South African Development Partnership Agency (SADPA) establishment

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Meeting Summary

The Department of International Relations and Co-operation (DIRCO) made a presentation on the establishment of the South African Development Partnership Agency. This would give DIRCO an institutional mechanism to be able to focus more on the political aspects of development cooperation and SADPA would focus on the implementation side. The key aspects of the SADPA Fund (which would replace the African Renaissance Fund) were to advance the African agenda, promote regional integration, promote South-South cooperation and promote the Millennium Development Goals with the objective of focusing on cooperation between South Africa and other African countries. SADPA would address the shortcomings in the management and implementation of development projects experienced with the African Renaissance Fund. SADPA would use development cooperation as a tool to advance South Africa’s foreign policy goals. By engaging in strategic development cooperation partnerships and dispensing development assistance, this did not mean that South Africa had graduated from developing country to developed country status. SADPA would be an entity within DIRCO that enjoyed a degree of autonomy in the management and execution of its programmes. The guiding principles of the agency would focus on integration rather than initiating a new process in development cooperation.

The Bill establishing SADPA had 13 elements: definitions, establishment of SADPA, objectives, functions of the agency, establishment of the Fund, application of the Fund, management of the Fund, control of Fund, appointment of the annual review, financial arrangement s of Fund, how law could be repealed and the short title and commencement. Projects that SADPA would pursue included a focus on issues of humanitarianism, natural disasters, supporting peace missions, preventative diplomacy, peace-building, peace-keeping, deepening democracy through elections, and also addressing multi lateral commitments from international financial institutions. The hope was that SADPA would be in place by 1 April 2012.

Members raised questions about potential duplication of work, skills shortages and the dangers of building ivory towers. If forty percent of budget went to personal use and salaries, “are we not increasing the amount of unproductive expense rather than investing the money into productive projects that could alleviate the pressure on poverty and inequality?” The question was asked as to how much work would be done in the first year, or would 2012 simply be spent on establishing SADPA? Questions were also raised as to the accountability and transparency of SADPA oversight for direct transfers from foreign donors. The Chairperson however stated that SADPA was long overdue because it would establish a centre for development cooperation and South Africa as a country would know where the work was being done and at what time. Another positive aspect of SADPA was that it encouraged cooperation rather than competition.

Meeting report

South African Development Partnership Agency establishment: briefing by Department of International Relations and Co-operation (DIRCO)
Mr Mxolisi Nkosi, DIRCO Deputy Director General:
Africa Bilateral, stated that the Government had long been involved in development cooperation as part of its foreign policy implementation on the African continent. As such, the advent of SADPA did not mean that this was the genesis of development cooperation work. The Department had been engaged in such work since 1994 through the development of the African Renaissance Fund (ARF). The various tiers of the Government had engaged in development cooperation however, the biggest challenge was that there was no coordination across local, provincial and national government. One intervention that SADPA would make would be to address the shortcomings in the management and implementation of development projects. SADPA would have the institutional capacity to ensure cohesion and proper coordination in government in the execution of the development aspect of foreign policy. SADPA would use development cooperation as a tool to advance South Africa’s foreign policy goals which sought to address issues of poverty, under-development and marginalisation on the African continent and the global South. Key projects and programmes would respond to the challenges of peace and security, infrastructure, building institutional capacity and deepening democratic governance. All of these goals were clearly elaborated on in the strategic plan document.

The fact that South Africa would be engaged in strategic development cooperation partnerships and dispensing development assistance did not suggest that the country had graduated from developing country to developed country status. South Africa would still receive aid and its classification would not be changed to donor country. DIRCO continued to be currently involved in integral development assistance programmes such as the ARF, the India Brazil South Africa (IBSA) Fund for Poverty and Hunger Alleviation, the African Development Bank and the Southern African Customs Union (SACU). Countries like Swaziland, Lesotho, Botswana and Namibia benefited heavily from SACU revenues.

National Treasury and DIRCO had worked together to identity the challenges in the current ARF. These gaps could be addressed, so that SADPA did not inherit some of these organizational management challenges. Cabinet had approved the conceptual framework for SADPA in 2009. This cabinet decision stated that SADPA would be an entity within DIRCO that enjoyed some degree of autonomy in the management and execution of its programmes. SADPA was established in terms of the Public Service Act and governed by the legislation and regulations that would govern any public entity. It would be staffed by a combination of diplomats and technical experts. Technical experts would fill the gaps in the ARF, and would provide project management skills, monitoring and evaluation skills and would have exposure to working in the development community. The task of establishing SADPA would solely be the responsibility of the Minister of International Relations and Cooperation.

