Minister & Department of Agriculture, Forestry and Fisheries & entities: Annual Reports 2010/11

Agriculture, Forestry and Fisheries

10 October 2011
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Department of Agriculture, Forestry and Fisheries (DAFF), and all its entities presented their Annual Reports to the Committee. The Minister, Hon Tina Joemat-Petterson, was present at the first session of the meeting. The Perishable Products Export Control Board (PPECB) noted that Europe, the Middle East and the United Kingdom were the major export markets for grapes, avocado pears and peaches. Enterprise risks included the delivery of a cost efficient statutory service, access to accurate information, maintaining credibility in South African quality and food safety, value added services needing to be financially self sustainable, sufficient capacity and appropriate skills, and responding effectively to changes in the environment. The outlook for the PPECB was cautiously confident, with liquid assets and strong cash reserves. There was a focus on real efficiency and improvement. Members felt that the PPECB had to speak more about its people, as it had merely noted that it regarded the officials as “assets” but failed to expand on it. The PPECB then explained its “People Strategy”. The Members wanted to know how the PPECB had addressed a previous concern that its former Chief Executive Officer had not been up to scratch, and noted that Landele Business Leaders were now managing the research process for the appointment of a new CEO. Members asked for clarity about the logistics of the electronic datasets and if this would contribute to enhancing the credibility of the export certificate in 2012/13. Members asked about the lost accreditation and the reasons for this loss. The Committee asked if the R13 million grant was going to be sufficient for the South Africa Pesticide Initiative Programme 1 (SA PIP1) and SA PIP2 projects. The Board listed and explained the five sites where investigations and research were done. The National Agricultural Marketing Council (NAMC) had received a qualified audit for 2010/11 financial year. The Committee heard that the basis for the qualified audit was for Work-in-progress and Property Plant and equipment assets which were historically expensed, and the valuation and allocation of minor assets amounting to R0.838 million, which were not verifiable. The Committee asked for an explanation about the expenditure trends which showed R2.9 million for human resources in 2010/2011, and R2.9 million for the Chief Executive Officer (CEO) in the same year. Members expressed concern about the status of exports, the rules regarding China; and issues regarding meat, Foot and Mouth disease, and the ostrich situation. Members asked what sort of monitoring mechanisms were used to monitor whether the trusts were expending funds in terms of the aims and objectives, and asked when the trusts had had their last meeting with Minister. The plight of rural consumers was questioned by the Committee. Members heard that South Africa had a high ranking only in the export of meat. The Committee asked for clarity about the levy on grapefruit. The Committee asked about the Walmart/Massmart merger, and whether NAMC had advised the Minister on it, requesting a written report. They further questioned some of the financial information and noted that “strategic measures” should be renamed as areas where the NAMC was still working. They noted that much work was still needed to upgrade herds in the community to allow competition with commercial farmers to improve genetic competition. The Onderstepoort Biological Products (OBP) presented its Annual Report to the Committee, who expressed its displeasure at such a poor report from the Auditor-General. They asked which certification body was dealing with the ISO 9001 standards. The Committee asked for clarity about the R120 million given by the Department and whether this amount was sufficient. The Committee was concerned about all the qualifications from the Auditor-General, and asked for a list of responses to these qualifications so that the Committee could monitor the progress of the OBP. The Committee heard that the OBP had started to close the gaps and would forward a list of responses to the issues raised by the Auditor-General. They asked for explanations on the Rift Valley Fever complaints, and heard about the further studies conducted on the vaccine, also noting that the complaint had not been lodged directly, but that new had reached the OBP only several weeks after the problem of sheep and goats aborting was raised. Members asked if the problems raised by consumers with regard to the effectiveness of vaccines had been addressed. A written response to the areas of leadership and investigations, which were raised by the Auditor-General as problematic, would be sent to the Committee. Members asked when the vacant posts of CFO and CEO were going to be filled. The Department of Agriculture, Forestry and Fisheries (DAFF) presented its Annual Report 2010/11. The Department noted that the Pesticides Policy was approved by the Minister and had been gazetted. The Department had facilitated the exports of 57% products into the European Union and the Southern African Development Community, The National Delivery Forum for Vulnerable Workers on farms and in forestry and fisheries had been established. The demand for food was expected to grow consistently in line with population growth. There were increases in the prices received by farmers for agricultural products, and the prices paid by farmers for farming requisites, by 4.3% and 13.2% respectively. The Transfer of Rights Policy and the Small-Scale Fisheries Policy had been gazetted. The Pesticides Policy was approved by the Minister and had been gazetted. It was noted that the plans to convert the 12 Colleges of Agriculture into National Agricultural Training Institutes was at an advanced stage. 31 474 community members, including 10 198 smallholder farmers had been trained through the Comprehensive Agricultural Support Programme (CASP). Several Members noted that they were not happy with the performance of the Department, were concerned about the various issues raised by the Auditor-General in respect of financial and performance monitoring, and questioned the integrity of some of the information in the Annual Report, as well as criticising vague generalisations in the presentation. They noted that the lack of proper information would prevent the Committee from doing its oversight work fully. The Committee was particularly interested to know why the Department had not engaged with the Red Meat Industry Forum’s concerns, but the Department asked for a chance to respond fully and did address the issue of broken border fences that could have contributed to the outbreak of disease. The number of smallholder farmers per province was going to be provided to the Committee in writing. The Chief Financial Officer was asked to provide a written response to the Committee about the areas highlighted by the Auditor-General. The Committee asked why information had not been provided about the forensic audit on Ncera Farms even though some findings had appeared in the press, and demanded that the Minister give a full report I regard to the forensic report on Marine and Coastal Management. The Department noted that it would circulate the confidential report on Ncera Farms. Members also asked for information about the tractors that were handed over – one Member mentioned that they were given to two provinces, but another mentioned more provinces, but noted also that several tractors had been found simply standing around unused. They asked if the process of procuring tractors had been compromised; who was responsible; if anybody had been charged, and what efforts had been made to rectify the matters. They questioned why the Department had failed to provide the Auditor-General with sufficient verifiable information in relation to the Comprehensive Agricultural Support Programme (CASP), and noted that this grant was vulnerable to being abused. They also asked about the under-spending and money being returned to the National Treasury. The Committee asked for clarity about the vacancy rate, and the situation with the Colleges of Agriculture. They questioned the number of Extension Officers. A number of questions that remained unanswered would still need to be answered (see end of report for details).

