Technology Innovation Agency & Africa Institute: 2010/11Annual Report briefings

Science and Technology

11 October 2011
Chairperson: Ms M Dunjwa (ANC)(Acting)
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Meeting Summary

The Technology Innovation Agency (TIA) presented its inaugural Annual Report and financial statements to the Committee. TIA was formed from the merger of seven different entities, some of which were operated as trusts or dormant entities. A new Board was appointed in April 2010 and the Chief Executive Officer in September. It had regional offices now in four provinces, and had established a number of local and international partnerships. The main focus of TIA was to find good ideas that were sustainable and met market needs, and to convert them from mere ideas to ongoing business propositions, in order to support innovation. TIA was engaging with academic institutions, other government agencies and the corporate world to find out where such ideas already existed, as well as to increase partnership and an innovation drive, especially through offering competitions. It wanted also to bridge the gap between local and international stakeholders. Some of the successes and initiatives were described. The Investments Framework Policy was agreed to and would shortly be gazetted, and the Youth Technology Innovation Fund was agreed to in the current financial year. TIA was driving innovations in a number of sectors, and there were ongoing special projects in agriculture and the motor industry. It had assisted 1 594 Small, Medium and Micro enterprises and had facilitated 59 exports through the technology stations. In regard to the financial statements, it was noted that TIA had been responsible for its own finances and had received an unqualified audit up to March 2010. However, in the 2010/11 year it received an adverse audit opinion because it was unable to produce financial statements timeously for the 126 entities it had inherited, where there were conflicting and sometimes problematic financial presentations. The Board had asked for exemptions from National Treasury and a solution was being discussed with National Treasury and the Auditor-General. The investments had been noted as zero. There were other problems due to lack of financial capacity. An Annual Plan was still needed, and the Minister had failed (although this was later rectified) to sign the materiality and significance framework. There were some instances of wasteful expenditure, and gaps in procurement policies, since regularised. An Action Plan to address these was tabled in August 2011. A Senior General Manager for Finance would commence duties on 1 November and a team from National Treasury was being seconded to assist with consolidation of investments.

Members asked for more details on the consolidation of investments, asked about the work with the Industrial Development Corporation, how the question of publishing versus patenting was handled, and how the banks were to be brought on board. Members asked who was taking the risk, and whether there would be a call for expert assistance on the investments and mergers. They questioned a bonus received by the interim Chief Executive Officer, and noted that a forensic audit was being done into an amount of R63.9 million. Members also wanted to know about employment of disabled people and whether there had been lay-offs.
They thought that dedicated programmes were needed in rural areas.

The Africa Institute of South Africa briefed the Committee on its annual report. This was largely a research institution, conducting research into various sectors throughout Africa. Its current agenda was concerned with
African Continental Integration 2008-2011. Its mandate was to provide research and policy development support in its pursuit of programmes that contributed to the development of the African continent, to foster continental patriotism and to increase awareness of Africa. The five research units and their work were outlined. The post of Executive Director for Research had now been filled. The work was highlighted, and it was noted that a major portion of the research was looking into whether Africa’s development was really helping its people, and whether development was done by the harvesting of natural resources. The numbers of academic outputs were given. Knowledge transfer and skills development was being done, and it ran a Fellowship programme. It participated in various book fairs, and the library and information centre continued to grow, although the utilisation could improve. AISA also ran schools outreach programmes and outreach to commissions and universities. It still needed to implement some recommendations from the institutional review in the previous year and to establish more partnerships. 55% of its budget was spent on employee-related costs. It had achieved an unqualified audit report, with no matters of emphasis, a substantial improvement on the disclaimer five years previously, through putting concerted work into improving its systems. It had ended with an effective deficit, having managed to reduce its surplus by better spending. About 93% of its income was from the Department of Science and Technology, and there was a 12% variance between budget and expenditure. It was solvent by the end of the year. Members were generally pleased with the performance, but asked questions about the number of library users and the sourcing of volumes, the staff turnover, and what AISA was doing specifically to address misperceptions giving rise to xenophobia, and to try to change attitudes. It urged AISA to tackle more at grass roots level.