DIRCO had worked on proposals and models for the implementation of SADPA. Lots of research had been done on the comparative evidence that existed in regards to other development agencies and their governance structures and legislative frameworks. The guiding principles should focus on integration rather than initiating a new process, given the experience of the ARF. SADPA would be established by a Bill and the African Renaissance and
International Co-operation Fund Act would be repealed. All assets and liabilities and all commitments of the current ARF would cede to SADPA. Once approved, the SADPA Bill would become the legislative framework that would give effect to the development partnership agency and SADPA would retain Schedule 3A status. There would be a board of trustees supported by technical units. The key elements that the board would preside over would be ensuring good corporate governance, financial management and adherence to procurement standards and practices. A separate component would be established within the ministerial portfolio for purposes of the administration of the Fund. Policy direction and oversight would be provided by DIRCO. SADPA would have its own head and the board of trustees would be appointed by the Minister of International Relations and Cooperation over a three-year period.

The Bill had 13 elements: definitions, establishment of SADPA, objectives, functions of the agency, establishment of the Fund, application of the Fund, management of the Fund, control of Fund, appointment of the annual review, financial arrangements of the Fund, how law could be repealed and the short title and commencement. The rationale and key aspects of the SADPA Fund were to advance the African agenda, promote regional integration, promote South-South cooperation and promote the Millennium Development Goals. The objectives of the agency were to focus on the cooperation between South Africa and other African countries. The scope of SADPA would principally be Africa but the agency did not exclude the possibility of the Fund going beyond Africa’s border to regions such as the Caribbean or smaller countries in South East Asia. The Fund would promote development, human rights, democracy and good governance, promotion of peace and security, institutional capacity building, exchange of expertise, assistance with socio-economic development, integration initiatives and humanitarian initiatives.

SADPA would assume responsibility for coordinating all outbound and inbound international development cooperation and assistance. Bilateral, trilateral and multilateral donor assistance was fragmented as they entered the country though different channels: through local authorities, municipalities, provincial governments and national government departments. SADPA wanted to bring this practice to an end and establish one agency of government responsible for inbound development assistance.

In terms of application of the Fund, the SADPA Fund could be used for the payment of expenditure for development cooperation and assistance, for the payment of remuneration and allowances for the members of the board as well as any other expenditure incurred within the framework of the Act. In terms of the governance of the agency and the Fund, the Minster would appoint a board of trustees and the board would perform an oversight function to ensure that the Fund performed its functions and that its objectives were met. The board would consist of a minimum of seven and a maximum of 15 members. The Minister would delegate one of the Deputy Ministers to have a political oversight over the Fund. The Director General of DIRCO would also be a member or would delegate a senior member of DIRCO management to represent DIRCO in the Fund. There would also be officials from the Department of Trade and Industry and the National Treasury represented on the board. The head of SADPA and the Chief Financial Officer of SADPA would sit on the board in ex-officio capacities, would manage the Fund and determine investment of the Fund. Civil servants who served on the board would not receive any additional remuneration. The board would meet at least once a quarter to review reports and project updates and the board would approve the work plan developed by SADPA management. The board would determine the investment policy of the Fund and may delegate some of the functions to the management committee or the head of the agency. The board would ensure that there was accountability, regular reports and accounting for utilisation of the Fund. The head of SADPA, and not the Director General of DIRCO would act as SADPA’s accounting officer.

The draft Bill of SADPA was currently with the Department of Justice (DOJ) and once the DOJ had completed its review the Bill, it would be sent to Cabinet for approval, and then tabled in Parliament for consideration. Hopefully it would reach Parliament before it rises at the end of the year and if not, February 2012 at the latest. The hope was that SADPA would be in place by 1 April 2012, so that its establishment coincided with the beginning of the financial year.

