National Development Agency: briefing

Social Development

04 June 2002
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Meeting report

PORTOFOLIO SOCIAL DEVELOPMENT

SOCIAL DEVELOPMENT PORTFOLIO COMMITTEE
5 June 2002
NATIONAL DEVELOPMENT AGENCY: BRIEFING

Documents handed out:
The NDA Strategic Plan
The NDA Annual Report (.pdf file)
Board Strategy Abridged Version

Relevant news article:
Mail & Guardian 22 April 2002 National Development Agency still underperforms (see Appendix)

Chairperson: Mr E. Saloojee (ANC)

SUMMARY
The National Development Agency presented an annual report of its activities. It has recently adopted a proactive rather than a reactive approach to poverty alleviation. The CEO categorically denied the allegations made by the Mail and Guardian on financial impropriety on the part of the NDA. It had asked Ernest &Young to undertake an in-depth audit on its financial operation and the audit firm had given it a clean bill of health. The Committee noted, however, that it is a matter of concern that no statement has been issued by the NDA to refute these obviously damaging allegations. The Committee suggested that the contents of the audit report be made public to set the record straight.

The NDA assured the Committee that the audit report is already before the Standing Committee on Public Accounts and that the NDA was waiting to be summoned to state its case before that parliamentary committee. The NDA said further that it was operating fully in compliance with the PMFA and that it had its own audit and finance committees, which drew expertise from outside the NDA.

MINUTES
The Chair welcomed officials from the NDA to the meeting and informed the Committee that the officials were present at the Committee's invitation on various issues of public interest. Without much ado, the Chair invited the NDA officials to commence their presentation.

Briefing by Mr Delani Mthembu, the CEO of the NDA
Mr Mthembu informed the Committee that the NDA was currently focusing its resources on four major areas: Focus approach, Partnerships, Programme Design and Fund Disbursement. All these areas are currently important and complement each other.

Mr Muthembu clarified that the NDA considers money as a central but not the only means through which to address the vexing problem of poverty alleviation. His organisation had abandoned the reactive approach in favour of the proactive one in order to go and reach out to those who are unable to articulate their otherwise deserving cases.

On the recent funding assistance given to the World Summit on Sustainable Development, Mr Mthembu said that the NDA had seen fit to do this so as to elevate the whole question of poverty alleviation to the international arena where it deserves to be. He continued that the NDA was also involved in the land restitution programs, which it sees as a legitimate instrument for poverty alleviation.

Mr Mthembu pointed out that the NDA had already covered Programs 1, 2 and 3 of its Strategic Plan and that it was currently working on Program 4. He explained that the NDA has the approach of looking at programs holistically in order to capture its true substance. He added that each province has been supplied with a satellite office to service the designated area and that these areas have been divided into three regions. He admitted that the whole question of poverty alleviation was clearly a mammoth task that called for patience, hard work and foresight. The biggest challenge was to make people realise that the so-called free money was not free in the strict sense of the word but that it called for collective participation to generate more wealth.

Mr Mthembu pointed out that the NDA has developed proper policy guidelines in order to avoid duplicating the work undertaken by the government. He explained that the mainstay of the NDA was to support and mentor beneficiaries on project development and management. This exercise is laborious and time consuming, hence often times most frustrating. He pointed out that the NDA puts extra emphasis on monitoring, impact assessment and random audits and that some important lessons have been learned from this exercise.

Mr Mthembu averred that the NDA engages in and encourages partnerships and robust interaction with other stakeholders, which includes regular meetings with the Minister, the Director-General and other Social Cluster Committees. He however clarified that the NDA strives to keep its independence from the Department to ensure that efficiency is maintained in service delivery.

Mr Mthembu acknowledged the technical support the NDA receives from the EU and other bilateral founders. The EU has already released the first tranche of R45 million in this regard. The NDA is working on a program that would ensure that the rural areas receive the lion's share of poverty relief funds to correct the current scenario where fairly well off provinces such as Gauteng receive a 15% share.

Mr Mthembu concluded that there was a need for more funding given the avalanche of applications for funding that are submitted to the NDA. He noted that on average, the NDA receives applications worth R 8 billion against its annual available funding of between R800-900m. Financial resources are, and would remain, the biggest challenge for the NDA.

Discussion
Ms Kalyan (DP) wanted to know the criteria used by the NDA to cluster programs and whether this is the right route to go.

Mr Mthembu replied that the method of clustering the NDA has adopted came out of the stakeholders briefing. He clarified that the NDA does not force people to cluster their projects but that where programs are concentrated in a particular area it is at times prudent to consolidate this effort so as to encourage synergies and specialisation.

Ms Kalyan (DP) observed that there are numerous complaints from people who fail to get feed back from the NDA on applications submitted for projects.