Meeting report

Ms M Dunjwa (ANC) was appointed as Acting Chairperson, since the Chairperson was attending an Expo of the Department of Science and Technology (DST) in another province.

Technology Innovation Agency (TIA) Annual Report and Financial Statements 2010/11
Mr Simphiwe Duma, Chief Executive Officer, Technology Innovation Agency, apologised for any delay in submitting copies of the presentation, saying that input was required from National Treasury on some points. He noted that the Technology Innovation Agency (TIA) was presenting its first annual report, and he hoped that the amount of work that had been put into getting it up and running would be noted.

The TIA Board was appointed by Cabinet on 15 April 2009. He had taken up his position as Chief Executive Officer in September 2010. TIA was formed out of the merger of seven entities. Shumisano Trust had reported to Parliament last year, whilst the other entities had been administered by the National Research Foundation, with the Advanced Manufacturing Technology Strategy (MTS) being administered by the Council for Scientific and Industrial Research (CSIR) on behalf of DST. He mentioned that the Bio-Technology Regional Innovation Centres (BRICS), which were referred to by the names of Plant Bio, Bio Pad, Life Lab and Cape Bio-Technology, were regional centres, other than Plant Bio, which had a national mandate. For this reason, most of the projects were regionally-based, with the bulk in Gauteng, KwaZulu Natal (KZN), Western Cape and a few in the Eastern Cape. TIA, however, was a national organisation and aimed to change the projects to a national basis. He hastened to assure the Committee that this was not to suggest that a regional project did not still have the capacity to impact on the country, but a national base would allow for more work to be done.

TIA looked at innovation that met a need in the market. It would not fund all research, but only that that was shown to meet a need in the market, and was sustainable. A project would not, in order to qualify for funding, have to show that it was already making a profit, but some research had to be self-sustaining. TIA was also addressing the problems relating to publishing and patenting. There were many products that lay dormant, not having yet been commercialised. This was known as “an innovation chasm” or “the valley of death”, and TIA hoped to form a bridge across that valley or chasm so that ideas from inventors could make the leap from being merely ideas, to becoming commercial industries or entities that could impact positively on society.  

Mr Duma noted that the National Research Foundation (NRF) and other institutions of government funded basic research. TIA, on the other hand, would work where there was generation of ideas and some early investment, and would then take matters through the value chain, to proof of concept and technology development to the point where a business start up and commercialisation could begin. TIA had a Memorandum of Understanding (MOU) with the Industrial Development Corporation (IDC), and would hand over to it projects that were ready for industrialisation, to avoid a duplication of the process by the inventors having to make the application. TIA was also working with the NRF and CSIR.

In order to implement the mandate, TIA used appropriately structured financial and non financial interventions, such as the 15 Technology Stations, 15 Universities of Technology and Higher Education Institutions, and 14 Technology Platforms. These entities had high end skills that small organisations who were developing technology may not be able to afford. A research service was made available, at a cost of R1 million a year, to assist these small entities, and TIA also provided access to high-class equipment, which was often too costly for individuals, as part of the non-financial interventions. TIA also had specific investment managers, who were alive to what needed to be done in the innovation space.

TIA wanted to build a culture of innovation. It had approached schools and offered science kits, had sponsored competitions around innovation at universities, and was currently the lead sponsor of the solar car for universities. It was vital for it to leverage local and international partnerships, through the larger entity of TIA. Mr Duma himself had visited 21 higher education institutions across the country, and still had two to visit. TIA wanted to understand what those institutions were doing, in order to be able to make direct referrals when requested to by international stakeholders. The leveraging was intended for the stakeholders. He outlined that TIA had partnerships with NRF, CSIR, IDC, the Agricultural Research Council (ARC), South African National Space Association (SANSA), Onderstepoort Biological Products (OBP) and South African Bureau of Standards (SABS). It was important for people to engage with SABS early. TIA was encouraging all its partners to produce the innovative products that had not yet seen the light of day, so that it could be supported.

