Buyisa e-Bag and Indalo Yethu 2011 Strategic Plans

Meeting report

Chairperson’s opening remarks
The Chairperson noted that Buyisa e-Bag's (BeBs) delegation, which consisted of Mr Shirlegh Strydom, Chief Executive Officer, did not include a board member.

Mr Strydom replied that the BeB board chairman advised him that he would not able to attend the meeting because he was attending labour negotiations.

The Chairperson asked Mr Strydom to inform the BeB Chairman that he took great umbrage with the fact that he did not attend the meeting when Parliament had called upon the entity to account for its affairs. The Committee was insulted by his lack of attendance, particularly in view of the problems the Committee was having with BeB.

Buyisa e-Bag Strategic plan and budget 2011
Mr Shirlegh Strydom, Chief Executive Officer, BeB, informed the Committee that BeB was a section 21 company, established by Government as part of the plastic bag initiative. It was also funded solely by government. BeB created 203 permanent jobs, 293 casual jobs and had 57 361 indirect beneficiaries.

291 schools around the country benefited from BeB’s School Education Programme, which looked at awareness and educational initiatives. 170 unemployed youth had been engaged through BeB’s Youth Empowerment Initiative Programme, and 15 000 were involved in BeB’s clean up campaigns.

BeB set out the key performance and priority areas for 2011/12. BeB planned to build eight Buy Back Centres (BBCs), employing fifteen permanent workers and thirty casual workers. BeB wanted to support nine external recycling centres, employing fifteen permanent and thirty casual workers. Opening a Materials Recovery Facility (MRF) in Kwazulu-Natal would create 150 permanent and 75 casual jobs. Other key performance areas for 2011/12 were set out. 246 schools were to benefit from schools education programmes, 15 schools in Gauteng were selected for the Green Ambassador pilot project, there were 8 youth empowerment initiatives and 20 clean-up campaigns, to attract 300 to 500 community members per campaign.

Mr Strydom said that he was aware that he was supposed to talk to BeB's strategic plan, but the strategic plan had not been finalised, due to turbulence and lack of agreement within the board, which affected the strategic planning process. However, management had put together an outline of the strategic plan, which was circulated to all the board members, who had never commented on it, nor was management able to sit down and discuss the document with the board.

Mr Strydom stated that the document had looked at all the different issues regarding the functioning of BeB and its mandate, which included job creation, poverty alleviation and empowerment. A Turnaround Strategy looked at different ways and means to move the company forward. However, management had not had the opportunity to give this strategy to the board. The management was looking at BeB from a holistic perspective. Management’s philosophy was to say that the company needed to create local economic development in rural areas, in order to create jobs that would allow people to stay in their home towns instead of having to migrate. BeB was looking at setting up hubs, and providing waste to those hubs, for processing there. This would allow people in those areas to earn a decent living. However, since the board had not met since January, management had not had the opportunity to speak to board members about these initiatives.

According to the budget, BeB received R20 million in 2009, R29 million in 2010, and R23.5 million in 2011. In 2008 BeB received a clean audit, but this audit was not conducted according to the Auditor-General’s (AGs) guidelines. BeB received a disclaimer in 2009, because the auditors could not rely on the opening balances, as well as for the reason that this audit was also not conducted according to the AG’s guidelines. Auditors recommended that a forensic audit be conducted [see relevant documents]. In 2010, BeB changed auditors and the audit was conducted according to AG guidelines, but still resulted in a disclaimer. Since its inception, BeB had not complied with the Public Finance Management Act (PFMA), National Treasury regulations, and the Companies Act. There was no audit committee, no risk committee and no Chief Financial Officer had been appointed. Internal auditors were only appointed in September 2010. 

Discussion
The Chairperson asked why the board was not meeting.

Mr Strydom answered that his opinion was that the board was “split”. The board included an element of labour and an element of industry, despite his own understanding that a board was supposed to be independent and should not have other interests. The Articles of Association said that a board had to go through arbitration if it encountered a deadlock. A lot of the issues regarding the moving forward of BeB had to do with the lack of agreement amongst board members.

The Chairperson asked from where these differences of opinion stemmed.

