National Youth Development Agency on its 2012/13 Annual Report

Meeting report

National Youth Development Agency 2012/13 Annual Report briefing
Opening Remarks
The Chairperson congratulated the National Youth Development Agency (NYDA or the Agency) for achieving an unqualified audit report, and said that the previous NYDA Board laid the foundation for the Agency to perform very well and to improve on their performance. It was also significant that the Auditor-General (AG) found no material findings on the predetermined objectives on the Agency’s Annual Performance Plan.

The Chairperson noted that the NYDA accounted to the Ministry of Performance Monitoring and Evaluation in the Presidency and he noted apologies from both the Minister and Deputy Minister that they were unable to attend this meeting.

Mr N Singh (IFP) said that he had been informed that the visit to Pretoria by the Minister and Deputy Minister had actually concluded on the previous day, and he believed that they needed to be at the meeting, because of the seriousness of some matters concerning the NYDA, on which the Committee needed information.

The Chairperson said that the apology stated that they were not able to come due to the Cabinet Committee meetings in Pretoria. However, he would raise the concerns of Mr Singh.

Ms L Yengeni (ANC) believed that it was enough for the Minister and Deputy Minister to send an apology. The Committee had not made an issue on this in the past.

Mr B Bhanga (COPE) said that it must be clearly recognised that Parliament was accountable to the people, and entities and departments were accountable to it. It should be the political leaders who came to speak to Parliament about annual performance, but Parliament had gradually been accepting what was in fact not acceptable – namely that  political executives were not coming to account for their political responsibility. Ministers were expected come to Parliament to account on their political responsibility, according to the Rules of Parliament. He did not think the Chairperson was going far enough in stating that Mr Singh’s concerns would be conveyed; if the excuse was not true, it should not be accepted.

Ms Yengeni said that when the Minister and the Deputy Minister had apologised it meant that they respected the Committee and knew their responsibility. At the time the apology was sent they were attending to government work in Pretoria. She suggested that the Committee accept the apology, unconditionally. The Minister and the Deputy Minister had always attended the meetings in the past.

Mr Singh said that there was no problem about accepting and noting the apology, but his major concern was that when the Annual Report of the entity was being presented, and that entity was without a Chief Executive Officer (CEO) or a Board, it was imperative that the Executive should be present, listen and shed light on events. He was saying that it was unfortunate that neither was present. That should be noted and brought to their attention.

The Chairperson asked Members to agree that the Ministry had made an effort, even for a cancelled meeting. The concern would, however, be noted.

Mr Yershen Pillay, Chairperson, NYDA, thanked the Committee for the opportunity to present the 2012/13 Annual Report of the NYDA. The NYDA had been in existence for the past four years and was still a young and growing institution. In 2012/13 financial year the NYDA did not have a Board in place, and so there was a collapse in some matters, but the NYDA had tried to build on other strengths. The new Board that had been appointed by Parliament had managed to turn things around, in order for this Annual Report to be tabled before Parliament.

Ms Ayanda Makaula, Acting Chief Executive Officer, NYDA, outlined what would be presented, and noted that the NYDA had a total of ten key performance areas for the past financial year. It achieved 85% of the predetermined targets, 47 out of 55 Key Performance Indicators (KPIs) were achieved and exceeded, and only eight KPIs were not met, and most of these were only a few points short.

The NYDA’s role was to enhance the participation of young people in the economy, through targeted and integrated programmes. With regard to education and skills development, the Agency’s object was to promote, facilitate and provide training and development opportunities to young people to enhance their socio-economic wellbeing. The strategic outcome for those objectives was an improved and sustainable livelihood and opportunities for young people in South Africa.

NYDA was supposed to develop a body of knowledge and best practice in the youth development sector to inform and influence policy development, planning and implementation. In relation to partnerships and stakeholder management, the objective was to lobby key stakeholders to implement youth development programmes in accordance with National Youth Policy Communication and Advisory Services. The object of the communication and advisory services was to ensure access for the youth to information about various interventions aimed at improving the living conditions of young people, including information and career guidance services. Overall, the NYDA sought to achieve an enhanced enabling environment that promoted youth development in all sectors of South African society.

She said that the objective of the National Youth Service and social cohesion was to promote youth social dialogue and create opportunities for young people to serve their communities. The objective of the sports recreation and arts programmes was to ensure the promotion of sports, arts and culture and raise awareness on the economic value within the fraternity. The objective of the health and wellbeing programme was to improve the health and wellbeing of young people to allow them to productively lead fulfilling socio-economic lives associated with a responsible and sustainable nation. The strategic outcome was an enhanced sustainable social capital for young people between the age of 14 and 35 in South Africa in sports recreation and arts.