TIA also had entered into various external memoranda of understanding, with entities in France, Brazil, Spain, Germany and Zambia (see attached presentation) and wanted also to move into the Continent. Many of the activities by South Africans presented many opportunities in the rest of Africa – for instance, cellular service providers’ solution for South Africa had been turned into profit-making enterprises elsewhere in Africa. MTN was one of the largest mobile networks in Africa because of their breakthrough technology. South Africa, although it did not have too much of a problem with malaria, was still working on this to market its innovations in other African countries. The size and influence of TIA would be used to establish relationships.

Mr Duma noted that the Investment Framework Policy was agreed to by the Board in November 2010, as required by the TIA Act, and would shortly be gazetted, after approval by the Minister. TIA, as an evolving instrument, kept testing its instruments, and had found that some were working well but others could be customised further. The Board had approved, in principle, of the Youth Technology Innovation Fund, in the current financial year, and would approve this in November 2011, after which it would be publicised. “Youth” would encompass those in the 18 to 30 year age group.

In September 2010, a workshop was held for the 200 staff members, to develop processes, values, and cultures in TIA. In the transition stages to TIA, some staff had moved away, but the regional offices were formally launched and Mr Duma thanked those Members who had assisted with the launches. The TIA was now located permanently at 83 Lewis Avenue, which was accessible by public transport.

TIA was driving the “slow pulse” sectors of agriculture, health and industrial bio-technology as well as “fast pulse” sectors of industry, advanced manufacturing, energy, ICT, mining, and special projects. Some of the significant projects had already created jobs, but were still at development stage. These included the adept engine, artificial insemination programmes for Nguni cattle, which were difficult to breed but were not so susceptible to disease, and were useful in the leather, meat and rural development industries, and this latter project was one of high impact, that would be rolled out nationally with ARC. Citro gold was a breeders’ right project, and was concerned with environmentally friendly pesticides in the citrus industry, and those who had used them had no returns of the goods exported. This was assisting with job creation in the citrus industry.

TIA had assisted 1 594 Small, Medium and Micro enterprises (SMMEs) and believed that it would surpass the target of assisting 2 500. It had facilitated 59 exports through the technology stations.

Mr Duma then presented the financial statements. He wanted to highlight that TIA had commenced as one of the entities in 2009/10. When, in March 2010, one of the NRF entities had moved across, TIA then became responsible for its own finances, and worked closely with National Treasury (NT) to comply with section 54 of the Public Finance and Management Act (PFMA). It received an unqualified audit in respect of those financial statements. However, it had done something unusual, in that all the investments were depreciated to zero. This was now being regularised through a process with NT and the Minister of Science and Technology. There was a need to “normalise” the investments, since the seven entities now incorporated into TIA had all been trusts that were being governed differently.

In the 2010/11 financial year, TIA had obtained an adverse audit opinion. This arose because TIA had inherited a combined portfolio of 126 entities, of which 43 had a significant shareholding, according to National Treasury. However, some had not had audited financial statements, and these could not be produced in time for the auditors. Some of the loans had not been properly classified and some investments were dormant, whilst there was a problem with recording on others. The Auditor-General was therefore not able to pronounce on the financials.

Mr Duma explained that there were two possible options. The first was to obtain exemptions. The second was to depreciate everything to a zero figure. The Board had chosen to follow the exemption route and had asked National Treasury to come up with instruments that would allow TIA to perform its mandate. There had been engagement with the Auditor-General, the Accounting Standards Board and National Treasury to try to reach a solution.

Another problem isolated by the auditors was the lack of experience in some staff to perform duties, the fact that an Annual Plan must still be sent to the Portfolio Committee, as it was not ready when TIA was set up, and the fact that the materiality and significance framework had not then been signed by the Minister, although this had now been rectified. There were some cases of wasteful and fruitless expenditure, including the under-utilisation of a building in Western Cape for six months, interest charged by South African Revenue Services for a late payment of PAYE. There were also gaps in procurement policies, which had since been regularised, and were explained to NT. In respect of declarations of interest by executives, it was noted that the furniture was purchased from a company on whose board one of the executives was represented, although the purchase was done before she joined TIA.