Mr Strydom replied that industry had not been in favour of BeB since its inception. For example, the Plastic Recyclers Organisation represented the interests of its organisation. Should BeB's beneficiaries start competing in this market, the Plastic Recyclers Organisation representatives would then turn down any initiative that would allow BeB's beneficiaries to go to the next level. At the moment BeB was a collector of recyclables. When BeB wanted to move to the next level, it became a huge problem.

The Chairperson noted that this meant that it was a huge mistake to create a recycling entity and put other competing recyclers on to the board, to help run it.

Mr Strydom concurred with the Chairperson. There was also a huge issue with the plastic industry, who believed that all the money collected from levies on plastic belonged to that industry, and had stated so, publicly. This was one of the issues that had caused conflict within the board.

Ms Lize McCourt, Chief Operations Officer, Department of Environmental Affairs, added that the Department of Environmental Affairs (DEA or the Department) believed that one of the founding problems emanated from the original negotiated Memorandum of Agreement (MoA), where it was agreed that BeB would be a Section 21 company that would be solely funded by public money. The problem was that the board was managed through the Companies Act, because it was a Section 21 company, and was therefore not bound to the governance structures and requirements of the Public Finance Management Act (PFMA), despite the fact that the funding it was receiving from DEA, the Accounting Officer for the entity, did fall under the PFMA. For example, although the original MoA alluded to the fact that the Minister would appoint the board, the board was actually nominated by the three different interest groups. The board then nominated its chairperson. This meant that the whole governance institution, or the way the governance structure was established, was not conducive for supervision.

The Chairperson noted that BeB was wrongly conceptualised.

Ms McCourt agreed, saying that this was the challenge also in terms of the turnaround strategy. The strategy had to correct the fundamental mistake that was set up in the beginning. In doing so, accountability and cost effectiveness also had to be considered. The administrative cost of doing the kind of work that BeB did had escalated substantially, although the project money had remained more or less the same.

The Chairperson asked if the DEA's review of BeB was already public knowledge.

Ms McCourt said it was not. The DEA would provide a review only to the Committee. The DEA had discussed matters with the board in the previous week, but no consensus was reached on the possible winding up of the company. However, the board had subsequently and informally notified the DEA that it supported the winding up, in principle. The DEA believed that this route was likely to be followed.

The Chairperson asked if this information could be made available to the Members.

Ms McCourt answered that it could. However, she cautioned that the information contained in the review was collected in January and did not represent the final findings.

The Chairperson asked how long BeB had been in existence.

Mr Strydom answered that BeB had existed since 2002.

The Chairperson asked how much money BeB had received over the years.

Mr Strydom replied that the amount of money given escalated from year to year. BeB started with R12 million allocation, and went up to R35 million.

The Chairperson noted that despite the substantial amounts received since inception, only ten BBCs had been built.

Mr Strydom answered that BeB only actually began its activities in 2006. He informed the Committee that there was a historical issue with BeB receiving funds late. The board had to be blamed for this, and some of the blame could also be put on the DEA, but it was the board and management's responsibility to ensure that the business plan was submitted on time, so funds could be released on time. The 2010/11 business plan would have been submitted to the DEA on time in August 2010, but because of the turbulence between the board and its failure to approve the business plan, it was again submitted late, which resulted in funds not being released on time. Management was trying to do its best to comply.

Ms McCourt confirmed that the MoA said that funds would be released on approval of the business plan. The DEA's approval depended on the quality of the business plan. The DEA could not release funds based on draft business plans and unclear deliverables. The BeB also had a history of roll-overs and unspent funds that also had to be taken into consideration.

The Chairperson stated that he accepted the DEA's explanation, but he could not understand why this Department had let this issue drag on for so long.

The Chairperson asked if a forensic audit had been conducted in line with the AG's recommendation, and what the findings were.

Mr Strydom replied that a forensic audit had been conducted and it was found that there were individuals, from companies that were providing services to BeB, who were alleged to have acted incorrectly. The alleged fraud exceeded R100 000, and was thus reported to the South African Police Services (SAPS) Commercial Crimes Unit and the South African Revenue Services (SARS). This was an ongoing case. There was another allegation involving two board members, but this had not been tested. The Articles of Association contained a clause noting that there were two categories of board members, from industry, and from labour. Each had only one vote. Each category could only discipline its own members, and this resulted in the board effectively being unable to discipline itself; any disciplinary action would need to be instituted by the constituency from where the member was drawn.

