PFMA). The Mandate of the Entity was to preserve, promote and develop performing arts as an advancement of growth, transformation and nation building through the performing arts, culture and heritage.

According to the Cultural Institutions Act, Act 119 of 1998, the entity operated under the auspices of a Council as its Accounting Authority.

It recorded a 90% performance rating for its non-financial targets in 2020, but this was followed by 83% in the next two years. Financial allocations, which were inclusive of baseline allocations and the infrastructure grant, totalled R56.168m in 2020, R70.093m in 2021, and R60.829 in 2022/23.

There had been consistency in the AGSA audit outcomes, with unqualified findings in all three years. In 2019/20, the submission of financial statements that were not in accordance with the prescribed framework, as per the requirements of the PFMA, surfaced. In 2020/21, there had been irregular expenditure due to a failure to follow proper procurement processes, where the AGSA had discovered that the procurement of some goods and services up to R500 000 had been procured without the invitation of competitive bids, as per the Treasury regulations.

In 2021/22, findings were related to Construction Industry Development Board (CIDB) matters, where it was found that certain contracts had been awarded to contractors who were deemed to be incompetent as per the requirements in accordance with the CIDB Act. Mr Tsanyane suggested that the Market Theatre Foundation should expand further on these findings and provide clarity, should there be a need.

The Market Theatre Council comprised eleven members, led by Mr Phil Molefe. There was a balance in gender representation, but not racial representation. Mr Andre le Roux had asked that his race classification be corrected, as he did not demographically identify as a white man, but was rather of mixed race.

Oversight activities were related to the Council’s meetings, and attendance rates were at a consistent 80% throughout 2020/21, 2021/22 and 2022/23. Remuneration had ranged from R1 210 171 in 2020/21, to R1 114 201 in 2021/22, and R833 690 in 2022/23. These remuneration figures were inclusive of meetings, preparation, and sometimes travel fees. The annual numbers of the audit and risk committee, management and staff meetings, were also displayed (see presentation).

Site visits, which normally occurred twice per financial year, had been conducted at the entity by the DSAC’s oversight unit. These site visits ensured a thorough engagement with the entity. The two most recent visits took place on 4 October 2022 and 14 February 2023.

The Market Theatre Foundation formed part of the Performing Arts Sector Forum, and the Foundation’s CEO formed part of the CEO’s Forum. The meetings of both forums were attended by the concerned parties respectively. The Chairpersons’ Forum was still underway, and remained without a confirmed date.

The executive management of the Market Theatre Foundation was comprised of Ms Tshiamo Mokgadi, the CEO, who was on a fixed contract until April 2025, Mr Mlungisi Mkhayiphi, the CFO, who was on a fixed contract until March 2027, Mr Greg Homann, the Artistic Director,  who was on a fixed contract until December 2027, and lastly, Ms Zingisa Jemsana, the Chief Operating Officer (COO), who was also on a fixed contract until June 2027.

The total number of Market Theatre Foundation staff was 80, with 36 employees being women, and the remaining 44 being men. The employees’ racial makeup was 93% black, 1% Indian/Asian, and the remaining 6% were white.

Challenges and DSAC intervention

The Market Theatre Foundation encountered problems with the Government Department of Infrastructure Development (GDID) over the lease agreement for the Windybrow Art Centre, which led to a delay in the infrastructure project at the Windybrow building.

However, the DSAC intervened. Meetings were held with the Foundation and the GDID, and discussions are still underway. Correspondence had been sent to the Gauteng GDID and the Health Department, and a response was still pending.

See attached for full presentation

Market Theatre Foundation 2023/24 Annual Performance Plan

Overview

Ms Andiswa Vikilahle, Deputy Chairperson, presented an overview of the entity's APP for the 2023/24 financial year, with the help of the CEO and the rest of the management, regarding the APP's technical aspects.

 As her starting point, she reiterated the Foundation’s vision statement: “to create an authentic South African cultural experience which was committed to providing the highest level of artistic excellence in all aspects of the performing and visual arts in which the education and development of a diverse community of artists, audiences and technicians was assured.” This was done through “producing and providing a platform for a professional performing and visual arts repertoire that was authentic and artistically excellent." This involved:

• Developing the next generation of South African performing and visual arts talent.
• Engaging, educating and developing a diverse community through the performing and visual arts to become enthusiastic audience members and supporters.

The Market Theatre Foundation’s core business units included:

• The Market Theatre, which was founded in June 1976, and was declared a cultural institution in 2005, focused on emerging and professional performing arts presentations;
• The Market Theatre Laboratory, which was founded in 1989, and was focused on performance training and the development of 18-35 year olds;
• The Market Photo Workshop, which was founded in 1989, and was focused on photography training and development of 18-35 year olds; and
• The Windybrow Arts Centre was opened to the public in 1987 under the Performing Arts Council of Transvaal, with Mr Walter Chakela appointed as the first Artistic Director in 1995. The centre was declared a Cultural Institution in 2006, and was administered by the Market Theatre Foundation from 2014, until its ultimate amalgamation into the Foundation in 2016.

