Department of Environmental Affairs: expenditure, impact, achievements & challenges in 2009/10

Water and Sanitation

31 May 2010
Chairperson: Ms M Sotyu (ANC)
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Meeting Summary

The Department of Environmental Affairs briefed the Committee on its priorities and expenditure trends during 2009/10, which encompassed the then Department of Environmental Affairs and Tourism. The Department had managed to spend 98% of its budget and most of the remainder was related to capital expenditure that would take place in 2010/11. The Committee praised the DEA for its good work. It believed that the challenges DEA experienced would not recur in the 2010/11 year now that it had fully separated from Tourism and had its own budget although they agreed that the budget was far too small. The challenges experienced by the Department during 2009/2010 were:

▪ The announced split in the Department of Environmental Affairs and Tourism during May 2009
▪ Funding of two Departments from a limited allocation amidst increases in rates and taxes of 25%
▪ Accommodation allocation shortfall with relocation of Department of Agriculture, Forestries and Fisheries and Antarctica staff to the Waterfront
▪ Shortfall in compensation of employees costs for Marine and Coastal Management
▪ Costs for establishing IT systems for new Tourism Department
▪ Deficits by their entities, SA National Parks (SANPARKS) and South African National Biodiversity Institute (SANBI) as the expense of project developments had expanded past donor funding and reprioritisation.
▪ Use of money from Goods and Services had become thin and could not be used for reprioritisation going forward.

Members asked questions about adjustment estimates, reprioritisation of funds from Environmental Quality and Protection and Biodiversity, monitoring and budgeting for infrastructure, high spending on consultants, legal costs, conference travel costs and catering costs, BEE compliance, the cost of EPWP projects, Isimangaliso funding, generation of revenue for Tourism and MCM. Members also asked for clarity on the African Stockpile Programme, Green Legacy, the Buyisa-e-Bag Project and the investigation into the former CEO of the Buyisa-e-Bag Project.

Meeting report

Department of Environmental Affairs (DEA) expenditure, impact, achievements and challenges
Ms Nosipho Ngcaba, Director-General: DEA said that Vote 25 of 2009/10 had combined both Environmental Affairs and Tourism. As of 1 April 2010, Vote 29 had come into effect and encompassed Environmental Affairs only.

Ms Ngcaba listed the items that DEA had prioritised in its six programmes in 2009/10. Some of these included:
▪ Administration – provide IT and internal audits
▪ Environmental Quality Protection (EQP) – ensure compliance to legislation, improve waste and air quality management, establish a coherent approach climate change, increase turnaround time for Environmental Impact Assessment (EIA).
▪ Marine Coastal Management (MCM) – provide for South Africa’s research needs at Antarctica as well as Marion and Gough Islands.
▪ Tourism – provide for the needs of tourists in the hosting cities during the 2010 FIFA World Cup
▪ Biodiversity and Conservation – coordinate implementation and transfers to SANBI and SANPARKS
▪ Sector Services and International Relations – provide intervention and support to local government projects and international environmental affairs and ensure ‘greening’ for the 2010 FIFA World Cup.

In 2009/2010, 98% of the budget allocation was spent. The average expenditure per quarter was 25%. The increased expenditure in the first quarter (29%) was due to upfront payment of most transfers to its public entities, as well as to SA Tourism, to cushion the currency variation for their international marketing offices.

Ms Esther Makau, Chief Financial Officer: DEA, said that for all the programmes in 2009/10, original budget allocation for expenditure was R3.48 billion, with an adjusted estimate for R29.8 million, so that the final appropriation was R3.51 billion. Expenditure was R3.5 billion leaving a variance R7.3 million. Of this variance, R3 million was intended for roll-over for the Marine and Coastal Management Programme.

MCM was the most expensive branch due to the costs for the Antarctic Supply Vessel, replacement of the Polar Supply Vessel and Antarctic and Island research. R583 million was allocated to MCM. The adjustment estimate transferred to MCM was R41 million. The total of R621 million was spent. The R3 million not utilised from the allocated amount for the replacement of the Polar Research Vessel. They had requested National Treasury that this amount be rolled over for the Capital Programme. This was in order to provide funding throughout the replacement programme, in case the exchange rate resulted in funding shortfalls in further years.

Tourism was originally allocated R655 million, with an adjustment of R43.8 million and the total of R699 million was spent on promotion and development of the tourism industry.