NYDA operations were to comply with applicable legislation and regulations governing a schedule 3A institution. The National Youth Fund had established a mechanism to enable the NYDA to raise funds for purposes of advancing and implementing programmes aimed at improving the livelihoods of the youth, in order to maintain an accountable, prudent and efficient centre for youth development.

Ms Makaula next set out the performance information, which assessed the participation of young people in the economy, aimed at increasing job creation, entrepreneurship participation, skills development, business and funding opportunities. The key performance indicator was the number of young entrepreneurs supported through non-financial support interventions (entrepreneurship awareness, business management skills, business consultancy services, mentorship, and market linkages). The target for 2012/13 was that 20 000 young entrepreneurs be supported. That target had been achieved and exceeded by 81%. (See presentation attached for more information)

She reiterated that the NYDA had been in existence for the past four years.  It was a young and growing institution. Over all the four years of existence, the Agency had maintained a record of unqualified audit reports from the Auditor-General South Africa (AGSA), which was far better than some older institutions. These reports did however indicate areas of improvement, through emphasis of matters and other reportable matters, but management had been working on them to improve the financial management and governance systems of the Agency. Significant progress had been made in addressing the reported deficiencies, but more still needed to be done and management and the board were committed to the achievement of clean governance.

She reiterated that the NYDA had an unqualified audit opinion, but there was one emphasis of matter – around material impairment of the loans. This marked a significant improvement in the financial management processes of the NYDA, given that it had six matters of emphasis in 2011/11 an two in the 2011/12 year. The high rate of impairment of loans was a consequence of the nature and character of the beneficiaries of the NYDA loans, who were high risk lenders, as well as the current global economic conditions.

Ms Makaula said that the loans impaired had not been written off, and whilst the current circumstances suggested that it was doubtful that the full or part of the loan amount may be recovered, the NYDA was still committed to pursuing all the beneficiaries to repay these loans. NYDA tried to ensure continuing support to beneficiaries, to ensure that they kept making profits, and where necessary it took legal action against the defaulters. A monthly portfolio report on the status of the loan book activity had been prepared and presented to the OpsExco, and in future this would also be presented to the Audit Committee and the Investment Committee of the Board to ensure constant monitoring of the performance of the loan book and the effectiveness of the recovery strategies.

She then commented on other matters. The misstatements contained in the annual financial statements presented for audit were mainly caused by the late conclusion of the valuation of assets report, and goods and services procured by way of deviations which the auditors did not accept. Furthermore they were affected by the outcomes of the investigations and the late compilation of the annual financial statements which led to limited reviews before submission by senior management. Some of the adjustments were identified by management after submission of the Annual Financial Statements for audit, when detailed reviews were conducted, and these adjustments were given to the Auditors. Lessons had been learned from this, and time tables on completion of monthly, quarterly and annual financial reports had been developed, with implementation being monitored and enforced by the Chief Financial Officer. A half-year financial statement was being prepared and in the next period, monthly financial statements would be prepared and presented to the OpsExco, Exco and Audit Committee.

Mr Ramukumba Khathuthelo, Chief Financial Officer, NYDA, commented on expenditure management. The irregular expenditure for the current financial year was at R62 million, but policies, processes and systems had been reviewed and amended to prevent irregular expenditure in future. Significant progress had been made in this regard, as irregular expenditure dropped from R133m in 2011/2012 financial year to R62m in this financial year. Oversight on compliance with Supply Chain Management (SCM) processes had been strengthened with the appointment of an experienced Senior Supply Chain Manager. Supply Chain Policies and procedures had been updated to comply with legislation and they would be approved by the Board in the next sitting, with training of all relevant staff members immediately to follow. An irregular expenditure report was prepared monthly and was presented to the OpsExco, Exco and the Audit Committee. The Accounting Authority and management had, subsequent to the audit, started instituting disciplinary processes against officials who caused irregular expenditure, and intended to continue with the practice.

He added to the comments on revenue management, and said that the Agency now had measures to ensure that it would collect revenue against loans advanced. Because of the nature of the NYDA loans and clientele, there was limited success. However, the NYDA remained committed to collecting all loans advanced, and a specific focus had been on the SME loan book, where defaulters were being referred to the Agency’s attorneys and taken through the legal process to recover the loans. He explained that the focus was on these, rather than micro loans, because in the latter the costs of recovering exceeded the amounts collected. However, NYDA still tried to engage with defaulters to get them to pay. This process would include pursuing third party sureties.

He explained that most of the expenses resulting in irregular expenditure were transactions that were above R500 000 that originated from contracts entered into by the former Umsobomvu Youth Fund. Almost all of them had since expired and new contracts were entered into, following the correct supply chain processes.

