Marine and Living Resources Fund Annual Report 2008/09

Water and Sanitation

09 November 2009
Chairperson: Ms M Sotyu (ANC)
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Meeting Summary

The Department of Environmental Affairs’ Marine Coastal Management unit offered a presentation on the Marine and Living Resources Fund's (MLRF) Annual Report for 2008/09. Uncompleted targets for the Fund included an uncompleted policy on subsistence and small-scale fisheries, and its inability to review 40% of the commercial sector. Nonetheless the Fund had managed to meet its targets in a number of other areas, including research on management of coastal resources and rebuilding of fish stocks, efficient monitoring of fisher landings, fishery feasibility studies, and engaging international agreements and commitments.

The Chief Financial Officer of the MLRF, presented the Fund's financial performance for 2008/09. Notably, the Fund had received an unqualified Audit from the Auditor-General for the second time, after notable fiscal mismanagement in earlier years. The fund's net surplus had decreased over the previous year, and the largest costs were in transportation and vessel operating costs. There was also a notable decrease in income from levies. Nonetheless, the Treasury had indicated that it would allow the Fund to keep its surplus in order to meet its current financial commitments. There were other discussions ongoing with National Treasury to try to find other ways of perhaps increasing levies, or using alternative methods both to drop the costs and increase the revenue, but nothing concrete had yet emerged.

Discussion by Members centred on the future of the MCM as an agency, future measures to raise revenue and lower costs, controversy surrounding conflicts in interest, development and promotion of small-scale fishing communities, particularly in aquaculture, new European Union documentation requirements, and the effects of poaching and climate change on fishing. Members also asked about those instances in which there was potential conflict of interest, and was briefed on those conflicts that arose after the tenders or appointments had been finalised. Members were also interested in the effects of climate change, the causality factors, and whether poaching was exacerbated also by foreign poaching. Members were also concerned with what was being done in cases where poaching was found. The Department indicated that the ideal situation would be to set up special courts. Members also questioned the fruitless expenditure mentioned in the audit report, asked whether the Fund had initiated training programmes to foster their own needed skill sets, and reduce reliance on consultancies, and asked about transformation targets.

Meeting report

Marine and Living Resources Fund (MLRF) Annual Report 2008/09: Department of Environmental Affairs (DEA) briefing
Mr Monde Mayekiso, Deputy-Director, Department of Environmental Affairs: Marine Coastal Management (DEA-MCM), introduced the Marine and Living Resources Fund (MLRF or the Fund) and set out its primary objective of promoting the conservation and sustainable use of marine and coastal resources. To this end, the fund aimed to manage the development, sustainable use, and orderly exploitation of marine and coastal resources whilst protecting the integrity and quality of marine and coastal ecosystems.

He presented a performance rubric by which to gauge the Fund's progress against its targets, first addressing issues pertaining to the equitable and sustainable use of natural resources.

The MLRF's objective of publishing a policy on subsistence and small scale fisheries policy by July 2009, as ruled by the Equality Court in November 2008, was not realized, due to a range of factors. Initial progress included the gazetting of a second Draft Policy on12 December 2008, and the holding of public meetings in January for fishers to submit comments by March. Issues highlighted centred largely on declining fish stocks, although requests to include Wild Coast Rock Lobster (WCRL) and Traditional Line-fish would also be subjected to the current court challenges. Generally, there was a lack of consensus on the content of the Policy.

The MLRF was similarly unable to reach its target of producing a performance review for 40% of the commercial fishery sector. A Service provider was appointed, and a project plan was finalised, a cluster workshop was held in February 2009, there had been a review of documents and instruments, and Key Performance Indicators (KPIs) were drafted. However, due to tight time frames and the complexity of the sector, the review could not be completed. Nonetheless, a revised target of producing a performance review of 70% of commercial fisheries by the end of March 2010 had been set.
 
The MLRF was partially able to achieve its objective of finalizing a National Plan of Action for seabirds and sharks. While this was achieved for seabirds, only a draft had been prepared for sharks, although finalisation of this policy should occur by December 2009.

The MLRF had reached its goal of finalising a policy for allocation of Boat Based Whale Watching (BBWW) and White Shark Cave Diving (WSCD) rights, and a Gazette Notice had been published.

It had also reached its target of finalising a policy on commercial rights transfer and application processes, despite some delays, had acquired Ministerial approval, and would expect implementation to commence in the 2009/10 financial year.