Meeting report

Department of Agriculture Forestry and Fisheries: Annual Report presentations 2010/11
The Chairperson welcomed the Minister of Agriculture, Forestry and Fisheries, Hon Tina Joemat-Petterson, to the meeting.

Mr Langa Zita, Director General, Department of Agriculture, Forestry and Fisheries, asked the committee for guidance as to how he should proceed, and noted a request that other entities start the presentation.

Perishable Products Export Control Board (PPECB) Annual Report presentation
Mr Johan Schwiebus, Acting Chief Executive Officer, Perishable Products Export Control Board, outlined the responsibilities, legislative mandate and statutory outputs of the Board (or PPECB). The major export markets for fruits were the United Kingdom for apples, Europe for avocado pears and grapes, and the Middle East for peaches. Enterprise risks included the delivery of a cost efficient statutory service, access to accurate information, maintaining credibility in South African quality and food safety, the fact that value added services must be financially self sustainable, sufficient capacity and appropriate skills, and responding effectively to changes in the environment.

The credibility of the export certificate was highlighted through an international harmonisation workshop on commercial quality standards, international forum meetings and the alternative risk-based sampling methodology. The PPECB Cold Chain, the PPECB laboratory and the harmonisation programme also played an important role. Export competitiveness was supported through research and development in the cold chain, international good practices, accreditations, the establishment of a Programme Management Unit for the South African Pesticide Programme, SA PiPII, and internal capacity building through the Johannesburg Fresh Produce Market.

Reliable sources of information for the PPECB were inspection information, export information, and access to information and management information. In the last year it had trained 25 inspectors for assessor training, 23 representatives on Occupational Health and Safety, and had trained all managers for change management.

Mr Schwiebus said that the outlook for the PPECB was cautiously confident. It had liquid assets and strong cash reserves. There was a focus on real efficiency and improvement.


Discussion
The Chairperson observed that the inputs had started off with organisational issues, but the Perishable Products Export Control Board (PPECB), although it had said that it valued staff as assets, did not say anything about those people involved in the work of the organisation. He asked for comment on this point.

Mr Zakhe Makhaya, Executive: Human Resources, PPECB, replied that the PPECB had a three-legged approach to its staff. The PPECB “People Strategy” had a certain vision, namely to create an environment for a dynamic and knowledgeable workforce, that would contribute to the diversity of the Board, to represent South African demographics. He then outlined the three legs of that vision. The first was investment in people’s development. The second was creating capacity to enable people to support the business objectives. The third was the application of “people practice”. He noted that the five main objectives around the people in the organisation could be found in the Annual Report. With regard to skills development, there was also a summarised report on this in the Annual Report. There were three distinct programmes to create capacity. There was a harmonisation programme, and an Advanced Technology Programme (ATP) used to deploy people who had just been trained and appointed to organisations. Only five people had left the organisation due to retirement. The PPECB was in control of its capacity needs.

The Chairperson said that in the last meeting the PPECB had reported that it was not happy with the performance of the Chief Executive Officer, and asked what had happened since then.

Mr Louis Vorster, Chairperson, PPECB, replied that the company had appointed Landele Business Leaders to manage the research process for the appointment of a new CEO on behalf of the PPECB. Correspondence had been forwarded to the Committee, which set out the process of meetings with the Minister. The PPECB was presently dealing with filling this vacancy.

Ms N Phaliso (ANC) asked if the Board could explain the logistics of the electronic datasets, their ease of use by stakeholders, and the budget allocated to the project for the year under review. She also asked how this would contribute to enhancing the credibility of the export certificate in 2011 and 2012.

Mr Schwiebus replied that the budget provided was R1.5 million. The PPECB was in the process of implementing the project plans. The delivery date for the first stage was December 2011. An industry forum had been formed, comprising representatives from different industry sectors, and also information logistics service providers. One of the critical factors identified was that there was no intention to create a new system, but rather to use the available systems, consolidate them, and form this platform for the PPECB to engage electronically with industry. The first phase was getting inspection information from pack-houses and their service providers. The second phase dealt with export information obtained from exporters. Matching of the sets of information would allow for the provision of validated information back to the industry, in regard to stock levels of South Africa, and the volumes in the export market. Another R1 million rand would be made available in the budget for 2011/12 for Phase one.

Ms D Carter (COPE) said that the PPECB was doing quite well. She asked what accreditation was lost, the reasons for the loss of accreditation, and if there were any processes in place for re-auditing and re-accreditation.

A member of the PPECB replied that the loss of accreditation was limited to the certification body, in particular ISO 17021 and ISO Guide 65 only. There were temporary substantiation problems, but time was given to institute corrective measures, which were duly implemented. Accreditation was returned in June this year, so the situation had been turned around.

Mr N Du Toit (DA) asked for an explanation about the finances presented, noting that the figures for changes in working capital did not seem to correlate.

Mr Schwiebus said that in 2009/10 a positive figure meant that the Debtors Book had decreased in relation to the previous year. A negative figure implied that the Debtors Book had increased. It was all related to the difference in timing as to when cash was received.

Mr Du Toit asked why the costs had increased, and wondered if it was perhaps due to loans.

Mr Schwiebus replied that the PPECB had a cost recovery policy. The surplus arose as a result of increased volumes, increased revenue and perhaps also lower expenditure levels. In this year, there was a decline in surplus because the growth in income was in line with the budget. Also, he noted that the “people” costs were the main costs. The decline in the surplus in fact indicated that the budgeting was more accurate than in previous years.

Mr Du Toit asked if the R13 million for the South Africa Pesticide Initiative Programme 1 (SA PIP1) and SA PIP2 project funds was going to be sufficient.

Mr Schwiebus replied that the grant for R13 million was received from the DAFF during the course of 2010/11, for the two year programme. The R4 million related to the SA PIP1 grant expenses. The grant for R13 million would be reduced to R0 during the 2011/12 financial year, when that programme was fully implemented. It was up to the DAFF whether it would want to continue with the programme in following years. An Oversight Committee would ensure that the PPECB did as was required, and would also look at whether the programme would be continued in the future.

Mr Du Toit asked if the depreciation reflected was taken from the profit, or if the money was stashed away somewhere.