Mr Mthembu acknowledged that there are such complains but attributed the problem to people relocating without leaving a forwarding address - but that the NDA tries its best to attend to all queries expeditiously.

Ms Ghandi (ANC) noted that child service providers run essential programs that were related to poverty alleviation yet they were not covered in projects undertaken by the NDA. She wanted an explanation for this.

Mr Mthembu acknowledged that the childcare providers did not feature in the projects database but clarified that the NDA had not excluded this category by design or at all. He said that this group is free to apply for provision if they come up with sustainable business plans.

Ms Southgate wanted to know the relationship between the NDA and the IDT and how the youth are accommodated in these projects.

Mr Mthembu said that the youth are covered not only at the fund's disbursement level but also the NDA goes out of the way to assist with the project development phase and that funds have been set aside specifically for this particular item. As for the relationship with the IDT, Mr Mthembu explained that the IDT was at the moment not a funder but only played a facilitative role when it comes to programs that are funded by the government.

Ms Mars (IFP) thanked the presenters for the clarity in their report and requested that the list of initiated projects be made available to members to facilitate their oversight work. She noted that allocations to the very needy areas was not prioritised by the NDA and asked why this was the case.

Mr Mthembu pointed out that the trouble with the physical address of the project beneficiaries is that they keep changing at such a fast rate that even the area councillor is unable to locate them. He however undertook to make the list of the allotted projects to the Committee as requested.

As regards inequalities in project funding, Mr Mthembu said that this is set to change with the re-aligned focus of the NDA that adapts the proactive approach to funding. He added that money had now been set aside for every area whether there are applications or not. He explained that the problem has been that certain areas are very good at designing and putting together project plans while others were lacking this skill. This was the very mischief the proactive approach was intended to remedy.

Ms Tsheole (ANC) asked if applications are processed at the departmental level or if this is handled by the NDA. She also asked for how long the proactive approach has been in practice and what role, if any, community organisations play in this regard.

Mr Mthembu replied that projects are processed at the departmental level in the provinces but that this is done in partnership with the NDA satellite offices in the provinces. The proactive approach is new but has served well for the short time it has been in existence.

Ms Tshoele (ANC) asked about the nature of the partnership the NDA had with the department and whether it was direct or indirect.

Mr Mthembu explained that there was no structured relationship as yet and that this was in view of the fact that the NDA was given legal independence only last November. However in some places like KZN and the Mpumalanga the NDA was networking meaningfully with social workers in its projects.

The Chair asked why the EU funding had drastically dropped from R190m in 2001 to R45m this year.

Mr Mthembu replied that the R45m is the standard funding from the EU and that the R190m figure that is reflected is in actual sense an accumulation from funding that had not been disbursed prior to that.

Ms Kasienyane (ANC) wanted to know how project monitoring is carried out in the provinces. She also wanted an explanation on the kind of relationship the NDA had with Land Bank.

Mr Mthembu replied that the NDA has personnel stationed in major centres in the provinces to monitor the projects. He said that the NDA only assist's people to access the loan facility offered by Land Bank since not everyone has the necessary capacity to access these funds.

Ms Rajbally (MF) wanted to know how accessible the NDA's satellite offices were to the Community and who manages the offices and whether there is any liaison between these offices and NGOs.

Mr Mthembu explained that the satellite offices are based in major centres in each province and that the locality of the offices is strategically placed to ensure that it is accessible to the general public - for example, at the bus ranks.

Prof. Mbadi (UDM) thanked the presenters for a briefing that was a real eye-opener for members. He has always been a crusader for the cause of the poorest of the poor and that the NDA report would empower the Committee in its oversight work. He asked the NDA to empower the constituency offices to assist it in identifying worthy community projects that require funding. He then asked whether the NDA has a fund for students who are unable to pay for their college fees.

Mr Mthembu acknowledged that the NDA has had a good working relationship with constituency offices and social service providers. He however noted that the later have been idle and the NDA is trying to incorporate them in their programs so as to break the common stereotype that they cannot work with the government. He clarified that financial assistance to students though a worthy cause was unfortunately outside their legal mandate.

Ms Gandi (ANC) sought clarity on the operational positioning of the NDA's satellite offices and whether they are adequately decentralised to reach deserving communities.

Mr Mthembu replied that the NDA has ensured that each province has its own database on projects run in the area so as to effectively manage that portfolio but added that this was a continuous process that is improved upon all the time.

Dr. Baloyi (IFP) lamented that the funding formula was often politically skewed and yet poverty knew no political barriers. He said that there was a group of people with vested interests who knew how to attract funding but there was no visible project that was being undertaken by them on the ground.

Mr Mthembu concurred with Dr. Baloyi that indeed there were some seasoned regulars who somehow knew how to put together project proposals and that they featured virtually everywhere whenever funding was available. He assured members that the NDA is presently closing in on these smooth operators and that they will not be allowed to abuse the funding procedures for selfish reasons. He even hinted at possible criminal charges for some cases the NDA has stumbled upon after undertaking a spot audit on where money is going.