In building a sound scientific base for effective management of marine and coastal resources, the Fund had also seen some notable progress in research. Research on catch and / or effort limit for twenty-one fishery sectors was completed, including survey and stock assessments, and total allowable catches/efforts recommendations were put out. Research on the optimal non-consumptive use of great white sharks, humpback whales and turtles was also completed.

In terms of rebuilding depleted fish stocks, a research and management and compliance strategy for hake and abalone was finalised, and a strategy for implementation was initiated. Progress so far had included a 20 hour coverage of abalone ecosystems being maintained, and tonnage of poached abalone had been reduced from 64 to 43 in 2009. Arrests on poachers had similarly increased by 194% from 185 to 514. Nonetheless hindering factors included the restriction of funds for hake research to stock assessment surveys, and a lack of sophisticated surveillance equipment to monitor abalone poaching.

In ensuring compliance with marine and coastal legislation, it was noted that the target of monitoring 30% of landings in 3 key fishery sectors, specifically WCRL, Hake LL, and Pelagics had been met and exceeded. 100% of landings in pelagic, hake long line, SCRL, WCRL and 30% of landings in deep sea trawl and tuna had been monitored. Moreover, vehicles, slipways, FPEs and restaurants were inspected and cooperative initiatives with the SAPS' organised crime intelligence unit were initiated.

In the feasibility assessments of two fisheries Mr Mayekiso said that there was some success with the re-launching of an octopus fishery and the completion of a feasibility study on deep water Natal rock lobster. However, targeted stakeholders lacked the capacity and resources to invest in the octopus fishery and, despite conducting some experiments, the Department was unable to pronounce on sustainability of fisheries.

Mr Mayekiso noted that in respect of efforts to ensure an enabling environment for growth and development of marine aquaculture, research into three species and two pilot projects were launched. These included feed experiments completed for silver kob; a research report completed on the reproductive cycle of scallops; and research initiated on gonad enhancement of sea urchins. Moreover a Marine Aquaculture Policy and Implementation Plan was finalised, development of ranching guidelines were completed, recommendations were made to the SRPP on biological feasibility of pilot projects, and there had been preparation of a  final report for joint aquaculture research. The  Frontier programme with Department of Science and Technology (DST) was completed.

Mr Mayekiso then said that the Fund's targets for conserving biodiversity, and mitigating threats against it, were met. In terms of Marine Protection Areas (MPAs), the Stillbaai MPA was declared in October 2008, bringing the total number of MPAs to 20. Twelve of these were managed through contract by Provincial agencies, six by SANParks, one by Marine Coastal Management (MCM), and one by the City of Cape Town.

The Integrated Coast Management (ICM) Bill had been signed into law, as Act No.24 of 2008, and a draft implementation framework was developed. Moreover, marine and coastal climate change variables were identified, and a bi-annual State of the Ocean Reports was produced.

The MLRF conducted a review of marine and fisheries agreements and International obligations. Notable developments included South Africa's ratification of the SEAFO, and the outcomes of the CCAMLR and International Commission for the Conservation of Atlantic Tunas (ICCAT) were implemented.

The Fund also maintained annual engagements with regional and/or sub regional organisations, as outlined in the presentation. Additionally, a successful Southern African Development Community (SADC) patrol with Mozambique, Tanzania and Kenya was conducted in March 2009.

The Department noted that in order to increase marine and coastal economic opportunities, the recommendations for fishing harbours’ feasibility studies were adopted, but it was noted that implementation would be a long term project. Generally, policies were finalised and access was provided in line with policy objectives, although policy for subsistence/small-scale fishing had been delayed.

He also noted that the Fund had complied with all relevant public entity prescriptions.

Mr Saliem Mohamed, Chief Financial Officer, MLRF, continued to present the Fund's financial performance for 2008/09. He noted that the Fund, as it did last year, had received an unqualified audit from the Auditor-General. This was a marked improvement from previous years, since in 2005/06 the Fund received twenty qualifications for R247 million worth of misstatements, and in 2006/07 where the Fund received seven qualifications worth R26 million. As a consequence of those improvements, no negative key governance responsibilities were reported.