The Chairperson asked how Parliament had ever agreed to such a clause.

Mr Strydom explained that the clause was contained in the Articles of Association, which was drafted by the board.

The Chairperson stated his view that it would be preferable for BeB to be wound up as soon as possible. He could not believe that government allowed BeB to go on for so long. He asked if the two board members had been reported to the police.

Mr Strydom replied that the forensic report and all other information were made available to the Commercial Crimes Unit. He had understood that the two board members were being investigated.

The Chairperson asked Mr Strydom to obtain a report from the police regarding the progress of the investigation.

Mr Strydom clarified that the board had taken action itself to suspend the two board members. This had been a long process. However, the Articles of Association, when studied, made it clear that the board members could not have been suspended in this way and they thus had to be reinstated.

The Chairperson asked if it was the industry or labour side of the board that was not taking action.

Mr Strydom answered that it was the industry side of the board.

The Chairperson asked if Mr Strydom was saying that there was a forensic report saying that two board members from the industry side of the board were implicated in fraud, but that there was no action being taken against them.

Mr Strydom replied that the Chairperson was correct.

The Chairperson stated that this was an absolute disgrace. It was to be hoped that the media would obtain the two member’s names and publicise them. He asked that the forensic audit must be given to the Committee, as well as a progress report from the police and any other relevant information in the possession of the Chief Executive Officer. He expected the DEA to take over all these responsibilities once BeB was wound up.

The Chairperson asked why, even after changing auditors, BeB still received an audit disclaimer.

Mr Strydom explained that BeB had been deregistered from VAT by SARS because it had not submitted VAT returns in 2008 and 2009 as scheduled.

The Chairperson questioned whether it was really true that BeB was deregistered by SARS for not paying VAT.

Mr Strydom replied that BeB had since been re-registered by SARS, and had managed to recover the money that was owed to it by SARS.

The Chairperson hoped that this was a lesson to the DEA not to create structures like BeB that fell outside of all the rules of government.

Ms McCourt replied that she wanted to clarify that BeB was not in fact established by the DEA. She had understood that this company was established following negotiations regarding the plastic bags regulation process. The National Economic Development and Labour Council (Nedlac) had facilitated discussion and the MoA was drafted in order to address the opposition to the plastic bag regulatory process. The agreement had said specifically that a section 21 company had to be established in order to establish rural Small, Medium and Micro Enterprises (SMMEs), to create job opportunities, and to address and improve skills. The MoA indicated that the company had to be solely funded by government. There was no direct link between the levies and the funds.

Mr J Skosana (ANC) stated that he struggled to understand what BeB was actually doing. He asked that the Committee should be given some idea of what schools had benefited from the programmes in which BeB was engaged.

Mr Skosana also expressed his surprise that the DEA was still giving money to an entity that was not complying with the appropriate legislation. It was clear from the audit that the company's funds were not properly handled. The Chairman of the board was not even at this meeting, which indicated a reluctance on his part to account for BeB’s affairs. The board was not functioning well. BeB was failing the country although it was supposed to be teaching people about recycling and creating more employment. The Committee needed a true indication of what the company was doing for the country. It was impossible for a company or entity to work without having a strategic plan.

Mr Strydom explained that BeB created or accepted proposals from cooperatives and entrepreneurs who were interested in recycling. They must meet certain criteria before being funded. This could be in the form of a buy-back facility that would be trained by BeB. Once the new entity was established, BeB would give it the resources it needed in order to function properly. BeB also had youth empowerment projects, especially in rural areas.

Mr Strydom confirmed that there were 346 schools that benefited from BeB's programmes, and all of the schools were known by name. He would make these names available to the Committee as soon as possible. The schools programme was a permanent feature of the BeB educational programme.

Mr Strydom said that he was not going to attempt to defend the statement that BeB's funds were not handled correctly. When he joined the company, it did not even have an asset register. It had equipment all over the country, but the precise whereabouts and quantities were not known. He had seen to correcting this when he joined in 2009, so that BeB could protect its assets. Management was working with the DEA to correct these problems, but this would take some time, given the circumstances.