An Action Plan to address the audit findings had been tabled on 25 August 2011. This had been approved by the board. A Senior General Manager for Finance would begin employment on 1 November 2011. A Task Team had
been set up to restructure all projects and investments in line with the National Treasury requirements as a stop gap measure. A team of trainee accountants, led by a senior accountant from the National Treasury, would be seconded to TIA to assist with the consolidation of all the investments. The Board reviewed the procurement policy, in line with the auditor’s recommendations, and one of the two new board members was going to chair the Audit and Risk Committee.

The Minister, when announcing the launch of TIA, had said that TIA was being launched in a difficult environment but hoped it would make the country realise that innovation was a worthwhile investment. It was hoped that TIA would bring the banks on board.

Mr P Smith (IFP) accepted that there were teething problems faced by TIA. He asked for more detail on the operational Plan. He asked how TIA was affected by the MOU with the IDC, since TIA seemed to want equity in the organisations.

Mr Smith asked if TIA had discussed the question of publishing versus patenting.

Mr Smith asked what was being done to bring the banks on board, and to have CSIR commercializing through TIA.

Mr Smith asked if all investments would be raised with NT, or only those investments from the past, and asked the link between the level of assistance and the number of investments, asking if this would result in any dilution.

Mr Duma said the MOU with IDC was intended to help entities that would run out of funding during a project, so that instead of going back to re-apply for additional funding, TIA would avail itself. It met once a month with IDC to discuss core investments. In some cases, everything was handed over to IDC. When TIA itself could not play a role, it did not force it, but would look at this as a way of assisting stakeholders to access IDC faster. He said that “dilution” would occur if it was suggested that a person could have 100% ownership of a R5 million company that was not likely to achieve much, or it could dilute to build a R500-million company, of which it would be possible to get 30% ownership. He hoped the model with the IDC would attract the banks. However, there was also a need to guard against profit making, as some investments were meant to sustain a particular industry. A partnership was formed with South Africa Venture Capital Association (SAVCA).

Mr Duma noted that TIA aimed to have a regional office in every province by March 2012. It had visited higher education institutions to make them understand the TIA business and to help achieve the foot print, and there would be further delivery on that in the 2011/12 financial year. TIA was interacting with CSIR to get more people on board. He noted that 10% of the 50 million South Africans worked in this field.

Mr Duma said, in relation to the National Treasury interactions, that if was trying to avoid shortcuts, but if the exemptions proved harmful, they would not be pursued.

Ms Barbara Kortjass, Chief Financial Officer, TIA, said that the Materiality and Significance Framework was now with the Minister for approval. In the meantime, any investment that triggered a section 54 compliance issue would be dealt with on a case-by-case basis.

Mr Duma added that the SMMEs who used technology stations were ready to go to the market. TIA was helping to provide an environment to do the work quickly. Biotechnology was a sector where industries should employ graduates. In regard to whether to publish or patent, he said that TIA advised people to use whichever strategy seemed most suitable for themselves.

Ms M Shinn (DA) asked who was taking the risk. She asked if TIA had considered calling in professionals who specialised in investments and mergers for help.

Mr Duma said that in relation to the mergers and investments, the problem should be solved by the TIA itself, but TIA had invited a Harvard Professor on investments and mergers to assist.

Ms Shinn asked why the Interim CEO, Dr Nhlanhla Msomi, had received a R750 000 bonus.

Mr Duma responded that the salary of the interim CEO was paid out because there was delivery on the mandate given by the board, and the bonus was compensation for the extra workload undertaken. Ms Shinn asked who was responsible for the two centres of compliance.

Ms Shinn asked for further clarity on the figure of R63.9 million.

Mr Duma said that a note was made by the auditors that the matter relating to this figure was being dealt with. Nobody had been paid this amount. The investigation into the forensic audit would be finalized by 4 November 2011.

Ms S Plaatjie (COPE) asked what TIA was doing to encourage the disabled.

Mr Duma said that TIA had a technology station for the disabled, although it had not been specially mentioned.

The Acting Chairperson wanted to know the positions held by the people who were laid off, and they could be assisted.

Mr Duma said no one was laid off but during the team integration some people had voluntarily resigned.