Plant and Equipment had increased by 96% over the prior year, representing an addition of R17 million in 2008/09, though this excluded vessels funded by government grants. Additions to intangible assets were primarily in computer software and totaled R785 000. The Fund’s asset inventory consisted primarily of confiscated abalone and shark fins, and included unprocessed stock in MCM stores and processors. The value of debtors at year-end had decreased by 56% from the prior year, largely due to an improved debtors’ management system and more aggressive debt collection. The liabilities totaled R62.4 million, representing a 12.6% decrease over the prior year. The composition of liabilities included R13.9 million in deferred income from the National Treasury, R13 million in donor funds, and R35.5 million in trade and other payables. In general, the total revenue increased by 12.9%, amounting to R337.8 million, and total expenditure increased by 22% to R312.1 million, indicating a 40.6% decrease in net surplus to R25.7 million. Nonetheless, the Fund obtained approval from National Treasury to retain the accumulated surplus for current and future commitments.

Generally, revenue decreased as a result of reduced income from chartering vessels, both due to increases in levies and fewer vessels being chartered. Nonetheless, other income increased by 31.2%; grants for vessel operating costs (VOC) increased by 85%, and overall confiscated fish and fish products, mainly abalone, comprised 6.5% of the total 2008/09 revenue budget.

The increase in expenditure was mainly due to increases in transportation costs, which increased by 31.3% due mainly to fuel prices, and other operational costs. This was incurred largely by staff travelling of R12.9 million and the use of government vehicles of R14.3 million. By far the largest costs were accrued in VOC, which accounted for R154  859 000.

There was also a 7% increase in the costs of consultancies, bringing the total amount expended on consultancies to R5.4 million. The main consultants were Ernst & Young, for a Harbour Feasibility Study, and the Resolve Group for a Fisheries Performance Review. He noted that outsourced services were utilised in areas where there was no in-house capacity. The main suppliers of outsourced services were Ingwane Consulting and Anchor Environmental Consultants as observers for the Ship Board Scientific Observer Programme; Nosipho Marine Services and SAB&T  to monitor commercial fish landings; Sheltam Aviation in aerial surveillance for oil pollution, and State Information Technology Agency for IT services.

He also noted that there was irrecoverable fruitless and wasteful expenditure of R2862 in interest incurred due to late payment of a supplier. This was fully reported and investigated by the Accounting Authority as required by section 51(1)(b)(ii) of the PFMA.

Discussion
Mr G Morgan (DA), said that while the financial statements were all in order, they only indicated that the Fund was aware of where its money was. He expressed concern over performance. Specifically, he asked if the Fund did not have enough income to fulfil its mandate, and where the increases would come from.

Mr Mohamed said that the issue of how additional funds would be generated was a heated one within the Fund. Discussions with the National Treasury yielded levy increases of 135%, although the Fund was asking for a 390% increase. For full cost-recovery to be made, another increase of another 109% would be necessary, though this had been mitigated by Treasury funds for vessels. He added that support from the Portfolio Committee and other MPs could help in lobbying for increases. Mr Mayekiso said that the Fund had also attempted to look for avenues other than levies to raise revenue and reduce costs, but this search had thus far not produced any results.

Mr Morgan then asked that the Committee be taken through the Fund's two pilot sites in its marine aquaculture programme, indicating the status, why these were selected, and how they would be managed.

Mr Mayekiso said that feasibility studies on four sites had been conducted, but the Fund's role had been limited to the technical selection of appropriate species, and as yet project partners had not been identified.

Mr Morgan then expressed concern over the Department's Marine Protection Areas (MPAs), saying that although though there were twenty in existence, it was questionable that they were achieving their conservation goals in such a way that they could be considered anything greater than paper rights.

Ms R Omar, Chief Director, Department of Environmental Affairs, said that MPAs began to be established eight years ago in line with the Marine and Living Resources Act, but targets were restricted to establishing the areas, and appropriate management strategies had not yet been finalised. The Department’s Marine Coastal Management section was looking to develop partnerships with other agencies.

Mr Morgan noted, in regard to the European Union (EU) catchment documentation programme, that the EU did not seem to be accepting South African fishing permits as sufficient documentation, and was demanding that documentation be much more extensive. He asked whether, in meeting these demands, an electronic or paper documentation system would be used.

Mr Mayekiso said that discussions with the EU had yielded partial recognition of the South African permit regime, and said that the DEA-MCM was looking to implement a combination of paper and electronic documentation forms.

Mr Morgan then asked whether MCM was to be turned into an 'agency' and what this really entailed.

Ms Noshipho Ngcaba, Director General, Department of Environmental Affairs, noted that at the moment the Department was in the contentious position of being both a player and referee in management and that this would need to change. The two main options available would be either for transformation into a fully autonomous agency, or a government compartment. As the latter would keep operational costs low, this was the one most favoured.

Ms H Ndude (COPE) said that in public hearings with fishing communities, concerns over climate change were raised, and asked what the extent of its effects had been.