Mr Strydom confirmed that buy-back centres could only provide for fifteen jobs at most. An increase in waste processing would mean an increase in the number of jobs that could be created in the future.

Mr G Morgan (DA) noted that there had been resistance against the levy on plastic bags from the start, but was implemented and had significantly reduced the number of plastic bags used in the country. This project had also been successful in creating employment. However, the tax payer was not getting value for money. BeB's governance issues were shocking, and the public was justified in feeling let down. The plastic bag levy was the first environmental tax and resulted in positive behaviour changes. However, the public would now get to know of BeB’s problems. He was glad to hear that it was likely that this company would be wound up. He believed there had to be consequences for those who had misguided the entity. He was confused how legislators had allowed this entity to create its own rules. He also asked why the Articles of Association were not better worded to avoid these errors.

Mr Morgan noted that he had never been able to tangibly measure the success and transformative quality of the work that BeB had done. He questioned why taxpayers’ money was being used when no tangible transformation was apparent. He had suspected that BeB did not really know how to spend its money and had massive clean-up projects to allow it to spend. However, society should not be relying on a small organisation like BeB to do this, as it should be a collective role of all in the country. Another problem was that BeB was regionally biased and heavily focused on certain provinces. Many of the buy-back centres were not even operational, which was a further point of annoyance.

Mr Morgan was not convinced that the DEA should take over BeB's role, as it seemed to be a local government function, and needed to be industry-planned. The Waste Act was an empowering piece of legislation that gave the Minister the power, in consultation with various sectors, to institute waste management plans. The Act also made it compulsory for each municipality to come up with a waste management plan. The country needed transformative programmes that would change society's behaviour.

Mr Strydom replied that the board included Congress of South African Trade Unions (COSATU), the Plastics Federation of South Africa (PFSA), the Paper Recycling Association of South Africa and similar bodies. It had been decided to have an industry category and labour category, although he conceded that he did not think that this was a good idea.

The Chairperson concurred, saying that this separation was not apposite for a company.

Mr Strydom said that in practice, both labour and industry would put forward their directives. The Articles of Association stipulated that the category of industry had one vote, and the category of labour had one vote, and if there was a deadlock, then the matter must go to arbitration. There was also an agreement that allowed the DEA to have a vote to break the deadlock. However, this had never happened. Votes were recorded according to whoever was present at board meetings. However, when allegations resulted in suspension of some members, the board decided to revert to the one-vote each method of voting and arbitration, which resulted in the situation where the board could not test the allegations made against the two board members. He reiterated that the Articles of Association provided that only the industry category could have dealt with the allegations, but only one of the four industry representatives was in favour of doing so. The allegations were therefore dismissed and the suspended individuals were reinstated on the board.

Mr Strydom agreed that the fact that BeB's activities were regional was part of the problem. However, BeB had expanded its team to allow it to reach all the buy-back centres in the provinces. This created more jobs and allowed buy-back centres, and the clean-up programmes, to become more sustainable.

Ms P Bhengu (ANC) said that the DEA had to tell the Committee why so little oversight was done on BeB and why it had allowed the problem to escalate for so many years. She also wanted a proper report from the DEA showing how much of the government's money had been wasted on BeB.

Ms McCourt repeated that the DEA did not legally have any oversight over the board. BeB was a section 21 company that was managed through the Companies Act. The DEA's oversight function, in terms of the MoA, looked merely at the provision of funds that would enable the BeB to implement its business plan. Towards the middle of 2010, the National Treasury also started questioning these transfers. The DEA's review of BeB looked solely at the question of whether there was any justification for transferring any more funds to the company. The DEA had requested the BeB to cut down on its costs and said that there should be closer scrutiny of the company's expenditure before further disbursement of funds. The DEA was the company's only source of funds, and so if no disbursements were made, it would go bankrupt. The only other options were either to fix the Articles of Association, which would still leave BeB with many other problems, or to convert this entity from a section 21 company to a public entity. BeB had few options open to it; it would either become bankrupt, wind up voluntarily, or find another source of income. DEA and BeB had established that the winding-up was the preferable route, and she agreed that it would be better if this could happen soon.