Mr Schwiebus replied that assets had depreciated over their expected life. For critical assets, like laboratory equipment and IT equipment, funds had been set aside in the asset replacement reserve. There was also provision made in this Reserve for changes in the exchange rate. He reiterated that funds were set aside for critical assets in PPECB.

Mr Du Toit asked for clarity about the increase in debtor days and the ‘greater than 60 days’ agreement.

Mr Schwiebus replied that once again this came down to questions of timing. In 2010, R46 000 was in the debtors book and R502 000 was in the “greater than 60 days” category. The Debtor Account book of the PPECB was very unevenly distributed. According to the Debtor Account book, 20% of debtors represented 80% of the total debtors’ book. This situation could be created by just one debtor who might have paid two days late, and this could create this fluctuation in outstanding debt. The performance indicator related to bad debts that had been written off. The R502 000 came about purely because of the timing of receipt of specific funds.

Ms N Twala (ANC) asked what the budget allocations were for the projects highlighted in the 2011/12 report.

Mr Dean Martin, Executive: Value Added Services, PPECB, said that the Research and Development (R&D) budget was well defined in terms of a governance process. Priorities for R&D were informed by a comprehensive environmental scan done on a yearly basis, and a needs analysis, in particular a gap analysis on the cold chain Value Chain. The plan for the future looked at how matters could be improved. At budget time, a governance model was presented, firstly through peer groups, then via the processes to the Board for final approval and budget allocation.

Ms Twala asked if the Board could list five sites where investigations and research were done.

Ms Nokolunga Maswana, Executive: PPECB, replied that an Alternative Sampling methodology project was under way. There were five pilot sites. The focus was mainly on deciduous production areas, because most of the activities were associated with citrus fruits. The expenditure was around R200 000, mainly for personnel looking after the pilot sites, as well as travel costs to the pilot sites.

Mr Schwiebus made some general comments in regard to the questions raised. He said that in terms of the cash generated in operations, and changes in comparison with previous years, the one major change was with receivables, which had increased to R1.8 million because of the timing differences between the collection of debt between two years. There was also an increase in the Debtors Book.

In relation to the change in movement and provisions, Mr Schwiebus said that in 2009 and 2010, provision was made for performance incentives, and it was reflected as a “provision” only because the Board had not yet approved the payments. After the year end, payment was made. In 2010/11 those items were reflected already as expenses, because the Board had already approved them.

He added that the changes in cash from operations related to the grant received from the Department for SA PIP, whilst the other was the reversal of the provision.  

Mr Schwiebus said that finance charges related to the pre-payment of expenditure by service providers, and this simplified business processes within the PPECB. Multiple invoices were no longer received throughout the month. All invoices were consolidated into one account with service providers, and they were paid once a month. In this situation, cost savings far outweighed finance charges.

With regard to trade and other payables Mr Schwiebus said that there was an outflow of R1.7 million last year, and an inflow of R15.8 million this year. The reason was that there was a grant received from the Department of Agriculture of R10 million, and a R13 million grant was received, which would be reflected as being spent in 2011/2012. This was the reason for the significant change in the trade payables account.

National Agriculture Marketing Council (NAMC) Annual Report presentation
Ms Ntombi Msimang, Chairperson: NAMC, presented the NAMC Annual Report. And outlined the goals, vision, mission and values of NAMC. The importance of the visibility of the NAMC was stressed, which was in line with the strategic objective to increase market participation and access. This was especially important for African countries to access the South African market. The NAMC had a budget of R31.1 million. The NAMC had received a clean audit.

Mr Ronald Ramabulana, Chief Executive Officer, NAMC, said one of the objectives of the Marketing Act was to improve marketing access to all. The NAMC had four programmes. One was the promotion of fruit in the fresh produce market, an example of which was the Mandela Market. The second programme dealt with the dissemination of information. Access to information was especially important for holder farmers and the cost of production was very important to remain competitive as an industry. The third programme was the trade analysis programme, which had produced six Trade Probes. The fourth programme, on export markets, assisted with the identification of possible export products and allowed for a continuous scan of the environment for trade opportunities. This programme had a focus on mapping and quantifying value chains. The NAMC also had an agri-benchmark programme. There was a partnership with the Department of Trade and Industry (dti), which had produced a study that looked at investment opportunities. The NAMC had capacity building programmes and had undertaken several statutory investigations. The other function it performed was managing the Crop Liaison Committee which worked closely with the Crop Estimation Committee.

The NAMC provided training programmes for 100 emerging farmers and 151 producers. (See attached document for further information)

Discussion
Ms Carter asked for an explanation about the expenditure trends, which showed R2.9 million for human resources in 2010/2011, and R2.9 million for the Chief Executive Officer (CEO) in the same year. She asked for an explanation on the expenses for the human resources.

Ms Msimang replied that under the CEO’s office were the CEO, the Personal Assistant, the Council Secretary and a Compliance Officer, so the R2.9 million related to four people.

Mr Bosman asked for an indication of what was achieved through the trade analysis programmes, and the results. He asked further how it was possible to get an idea if the trading volumes had increased.
 
Mr Ramabulana replied that the industry collected R260 million, of which R61 million was spent on transformation. The major challenges that required partnerships between industry and government, could not be addressed with R61 million, so NAMC clearly required more investment. Any additional money would be used to leverage additional resources, as well as to develop the markets.

Mr L Bosman (DA) expressed concern about the status of exports, the rules regarding China; and issues regarding meat, Foot and Mouth disease, and the ostrich situation, all of which were vital issues for trade. Nothing was mentioned about value addition in trade development. It would have been good to see much more about taking primary products along the value chain. This avenue could be used to improve the agricultural sector.

Mr Du Toit said there were no results which reflected leaps forward in the international market. He asked about the issue of surplus maize.

Mr Ramabulana replied that the NAMC had recommended to the Minister that the market mechanism in the free market should dictate maize prices, with no government intervention.

Mr Abram asked what sort of monitoring mechanism was used to monitor whether the trusts were expending funds in terms of the aims and objectives. He asked further when the trusts had their last meeting with Minister.

Mr Ramabulana replied that the trusts had not been able to meet with the Minister. The NAMC was fairly comfortable that the necessary processes were in place to improve communication between the Trustees and the Minister. The NAMC had representatives sitting in at all the Trust meetings. He would be happy to table the reports of the Trust meetings.