The impact statement of the Market Theatre Foundation stated that the Foundation worked towards “increasing awareness and knowledge of the performing and visual arts through accessible, relevant, and sustainable programming, thus contributing meaningfully to nation-building, social cohesion and socio-economic transformation."

This was achieved through continued innovation, a review of the Foundation’s structure and operations, revenue generation and reputation management.

The Foundation’s institutional strengths included, but were not limited to:

• A long-term track record of artistic excellence;
• A strong brand and legacy reputation at both national and international level;
• Accountable institutional governance and management, with an unqualified audit opinion for 19 years; and
• Resource capacity to continue mentorship programmes and some performances during the difficult lockdown and social distancing period.

The top two risks faced by the Foundation were limited revenue streams due to a change in viewership and public interaction with the arts, and a declining number of patrons and audiences.

Ms Sibande, CFO, presented the trends seen by the Market Theatre Foundation in the years 2018 to 2022, in terms of both financial and non-financial targets. There had been consistency in the number of productions staged from 2018 to 2020, and a sudden dip in 2021, due to the last of lockdown restrictions.

The number of patrons showed a constant decline from 2018 to 2022, and this could be attributed to the two top risks previously discussed.

There had been a steady operating income until the dip in 2021 due to an output reduction.

A breakdown of the production and staff expenditure, in line with the four core business units of the Foundation, was further broken down, along with auditor reports. (See presentation)

2023/24 APP

Ms Vikilahle said the APP had been developed in the context of a concerning socio-economic outlook. As a result, the Foundation’s Council had to take a long-term view of running a public entity, and the imperative to ensure the sustainability of the Market Theatre Foundation beyond its term in office.

The Foundation aimed to ensure posterity for future generations through:

• The adoption of sustainable practices in daily operations;
• Ensuring the ability to function in the event that the fiscus was unable to meet operational needs; and
• Appreciation of the province’s natural and other resources, which were under increasing pressure.

The Market Theatre Foundation also contributed to the goals set by the National Development Plan (NDP), which called for the government to have achieved certain milestones by 2030 towards bettering the lives of all South Africans through performing and visual arts institutions, such as the Foundation.

Primary contributions by the Foundation were directed towards Priority 6 -- social cohesion and safer communities. Secondary contributions included addressing:

• Priority 1: Capable, ethical and developmental state;
• Priority 2: Economic transformation and employment creation;
• Priority 3: education, skills, and health;
• Priority 5: spatial integration, human settlements, and local government.

The DSAC had already discussed the legislative and policy mandates of the Foundation.

External and internal stakeholders

The Foundation’s stakeholder profile was divided into two categories, internal and external. The external consisted of the DSAC, Parliament, and stakeholders who act as reputational agents. The internal consisted of creatives across the spectrum, students and interns, sponsors, grantors and donors, and lastly, the Market Theatre Foundation’s employees and the recognised union.

External environment analysis

In terms of the external environment analysis, there were four factors were discussed:

• Covid-19 restrictions disallowing or highly restricting live performances for over a year and a half;
• Entities such as the Market Theatre Foundation reopening only in June 2022, and the pressure of having to lure the public back in, or to generate employment opportunities, which often opposed revenue generation objectives or allocated finances;
• A high unemployment rate among the youth, women, and the black and coloured population groups;
• Fear of the repeated effects of Covid-19, and questioning the technological adequacy to recover.

Internal environment analysis

Regarding the internal environment analysis, income and expenditure trends were discussed, with actual costs compared to the projected amounts. The categories explored were total expenditure, DSAC grants, donations, other generated income, and surpluses or deficits.

Ms Vikilahle displayed the expenditure history of the Foundation, with the total expenditure, made up of operational and programme expenditure, shown alongside the DSAC's funding percentages for the years 2014 to 2023. The Foundation’s reliance on the DSAC’s grants steadily increased due to increased entity targets and a difficult funding climate.

In the 2023/24 financial year, 63% of the available budget – R68.546 million -- would be allocated towards administration (R22.2m), public engagements (R43.1m) and business development (R4,2m). The Foundation’s performance would also be measured to ensure its programme objectives were adequately met.

Challenges

The challenges faced by the Market Theatre Foundation were mainly of a financial nature, with below inflation increases in government grants – the Foundation had received only approximately a R200 000 increase in grants -- a challenging fundraising climate, no tax incentives for funders, limited resources to meet artists’ needs, and an economic climate wherein there was limited disposable income.

Capital works projects

Between 2010 and 2011, the Market Theatre Foundation received generous allocations of funding from the DSAC, and over R100m had been donated and allocated towards the maintenance and construction of multiple infrastructures, including the Barney Simon Theatre renovations which were currently underway and were expected to be complete by September.

Ms Sibande lastly presented a list of the Market Theatre Foundation donors, before concluding the presentation.

See attached for full presentation

The Chairperson thanked the entities and the DSAC for their presentations, and opened the platform for discussion.

Discussion

Mr B Madlingozi (EFF) asked about the costs of revamping the Market Theatre in 2013, and for details of the expenditure. He questioned the annual amount required for running programmes, and the profits generated annually. He also asked which programmes were most expensive to run, and the Theatre’s impact on the poorer communities of Gauteng over the past five years.