Ms Ghandi (ANC) noted with disapproval that the major proportion of funds goes to the health and education sectors at the expense of other equally deserving sectors and more so, the services organisations. She wanted to know why this was the case.

Mr Mthembu said that the inequity in funding was a major concern to the NDA as well and that his organisation is trying to prioritise projects in order to go around this problem.

The Chair drew the attention of the NDA to an article in the Mail and Guardian newspaper, which he said, had made some serious allegations on financial impropriety by the NDA management. He sought for the NDA's position on this issue.

Mr Mthembu stated categorically that the allegations in the Mail and Guardian have no base whatsoever. He contended that the NDA had in fact asked Ernest &Young to undertake a thorough audit on its financial affairs and that the audit firm had given it a clean bill of health but that when this report was sent to the Mail & Guardian, no correction was published. He said that the NDA would be happy to furnish the audit report to the Portfolio Committee to vindicate this position.

The Chair said that it is a matter of concern that no statement has been issued by the NDA to refute these obviously damaging allegations. He said that the contents of the audit should be made public to set the record straight.

Mr D'Camara (DP) asked whether the Standing Committee on Public Accounts (SCOPA) had been furnished with the audit report and whether the NDA is implementing the requirements of the PMFA.

Mr Mthembu replied that the audit report is before SCOPA and that the NDA was waiting to be summoned to state its case before that committee. He said that the NDA was fully in compliance with the PMFA and that it had its own audit and finance committee, which draws expertise from outside the NDA.

The Chair reiterated the importance of taking urgent steps to correct the wrong impression created by the allegations in the report and said that it would be detrimental to the image of the NDA to leave this cloud of suspicion hanging over its operations.

The Chair thanked the NDA for the fruitful interaction and closed the meeting.

Appendix:
National Development Agency still underperforms
Date: 19 Apr 2002
David Macfarlane

The country's largest channel for directing donor funds to non-profit organisations in their fight against poverty managed to disburse a mere 26% of funds available to it in the past financial year. And R48-million donated by the European Union more than 18 months ago remained undisbursed as well.

These details emerge from the auditor general's recent report on the National Development Agency (NDA), which has been under repeated fire for its ongoing inability to get donor money out to needy NGOs since it commenced operations in April 2000. This is the NDA's core function, as established in the 1998 Act that brought the agency into being.


Cash-strapped NGOs have been complaining for nearly two years that the NDA lacks the capacity to serve the sector adequately. They say a range of South Africa's high-priority areas remains seriously underfunded and neglected as a result - adult education (including literacy training), early childhood development, HIV/Aids awareness, domestic violence, land reform, human rights education and rural local government, among others.


Last year an independent audit of the NDA delivered a scathing report that development experts said cast doubt on the agency's ability to perform its core functions. Accounting firm Ngubani & Co identified nine areas of chronic mismanagement. It found that some contracts between the NDA and organisations it is funding were unsigned or simply missing; disbursement records were not up to date; and the agency was continuing to pour money into projects that did not meet its own criteria for funding.


Commenting on the 26% disbursement in the past financial year, the NDA's acting CEO, Delani Mthembu, told the Mail & Guardian, "We are satisfied with our performance, as we have committed 67% of the funds under our direct control. As per the auditor general's report 67% of the funds were allocated to projects of which 26% was cash disbursements. The NDA ... normally releases funds in two tranches. As projects achieve agreed milestones, further tranches are released. This is a normal, generally accepted principle of project management."


In April last year the M&G reported that the NDA had R340-million available during its first year of operation, but managed to disburse less than a tenth of that. In February this year, Mthembu told the M&G the agency had disbursed more than R142-million between May 2000 and December last year. This is less than half the total donor money to which the NDA had access during that period.

The situation concerning money from the EU appears to have remained static since the M&G first reported, in April last year, that the R48-million the EU handed over in August 2000 remained undisbursed and that a further R66-million pledged by the EU remained in EU hands as a result. At the time the NDA told the M&G that certain "preconditions", including the appointment of "technical assistants", had to be met before the initial R48-million could be allocated.


This week Mthembu delivered essentially the same explanation for the long delay, but added that some of the preconditions have now been met. Concerning further conditions, including "situation analysis in poverty pockets selected as target areas", Mthembu said work "is under execution and disbursement will take place according to the established guidelines and plans".

The auditor general's report points out two NDA failures in the past financial year to meet its legislated obligations: it failed to establish an audit committee, as the Public Finance Management Act (PFMA) requires, and "written delegations of authority did not exist for the financial year under review", as both the PFMA and the NDA Act require. Mthembu told the M&G this week that the NDA has rectified both matters.

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