Mr Ramabulana said each and every Trust was governed by a trust deed, but noted that some of these were written in 1994, and might not necessarily be in line with what country wanted at the moment. The Ministry did not have a majority of trustees, so it was not up to the Ministry to change these deeds. The role of the Marketing Act around those trusts had to be clearly understood.  

Mr Ramabulana added that a meeting was held with the Minister, about two years ago, but that the NAMC was present at meetings every three or four months, and at each of these, there were detailed discussions held on the agricultural trusts.

Mr R Cebekhulu (IFP) said that rural consumers were challenged. He asked if it was possible for them to be able to pay the same as urban consumers.

Mr Ramabulana replied that the NAMC had a team that monitored food prices and explained some of the reasons why there might be increases or decreases in food prices. The government did design programmes aimed at addressing some of the problems.

Mr Du Toit asked if South Africa was making an impact on marketing overseas. He asked further where the trade attachés were, as he had not seen any results.

Ms Msimang replied that South Africa had a high ranking in exports only in respect of meat. This was a challenge that should be receiving more attention from the NAMC and partners. He noted that the agricultural structure was very complicated.

Mr Bosman asked for reasons why the levy was implemented in this way. He asked for clarity about the levy on grapefruit.

Mr Ramabulana replied that it had been acknowledged that the two biggest markets for grapefruit were the United Kingdom and Japan, and a majority had agreed on the statutory measures for grapefruit. For those not exporting to those two markets, there were two options – firstly, countries could indicate that they did not intend to export to those two countries, in which case they would be excluded from paying a levy, or secondly, they could lodge a complaint if there was no declaration up front about not exporting to those two countries. The NAMC had given information, through the Citrus Growers Association of Southern Africa, and through websites, to allow for complaints. No formal complaints had been received. One single producer had communicated through the Minister’s Office, and this matter had been addressed. If there were more than 50% of complaints, then the Minister could be advised to change her position.

Mr Du Toit said that ‘strategic measures’ should be renamed as ‘still busy with…’. He pointed out that there were many issues outstanding.

Mr Du Toit asked if, and how, the levies were supposed to help in marketing or administration. If most of the levies were channelled to marketing, then more money should have been spent.

Mr Ramabulana replied that the Annual Report contained a table setting out the industries that collected levies, as well as the Agricultural Trust, which consisted of different institutions. Once the reports were released, he thought that it would be useful for the Portfolio Committee to sit with levy administrators or trust administrators, to hear about some of the activities that were done with each of the industries.

Mr Bosman said that the Minister had expressed some opposition to the Walmart/Massmart merger, and asked if the NAMC had advised the Minister to take this stance. He asked what research had been done on this matter, and what effects this would have on the market.  

Mr Ramabulana replied that advice had been provided to the Minister.

Mr Bosman expressed dissatisfaction with the Walmart/Massmart merger. If any research was done, this information should have come to this Committee, to enable it to decide for itself whether the merger was in the best interest of the country. The Committee did not have its own research information to enable it to decide on this matter. A written report was requested.

Mr S Abram (ANC) congratulated all institutions present for their presentations. The PPECB had conducted their business well. He questioned the integrity of the information presented by the NAMC especially with regard to the financial statement 2010/11. He called into question the information provided in the total expenditure and income statement, and the resultant deficit funding.

Mr Abram said that lots of work needed to be done to upgrade herds in the community, to allow for competition with commercial farmers, and to improve genetic competition.

Mr Ramabulana stated that there were a lot of problems, because the country was still in the process of coming up with a new Marketing Act to address the challenges that South Africa faced. He noted that the NAMC merely administered the statutes as they stood. The industry did have some money to spend. He apologised if some of the issues had not been addressed.

Mr Ramabulana said that four investigations at the NAMC were pending at the end of the financial year. These had since been gazetted. The issues that were still pending depended on when the industry applied for those regulations to be gazetted.

Onderstepoort Biological Products (OBP) Annual Report presentation
Dr Steven Cornelius, Board Member, Onderstepoort Biological Products (OBP), provided a historical perspective of the OBP, highlighting the revenue milestones of R100 million and R150 million that were achieved. Its key strategic achievements included increasing its net operating profit, increasing both sales revenue and market share, establishing an available strategic vaccine bank in partnership and collaboration with the government, and human capital development.

The OBP had total sales of 68% above budget, with a 57.6% increase in sales revenue growth compared to the 2009/10 financial year. The OBP achieved unit growth in sales of 4.6% in the Southern African Development Community (SADC) region. There was ongoing improvement of both in vitro and in vivo tests, towards achieving ISO 17025 certification by 2012/13. Three vaccines (Lumpy Skin Disease, RVF Clone 13, and a Brucella S19 dossier update) were registered in South Africa.

Production remained the main thrust of OBP’s business, and in the 2010/11 financial year, the Production Division was again able to improve its production performance in comparison with previous years and achieve record output in terms of units/doses of vaccine compared to the past ten years. With the help of maintenance interventions, the level of availability of key production equipment was maintained above 95% throughout the reporting year, resulting in reduced down-time and losses in production.

12 interns and learners joined the OBP in April 2010 for a 12 month programme of intensive technical and behavioural training and development.

The OBP was audited by the Auditor General for the first time in over five years. A qualified opinion was given for the 2010/11 financial year.

Discussion
Ms Carter asked how it was possible that such a poor report was received from the Auditor-General. She asked further which certification body was doing the ISO 9001 certification.

Mr Steven Cornelius, Board Member, OBP, replied that ISO Certification was done by the South African Bureau of Standards (SABS).  

Mr Bosman asked about the R120 million given by the Department and what had happened to the R75 million that was supposed to improve the ageing infrastructure. He asked if this amount of money was sufficient.

Mr Cornelius said that the R120 million was given prior to the appointment of the new Board. He did recall that there was a discussion point about this. The upgrading of equipment was a discussion point, especially that of the of the Foot and Mouth disease laboratory, and this was a matter that resided with the Agricultural Research Council (ARC) and the Department. The current Board had allocated R75 million to upgrading of equipment, but this was not enough. R250 million was probably required over a three-year period. The current board had engaged with the DAFF to see how it could help the OBP to access funding to upgrade equipment. There were ongoing discussions about this matter.

Mr Abram noted that the Auditor-General (AG) had cited a number of qualifications in the audit report. The OBP needed to provide information on what it had done to remedy the situation. In particular, he wanted to see a list of responses to everything flagged by the AG.