Savings were acquired from the Biodiversity and Conservation Programme (R25.6 million) and Sector Services and International Relations Programme (R95 million) for reprioritising across the DEA. Reprioritisation of funds was R11.8 million for Compensation of Employees (salary increases), R11.7 million for MCM, R49.9 million for Property Management (office accommodation) and for funding of IT systems (transfer functions from the new DEA to the new DAFF). Reprioritisation for the SA Agulhas and helicopter services for MCM was R18.4 million and reprioritisation for Tourism was R30.3 million.

Reprioritisation had been important to achieve the 99.8% expenditure, but this shifting of funds disturbed the baseline of the DEA and added financial risk. These budget shifts had ensued for four years.

Consultant and Advisory Services totaled R147 million, Operating Leases (property) R90 million and Travel and Subsistence R72 million, (of which travel to 15th Conference of the Parties (COP 15) in December 2009 cost R18 million). Other Operating expenditure, comprising mostly Air Charter Services and International membership fees totalled R34.7 million.

Due to slow infrastructure development, a surplus was reflected in the financial statement at year end, resulting in National Treasury taking R56 million from SANPARKS and R36 million from MCM. DEA would request National Treasury that this money be reinvested for further infrastructure development.

The most significant transfer payments was for the Expanded Public Works Programme (EPWP) Projects which went to Sustainable Land Base Livelihoods, Working on Waste and Working for Tourism.

Total Donor Funding was R42 million and this amount was not expected to increase.

The challenges experienced by the Department during 2009/2010 were:

▪ The announced split in the Department of Environmental Affairs and Tourism during May 2009
▪ Funding of two Departments from a limited allocation amidst increases in rates and taxes of 25%
▪ Accommodation allocation shortfall with relocation of Department of Agriculture, Forestries and Fisheries and Antarctica staff to the Waterfront
▪ Shortfall in compensation of employees costs for Marine and Coastal Management
▪ Costs for establishing IT systems for new Tourism Department
▪ Deficits by their entities: the expense of development of projects had expanded past donor funding and reprioritisation
▪ Use of money from Goods and Services had become thin and could not be used for reprioritisation going forward.

The Chairperson said that DEA challenges and achievements would be more fully addressed in response to questions from the Committee.

Discussion
Ms Lovemore (DA) asked why adjustments in the Environmental Quality Protection and Biodiversity and Conservation Programmes reduced allocation of funds to these important programmes, especially since legislation for air quality management and climate change had been in the spotlight.

Ms Makau replied that according to Public Finance Management Act (PFMA) stipulations, the DEA could only move funds close to the end of the year. DEA had negotiated with each of the branches as to whether funds could be moved and where they could be used optimally. R21 million had been taken from SANPARKS to fund Tourism, which was not able to honour international contracts due to the rate of exchange.

Ms Ngcaba added that the DEA establishment was not well funded and there were also challenges with the recruitment of scarce skills where money had been allocated for projects. DEA had approached National Treasury and was given approval to reprioritise which thus led to the movement of funds from the EQP and Biodiversity branch.

Ms Lovemore asked if the DEA had assessed what EPWP actually cost, as reprioritisation for office accommodation probably also included employment of staff.

Mr J Skosana (ANC) asked what projects were implemented under the EPWP, specifically in the rural municipalities and if these were sustainable, permanent projects.

Ms Ngcaba replied that EPWP programmes were costly. DEA coordinated the various programmes and, together with Public Works, would make a presentation to the Committee on these.

Ms Lovemore noted that some institutions were funded but others, such as the Institute for Waste Management, or Earthlife Africa, were not funded. She asked how the DEA selected which nonprofit organisations (NGOs) or non-profit associations it funded.

Ms Ngcaba replied that in previous financial years, the Institute for Waste Management had been engaged by DEA. The DEA worked from a database of NGOs and Environmental Awareness Programmes and focused on programmes depending on what had been approved according to a business plan and agreed upon with the entity.
 
Ms Lovemore asked for clarity on the purpose of the African Stockpile Programme.

Ms Ngcaba said that the African Stockpile Programme fell under the Environmental Protection Programme and was responsible for assessing and dealing with listed chemicals such as DDT and other pesticides which were damaging to the environment. The programme assessed which areas had stockpiles of contamination and dealt with the issues of rehabilitation and possible condemnation of the land. The World Bank was DEA’s implementing agent on that programme.