He asked about the proceedings of former Foundation chairperson Kwanele Gumbi’s alleged mismanagement of funds, and the loss encountered by the Market Theatre, if any. If there was no loss, how did the Foundation ensure this?

Lastly, he asked about the Market Theatre’s training and development programmes -- how many of them were committed to rebuilding the country from the oppressive system of apartheid? He asked that they be listed.

Mr T Mhlongo (DA) asked about the absence of the Foundation Council at the last scheduled meeting. Referring to the audit reports and findings, he asked what issues had been raised by AGSA, and how many repeats of findings there were. How far were they in addressing the findings, especially those involving irregular expenditure?

He questioned the amount of money donated by the Gauteng government to the Foundation and the audience participation statistic, stating that there had been an upswing from 2019, as seen in the presentation. What had caused that?

He asked for clarity regarding the remuneration of Council members, seeing that there had been a decline after Covid-19.

Mr Mhlongo had questions regarding the financial audits, reiterating Mr Madlingozi’s question on the progress regarding the mismanagement of funds and the litigation costs. He also asked about the allocation of surplus amounts after the completion of a financial year, and the unspent R63m conditional grant -- was this not a disadvantage to artists and the arts? Why was the money unspent?

Ms D Sibiya (ANC) questioned a discrepancy in the targeted outcomes from 2019 to 2022. An elaboration explaining the targets and their intentions and allocations was requested.

She questioned the number of funding proposals submitted to donors. What factors deter the Market Theatre Foundation from submitting proposals to the 50+ prospective donors?

Mr A Zondi (ANC) commended the Foundation for its unqualified audit findings for five consecutive years. He expressed confidence in the resolution of the alleged mismanagement of funds, seeing that auditor reports with the unqualified reports often displayed minimal to no discrepancies.

He noted that in the budget allocation for 2023/24, only a nominal increase of R202 000 had been awarded -- from the R52.6m in 2022/23, to R52.8m in the current financial year. When taking into consideration the projected inflation rate of 4.9%, there was, in fact, a decrease of 4.3%, or R2.3m, in the budget. The entity thus allocated R28.7m towards salaries and wages.

Ms V van Dyk (DA) asked about the delay in the disbursement of the incubation funding, which resulted in the entity’s failure to achieve its Programme 3: Artistic Skills Development. She asked about the lessons that had been learned during the amalgamation process that could benefit the sector.

She questioned the employee recruitment -- had the human resources (HR) position been advertised and filled, seeing that there was still an acting HR manager even at the end of March?

Her last question was to request an elaboration regarding the top three risks.

Ms R Adams (ANC) asked about the factors affecting the Market Theatre Foundation’s ability to set a target for its vacancy rate that was lower than 10%. She said an amount of approximately R10.5m had been set aside for the entity’s capital works, and the APP indicated a start on renovations at two projects -- the Windybrow Arts Centre and the Barney Simon Theatre --but these projects’ renovations had been allocated for in previous budgets. What was the movement of these projects, as the balances at the end of the 2021/22 financial year had been R6.1m for the Windybrow Centre and R38.6m for the Barney Simon, which were not changed from the closing balances at the end of the 2020/21 financial year.

Her last question was on rationalising the amalgamation of entities. She said it was expected that the entities receiving government subsidies would collaborate with other entities with similar mandates, or did the entities aim to retain their individual identities?

The Chairperson expressed concern regarding the target for the number of productions staged per financial year over the medium term. What was achieved during the financial years in which Covid-19 was rampant? She asked about the number of staged productions expected in 2022/23 and the two consecutive financial years, and how the Foundation was ensuring that it engaged its sponsors to increase its offerings. How was the Foundation looking to increase its audience numbers over the medium term expenditure framework (MTEF) period if production did not increase within the same period?

Ms V Malomane (ANC) requested to send her input to the Portfolio Committee administration, and this was granted by the Chairperson.

The Chairperson presented Ms Malomane’s questions, which were a reiteration of Ms Adams’ questions regarding the renovation of the Windybrow Arts Centre and Barney Simon Theatre. Her other questions were about the factors affecting the Foundation’s ability to set a target for its vacancy rate that was lower than 10%.

The Chairperson provided the Market Theatre Foundation an opportunity to answer questions the Members of Committee posed.

Foundation's responses

Ms Vikilahle said she would answer high level governance-related questions, Ms Sibande would respond to the technical questions, and Mr Le Roux would discuss parts of the Mr Gumbi matter.

Ms Vikilahle started off by explaining the Council’s absence at the previous meeting, stating that there had been miscommunication, as the Council presumed that only the Chairperson and CEO of the Foundation were required to be present. Unfortunately, by the time the other Council members realised their mistake and attempted to attend the meeting, the MTF had been excused. No disrespect towards the Committee had been intended.

Regarding the increased cost of MTF sittings during the period of Covid-19, compared to the post-Covid-19 period, she explained that it was due to the recruitment of the CEO, as more meetings had been held to address this, and there were other stability issues that needed addressing. However, since stability had been ensured, and a CEO instated, there was no need for additional meetings, which was why costs were reduced.