Mr Cornelius replied that the current Board had started to close the gaps, and would send a list to the Committee showing what was being done regarding each of the issues raised by the Auditor-General.

Mr Abram asked for information about the Rift Valley Fever complaint.

Ms Theresa Smith, Acting Chief Executive Officer, OBP, replied that it had been realised that there was very poor direction of complaints to the OBP. These complaints came from farmers, particularly in the Aberdeen and Graaf-Reinet area, but no information was lodged directly with OBP; instead it had reached the OBP only after six weeks to two months had elapsed. It was alleged that there was a break in the cold chain during supply of vaccines, or that there was a new strain or variant of Rift Valley Fever circulating which the vaccine had failed to attack effectively, alternatively that this particular batch of vaccine had outright failed. A total of 48 complaints were eventually received, all from the Aberdeen, Graaf-Reinet, and Beaufort West areas. The complaints were predominantly to do with sheep, and a few goats, some of whom had been vaccinated, and had aborted, although some animals that had not been vaccinated also aborted. An investigation was initiated. Researchers were sent to six farms and drew some samples from sheep and goats that had and had not aborted. These samples were sent to the ARC for verification. The results were not overly conclusive, because in order that the cause be pinpointed exactly it would have been necessary also to test for a host of other diseases that may have been circulating at the time the animals aborted. The only thing that could be shown was that there was a possibility that a virus had been circulated on some of the farms.

Ms Smith said that there was a good response in animals who had been vaccinated against Rift Valley fever. However, it was impossible to distinguish between those who had been vaccinated and were well, and those who had been directly exposed during an outbreak. Further studies had been conducted, both through controlled experimental investigations that had been ongoing in any case, as well as other field trials that were being conducted. All of them alluded to the fact that the vaccine, particularly Clone 13, was safe and effective.

This, therefore, seemed to be an isolated incident. There were no other reports in South Africa in relation to cattle, where the vaccine was also effectively used during the outbreak. The OBP was conducting a study using Rift Valley vaccines in collaboration with another vaccine, in a controlled setting. This study was done by ClinVet. There was a challenge in that all the animals were now in various stages of pregnancy, and there were no cases of abortions. It was believed that in the Aberdeen and Graaf-Reinet areas there could have been a major outbreak, and the disease overload was just far too great for the animals to deal with.

Ms Smith said that the OBP hosted continuous sessions with vets and farmers to keep them informed of the process, and what was being investigated. A booster vaccination was given just before an outbreak to ensure that the immune systems of the animals were at the kind of levels where they could deal with the outbreak. There was no substantial evidence to show that the vaccine was not effective. The OBP believed fully in the efficiency, safety and protection offered by the Clone 13 vaccine.  

Mr Abram asked if the problems raised by consumers with regard to the effectiveness of vaccines had been addressed, as this was vital to maintain integrity.

Ms Smith replied that in terms of the availability of vaccines, the real threat faced related to vector-borne diseases, with the threat of high rainfall following drought scenarios in the country. Currently, there was no problem with viral vaccine production in respect of vector-borne vaccines. OBP believed that it was well able to meet the demand. However, there could be challenges in future with bacterial vaccine production, because of ailing equipment, and there would be major concerns if vaccines were not available. However, he assured the Committee that at the moment, OBP was on track to protect and cover what was needed.

Ms Pilusa-Mosoane said that the Auditor-General had commented that the area of leadership needed to be improved. The OBP had to address the challenges and implement the Human Resource management strategy. Financial and performance management also showed weaknesses. These matters should not have been noted, and it was necessary that steps be taken to improve.

Mr Cornelius replied that the question on leadership would also be addressed in the report that OBP would compile and send to the Committee, to address all issues raised by the Auditor-General. This was the first time in five years that an audit had been performed by the Auditor-General. It had been done during a different scenario than what was evident before, and management had learnt quite a bit. It was hoped that OBP could show a huge improvement next year.

Ms Twala said that the posts of Chief Financial Officer (CFO) and the Chief Executive Officer (CEO) were still vacant, with acting appointees doing the work. She asked when appointments for these positions were going to be made, stressing that vacant posts affected the work of the organisation.

Mr Cornelius replied that the new Board had started the process to address this matter. Posts had been advertised in the newspapers. He noted that the OBP included in its contracts a provision for restraint of trade for a period of one year after leaving OBP.

Department of Agriculture, Forestry and Fisheries (DAFF) Annual Report presentation
Mr Langa Zita, Director-General, Department Agriculture, Forestry and Fisheries, provided an overview of the Department’s activities to date and the sector economic highlights. The sector economic highlights included the steady recovery of the forestry industry since the 2008 recession. The demand for food was expected to grow consistently in line with population growth. There were increases in the prices received by farmers for agricultural products, and the prices paid by farmers for farming requisites, by 4.3% and 13.2% respectively. The Transfer of Rights Policy and the Small-Scale Fisheries Policy had been gazetted. The Pesticides Policy was approved by the Minister and had been gazetted.

The Department had facilitated the exports of 57% products into the European Union and the SADC, which were the two biggest destinations for South African exports. The ‘Zero Hunger Programme’ had been initiated. The National Delivery Forum for Vulnerable Workers on farms and in forestry and fisheries was established. The plan to convert the 12 Colleges of Agriculture into National Agricultural Training Institutes was at an advanced stage. 31 474 community members, including 10 198 smallholder farmers had been trained through the Comprehensive Agricultural Support Programme (CASP).

There was an outbreak of Rift Valley fever in spite of the improved control measures. Foot and Mouth Disease was currently well under control, with over 120 000 animals having been vaccinated. All the necessary measures had been implemented to bring Foot and Mouth Disease under control in Kwazulu Natal, and over 120 000 animals had been vaccinated.

The challenges included intergovernmental relations, which sometimes posed a hindrance to implementation. The length of time involved in legislative processes were also a problem, given the pressures on the Department to deliver. There was still limited public and private investment in storage facilities to support smallholder farmers. The Department was currently working on standardising all Monitoring and Evaluation responsibilities, including reporting and verification in DAFF.

Discussion
The Chairperson commented, in respect of the DAFF entities, that the PPECB and the NAMC had worked well, but the OBP still showed had challenges. It was a painful experience when China burnt the country’s wool. The OBP had to sort out the situation of staff leaving and carrying on with a ‘ business as usual’ approach. This was a very sensitive situation. Another problem was that of the ageing equipment. The Committee wished also to hear more about the trucks and performance. The Chairperson asked if headway was being made with the wine industry, and if foreign governments had committed to support black farmers.