Ms H Ndude (COPE) asked how much DEA was receiving in revenue from SANPARKS, a cash generating entity which received revenue from tourists.

Ms Makau said that SANPARKS was a viable self-funding entity, which was funded by DEA by about 25%.

Ms J Manganye (ANC) asked if there was a system for monitoring expenditure, as DEA had presented that it did not have adequate funding for running the DEA, but money for infrastructure was returned to National Treasury.

The Chairperson asked why infrastructure funding was budgeted for when each financial year it was not used. She questioned why plans were not in place to prevent the problem of unused funding processes from occurring.

Ms Ngcaba explained that negotiations around land caused delays and according to PFMA, funds had to be rolled over for the following year. Land acquisition and implementation of the Protected Area Expansion Plan, which involved identifying grassland protected areas and prioritising biomes, involved negotiation processes with SANPARKS and Land Affairs. Delays were inherent in this process and though funds were committed once a public entity demonstrated commitment and a plan for a particular area, they were not released until all agreements were signed. Thus the money was not sitting unspent. Public entities operated on accrual based accounting.

The Chairperson asked if all the institutions which were funded, such as SANPARKS and SANBI, could present on their progress.

Ms Nbcaba replied that these Public Entities presented their revenue plan each year to DEA, which were then presented to National Treasury. These entities would be requested to present detailed information to the Committee.

Ms Lovemore said that the Annexure outlined legal costs to the extent of R1.1 billion. She asked if it was budgeted for and how it was spent.

Ms Ngcaba explained that DEA outsourced legal services for contracts, administration, legislation and legal opinion as well as engaging with the Department of Justice. Further detail would be provided to the Committee if requested.

Ms Ndude asked for detail on the R147 million spent on Consultation and Advisory Services and at what point DEA planned to reduce use of these services.

The Chairperson said that the R147 million spent on consultants was too much. She commented that the DEA should not keep those who did not have the skills required for the job. She asked who the consultants were and how many of them had BEE status.

Ms Ngcaba agreed that this was a huge amount of money but the nature of the work necessitated that a permanent position for a specialist could not be justified or afforded. For Weather Services for example, in terms of the Act, an independent regulator was required to advise the Minister on the tariffs and external expertise was required to take those in the industry through the process. External expertise was also required for adjudication of EIAs. Smit Amandla Marine (R61 million spent on consultants) also required expertise for maintenance of vessels. DEA had approached National Treasury on how best to transform Smit Amandla in terms of having black participation and growing expertise in DEA. It was found that in the long run, DAFF would have to carry constant costs over time. A joint session with National Treasury revealed that South African Maritime Safety Authority (SAMSA) would also incur costs over time in addressing this issue. DEA agreed that outsourcing should be minimised but would present a plan on use of consultants for the present financial year and discuss it with the Committee.

Ms C Zikalala (IFP) asked why DEA transferred such a small amount to Isimangaliso.

Ms Ngcaba replied that Isimangaliso was managing one park area and in terms of what was presented to DEA, their budget was growing adequately. SANPARKS managed over 20 parks, which is why the SANPARKS budget was considerably larger. Should Isimangaliso have additional needs, DEA would approach National Treasury for additional funding.

Ms Zikalala asked if MCM generated more revenue than Tourism.

Ms Makau replied that both Tourism and MCM required a large amount of funding. Annually MCM received funding of R208 million from DEA for unique activities such as Ocean Science, which assisted MCM in generating R168 million revenue.

Ms Zikalala asked for information on the activities of Buyisa-e-Bag and if perhaps they could present to the Committee on their progress.

Ms Ngcaba said that Buyisa-e-Bag would be requested to present a detailed presentation to the Committee.

Mr Skosana commented that the DEA should try to spend the R7.3 million roll-over as the President of RSA last year had requested that the full budget be spent.

Ms Makau said that the outstanding R7.3 million was not under-expenditure. R3 million of this amount related to the Polar Vessel and was rolled over for the Marine and Coastal Management Programme. Overseas consultants for the Polar Vessel were paid R147 million and had they completed the work intended, all the funds would have been transferred. The money rolled over was Capital in nature and money for Goods and Services was all spent.

Mr J Skosana (ANC) commented that expenditure covered a broad area but asked where it was spent in the rural areas, where disadvantaged people could benefit from the expenditure.