To answer the question on the risk around the revenue, despite stating in the other financial statements that the MTF was able to continue operating, Ms Vikilahle explained that it was required in the annual financial statements to indicate whether the Foundation would be able to keep operating, and at the time, the allocated budget had not affected the operational abilities of the Foundation. However, after consideration of the current budget allocation and the growth of the budget, the risk of revenue would pose as a concern in future. The targets would be hard to meet.

She partially responded to the question regarding amalgamation, saying that the MTF did work with related entities in the performing arts. This was evident in their attendance and participation in the National Arts Festival in Makhanda, and the sharing of resources with other entities of a similar nature.

Mr Le Roux, MTC council member, said he had recently resigned from the Legal Governance and Ethics Committee and HR. This was not due to any negative reasons, but all the legal proceedings handled by the Legal Governance and Ethics Committee, inclusive of the Mr Gumbi matter, and some other matters which had proved to be very expensive and historical, had mostly been dealt with. The Gumbi matter had been handed over to the police. Mr Le Roux made mention of a forensic audit which had provided a rather damning report, but this had been addressed, bringing the Foundation back on track in terms of finances, governance and its legal issues.

Regarding the issues involving HR, a new CEO and a COO had been appointed for the very first time, and both had proved to perform at an optimum level. Other appointments included the CFO and artistic director. There was a pending appointment for the Head of Lab, and the new Head of the Windybrow. He described the Windybrow Arts Centre as a top performing unit, despite an ailing performance in the past, and attributed this change to a good appointment of leadership by the MTF. There were, however, inherited challenges attached to the Art Centre, which were being attended to with the assistance of the Department.

To respond to the question of audiences and the unjust system of apartheid, Mr Le Roux said that there was a period wherein the Department saw theatres as receiving houses, but the Market Theatre Foundation, alongside the Photo Laboratory and the Windybrow centre, had shifted the narrative by taking part in the production ecosystem of the sector, and not just receiving productions. There was an upward swing in audiences and content, and he invited the Committee to come and witness this for themselves.

He also answered the question on the amalgamation of entities, stating that the MTF did not see itself as an individual entity, but rather as a part and core of the performing and visual arts ecosystem. This was evident in the range of sponsors and partnerships within the entities, such as the USA, Belgium and the Irish, to mention a few.

Mr Le Roux asked that the Committee avoid sensationalism in social media articles, as that was not always factual.

The Chairperson commented that social media were allowed to attend parliamentary proceedings, as per the regulations of a democracy, and was present even in this meeting, and would thus be reporting on it.

Ms Sibande responded on the decreasing number of staged productions and the expected audiences the MTF was looking to draw in. This decline in numbers in the targets was attributed to financial insecurity, seeing as the only secure form of financial aid received by the Foundation was the grant from the DSAC. The Foundation, however, had tried to generate other forms of income for the operation of the core units and outreach programmes, and this would range from R3m to R4m for productions, and about R500 000 for the workshop and the laboratory each, and just under a million for the Windybrow. These amounts were, of course, dependent on annual operational requirements. As a result, achieving targets was reliant on the ability to generate additional funds.

In terms of audience numbers, there had been a concerning decline, which had prompted the MTF to investigate, and the findings indicated that its programming was perceived as niche by the public, location was a challenge, the precinct had lost tenants such as SA Breweries (SAB), and there were safety and cleanliness concerns.

To answer the question on the low vacancy rate, Ms Sibande said nothing prohibited the Foundation from reducing this, but recruitment processes and appointments had proved to take up time due to unmet skill and education requirements.

She said the Barney Simon Theatre renovation had been delayed due to power supply and lease issues, but this had been mitigated, hence the current continuation. The issue of the unspent conditional grant was due to issues with the GDID regarding the Windybrow Arts Centre, as previously discussed by Mr Tsanyane.

On the issue of submission of proposals to prospective donors, the fundraisers have signed the Foundation on to databases where they got notified of proposal callouts, whether local or international, so the MTF responded only to proposal callouts. There were, of course, instances where active proposals would be handed in, but this was not the norm. The Foundation did, however, have support from entities such as the American Embassy and the Alliance Francaise.

Ms Sibande answered Mr Madlingozi’s question regarding the MTF’s outreach to poor communities in Gauteng, explaining that on the theatre side, a community arts development programme, which was limited to just Gauteng due to financial constraints, was in existence, and was funded by the DSAC under the Incubation programme. This development programme allowed community artists to showcase their work and receive guidance. These artists would then later compete in a festival setting, and the winner would have a portion of the Foundation’s grant allocated towards a professionally supported staging of their production. These community-based artists were afforded optimum assistance.

In terms of collaboration with other entities, the MTF had made a deal with the South African State Theatre in the previous year, to provide the winner the opportunity to showcase their work at the State Theatre for a three-week season. The winner was remunerated for the six weeks of production, which could be considered a month and a half’s worth of employment opportunity. The Market Theatre had also taken on one of the State Theatre’s productions for showcasing for a season, as reciprocation. The production by the State Theatre was nothing like the Market Theatre productions, and as a result, there had been an increase in ticket sales, indicating that patrons were excited to watch the production. This revived engagement with the public.

The Windybrow Arts Centre and the Photo Workshop and Laboratory also facilitated workshops to develop inner city youths. The fees they charged were nothing compared to the costs it took to facilitate them. This was, of course, subsidised by the grant received from the DSAC, with the intention of reaching out to marginalised communities.