Mr Abram said that he had a lot of problems with this Department. Very little was said about meat in the presentation. There was supposed to be a census amongst farmers, and a farmer register project. No information was provided about how money was spent. The Committee needed to know what was achieved. There were many complaints in the press. He wanted to question the integrity of the processes.

Mr Hlatshwayo responded, in respect of the farmer register, that R20 million had been ring-fenced for this project. However, only some preliminary work had been done by the end of the year, and it had spent R500 000. The Department made the situation clear to the National Treasury, and asked for the R19.5 million to be rolled over.

Mr Abram said that the Red Meat Industry Forum had been trying to reach out to the Department but the Department had not availed themselves of the opportunity. He said that he empathised with them, as he had also tried to reach out and his letters were not answered. He had personally spoken to the Director-General about a massive project in the Free State, but the Department did not respond to this either. He asked why there had been no engagement with the Red Meat Industry Forum when they had made requests to meet with the Department.

Mr Zita said that the Department did have relationships with community groups such as the Red Meat Industry Forum. He was not aware of any letter sent to the Department by the Red Meat Industry Forum. The Department went out of its way to work with people and had appointed people to deal with communities.

Mr Abram said that the Red Meat Industry Forum was facing the problem of animal diseases, largely as a result of problems with fences in the northern part of the country.

Ms Mpho Maja, Director: Animal Health: DAFF, responded that a report had been submitted by the Department to respond to those issues that the Red Meat Industry had raised. During the meeting between the Red Meat Industry Forum, the Committee had agreed that the Department would be given a slot also to make verbal representations in response to those issues, and Mr Zita would be following up on that.

Ms Maja said that the challenge in regard to fences was much more serious than it appeared to be. For disease control purposes, South Africa actually needed only minimal fencing, of only a three-strength, to prevent movement of animals from one country to another. That fence was clearly not going to be sufficient for other purposes, including security purposes. There were over 1 000 officials manning the fences from east to west, but unfortunately the major repeated instance that caused breakage of fences was criminal activity. On a daily basis, officials were threatened by people illegally crossing borders in KwaZulu Natal and the border with Mozambique, with stolen vehicles. As fast as the fences were fixed, they would be broken again. The DAFF was in consultation with the South African National Defence Force, and was keen for the latter to take over the functions, as there was a greater need in the country for security than for disease control.

Mr Abram asked how many new smallholder farmers had been established

Mr Kgobokoe promised to provide Members with a break down of the numbers in the provinces.

Mr Abram said that some of the slides presented merely contained “useless statements”. The Committee required full details so that oversight work could be done effectively.

Mr Abram asked if the Chief Financial Officer could provide responses in writing to everything that the Auditor-General had highlighted, but noted that this obviously could not be addressed today.

Mr Abram said that two forensic audits had been done, one on Ncera Farms, and the other to do with the fishing sector. The Committee had heard from outside that both these audit reports were available, but until now had not been provided with any of the findings, apart from the snippets of information it had managed to glean from the media. He said it was the duty of the Department to keep the Committee posted at all stages of development on various reports, and he urged that the Committee had to receive reports at least on a quarterly basis.

Mr Zita said that the Department had the Ncera Farms report at this meeting. It was a forensic report, which was both very sensitive and confidential, and should be treated in this way. The report would be given to the Committee Members after this meeting.

Mr Abram said that earlier this year, during the budget discussions, the DAFF had announced that R50 million worth of tractors and implements were going to be made available to communities. Mpumalanga and Kwazulu Natal had received these, but other provinces had received nothing. Again, to date the Committee had no report on this matter. Hon B Holomisa had been reported, in the New Age, as having written to the Minister to ask why the Eastern Cape had received nothing, and this letter was copied to the office of the President. According to the New Age, the Presidency was advised by the Ministry that the process of procuring those tractors and implements was comprised. He asked for a report whether indeed the process was compromised, as the media had reported, what the compromise was, who was responsible, if anyone had been disciplined, and whether the Department had made any effort to see that the matter had been put right, and, finally, when the provinces could expect to get their tractors and equipment.

Mr Zita replied that he was aware of the situation, and the Department had indeed facilitated the deliveries in Mpumalanga. The provincial governments in the provinces where equipment was delivered now had to report on what happened to those tractors.

Mr Hlatshwayo added that 84 tractors had been provided to each of the two provinces who had received tractors. If usage of tractors were as a result of a tender process then it was irregular for provinces to have operated in this way.

Mr Du Toit said that the report from the Auditor-General had queried the usefulness of information, and there were serious allegations with regard to programmes 3, 5 and 6, that the Department had not supplied sufficient verifiable information. He added that a serious administrative problem was highlighted on page 79 of the Annual Report, which stated that because the internal audit was under-resourced, both in terms of budget and capacity, it could not operate optimally. The Committee needed to know what was going on. The Auditor-General had also reported leadership problems. He added that it was very serious that, some ten weeks after the Auditor-General had signed off, it was found that the Executive Authority had been “sitting on” some investigations, and Parliament should immediately have been told of the outcomes.

Mr Richard Seleke, Chief Director: Policy and Planning, DAFF, said that he would try to respond to the allegation of that the Department had not provided sufficient verifiable information. The Department was in the process of finalising its strategic plan. He noted that when CASP was implemented, the administrative data giving the name of the farmer could be found at provincial level. However, the Department received a comprehensive report on how this programme was performing. The Auditor-General had looked at the target that appeared in the strategic plan, but had called for information on the specifics, which was information housed not at the national Department, but at provincial level, and this detail could not therefore be provided. He stressed, however, that this did not mean there were any problems with the administration.

Mr Hlatshwayo responded on the issues of Leadership and investigations as highlighted by the Auditor-General as problematic areas for the Department.
In terms of leadership the Auditor-General had said that the Department did not exercise oversight. Mr Hlatshwayo said that he was tempted to express his disagreement with this finding. The Department had come up with an audit matrix to identify and address the audit findings. The Auditor-General should have said that the Department had not moved to a proper stage of development. The Department had an audit steering Committee that met on a monthly basis to look at the findings.