Mr Mayekiso said that there have been increases in algal blooms, sulphur eruptions, greater variability in temperature and weather events, and changes in fish distribution. However, whilst climate change could be the ultimate source of these problems, it was very difficult to discern the causal sources of these changes, and therefore to find solutions for them.
 
Ms Ndude then noted that poaching by international fishing trawlers, particularly in abalone, had been going on for over fifteen years, and asked whether South Africa was effectively combating this.

Mr Mayekiso said he was not sure about statistical effects of trawlers, and would need to consult records. There was, nonetheless, little to no poaching being done by foreign companies in South African waters. However there were cases where joint ventures were done between South African and foreign companies, and many cases where foreign companies offloaded in South African ports.

Ms Ndude asked whether any areas where costs could be reduced had been identified.

Mr Mayekiso said that the Fund had been looking for ways to both increase revenue and decrease costs, particularly in avenues other than levies, but had not so far found any definite suggestions.

Mr J Skosana (ANC)asked why the 'fruitless' expenditure was made, why it was considered irrecoverable, and whether cost-recovery mechanisms could be implemented to prevent this in the future.

Mr Mohamed said that the fruitless expenditure was due to a misplaced invoice lost by an employee who had left by the time of discovery of the loss. As legal costs in prosecuting the transgressor would be higher than any costs recovered, the Fund deemed it prudent to accept the loss as irrecoverable, and this was accepted by the Auditor-General.

Mr Skosana asked what measures were being put in place to ensure the sustainability of fisheries.

Mr Ntobeko Bacela, Director of Inshore Fishing Management, DEA, said that if sustainability was to be prioritised, a change in policy would be necessary, and the Department would need guidance in this regard. There were particular conflicts between sustainability issues and empowerment of poor communities. Thus specific guidelines on Local Economic Development and national priorities would need to be spelled out.

Mr L Greyling (ID) said that there appeared to be controversial conflicts of interest in the Fund's appointment of consultancies, particularly when the same consultancies were being tasked with drafting and reviewing fishing rights for a fishing company in which they had shares.

Mr Mayekiso said that while it was true that there were cases which appeared to present a conflict of interests, such as his own son sitting on the board of a fishing company from February to August 2008, these had been declared, and there had not been overlaps in each other's tenure, meaning that decision making would not be compromised.

Ms Ngcaba added that the tenders had been issued before the consultancies had developed links with the fishing companies, and they could not be terminated after being issued. The Department was thus bound in this regard.

Mr Greyling said that subsistence fish policy had been insufficient so far, working solely on a process of 'exempting' small fisherman from certain regulations. However many were still being arrested, and the issue seemed to be almost completely ignored by the Fund.

Mr Mayekiso agreed that the exemption programme was insufficient, and that there have been proposals for a regionalisation of strategy. He further noted that the biggest problem areas were in linefish and lobster.

Mr Greyling then asked whether aquaculture was to be primarily a commercial initiative or one aimed to uplift small communities. He said that successful aquaculture initiatives for communities had been made, but that MCM was often seeming to block the projects.

Mr Mayekiso said that initially the programme had been developed for environmental and not development purposes, though a development policy was established in 2007. Whilst it was a laudable objective to uplift small communities, the nature of South Africa's coastlines rendered this approach difficult, particularly when identifying appropriate technology and management regimes.

The Chairperson said that R12 to R14 million seemed to be excessive for travel expenses, and asked why these costs were so high, and what was being done to reduce them.

Mr Mohamed said that in traveling, the Fund observed international best practices. The high costs were largely due to the need for over 800 staff members to cover large distances, so costs were mainly attributed to fuel. Some coordination measures were being made to make travel more efficient and reduce costs.

Ms P Bhengu (ANC) noted that effective environmental crime codes had not been established, and asked how criminal matters would be handled and processed.

Ms Ngcaba said that there did exist a serious problem insofar that the general criminal courts were too overloaded to review criminal fishing matters, and that specialised courts would need to be established.

Mr P Mathebe (ANC) asked whether the Fund had initiated training programmes to foster their own needed skill sets, and thus reduce reliance on consultancies.

Ms Ngcaba said that the Department only relied on consultancies for skills which were not core to its activities and which would be overtly costly to develop and maintain internally.

Mr Mathebe then asked why transformation targets had not been touched on.

Ms Ngcaba apologised for the oversight. She noted that transformation targets had been met, with 75% of staff being black, and 1.5% being disabled.

The meeting was adjourned.


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