She said accreditation would generate more funding from institutions such as the Sector Education and Training Authority (SETA) for costs such as bursaries.

Ms Sibande said that the Gauteng government did not donate any amounts towards the Foundation, but it was mentioned as part of the entities that had a mandate towards communities, despite the level of needs by the communities outnumbering the resources. In the event where collaboration was possible, engagements were had with the Gauteng government.

Ms Jemsana, COO,  addressed the financial aspects of the Foundation. She said that when it came to surplus amounts, the MTF followed the Treasury route by applying to use them elsewhere in the budget, and the previous application had been granted. The surplus amounts were used for replacing assets that were no longer in working condition, and for production costs, as per approval by National Treasury.

Regarding the unused conditional funding, she said that the fund was mainly from a grant by the DSAC for capital works. R38m had been allocated for the Barney Simons Theatre refurbishment, which commenced in February, and R6.3m was allocated to the Windybrow Arts Centre. Of R63m, R56m was for DSAC capital grants. The remaining grant was for maintaining the rest of the Market Theatre facilities. Other funders included Atterbury and Open Society.

To answer the question on findings regarding irregular expenditure, Ms Jemsana said that an audit implementation plan had been adopted and monitored by the Board and the audit committee. There had been attempts to address the findings on irregular expenditure by centralising procurement to ensure they could pay closer attention to the proceedings.

A standard operating procedure to address the weaknesses identified in the audit report has been developed. The Foundation’s supply chain policy had been reconsidered to ensure it addressed its current challenges.

DSAC's responses

Ms Khumalo said she had network issues, but would try to resume.

In her view, the MTF had addressed all of the questions, but the DSAC wanted to add to the response to the question about entity collaboration. She said the Department also played its role in facilitating collaboration through avenues such as the Performing Arts Institution Forum, which allowed for the management of performing arts entities to come together. Another form of facilitation was the CEOs' Forum, which cuts across the different categories of entities which fall under the DSAC. These forums were considered platforms for the management of performing arts entities to exchange ideas on good management and operational procedures.

Ms Khumalo said that the presentation by AGSA would hopefully provide insight into the Department’s approach to the auditor's findings.

Follow up questions

Mr J Mamabolo (ANC) asked the MTF how they dealt with the proposals they received.

He also asked about a litigation issue surrounding the actor Sello Maake ka Ncube. What was the matter about, and why was he being taken to court, seeing that he had taken the MTF to the Commission for Conciliation, Mediation and Arbitration (CCMA) on allegations of discrimination?

He questioned the MTF’s strategy to attract black audiences, particularly the youths, towards theatre.

Mr Mhlongo said that his question regarding the individual remuneration for Council members had not been answered, since no figure had been given.

He also asked how the MTF’s committee monitored supply chain issues. What was the committee doing to remedy the situation around irregular expenditure? Did any consequence management exist?

He added that issues regarding litigation from the prior committee had not been addressed, seeing that there were still issues with the MTF. How much was spent on the litigation addressing historical issues?

Follow-up responses by MTF and DSAC

Mr Le Roux said he could not answer the questions regarding the litigation costs due to not having enough information, as he did not know the operational costs. He asked that the CEO answer on his behalf. He reiterated that the Legal Governance and Ethics Committee had managed to resolve many disputes, including the Mr Gumbi case that was now in the police's hands.

Ms Sibande stated that only two legal matters were still pending. The first involved an old Windybrow Arts Centre contract that had been awarded before the centre’s amalgamation with the Market Theatre, whereby a tender for approximately R22.7m had been awarded to a company to refurbish the centre at the time. The contract was found to be irregular, and upon amalgamation, the Market Theatre had sought to recoup the amount that had been made to the contractor, the MTF won the judgment of the case, and the company in question would pay back all the money with interest that had been paid to them by Windybrow. The matter was still ongoing and awaiting finalisation.

Mr Le Roux advised Ms Sibande against mentioning names, as the minutes of the meeting were public record, and some cases had not yet been concluded.

Ms Sibande addressed the Mr Gumbi matter by stating that the Foundation sought to recoup R40 473, and only R11 500 had been spent on legal fees. There were deliberations within the Theatre’s Council regarding how much was to be spent on legal costs, but the Gumbi matter was now in the hands of the police.

Ms Sibande said the CFO would provide the numbers on individual Council members’ remuneration.

Ms Sibande said it would not be wise to delve into the details of the Sello Maake ka Ncube case, seeing as it was ongoing. However, she confirmed the allegations of discrimination made by Mr Maake ka Ncube.

Mr Mhlongo raised a point of order, reminding the MTF that Parliament was a public platform, and that sub judice cases were well worth being discussed instead of being restricted, as Mr Le Roux had advised. It was suspicious to hide information.

Mr Mamabolo interrupted, agreeing with Mr Mhlongo, but was called to order by the Chairperson.

Mr Le Roux recognised Mr Mhlongo’s point of order. He said that all questions posed by the Committee would be answered without restriction, and further explained the proceedings of Mr Maake ka Ncube’s case. He said the Market Theatre respected Mr Maake ka Ncube, and had responded to his complaint at the CCMA. If there were any more matters requiring a response, they would be dealt with then.

