International Trade and Administration Commission (ITAC) Strategic Plan 2013/14: briefing; Economic Development Department performance: Department of Performance Monitoring and Evaluation briefing; Principles of Performance Auditing: Auditor-General of So

Economic Development

26 March 2013
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The International Trade Agreement Council of South Africa (ITAC) briefed the Committee on its strategic plan 2013/14, followed by the Department of Performance Monitoring and Evaluation (DPME) on the management performance of the Economic Development Department (EDD) as measured by the DPME’s management performance assessment tool (MPAT), and by the Office of the Auditor-General of South Africa (AGSA) on what the Committee should focus on when doing oversight of the Department or one of its entities. 

ITAC

The Chief Commissioner of the International Trade Agreement Council of SA (ITAC) said that key issues for ITAC were the quality and the turnaround time of its investigations.  ITAC had aligned its instruments to government policy, reviewed the time frames for tariff and trade remedy investigations, and used export control to supplement local beneficiation. ITAC was at an advanced stage of investigating tariff protection for wheat farmers, had increased the tariff on auto windscreens, and had ordered a tariff investigation on the importation of chickens following the recent poultry anti-dumping case.

ITAC had been criticised for the time it took to complete its investigations, but the poultry anti-dumping case had been complex, involved, and had been conducted in accordance with World Trade Organisation (WTO) processes. On average it took between six to 12 months to put together an application. ITAC’s impact assessments had been questioned and it was now assessing its instruments at the sectoral level and was getting co-operation from firms to supply the necessary data. A further challenge was the need to increase the human resource capacity as the workload was increasing because global economic conditions had resulted in an increased demand for ITAC’s instruments to be used. There was also pressure for time frames to be shortened. Its staff complement currently was 131.

Members asked how it was possible that duty-free exports by the European Union (EU) to South Africa stood at 85%. How come a tariff investigation into tyres was approved when South Africa had a number of the leading tyre manufacturers in the country? Members asked what the impact of the importation of second hand clothes had on the South African clothing industry. Members asked what the gender and race breakdown of the staff was. Members said that some of the Brazil, Russia, India, China, and South Africa group of countries (BRICS) members were implicated in the dumping cases. How would it affect ITAC’s work and was there political interference in their work? There had been reports of imported meat being contaminated. Whose job was it to determine this? Members asked if there was any support to the New Growth Path (NGP) priority sectors and, if not, what plans were there to provide such support. Members asked for more information about impact assessments done by ITAC and about the poultry case. Members asked that ITAC’s strategic plan and annual plan be more target-orientated. Members said that ITAC operated at the micro level, interacting with companies, while Government operated at the macro level. ITAC should be presenting macro level policy issues to Government for consideration.

Department of Performance Monitoring and Evaluation (DPME)

The DPME said that the focus of the assessment would look at the twelve outcomes, specifically Outcomes 4 and 6 that dealt with job creation and economic infrastructure. It would look at the quality of management practices of departments and municipalities. It had not started evaluation of the EDD but, in consultation with it, would submit one of the major programmes, which dealt with the EDD’s management practices, and the DPME would make a separate presentation to the Committee on the performance of the Department.

The DPME was finalising the results of the management performance assessments of all departments. Management performance was targeted because it was important as it was the key to service delivery.

The Management Performance Assessment Tool (MPAT) was implemented in 2011/12 and the results were available on the DPME’s website. Since then it had implemented improvements to the tool.

The assessments were done over 17 management areas and comprised 31 core management standards based on legislation and regulations. Management rated itself and the results were audited to verify that there was evidence to back up the answers given in the assessments. The results were moderated and feedback given to departments to allow for comment from the participants and for the provision of further information. The department then had to implement an improvement plan. The DPME would do this assessment annually. The 2011/12 results were the self-assessment scores only, while the 2012/13 results would be the moderated scores. The results for 2012/13 would be published in July 2013, after having been presented to Cabinet. There were four MPAT ratings: Level One for non-compliance with the legal/regulatory requirements, Level Two for partial compliance, Level Three for full compliance and Level Four for full compliance and for doing things efficiently. A summary of the MPAT self-assessments for the year 2011/12 together with the national departments’ average could be found on the second last page of the MPAT document. The final moderated scores of the EDD for 2012/13 could be found on the last page of the MPAT document.