The Acting Chairperson noted that there did not appear to be a dedicated programme to expose people in rural and peri-urban areas to innovation.

Africa Institute of South Africa (AISA): Annual Report and Financial Statements 2010/11
Dr Matlotleng Matlou, Chief Executive Officer, Africa Institute of South Africa, noted an apology from the Chairperson of the Institute (AISA). He tabled a map of Africa, showing the geographical areas that AISA had covered since the vision was altered two years previously. He noted that its current agenda was concerned with
African Continental Integration 2008-2011. Its mandate was to provide research and policy development support in its pursuit of programmes that contributed to the development of the African continent, to foster continental patriotism and to increase awareness of Africa. It aimed to promote knowledge and understanding of African affairs through social sciences.

AISA’s core business lay in research. This was organised through five units (see attached presentation) Dr Matlou highlighted the management structure, noting that although there was currently a vacancy for the Executive Director for Research, this post had been interviewed and an appointment was made, although the incumbent had been delayed in joining by some family commitments in Sweden.

He then highlighted a pie-chart showing what AISA had produced. In the area of governance and democracy, AISA aimed to promote and encourage the institutionalisation and entrenchment of democracy and governance fundamentals as a basis for integration on the Continent. It aimed to establish international partnerships and monitor elections. The African Union (AU) had an industrialisation plan and one of the AISA researchers had done some work in to the extent of regional and continental synergy, subsequently producing journal articles and reports. There were two interns in the unit. In the area of peace and security, the AISA unit looked at post war conflict situations and also sought to understand what might be drivers of conflict, and how African solutions could be found. One researcher had visited Burundi and Rwanda, to investigate those countries’ courts as a means for social justice. Projects were also undertaken in the areas of natural resource management, looking at the Congo Basin rainforest, because of concerns about the Chinese, European Union and multi-national organisations harvesting some resources. Journal articles, policy briefs and a book chapter had been produced. Researchers and colleagues had participated with guest lectures at the South African National Defence Forces (SANDF) Multi-lateral Organisations’ meetings. In relation to sustainable development, AISA noted that Africa was developing at about a rate of 5% to 6% but the question was whether its people were benefiting from this, and to what extent development was achieved by the harvesting of natural resources. AISA had looked into how best to manage informal trading at border posts, and had shared the results with the Department of Home Affairs. Again, journal articles and policy briefs had been prepared. Work was also done into the indigenous people of Lamu District in Kenya.

Dr Matlou emphasised that it was necessary to look into how results from science and technology investigations could be used, and what the impact of science and technology could be. The AISA had also looked into renewable energy and work done in Cameroon, land use changes, and had a special focus on rural Zimbabwe and South Africa. South Africa had called for AISA’s participation in a seminar series. AISA would be launching a book on the Climate Change Conference (COP17) in the next month.

AISA had moved its knowledge transfer and skills development to another unit on Special Projects. It expressed assistance to NRF and DST for their assistance. A fellowship programme existed, although the Fellows could be based anywhere in the world. The Archie Mafeje Memorial lecture honoured the late Professor Mafeje, who was formerly a Fellow at AISA. An annual Scramble for Africa conference was held each May. The next would have the theme of Ten years of the AU. Other special projects were tabled (see attached presentation for details).

In respect of publications, the quarterly journals, books, monographs and policy briefs to which AISA contributed were highlighted. AISA participated in the
Cape Town Book Fair, the South African Society of Education (SASE), and the MAP conference. Its library and documentation centre continued to grow, by various means and the total holding was currently 96 784 volumes, although usage should ideally improve.

There were schools outreach programmes, through the Department of Basic Education and it was hoped that ICT use would enable it to reach more people. 3 448 maps had been captured, although AISA was competing with Google in this regard.

Outreach programmes were also tabled (see attached presentation). There was an ambassadorial forum because many high commissions were based in Tshwane. Although it had been asked to work with more universities, there were capacity challenges in achieving this.

The AISA still needed to implement some of the recommendations from its institutional review last year, and to partner with those who have similar research and governmental organisations.