Mr Mhlongo that his follow-up questions regarding the Council remuneration and the Market Theatre’s audit Committee and their purpose, had not been responded to.

He asked that no artists be given favours when discussing lawsuits, because it was expected that Parliament remain neutral, just as it had in previous discussions regarding prominent artists such as Arthur Mafokate. How much had been spent towards the litigation surrounding Mr Maake ka Ncube?

The Chairperson asked Members to be brief in their questions, since the AGSA was yet to present.

Mr Mamabolo asked whether the Sello Maake ka Ncube matter could not be settled out of court, and asked that his question on the attraction of black audiences to theatre be answered.

Ms Jemsana reiterated that it was not the intention of the MTF to hold back information, but rather that they were not aware of what they could and could not share on the platform.

To give context to Mr Maake ka Ncube’s case, it originated from the appointment of the artistic director in July 2022. After interviews within the communicated timeframes, the candidates that were interviewed and did not make it were informed by the Market Theatre’s HR department in November 2022. It was here that Mr Maake ka Ncube felt discriminated against, as a self-perceived appropriate candidate due to his age, so he decided to take the matter further to the CCMA. All the communication had been with the Theatre’s HR department, with the guidance of the CEO and the HR committee head. A series of conciliation meetings were held, with the first being at the beginning of February. It had been at this first meeting where Mr Maake ka Ncube informed the Council that he had felt discriminated against in the interview process, which he had previously claimed was fair and transparent, and he would escalate the matter. After deliberation, and an extension, a follow-up conciliation meeting took place on 3 April at the CCMA.

Only after the last conciliation process had the MTF appointed attorneys to assist with finalising the matter, and the only invoice received amounted to about R5 000.

The last communication was from the last conciliation meeting on 3 April, where the parties involved could not find each other, so the matter had been taken to the Labour Court.

The Chairperson expressed gratitude to the DSAC and the MTF, and was about to call upon the AGSA to make their presentation, when Ms Jemsana interrupted, asking to address another question, and for the CFO to address supply chain queries.

Mr Greg Homann, Artistic Director, MTF, responded to the question regarding proposals received by the Foundation, and said that 91 unsolicited proposals had been received, and that there was a working document with all the specifications of the criteria for a proposal that the Foundation followed. It was this working document that determined whether proposals would be approved or not.

The establishment of an advisory committee to the Artistic Director was also underway, and this committee would assist in reviewing proposals to ensure collective, thorough and transparent election processes.

There were also current callouts for artists' proposals with regard to play programmes, which had been advertised with clear indications of the criteria. Applications were encouraged from people from all walks of life, in any South African language, to promote diversity. There were systems in place to accommodate this. The 47-year legacy of the MTF was heavily reliant on diversity and telling relatable stories about the city and the everyday lives of its dwellers.

Regarding attracting black audiences, Mr Homann said that it was through this diversity and relatable stories that over 60% of the audiences were demographically black. There was also collaboration with other African entities, and discussions were underway with the Zimbabwean and Ghanaian Embassies regarding future projects that would be beneficial to the continent. It was thus made clear that attempts to draw in black audiences were being made.

Mr Mlungisi Mkhayiphe, CFO, MTF, addressed the rate per meeting for individual Council members:

• The Chairperson of the Council received R2 172 per meeting;
• The Vice Chairperson received R1 974 per meeting;
• An ordinary Council member received R1 795 per meeting.

These were rates published by the Treasury. There were also payments made for meeting preparations, and meeting attendance.

Regarding irregular expenditure, action was taken against parties found guilty of infringing on the regulations regarding the supply chain and other factors. Written warnings were issued, and the procurement was centralised to ensure that there was compliance with supply chain regulations at all times.

Ms Vikilahle expressed gratitude for the opportunity to come before the Portfolio Committee to account, and thanked the DSAC for its support. She concluded by inviting the Portfolio Committee to one of the shows to see how the MTF worked.

The Chairperson expressed gratitude to the Department and the MTF, and said that the Committee would appreciate an invitation from the Market Theatre.

The Chairperson stated that despite the risks and challenges displayed in the Market Theatre’s annual report, there was proof that the MTF continued to fulfil its mandate, and contributed to the growth of the performing arts sector. There was thus a need for the entity and the Department to implement tax incentives for the sector as a whole. This would potentially mitigate challenges currently experienced by the sector, and help generate revenue beyond government subsidies and project funding.

DSAC 2023/24 Annual Performance Plan: AGSA input

Ms Mbali Tsotetsi, Deputy Business Executive, AGSA, said that the AGSA had brought forth more insights than required for the Committee. The presentation would focus on the status of the record reviews done on the Department and some matters relating to the entities under the Portfolio of Sports, Arts and Culture. There would also be a consideration of material irregularities and processes in line with the Public Audit Act, and feedback provided on APP reviews and insights as requested.