The Chairperson warned that the DEA needed to put steps in place so that nothing untoward happened in regard to the winding-up. He insisted on receiving a thorough report from the DEA detailing the assets and liabilities that the company had.

Mr S Huang (ANC) agreed that DEA had also contributed to the problem by making allocations to BeB. He noted that although BeB apparently could not afford to pay VAT, it had managed to pay bonuses to the value of R703 000.

The Chairperson asked if Mr Strydom had received a bonus.

Mr Strydom answered that he did not receive a bonus.

Mr Huang stated that BeB's financial statement showed that he received a bonus.

Mr Strydom explained that employees’ contracts said they were entitled to bonuses. The bonuses were given in the previous year, when various employees were given performance-based bonus.

The Chairperson did not understand why bonuses were being given, noting that they should be given only for excellent performance.

The Chairperson said that he thought the problem was that the model chosen for BeB was wrong. He agreed with Mr Morgan’s comments about responsibility for taking over the functions of BeB. He asked for the names of the board members implicated by the forensic audit report.

Mr Strydom answered that they were Mr Douw Steyn and Mr David Hughes from the PFSA. 

The Chairperson stated that he had asked this question on purpose, so that the media could take note of the names. The industry category within the board had refused to take steps against the individuals and had reinstated them on the board. The forensic report would be handed to the Committee and would be dealt with accordingly. He also wanted a report from the South African Police Service (SAPS) that spoke to the progress of the investigation. If the media wanted the forensic report, this could be accessed through the Committee Secretary.

The Chairperson concluded that the steps that need to be taken to wind up BeB were long overdue. If the winding up did not happen voluntarily, then the DEA had to take steps to make it happen. He also thought that an alternative discussion was needed on waste management. He expected the DEA to take the forensic report to its logical conclusion. He thanked Mr Strydom for everything he had tried to do for BeB as it was clear that after his appointment in 2009 some of the matters had begun to turn around.

Indalo Yethu strategic plans and budget
Ms June Josephs-Langa, Chief Executive Officer, Indalo Yethu, informed the Committee that Indalo Yethu was a legacy programme of the World Summit on Sustainable Development that was hosted by South Africa. It was established as a trust and founded by the DEA. The entity worked with all three spheres of government, and created a bridge between government, civil society, and business. The first part of Indalo Yethu’s mandate was to focus on education and awareness, while the second part was to focus on eco-endorsement. The entity thought that education and awareness was a key enabler for climate action and more responsible environmental practice.

The environmental sector provided entities with the opportunity to contribute to the national agenda, which was to create jobs, to create wealth through new enterprises, and to develop new skills sets. Indalo Yethu programmes demonstrated the ability to contribute to development, as well as to change behaviour towards the planet. The entity wanted to create an eco-conscience society through increased awareness, income generation and skills development in the green sector.

Indalo Yethu’s strategic programme focused on creating green skills, green jobs and enterprise development, outreach and awareness, and eco-endorsement. Eco-endorsement rewarded good business practice and promoted competitiveness, whilst also reducing the impact on the environment and human health, and promoting sustainable consumption and production.

Indalo Yethu’s strategic priorities for 2011/12 included establishing an advisory structure/panel, focusing on the built environment sector development. The priorities also included supporting and developing Eco-towns, which is a local government programme. Indalo Yethu conceptualised the national chapter of the United Nations (UN) derived Ecotowns and raised social responsibility policy and programmes, and Expanded Public Works Programme (EPWP) support.

She explained that the programme would provide capacity support to municipalities for waste management and open space planning. It would create sustainability centered models of town management, which would facilitate town functioning, waste disposal and traffic flow, thus also reducing the town’s impact on the environment and human health. It created jobs while restoring and rehabilitating the environment, and increased skills levels and stimulated waste and food garden enterprises. It also created visibly cleaner towns and would grow civic pride and individual responsibility to change behaviour.

The eco-town sites were located in ten municipalities. 2 894 workers had been employed at decent jobs with an EPWP contract, and a monthly income. Ecotowns had shown visibly cleaner towns. Approximately 250 youth have become awareness ambassadors. Indalo Yethu contributed to skills development, specifically youth skills development with programmes that enabled them to become energy auditors and energy saver advocates.