In relation to the budget, it was outlined that 55% of the budget was spent on employee related costs. Tables were shown of the distribution of employees and an age chart, which also showed their gender, demographic classification and qualifications.

Ms Elsie Maritz, Chief Financial Officer, AISA, said she was proud to present the unqualified financial report. Much time had been spent in the 2010/11 year to improve the control environment and achieve financial excellence through effective controls and procurement processes. AISA had also focused on safeguarding its assets and it reviewed policies on an annual basis to improve business efficiencies. She noted that over the past five years, AISA had moved from a disclaimer to an unqualified report with no matters of emphasis.

AISA had ended the financial year with a deficit of R4,587 million. Three years ago, it showed a surplus of R15 million, but the shareholder had been concerned that AISA was not using or spending appropriately. That surplus was not reduced down to R5.5 million. The note on a deficit was due to the recognition of a Pension Fund surplus being reversed in the financial statements, as well as a writing-down of the inventory of old publications. Some projects had not been finalised at year-end and had to be completed. Ring-fenced money was also included in that surplus. Contingent liabilities were not included.

Ms Maritz noted that the total income was R32,669 million. 93% of this came from DST. The total expenditure had been R37,256 million and 55% of that related, as previously noted, to employee costs. There was a decrease in non-current assets from R7,716 million to R4,064 million, largely because of the decrease in value of equipment, furniture and intangibles. Current assets decreased from R7,932 million to R5,704 million, because of trade and other receivables and inventory value at year end. Non-current liabilities decreased from R5,559 million to R4,266 million from the prior year, and trade and other payables increased from R1,929 million to R2,381 million. AISA was solvent at the end of the year, with total assets less current liabilities at R5,502 million with a liquidity ratio of 2,3:1. It had managed to use its budget more effectively, with a 12% variance between budget and expenditure.

The Acting Chairperson said that there was some improvement from last year, but the Committee still expected AISA to improve.

Ms Shinn was concerned by the number of people using the library, noting that the general public seemed not to be using the library. She asked how much funding was contributed by the NRF. She wondered if it was possible also to access funding from the rest of Africa, African Union and Pan-African Parliament, Southern African Development Community (SADC) or other African Governments.

Dr Matlou said AISA had digitised a lot of its information, and the University of Pretoria had agreed to assist with this expensive process. It was expecting a United States delegation to assist with a scanner, which it hoped to be able to keep, as the intention was to try to store information electronically. Although it might be desirable to have more “walk-in” users of the library, AISA did not have the capacity to carry them. Other countries’ libraries were being requested for contributions through their embassies. AISA had approached the Pan African Parliament. It had received funding from the Nigerian government through a partnership, and it seemed that the best option was for AISA to work with countries on certain specialist issues, to get funding. Standard Bank had asked AISA to look into issues on the Continent, like the Mafisa system.

Ms Shinn asked about the staff turnover.

Dr Matlou said that the turnover was largely due to some staff using AISA as a springboard to get to the next level and to gain experience. They were not lost to the country, as some had moved to other government departments. Others had left due to incompatibility and personality clashes.

The Acting Chairperson said that there seemed to be a gap between expectations and what it meant to be “African”, as South Africa was very much affected by what happened elsewhere in Africa. She was concerned about the high rate of xenophobia still in the country, and said that most conflict arose about resources.

Ms Plaatjie wondered how schools were identified and what programmes were being run in schools and on the ground to try to bring about change.

Dr Matlou said South Africa should also try to learn from the Continent. It was important for AISA to try to use the media to reach the rest of the country, although radio stations were not always ideal. Many of the AISA researchers were from other countries and were mostly fluent in only English and French, but not local languages. TV might be an option. AISA was using social networking sites. It had worked with the Department of Basic Education on geography and history, was also working on a book in South Africa on education, safety, violence, and drugs at schools. He added that the corporate world should also assume more responsibility. So far, only 200 schools out of 17 000 in the country had been covered. The organisation Ebukhosini Solutions worked at the grassroots, and AISA also wanted to work with parliamentarians in their constituencies.

The Acting Chairperson asked AISA to talk not only to universities but also at grass root level.

The meeting was adjourned.


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