Members said the Committee needed a workshop to fully engage with the report. Could entities be assessed similarly? Was there a need for an audit if the Department was satisfied with MPAT? Who were the Department’s partners? Members said the issue was one of non-compliance. Was there any enforcement programme and was this part of the Department’s mandate? What time was required to reach level four? Was there any strategy to overcome any limitations of the MPAT or any new instrument to ensure that the outputs were at the required standards? Members asked if the assessment results were in the public domain.

AGSA

The AGSA’s presentation addressed the question of what the focus of the Committee should be when engaging with the Department or one of its entities. He emphasised that the presentation dealt with the predetermined objectives of the Department and not on performance audits, that is, it dealt with what the Department had done with reference to what it had planned to do. The audit of predetermined objectives focused on compliance with laws and regulations, the usefulness of the information given as seen from a planning perspective, and the reliability of the reports generated. 

Meeting report

 

International Trade Administration Commission (ITAC) Strategic Plan 2013/14: briefing
Mr Siyabulela Tsengiwe, Chief Commissioner: International Trade Administration Council of SA (ITAC), said that key issues for ITAC were the quality and the turnaround time of its investigations.  ITAC had aligned its instruments to government policy, reviewed the time frames for tariff and trade remedy investigations, and used export control to supplement local beneficiation.

ITAC was at an advanced stage of investigating tariff protection for wheat farmers. It had increased the tariff on auto windscreens and had ordered a tariff investigation on the importation of chickens following the poultry anti-dumping case recently. Two investigations, into fine paper and glass, were on-going. The Automotive Parts Development Plan (APDP) had replaced the Motor Industries Development Plan (MIDP) and the latter’s success could be attributed to a clear industrial policy based on tariffs and rebates.

He said between 2008 and 2012, only two of its investigations had been taken to court and in both instances the courts ruled in their favour. There was still one outstanding case. All these cases were trade remedy cases while no tariff related cases had gone to court. ITAC had been criticised for the time it took to complete its investigations but the poultry anti-dumping case had been complex, involved and had been conducted in consistence with World Trade Organisation (WTO) processes. On average it took between six to 12 months to put together an application. ITAC’s impact assessments had been questioned and it was now assessing its instruments at the sectoral level and was getting co-operation from firms to supply the necessary data. A further challenge was organisational development as the work, which was demanding, was increasing and expanding because global economic conditions had resulted in an increased demand for ITAC’s instruments to be used. There was also pressure for time frames to be shortened. There was thus a need to increase ITAC’s human resource capacity and it was working with the Economic Development Department (EDD) on this matter. Its staff complement currently was 131. South Africa was an active user of the anti-dumping instrument. Between 1999 and 2004 there had been a decline in the use of the anti-dumping instrument, but since 2010 there had been an increase.

Discussion
Mr L Ngonyama (COPE) asked how it was possible that duty-free exports by the European Union (EU) to South Africa stood at 85%. How come a tariff investigation into tyres was approved when South Africa had a number of the leading tyre manufacturers in the country?

Mr Tsengiwe replied that South Africa had a trade agreement with the EU, which was a matter of give and take, to gain market access for both entities. While EU exports to South Africa were 85% duty free, South African exports to the EU were 90% duty free. South African agri-processers, however, were struggling against the goods coming in from the EU. The country could use trade remedies, but could not increase the duties. If this avenue were to be re-opened, it would have to be done by the Department of Trade and Industry (the dti) and would have to be with countries with which South Africa had no bilateral trade agreements. Only 22 of the 154 member countries of the WTO, including South Africa, were active users of the anti-dumping tool. There were more anti-dumping cases than counter-veiling cases, which was where countries’ governments subsidised exports. Acting against the latter would be seen as interfering in the domestic industrial policies of countries. The safeguard instrument had to show that there had been a sharp rise in imports under unforeseen circumstances.  Imports were increasing faster than exports. ITAC did, however, have an instrument to promote exports. Import rebates were given on inputs, which were manufactured for later export.

The tyre rebates were for specialised tyres whose production volumes were so low as to make them unattractive for manufacture locally.