In terms of conception and development of projects within the strategic framework, SADPA would start at the bilateral level. For example SADPA would expand cooperation with Lesotho and the Lesotho Highlands Water Project. This project was important for South Africa’s own economic development and survival. The Lesotho Highlands Water Project provided an important resource to the Gauteng            economy for both domestic and commercial use. The next phase would be the development and review of existing country strategy papers, followed by the finalisation of the strategy and policy. The final phase in terms of the execution was the implementation and project initiation, followed by the monitoring and evaluation. In terms of the legal framework, all development cooperation would be elaborated in a legal framework agreement with the recipient country. This would be contracted between all parties and would define the levels of responsibility that each party would have to carry such as levels of funding for each phase, compliance indicators overall programme indicators and mechanisms for monitoring and evaluation.

Projects that SADPA would pursue included a focus on issues of humanitarianism, natural disasters, supporting peace missions, preventative diplomacy, peace-building, peace-keeping, deepening democracy through elections and also addressing multi lateral commitments from international financial institutions. SADPA would also address major infrastructure projects such as road construction, refurbishment of the rail infrastructure and the ports infrastructure. This was aimed at increasing and improving the movement of goods and services across the continent.

In terms of accountability, SADPA would submit annual reports that would be reviewed by the board of trustees and approved by the Minister. A progress report would be submitted to the International Cooperation cluster of government. Parliament would also get an annual report on the activities of SADPA. This report would be audited by the Office of the Auditor General. SADPA would display all of its information to the public using a website, brochures and other means of publicizing its work. Its books would annually be subjected to the usual rigorous auditing process that public entities were subjected to. SADPA would apply quality assurance guidelines and performance indicators in its work.

Discussion
Mr B Mnguni (ANC) asked whether by establishing SADPA there was the creation of duplication of work done by other departments? On the skills issue, many departments did not have skills and expertise. Would SADPA be another agency that was unable to fulfill its mandate due to a skills shortage? 40% of budget went to personal use and salaries. “Are we not increasing the amount of unproductive expense rather than investing the money into productive projects that could alleviate the pressure on poverty and inequality?”

Mr K Sinclair (COPE) said it was unfortunate that government was “hell-bent” on creating alternate structures. Could the ARF not have been restructured to achieve the same objectives? In essence SADPA and the ARF had the same mandate. At the same head of missions meetings, the Committee was briefed by the Minister about the need to expand South Africa’s global footprint however SADPA had more to do with Africa. Government had a tendency to build ivory towers. This was not a way to grow the global economy. Institutions should be more lean and more effective. Could government not establish a unit within DIRCO with SADPA’s mandate?

The Chairperson stated that SADPA was long overdue because it would establish a centre for development cooperation and South Africa as a country would know where the work was being done and at what time. Another positive aspect of SADPA was that it encouraged cooperation rather than competition. The Chairperson asked if the Committee could look into the standardisation of board establishment to encourage uniformity. All boards should have the same number of members. The other issue was that of civil servants serving on the board. How would SADPA reconcile contracting of employment responsibilities? According to the strategic plan, the Bill would come before the house before November. The Committee would hold DIRCO to meeting that target. Would the people of Lesotho benefit from the Highlands Water Project?

Mr Nkosi responded that the rationale behind the creation of SADPA addressed the importance of South Africa having an agency of this nature, because many other countries with ambitions of playing a key role in international relations had autonomous aid agencies that existed parallel to their foreign affairs departments and embassies. In the developing world, Egypt and Brazil and India had development agencies. It was a global trend and South Africa was not out of step with global trends. DIRCO had observed that where these agencies had been used effectively, they had supported foreign policy goals and contributed to the achievement of domestic objectives. South Africa was an ambitious country that was playing a key role on the African continent and in multilateral affairs. Given South Africa’s stature, it would not shy away from such an important role in global affairs.

In terms of skills, it was too early to answer that question because the agency had not been established. But DIRCO believed that there were adequate skills, capacity and expertise within the country that could be drawn into SADPA to help to fulfill the responsibility of the agency. The skills were spread out in the government sector, the private sector and the NGO sector. DIRCO needed to bring these skills together in SADPA as soon as it was established for the effective and efficient execution of the mandate of agency.

Mr Nkosi responded that the ARF was created out of modest circumstances. It was mainly a fund that reacted to specific demands and needs on the continent. SADPA was not reactive, but proactive in the execution of its programmes. ARF responded to humanitarian disasters, electoral support to electoral commissions and the challenge of food security. SADPA would have the element of responding to unforeseen disasters and requests, but it would mainly be proactive in the sense that the agenda and programme to be outlined would be very clear.