Discussion
Mr G Snell (ANC) said that the Committee should acknowledge that the previous Board of the NYDA had put the Agency in a difficult position, but it was the collective responsibility of the Committee to ensure that the current NYDA was monitored and assisted in achieving its goals. He asked what kind of corrective measures were put in place to change the character of the organisation He asked for some examples of how it was holding people accountable, and change management initiatives, to assist people to reach their goals.

Mr J Gelderblom (ANC) noted that R62m was noted as irregular expenditure for 2012/13 financial year, and asked what was done to ensure that those responsible were being held accountable.

Mr M Swart (DA) asked whether, given the information on slide 54, NYDA was not going to provide any loans in future. He also wanted information on the quality was of the targets reached and how this was assessed.

Mr M Hlengwa (IFP) welcomed the initiative of the new Board of the NYDA to try to sort things out in the Agency, but said that the NYDA still had far to go. He asked for clarity on to the procedure followed to dismiss the former Chief Executive Officer, who had approached the Labour Court.

Mr Hlengwa noted that the AG had emphasised, in his report, the issue of the 2010 Youth Festival. He had asked the Public Protector to undertake an investigation but she was complaining that she was not receiving the information that she wanted from the NYDA. He asked why this was so, and stressed that the Public Protector needed to conclude the investigation and her report, so that Parliament had a clearer picture of the credibility of the NYDA.

Mr Hlengwa noted the mention of people were getting loans on programmes, and asked if there were, as part of the new initiatives, an incubation programme to ensure that money was not wasted, and to ensure sustainability of that programme.

Mr Hlengwa said that the NYDA needed to have realistic targets to make maximum impact. He also said that young South Africans continued to complain that they were not able to access the NYDA, particularly those who came from rural areas, and asked that the Agency prioritise that.

Ms A Mfulo (ANC) asked if the matric rewrite programme covered those who failed matric only in the last year, or some years back as well.

Ms Mfulo asked the Agency to set its targets and programmes out more clearly. She wondered when it would achieve a totally clean audit; she also noted that it had said it wanted to achieve this but gave no indication how. She asked how NYDA would strengthen its capacity for supply chain management and financial control within the Agency, because their plan was not clear.

Ms Mfulo asked how many permanent jobs  had been created by the Agency, and how it was filling vacancies. She wondered if any programmes catered for women and people with disabilities, and how many of them benefited under these programmes. She wondered why the programmes seemed mostly to be benefiting people from Gauteng, and asked if this was because its offices were in Gauteng. She urged that there be a geographic spread so that people in rural areas could benefit from the services of NYDA.

Mr B Bhanga (COPE) said that the irregular spending of R63m was not good for the entity, although it had received an unqualified report. He asked that this must be addressed to understand the reasons behind it, and achieve improvement. In regard to the limitations now pointed out by AGSA, on irregular expenditure, he urged that these be worked upon; the same problems had been recurrent, and wondered if the same interventions were needed again, or new ones.

Mr Bhanga said that the Chairperson of NYDA had mentioned that there was good work on publications, but he wondered whether NYDA had managed to quantify what its interventions actually achieved by way of impact. He asked if NYDA was able to know if every government department was contributing to the issue of youth development, and whether it invested in programmes in each and every government department. He also asked what NYDA was doing to partner with private sector. It could not be left to government alone to address the burden of youth unemployment and the private sector should come on board. NYDA should be attractive to the private sector, including international donors.

Mr Bhanga asked whether the Agency was getting briefings from the Hawks or the Public Protector on the progress of the investigation into the Youth Conference hosted by NYDA, to report further to the Committee.

Ms R Mashigo (ANC) asked for clarity why the Agency did not follow proper processes as laid down by National Treasury with regard to the procurement of goods above R500 000.

Ms Yengeni commended the report from the NYDA and appreciated that it was learning from its mistakes and promising the Committee to do everything in its power to clean up its image and bring credibility to the organisation.

Ms Yengeni noted that Mr Hlengwa had stated that the NYDA was not cooperating with the Public Protector, which was the reason for the delayed report. However, she pointed out that this was not information that had been given to Parliament, and it would be unfair if he, as the person who called for the investigation, raised other matters not yet before Parliament.

Mr Bhanga wanted to raise a point of order.

The Chairperson asked that he allow Ms Yengeni to finish her point.

Ms Yengeni continued that she had tried to check with Parliamentary staff whether the information raised by Mr Hlengwa had come before Parliament, and if it had come, then she would withdraw her comment. If not, then she felt that the matter should not be entertained, until the necessary information was before Parliament formally, not by way of media statements.