The Greening Legacy Report measured the success of greening interventions since the greening framework. It also provided the country with lessons learnt. This project was in partnership with the DEA. Indalo Yethu trained 200 youth green ambassadors and helped to create short term employment. The project helped to build a pool of eco-consciousness amongst youth. It helped to increase skills levels on greening and created career interest for youth in environmental fields.

Indalo Yethu was in the process of capacity building with municipalities through eco-towns and open space planning. The entity was also assisting local government to develop a climate change planning tool to assist local municipalities. It was collaborating with the National Youth Development Agency (NYDA) and the education departments on Energy Savers Youth Skills Development.

In terms of Audit and Governance, Indalo Yethu was fully PFMA compliant and had received unqualified audits since its inception. The DEA was the entity’s core funder. Indalo Yethu received R4 million from the DEA in 2010, and R8 million in 2011. The National Lotteries Board gave Indalo Yethu approximately R8 million as well, and there was more funding given for eco-towns to the value of R225 million. However, eco-labelling would not be able to sustain its core funding in the medium term. Indalo Yethu’s total budget for 2011 was R253 384 341. 89% of this budget was considered project funding for eco-towns. Approximately R6 million would be used for the greening programme in 2011. Of the money allocated to eco-towns, 53% would go toward street cleaning, 21% would go toward materials and equipment, and 7% would be given toward public education and awareness. Eco-labeling made up 2% of the budget.

Indalo Yethu noted a 72% increase in its budget from year to year since its inception. There was also a 75% increase in budget for the eco-towns project year on year.

Discussion
Mr Huang thanked Indalo Yethu for a wonderful presentation. He asked how much funding they received from the National Youth Development Agency (NYDA).

Ms Josephs-Langa replied that Indalo Yethu did not get any funding from the NYDA. It provided life skills and entrepreneurship training for the youth energy auditors.

Mr Skosana thanked Indalo Yethu for a good presentation, saying he appreciated the work it did for the country. He noted, however, that this programme was only being implemented in Gauteng, Eastern Cape and KwaZulu Natal (KZN). He asked how Indalo Yethu coordinated its activities so it covered each and every area of the country. He also acknowledged and appreciated the very close contact with municipalities in the country. He asked how it would ensure that it related to community structures that were dealing with waste management and greening.

Ms Josephs-Langa answered that the only two provinces where the programme was not implemented were the Western Cape and the North-West Province. Indalo Yethu tried to get funding for all nine provinces, but the DEA was implementing a similar programme in the Western Cape, and another entity was funding a similar project in the North-West Province. Indalo Yethu approached provinces and municipalities to take part in greening programmes. It put particular emphasis on rural areas.

She added that in order to relate with community structures, Indalo Yethu set up a project stakeholder committee, which included provinces. These provinces provided oversight on the implementation of programmes. The eco town programme was largely a municipal support programme. A stakeholder forum was also established in municipalities. Indalo Yethu also insisted on the establishment of a community forum, which included the hawkers’ association, the taxi association, schools, retailers and other bodies, as it was important that all sectors must give input into how resources were being spent.

Ms D Tsotetsi (ANC) asked if Indalo Yethu had joint programmes with community groupings that did recycling for a living. She wanted a breakdown of where the green ambassadors were located.

Ms Josephs-Langa replied that Indalo Yethu assisted people working on landfill sites, the collectors and the recycling agents. Indalo Yethu registered these workers to form an enterprise and looked to invest enterprise development and training resources into people who were doing that work in the eco-towns.

Ms Bhengu asked Indalo Yethu to expand on its programmes in remote rural areas.

Ms Manganye asked if Indalo Yethu would be able to expand their programmes to other provinces.

The Chairperson noted that the presentation did not give the Committee an idea of how the trust would attend to governance, and did not know how it would work with government.

Ms Josephs-Langa answered that Indalo-Yethu was established as a legacy programme. The entity submitted reports to the DEA on a quarterly basis, but because not all of its funding was from the National Treasury, it was not considered a formal public entity.

The Chairperson thanked Indalo Yethu for its presentation, and was pleased to hear of its unqualified audit reports. He noted that the Committee was happy with the work being done and encouraged it to keep up the positive efforts.

The meeting was adjourned.