With regard to the issue of Investigations he said that if the Auditor-General had been denied access, it would have amounted to a disclaimer. These reports were handed over to the Auditor-General and hence they were able to identify supply chain problems. After having looked at the findings, he felt that the AG should not have commented in this way.

Mr Du Toit agreed with Mr Abram’s comment that some statements were meaningless, citing some examples and saying that the Committee needed to see a business plan, and the department had to be practical. For purposes of oversight, the Committee had to know what exactly the results were. The area of intergovernmental relations, one of the challenges mentioned in the Annual Report, needed much more information.

Ms Pilusa-Mosoane asked for clarity about the vacancy rate, as it was 11.3% the last time the Committee had dealt with the issue.

Mr Sipho Ntombele Deputy Director-General, DAFF, replied that at the end of the financial cycle the Department of Agriculture had to merge with the Departments of Forestry and Fisheries. By April 2010 all three departments merged with new government structures and ministries, and all the unfunded vacancies were transferred. The vacancy rate was currently 13%.

Mr Sipho Ntombele replied that generally, in regard to vacancies, there had been a Cabinet decision that candidates had to undergo suitability checks, including the South African Qualification Authority (SAQA) having to verify qualifications in resumes. This often had undesirable consequences as it delayed the recruitment process.

Ms Pilusa-Mosoane noted the plan to convert 12 colleges of agriculture, and asked what “at an advanced stage” actually meant, stressing that an appropriate reporting style should have been used.

Mr Joe Kgobokoe, Chief Director: Sector Capacity Development, DAFF, replied that the Department was passionate about Colleges of Agriculture. In 1994 the Department had inherited 12 Colleges of Agriculture, some in the former homelands and some in the former Republic. They were characterised by disparities in terms of operations, staffing and resources. The Department had since started a process of transforming them. This operation had been successful. Norms and Standards had been established, with international benchmarking, and these had been used to do an audit of all colleges, to bring them to the same level. A report outlining the weaknesses of each college was prepared, and the National Treasury was approached to revitalise the colleges. Each college had been given money towards its revitalisation. They would now major in the training of smallholder farmers. The Department now had a unit whose responsibility would be sector colleges.

The Chairperson asked where these colleges were located.

Mr Kgobokoe replied that an agreement had been reached with the Department of Higher Education and Training (DHET) that Colleges of Agriculture would reside with the Department of Agriculture, Forestry and Fisheries.

Ms Pilusa-Mosoane said that the 670 extension officers mentioned in the Annual Report was far too low.

Mr Kgobokoe said that the figure of 670 Extension officers indicated the officers who had enrolled in various universities in the country during the academic year 2010, to upgrade their qualifications. There were approximately 3 000 Extension Officers in the country. The Extension Officer to farmer ratio was one Officer to 800 or 1000 farmers. The plan was to work towards a ratio of one Officer to 400 or 500 farmers.

Ms Pilusa-Mosoane said that no report was available about the tractors for the provinces who had received tractors. She stressed that the Committee needed to know how far the process had gone. Some of these tractors were found parked unused.

Ms Pilusa-Mosoane said that the AG’s report clearly set out the facts for the Committee, and she was not happy with the Department’s performance. The Auditor-General had said, in respect of governance, that although an assessment was conducted, the risk management strategy was not approved in line with the requirements by the National Treasury.

Mr Hlatshwayo said that he did not agree with the paragraph relating to the audit of risk assessment. There were problems, and the Department had engaged with the National Treasury who had provided assistance.

Mr Bosman agreed with other Committee members about the failure of the Department. The Annual Report did not speak to the issues on ground. He still needed to be convinced that new farmers were successful as he had not seen evidence of this. Most of the projects were insolvent. Mr Bosman said he was very upset at the moment and did not feel very optimistic about the future. He further commented that the Red Meat Industry Forum had made itself available to the Department and submitted a written report, but the Department did not respond in kind. The Forum had even made itself available to the Committee. The Department did not even know what the provinces were doing. He said he was very upset with the Department.

Ms Phalisa asked in which areas the Marine Living Resources Fund was working, as there were no deliverables on the ground. She recommended that the Auditor-General should audit this fund.

Mr Hlatshwayo replied that the Marine Living Resources Fund (MLRF) was not audited by the Auditor-General, because it was a schedule 3 public entity, which meant that it could appoints its own auditors, and this was what was happening.

Ms Carter asked how many agricultural schools there were.

Mr Kgobokoe said that unfortunately high schools resided with the Minister of Basic Education. Principals of the agricultural schools had approached the Department to say that they had been neglected. There should be a dedicated programme with people who understood agriculture.

Ms Carter said that projects had failed, but the Department kept on investing in failed projects.

Mr Zita conceded that some projects had not worked well. There had been a move from the grant to a loan system, which would make matters easier for the Department, but this was seen as a radical measure, and Provinces were reluctant to make this move. The Department had engaged with the National Treasury about this. National Treasury had agreed to conditional grants for projects, but not for the Department as a whole. The Department motivated that it needed more of a say in the matter if it was  expected to achieve. Hence for the next financial year, the Department had stopped just handing over money and had planned for the whole year, to minimise costs. The Department had introduced area based planning into their operations and added a system of deploying officials to local areas to mobilise smallholder farmers. A tender would put out for an implementation agent to facilitate this process. 

Mr Zita added that the problem related also to concurrence, since two authorities were working on the same thing. Even if the Department set the parameters, it was not the sole implementer. It was necessary to be very cautious about how implementation took place, to avoid interference.

Ms Carter asked what had happened to the Deputy Minister and if he had been sidelined.

Mr Zita responded that he did not want to get involved with that matter. He worked with everyone in the Ministry.

Ms Carter asked for more information about the terms regarding the outstanding debt.

Mr Hlatshwayo replied that he did not have the figures but would respond to Members later.

Ms Twala asked why there was under-spending, as the Department had to assist emerging farmers.

Mr Hlatshwayo replied that of the R103 million that was under-spent, R12.2 million related to a building obtained for Forestry employees. At the end of the year that building had not been occupied and therefore this amount had been ring fenced. The building was not in a good state, so the officials from Forestry had not occupied the place.

Ms Twala asked why the funds to provinces had been withheld.

Mr Hlatshwayo replied that R33.6 million had been withheld for the CASP, and was then returned to National Treasury, with a full explanation as to why not  all of it was used, and why it had therefore been withheld. Out of that money, he indicated that rollovers of R10.07 million for the North West, and R5 million for the Eastern Cape were returned. Members had previously commented that the projects for which these funds were intended were not having enough impact.