Ms Tsotetsi made mention of the incorporation of a new strategy known as Culture Shift 2030, which was in its second year of implementation. This strategy aimed to promote a culture of accountability, transparency, performance and ethics among the audit teams in the public sector. This would enable a sustained improvement trend for entities in their audit outcomes, and improved audit outcomes would mean improved lives for South Africans. The presentation displayed the accountability ecosystem, wherein the AGSA and the different tiers of governance and the public sector had a role to play.

Status of records review

The Status of Records Review was a tool implemented in previous years. It was used after the completion of audits and presentations of reports, to assess the progress of departments or entities in responding to the AG’s findings. This review existed to assist the accounting officers in bridging any gaps before issuing financial statements and also to provide them with the status regarding their progress in implementing the plans prescribed to respond to issues. These were issued as a pre-warning to the accounting officers so that they could resolve issues in time.

The status of records review had been discussed with the DSAC's Acting DG only in late January, but reviews for entities were also in existence and would be discussed. Ms Tsotetsi said that the AGSA hoped that the Department had implemented all the recommendations prescribed to them.

Key insights on focus areas

The AGSA had focus areas that it had looked into as part of its review of the DSAC for the period until December 2022. Under procurement and contract management, the review of the procurement plan for 2022/23 highlighted several items that had passed the envisaged award date due to either outstanding terms of reference, or the terms of reference being in their finalisation stage. Some of the items that were not procured directly impacted the achievement of output indicators in the respective programmes regarding performance information.

Ms Tsotetsi said that the AGSA had taken notice of the Department’s failure to update the supply chain management (SCM) policy to cater for the significant changes contained in National Treasury instruction note 3 of 2021/22. It also noted that the Department had implemented a variation for its contract with an implementing agent, and that this variation was done through the National Treasury instruction note 3 of 2021/22. The total contract variation was above R20 million, and it was important for management to note that they were required to include the details of the variation in the annual report in the format determined by National Treasury, otherwise the failure to do so would result in non-compliance with NT instruction note 3 of 2021/22 and render a possible irregular expenditure.

The AGSA had also made note of the contractor for the JL Dube Amphitheatre vacating the construction site in June 2022 due to contractual challenges, which essentially involved poor quality work by the sub-contractor and a conflict between the contractor and sub-contractor. Management had been prompted to ensure that rigid project and contract management measures were put in place to avoid continuous delays in the completion of this project. The revised completion date was 30 November 2022, and has now been moved to September 2023. These delays would also affect achieving the targets for the number of heritage legacy facilities developed and maintained to transform the national heritage landscape.

There were also still delays in the completion of the construction of the Sarah Baartman Centre of Remembrance. A project execution plan had been developed, and it was planned to have a contractor on site by September 2022. The implementation was subject to signing of a memorandum of understanding (MoU) and terms of reference (ToR) to give effect to co-management of the project with the Department of Public Works and Infrastructure (DPWI). The AGSA noted that the MoU and ToR were signed only on 3 October 2022 due to some delays in finalising the approval of the assignment, which was an activity that was of necessity prior to the appointment of contractors to resume construction. As a result, no contractor has been appointed and the anticipated completion date has been moved to February 2024.

Ms Tsotetsi said that the AGSA recommended that the Department engage with the management of DPWI regarding these delays to prevent any variations for this project, and to meet the new anticipated date of completion.

Compliance management

According to AGSA, in the previous year audit report, there had reported instances of non-compliance with Treasury Regulations 8.4.1 under the audit of transfers and subsidies. This was because the second and third tranche payments were made to the entities or beneficiaries without obtaining relevant reports or supporting evidence indicating that the funds were used for the intended projects as agreed with the Department. The AG had thus advised the Department to strengthen its internal controls to prevent further instances of non-compliance in this regard, as these were likely to result in financial losses for the Department.

Ms Tsotetsi also addressed issues regarding the Department’s HR management. These included:

• The post of the Director-General being vacant since 1 September 2022, and that of Director: Internal Control and Compliance, since 1 April 2020.
• The vacancy rate for the Office of the Chief Directorate: Finance Management Services being 19.44%. These issues with the vacancies could lead to the Department’s inability to meet its financial and performance reporting objectives at the year-end. The vacancies could also negatively impact effective monitoring and review of internal controls.

Oversight and monitoring

For oversight and monitoring, it had been found that the internal audit was behind schedule in executing the internal audit plan because 53% (10/19) of the engagements planned to be completed between 1 April 2022 and 31 October 2022 were still incomplete. The new planned completion dates were in March 2023. Furthermore, the majority of the planned engagements that were completed were not done in time, as per the audit plan. The same matter had also been raised in the prior year, and there was the possibility of a recurrence of non-compliance with section 3.2.11 (a) of the Treasury Regulations.

The fraud risk assessment was finalised on 23 February 2023. With a month remaining before the financial year end, there was a possibility that the Department would not have sufficient time to ensure adequate controls were in place to address the risks of fraud and to implement the recommendations. Treasury Regulation 3.2.1 required that a risk assessment be conducted regularly to identify emerging risks of the institution. The Department was expected to adhere to this regulation.

Entities within the portfolio

For entities within the portfolio, Ms Tsotetsi made reference to seven distinct entities:

• National Heritage Council
• Boxing SA
• South African State Theatre (SAST)
• Iziko Museum
• Robben Island Museum
• Performing Arts Centre of the Free State (PACOFS), and
• National Library of South Africa

The similarity between all these entities was difficult to ignore -- they all had pending cases of either corruption and fraud, failure to adhere to set standards and regulations, investigations into financial misconduct, or supply chain management irregularities. 