Ms Ngcaba said that a DEA programme reflected the projects in the rural and urban areas, and these were implemented depending on environmental pressures in the areas. In Ladybrand, for example, DEA was funding Mantsopa Municipality waste management strategy and land rehabilitation. Wetlands rehabilitation programmes were spread across the country, mostly around the rural areas. DEA would provide the Committee with the programme and all municipalities involved with rural development funded by DEA. These projects were all labour intensive.

The Chairperson asked for a breakdown on the R18 million spend on the 15th Conference of the Parties (COP 15) in December 2009.

Ms Ngacba said that the funds utilised from donors for COP 15 were for preparatory work such as pilot work. Travel was paid for by DEA and a breakdown would be presented to the Committee, as reflected in the financial report.

Mr P Mathebe (ANC) asked about the status quo on the investigation of the former CEO of Buyisa-e-Bag.

Ms Ngcaba replied that the investigation was done and the Board had to take steps in terms of facilitating a hearing in order to impose sanctions. DEA was in the process of reviewing the Articles of Appropriation that specifiied how the R30 million appropriated to Buyisa-e-Bag was to be used.

At that point, Mr Mathebe informed the Committee and the DEA that the former CEO was deceased. This had happened within the last month.

Mr Skosana asked if DEA was still in charge of funding the Tourism programmes for 2010 now that it was separate from Tourism.

Ms Ngacba said that the report reflected what was committed in the business plan of Vote 25 which was a combined vote with Tourism included. The report outlines what was provided.

The Chairperson said that she was not comfortable with the way in which funds were spent on consultants She asked how best to address BEE and transfer of skills to the offices in the DEA.

Ms Ngacba said that DEA tried to implement BEE compliance with tenders. As part of service provider agreement, they were required to reflect how they would transfer skills to an official in DEA. Proactive planning would improve the rate of outsourcing consultants. DEA performance report showed BEE at 62%, which reflects overall compliance.

Dr Sekwati Rakhoho, Director: Supply Chain; DEA, said that DEA had put in place efforts to ensure reaching the DEA target of 58% BEE per annum. DEA had exceeded that. They had also put together a database of suppliers. When registering they had to provide a SARS and BEE compliance certificate. DEA had a draft BEE policy and was waiting on DTI and National Treasury for finalisation of regulations before the draft policy was concluded. The skills transfer policy was implemented as of 1 April 2010. A project manager would present how skills would be transferred in each project and this was monitored on a quarterly basis and this was reported back to management.

Mr P Mathebe asked how DEA closed gaps in terms of service providers actually being BEE.

Dr Rakhoho said that in November 2009, letters had been sent to all suppliers requesting certificates from service providers to ensure those service providers were BEE compliant with DTI registration and SARS certification.

The Chairperson asked how DEA explained R2.9 million allocated to catering.

Ms Ngacba explained that catering was provided for meetings outside when service providers catered. She had indicated last year that due to budget constraints, line managers had to find ways to reduce this cost.

The Chairperson said schools, hospitals and clinics could be built and people could be fed with that money. She asked the Director General to cut down on this catering expenditure.

Ms Ndude asked for a breakdown of women, people with disability and young people in the BEE companies.

Ms Ndude asked if DEA had implemented the 2010 Green Legacy.

Ms Ngcaba said DEA could demonstrate the Green initiatives, energy efficiency, water and waste efficiency of the Green Legacy in the host cities tourism bureaus and stadiums. A Carbon emissions assessment could be presented to the Committee. DEA did not succeed in launching its Green logo with FIFA due to trademark rights and had therefore launched its own logo which would be used at all events in the future, including COP South Africa.

The Chairperson said that an amount of R2 million had been put aside by Parliament for travel for Climate Change alone. In comparison, it was clear that the DEA budget was too little.

Mr G Morgan (DA) suggested that the DEA should use the Money Bills Amendment Act and discuss the inadequate budget after the World Cup. He believed that Members should perform oversight on projects of both Water and Environmental Affairs for at least 5 days during July to be better equipped to request money for projects. It could be an opportunity for oversight and to praise the officials who were doing good work.

The Chairperson commented that Vote 29 would not include problems that DEA presently faced. She praised the DEA for its good work and said that the Committee would try to assist wherever possible.

The meeting was adjourned.

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