The SADPA Fund differed from the ARF in that it was a broader fund with a wider mandate. The SADPA Fund was government-wide and looked at outbound development assistance in a broad, government-wide perspective rather than simply a DIRCO perspective. The clear objective was to support South Africa’s foreign policy objectives on the African continent. It was a tool that could create opportunities for the business sector where it engaged in infrastructure development and the creation of particular frameworks. The Fund was not meant to be an egalitarian instrument that churned out development assistance without necessarily creating opportunities for South Africa’s investments. SADPA would ensure a synergy between the two elements of foreign policy and the business sector. The jury was out on whether it would be an ivory tower but DIRCO did not believe that it would be.

Mr Nkosi agreed with the Chairperson’s comments on cooperation as opposed to competition. Civil servants who served on the board would have to have contracting reflected in their performance agreements because the work would be done in an official, formal capacity. It was DIRCO’s hope that the Bill would hit the House by the end of the year - failing that, it would be early in the next year. The people of Lesotho benefited from the Highlands Water Project in terms of employment creation. The Lesotho Highlands Water Project was the largest employment creation project in the Mountain Kingdom, over and above the textile industry.

A DIRCO representative added that the Department did not envision the size of the Agency to be very large. To start there would be18 to 20 people focused specifically on facilitating development and cooperation work. There would be a strong symbiotic relationship between SADPA and DIRCO. One of the advantages of establishing the SADPA Fund was for foreign donors who wanted to engage in trilateral partnerships with South Africa because currently the money went to the National Treasury account even though it was earmarked for trilateral cooperation. DIRCO had no difficulty accessing the funds from National Treasury, but for foreign donors it was reflected in their books as transfers to South Africa whereas it was intended for other partners on the continent. Foreign donors had requested a need for a change from the ARF model. The Bill created the financial arrangements for foreign donors to transfer money directly into the SADPA Fund for whatever projects were required.

Ms E Van Lingen (DA) asked whether year one would simply be an establishment year or whether any work would actually be done? She did not understand why the question about the budget could not be answered. DIRCO needed to give the Committee an idea of how much it would cost to establish SADPA. What were the immediate projects that SADPA envisaged working on? If foreign partners would be able to transfer funds directly to the SADPA Fund, how would the Committee be able to trace the transfer funds? Who would be accountable? Would it be transparent? Would the Committee know where and how the funds were to be used?

Mr Sinclair asked how big was the ARF, and would the ARF money be rolled over to SADPA Fund? What allocations had been made in terms of the MTEF cycle? It seemed to him that what SADPA wanted to establish was, in essence, the dream of Cecil Rhodes to build a road from Cape Town to Cairo.

Mr Nkosi called on Mr Jeets Hargovan, Senior Technical Advisor of the Technical Assistance Unit at National Treasury, to answer questions around the budget and financial oversight.

Mr Hargovan replied that funds that come into South Africa were put into the ITP Fund and were accounted for by National Treasury as part of that process. By law, in terms of the Public Finance Management Act, these funds should have been accounted for in the annual report, both in financial terms and in technical cooperation terms. In terms of SADPA there needed to be a clear separation between incoming and out going earmarks for aid, assistance and technical cooperation.

A DIRCO representative stated that institutional arrangements in order to be fully operational by 1 April 2012, were currently being put in place. There was the hope to have the board of trustees appointed by the first quarter of next year. DIRCO was doing all that it could to ensure that all the institutional arrangements, tools, technology and frameworks were completed by the end of this year, so that come 1 April 2012, SADPA would be ready. On the issue of the budget, the discussions had begun with the National Treasury budget managers on creating a SADPA budget within the MTEF framework. There would be a budget for 18-20 people, technology and administrative costs. SADPA would be housed within DIRCO and thus would not need separate premises. The current status of the ARF had an amount of between R600-R800 million to be rolled over. There was also a commitment from three other governments to match SADPA’s initial start up budget Rand for Rand. This would give SADPA an initial start up fund of R3-R4 billion. There were many current programmes that DIRCO was running under IBSA or BRICS that would retain their responsibilities and SADPA would be a technical body to support them. This would give DIRCO an institutional mechanism to be able to focus more on the political aspects of development cooperation and SADPA would focus on the implementation side.

The Chairperson closed the meeting




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