The Chairperson said that he had allowed questions to be raised, but on page 38 of the Annual Report, the question was discussed; the Public Protector’s investigation was probing if the hosting of the Festival of Youth in December 2010 was within the mandate of the NYDA. He said that whilst Members would be robust in engagement with NYDA, they must be fair and concentrate on questions relating to the Annual Report. The Agency would have to report back on the Public Protector issues. This was an important process for all Members of the Committee.

Mr Bhanga said that the NYDA came as a government entity and was capable of responding to the questions asked by Members and Parliament should, as it did with government officials, give them space to respond where they could. It was not proper, when a controversial issue was raised, for some Members to shield the presenters from answering. He pointed out that this was not the first time that the NYDA reported n the Public Protector matter, and the investigation was an ongoing matter. He merely wanted to know if the board was withholding information – yes or no would suffice.

Ms Yengeni maintained that the Committee could not discuss something that was not tabled before Parliament, as Mr Hlengwa said he got the information from somewhere else.

The Chairperson said Members should allow the Agency to respond to questions raised by Members.

Ms Mashigo was of the view that NYDA should not respond to hearsay information, but speak to  what was on the Annual Report.

Mr Hlengwa complained that he did not understand why it was alleged to be “hearsay”.

The Chairperson asked for NYDA would respond to questions; Mr Hlengwa could speak again if he was not happy.

Mr Naidoo appreciated the constructive criticisms and recommendations, which would help the entity to be stronger in future

Ms Makaula answered on the matric re-writes, who were those who wrote and failed matric in 2012. The NYDA was focusing on those who failed four subjects or more, but who qualified to re-sit. The trend of failures was seen in Mathematics, Physical science, English and Business Management, but a breakdown could be provided.

She said that the jobs made available were permanent jobs and there was ongoing research on how young people were placed in jobs. The indicator was confirmation from the placement officer or the organisation itself, which would report on how many met the criteria to be placed permanently. The data could also provide details on the length of the job.

She appreciated Mr Swart’s suggestion for formulation of a guideline on the qualitative indicators, which drove the manner in which NYDA reported overall. That was appreciated, because the IT systems and monitoring and evaluation mechanisms did not really drill down to quantitative and qualitative indicators, although the Annual Report listed most of the success stories. This would be included in the key performance indicators for the future.

Ms Makaula said, with regard to the involvement of government departments in youth development, that NYDA was working with the Youth Directorate and that report could be tabled very soon in terms of the investments and the interventions made by government departments.

She said that the Youth Fund Report had reported on R65 million of donor funding, and part of that was international donor funding. However, she agreed that the indicators should break down the private sector, government funding, and international donors, to give Members a greater sense of comfort around how the performance compared with partnerships across the board, as well as international partners.

In relation to target setting, Ms Makaula said that part of the target setting was informed by the budget and the resources at NYDA’s disposal. At the beginning of the financial year, it may not be aware that R10 million would be coming from the Skills Fund, and that was why there were over-achievements seen on some targets. Donors or partners may find out, in the middle of the year, that a particular project or programme was making a significant impact in the life of the young people, and when they noted this, they would give funding. However, the NYDA had decided now that, as part of their strategic review training process at the end of October, it would develop a list of private sector, public sector as well as international donor funding, to ensure that there was full engagement with the funders not only to report, but to try to secure funding in advance for the next financial year.

The Deputy Chairperson of the NYDA said that he would report on the dismissal of Mr Steven Ngobeni, the former Chief Executive Officer, but without expanding on the merits and demerits of that case, especially on the issue of procedural fairness, because it had been in the public domain for quite some time.

The Chairperson interjected that he would prefer that the NYDA not go into this at this meeting. It had to first report formally to the Minister, and only thereafter to the Committee. He could also foresee a number of questions being raised.

The Deputy Chairperson said that the board was satisfied on that, but wanted to place on record that the board was satisfied that procedural and substantive fairness were followed. In due course, it would respond to all the issues raised by Members and that were in the public discourse.

Mr Khathuthelo responded to the financial questions. The NYDA was no longer providing loans or financing in the same way, for entrepreneurship enterprise development, but was now offering a programme called “Grant Funding of the NYDA” which encompassed mentorship and partnerships, and there was no young person that would be turned away.

He answered that there were a number of issues around the procurement of goods above R500 000, particularly the issue of capacity within the Supply Chain Management Unit. There were interventions by way of disciplinary procedures against the SCM staff, and the NYDA had tried to bring in external assistance from supply chain management experts. The intention was to capacitate and train all SCM staff adequately. Adequate action had been taken there, and the NYDA was continuing to prioritise training in that environment when moving forward. Further to that a senior manager had been appointed and had just started work, but the results were already seen, with more compliance and a drop in irregular expenditure.

Mr Pillay said that the Audit Committee of the Board was capacitated to deliver more checks internally, and that too had led to positive results.

The meeting was adjourned.