Material irregularities

Ms Tsotetsi moved on to the section dealing with material irregularities (MIs). With the amendment of the Public Audit Act, it was possible to resolve matters surrounding material irregularities.

The concept of MIs referred to “any non-compliance with, or contravention of, legislation, fraud, theft or a breach of fiduciary duty identified during an audit performed under the Public Audit Act, that resulted in, or was likely to result in material financial loss, or the misuse or loss of a material public resource, or substantial harm to a public sector or the public in general.”

There were four distinct steps in the MI process:

• An entity dealt with MI and had recommendations of actions from AGSA, which it implemented to address the MI and improve controls to prevent a recurrence. The AGSA would then follow up in the next audit to check if the actions had been implemented and if the outcomes were reasonable. If not, recommendations could be included in the audit report on how the MI should be addressed by a specific date
• The MI would then be referred to a public body and entities would have to cooperate with the public body and implement any remedial actions/recommendations made. This would improve controls to prevent a recurrence. The AGSA would then provide information on the MI to the public body, monitor progress with an investigation and follow up in audits on the implementation of any remedial actions/ recommendations
• Recommendations would be included in the audit report for entities to implement by the date stipulated in the audit report. The AGSA would then follow up by stipulated dates to see if the recommendations had been implemented and if the outcomes were reasonable. If not, it would issue remedial actions to entities to be implemented by a specific date.
• Upon issue of the remedial action, the action would be implemented by the stipulated date. If not implemented, the AGSA would issue a notice of intention to issue a certificate of debt (CoD) to the entity, and request a written submission of reasons not to issue a CoD within 20 working days.

The nature of material irregularities  identified at the national and provincial governmentd were listed as:

• Procurement and payment issues
• Resource management inadequacy
• Revenue management
• Interest and penalties
• Fraud and non-compliance
• Misuse of a material public resource
• Harm to public institutions

Impact of MI

As an effect of MI, 179 material irregularities on non-compliance and fraud resulted in;

• Material financial loss (estimated at R12 billion);
• Substantial harm to a public sector institution;
• Misuse of a material public sector resource.

It was also noted that no action had been taken to address 82% of these matters until the AGSA had issued notifications.

However, actions taken by auditees have resulted in:

• Preventing a loss of R636m;
• A pending recovery of R509m; and
• A financial loss recovery of R14m.
• Those responsible for MI being identified and disciplinary processes being completed or in process;
•  Fraud/criminal investigations being instituted; and
• Supplier contracts, where money was being lost, had been stopped.

Material irregularity identified at DSAC

The AGSA notified the DSAC of an MI in October 2022. The MI was inefficient use of resources, therefore resulting in no benefit derived from the cost. The Department had made transfer payments amounting to R7.5 million to a beneficiary for implementation of a project in broadcasting. The Department had not implemented timely and appropriate procedures to monitor the usage of funds by the beneficiary. No evidence could be provided to confirm that the funds were used for the project as agreed between the Department and the beneficiary. This resulted in non-compliance with Treasury regulation 8.4.1. and a financial loss of R7.5 million to the Department.

Upon notification by the AGSA, the Department took appropriate action, concluding a forensic investigation into the matter.

The recommendations of the investigation report were being implemented.

Objectives of annual performance plan review

The purpose of the review was to:

• understand the process followed for the preparation and revision of the five-year plans, strategic plans and final draft annual plans (APP);
• assess the measurability, relevance, and quality of the indicators and targets planned for the scoped-in subject matter(s) in the final draft annual plans;
• assess the completeness of relevant indicators relating to core functions prioritised for the scoped-in subject matter; and
• enable insights to accounting officers, executive authorities and oversight through discussions of the proactive findings raised.

Ms Tsotetsi further discussed the APP review findings, which could be found on slides 23 and 24 of the presentation.

Recommendations to improve audit outcomes

The overall recommendations to the accounting officer were to:

• Ensure that all the key audit issues reported in the status of records review under the key focus areas were timeously addressed.
• Implement without delay, all the actions required to address the material irregularity.
• Provide oversight over entities within the portfolio with a focus on proper and timely investigations into all instances of irregular, fruitless and wasteful expenditure, and the implementation of consequence management

Recommendations and commitments from the previous engagements

It was recommended that the Portfolio Committee should:

• Obtain and actively track commitments made, specifically in relation to the accounting officer (AO)/accounting authority (AA), implementing action plans and other corrective measures to ensure improvement in the portfolio audit outcomes.
• Continue engaging with all role players within the accountability ecosystem to ensure appropriate measures are taken to implement consequence management.
• Utilise preventative control guides developed by the AGSA to assist other oversight functions and ask relevant questions during their oversight.
• Assess the Department and public entities’ strategic and annual performance plans to ensure that auditees plan and deliver in line with their respective mandates.

Ms Tsotetsi concluded the AGSA’s presentation – see attached for full presentation

The Chairperson thanked all those present, and adjourned the meeting.