The Chairperson expressed concern about the CASP under-spending and money being returned back to the National Treasury. Provinces were getting those grants, but there were concerns about the role that the national government played in this matter. The CASP grant could be subject to abuse. The people who deserved money were unable to have access, yet this matter seemed to be in the hands of provinces, over whom this Committee had no oversight.
 
Mr Zita replied that in the past the Department did get applications for CASP. In the 2010/11 financial year, the Department had allocated individuals to link up with all community groups. There was no longer a need to hand over to the provinces. The implementation of projects by the Department was a new development. A tender had been put out around the Zero Hunger campaign, for assistance to roll out the campaign, for job creation projects and also in terms of implementation to promote agriculture in the former homelands. A list of directors had been compiled to work with those projects and they were required to spend a week every month to do work on the ground. This list was available for the Committee.

Mr Seleke added that CASP implementation took place through projects. From an administrative point of view the figures in the report referred to the beneficiaries.

Mr Cebekhulu commented, in respect of the spread of Foot and Mouth disease, that it was necessary for the Department to look at the movement of animals to rivers for drinking, as the main focus was on main roads. It might be useful if the Department went out in full force and did testing on cattle.

Ms Maja said that the Director-General had already alluded to the challenges that the Department faced with regard to the concurrence of functions. Veterinary services was one of those functions affected, because there had been provincialisation of veterinary controls, and this had been raised in different forums. She explained the problems with the Foot and Mouth disease outbreak in particular. Although the last cases were detected in April 2011, the Department had been struggling since them to get the  Kwazulu Natal Veterinary services to close the outbreak, and to put control measures in place, so that all the measures were in place for the Department then to approach the World Organisation for Animal Health (OIE) and trade partners, and ask them to reinstate South Africa’s disease-free status so that exports could be resumed. Unfortunately, the KwaZulu Natal services had not cooperated, and had said that surveillance could not be started, although the Department had been hoping that it would already have  been concluded.   

Mr L Gaehler (UDM) asked how far the process of revising irrigation schemes had gone, as the Minister had said the Department would do this.

Mr Zita said that the Department had an overall plan for the irrigation schemes at Ncera Farms. There was a small budget of R48 million, but the Department was working with the Department of Rural Development and Land Reform (DRDLR), who had more money. Traditional leaders also had to be engaged on this matter. The issue of irrigation schemes could be a quick win for the Department.

Mr Abram noted that some questions remained unanswered. He said that the Committee wanted the CFO to present a written account on the Auditor-General report, setting out all the issues, and how the Department planned to rectify the issues.

Mr Hlatshwayo said that with regard to the issues raised by the AG, these were set out on pages 94 to 97 of the Annual Report, and paragraphs 1 to 10 related to the financial statement figures. Paragraphs 11 to 27 dealt with the legal and regulatory requirements. He was not sure where the major concerns of the Committee stemmed from, but a report would be compiled.

Mr Abram noted that questions about the tractors had not been answered to his satisfaction. He wanted to know if the procurement process was compromised in any way, and, if so, what was the extent of the compromise. He also reminded the Department that the Committee wanted responses about when the other provinces were going to get tractors.

Mr Abram asked where the forensic report on Marine and Coastal Management was, and why reports were being withheld.

Mr Zita replied that a message would be conveyed to the Minister that the Committee wanted to see the report.

Mr Abram said that the question from Ms Carter about the pre-1997 loans had not been responded to, and that this response should be sent to the Committee in writing.

Ms Pilusa-Mosoane asked what should be done to get the forensic report about Ncera Farms from the Department.

Ms Pilusa-Mosane said that the Department had given tractors to the municipality in Kwazulu Natal, yet it did not appear that monitoring and evaluation had been done to follow up on the tractors.

Ms Phaliso said that there was little information about the Forestry sector. She asked if the Department had capacity. The Committee was frustrated about the lack of deliverables. The advice given had not been taken into consideration.

Mr Zita said that the Department did refer to Forestry matters, and conceded that more could be done. Now that there were directors in all the municipalities, the Forestry function could be engaged with more  directly. He said that it was not easy to move from providing grants to providing loans, as it was a move away from a known bureaucratic system

Ms Phaliso asked if officials were working with the municipalities.

Mr Zita said that the Department was deploying people to work in municipalities, especially in those areas where the farmers were, and service providers would help people located in those areas. Of course the Department would work with provinces, but they could not be blamed if there was not a constructive working relationship. The Department was sending officials into areas once a month. The Department was assuming responsibility for what was happening on the ground.

The Chairperson said that this was a very fruitful session, and there would be written replies to some of the questions raised.

Mr Hlatshwayo made some further comments on the financial statements. He said that assets valued at R3,126 million had been disposed of, and that figure was the original purchase cost. The assets of the Department were depreciating at a faster rate than anticipated.

With regard to funds transferred to provinces, Mr Hlatshwayo said that previously the money was transferred without any account being given of what had been done with the money. This was related to the National Treasury Schedule 4 and had to be changed to Schedule 5.

The following questions were raised but not answered:
Ms Phaliso asked if the PPECB could provide the Committee with detailed information about the key findings of the research report that would allow the project to continue into the next financial year.

Mr Bosman asked why there was under-spending for capacity and skills development at the PPECB.

Mr Bosman asked the PPECB for a longer term vision, as revenue had increased by R28 million, which reflected a sharp increase in expenses. He asked if this situation was going to continue.

Ms Pilusa-Mosoane asked what had been done to address the capacity shortage challenges highlighted in the PPECB report.

Ms Twala asked what the impact for the PPECB was of the increases in the cost of electricity.

Mr Du Toit expressed concern about the 300 containers sent to the United States (USA). He asked the NAMC if this was considered a large amount for the USA, saying that he did not think it was particularly large.

Ms Pilusa-Mosoane asked was the most challenging aspect of the work of the NAMC.

Ms Carter asked the Department to give clarity about the pre-1997 loans.

Ms Carter asked when the draft agricultural modalities currently under negotiation, would be made available to the Committee by the Department.

Ms Carter asked if the management report would be made available to the Committee.

Mr Cebekhulu asked what role the Department played with regard to projects to help farmers to move away from being emerging or developing farmers, to being fully fledged farmers.

The meeting was adjourned.


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