Trade remedies were dependent on applications being received from industry, so ITAC could not be proactive with their use. In addition, initiating an investigation would imply that ITAC was not impartial and had a perceived bias, because in all cases there were always interested parties on both sides of the argument.

Mr X Mabasa (ANC) asked what the impact of the importation of second hand clothes had on the South African clothing industry

Mr Tsengiwe replied that second hand goods were almost prohibited; only a quota of warm overcoats was allowed to provide for the lower end of the market.

Ms D Tsotetsi (ANC) asked what the gender and race breakdown of the staff was.

Ms Lihle Mndebela, ITAC Senior Manager: Human Resources, said that ITAC had 13 senior managers comprising three black females, two white females, five black males and three white males. At middle management level there were eight males and 12 females.

Mr K Mubu (DA) said some of the Brazil, Russia, India, China, and South Africa group of countries (BRICS) members were implicated in the dumping cases. How would it affect ITAC’s work and was there political interference in their work? There had been reports of imported meat being contaminated. Whose job was it to determine this?

Mr Tsengiwe replied that BRICS was both an opportunity and a challenge. It was an opportunity because it attracted investment in manufacturing which gave exports a competitive advantage, and it was a challenge because South Africa, in comparison to the rest of the BRICS countries, had high costs of production.

The meat imports and the animal and plant standards were the responsibility of the Department of Agriculture, Forestry and Fishing.

Ms M Mpane-Mohorosi (ANC) asked if there was any support to the New Growth Path (NGP) priority sectors and, if not, what plans were there to provide such support.

Mr Tsengiwe replied that the sectors given more support were the high value and labour intensive sectors. The sectors were identified on page eight of the strategic plan and included agriculture, mining, infrastructure development, manufacturing and the green economy.

Mr Z Ntuli (ANC) asked for more information about impact assessments done by ITAC and about the poultry case.

Mr Tsengiwe replied that impact assessments had been done on television (TV) sets, home textiles and power pylons. Time was needed to assess the impact of ITAC’s interventions. It had just started with impact assessments, which would tell whether there had been an increase in production, investment and employment. The chicken case was closed and it had now ordered a tariff investigation, rather than an anti-dumping investigation, against Brazil.

The Chairperson asked that ITAC’s strategic plan and annual plan be more target-orientated.

Ms Carina van Vuuren, ITAC Senior Manager: Trade Remedies, said that ITAC had learnt much regarding agreements with other countries from the EU agreement. It was more difficult for South Africa to use the implementation tools than for the EU countries. The problem also extended and applied to the Southern African Customs Union (SACU) and the Botswana, Lesotho, Namibia and Swaziland (BLNS) countries. The European Union (EU) was negotiating with the BLNS countries. A further challenge was that EU goods could come in through the BLNS countries as exports between South Africa and the BLNS countries were duty free.

Mr Ngonyama said ITAC operated at the micro level with companies while government operated at the macro level. ITAC should be presenting macro level policy issues with government

Mr Tsengiwe replied that ITAC was mandated to promote domestic production and employment, which it did by using instruments at its disposal within a set legal framework. If these were disregarded it would be challenged by the WTO and the local courts. ITAC was a technical agency giving expert advice and did not make any decisions but made only recommendations to the Minister. The limitations of the trade remedies were not unknown by the dti, which understood what the weaknesses were. South Africa’s number of tariff investigations was relatively high given the size of the South African economy. South Africa consulted with SACU and made representations. Once the SACU body and a SACU Tariff Board was finalised and constituted, recommendations would not go to the Minister but to the SACU Commissioner and then to a SACU Tariff Board and then to a SACU Council of Ministers, with a possible gridlock on decision making occurring.

Ms Van Vuuren said that ITAC had been included in government negotiations to protect South Africa s Interests.

Economic Development Department (EDD) management performance: Department of Performance Monitoring and Evaluation (DPME) briefing
Dr Sean Phillips, DPME Director-General, said that the focus of the assessment would look at the twelve outcomes, specifically Outcomes 4 and 6 that dealt with job creation and economic infrastructure. It would look at the quality of management practices of departments and municipalities. It had not started evaluation with the EDD but, in consultation with it, would submit one of the major programmes, which dealt with the management practices of the EDD and would make a separate presentation on the performance of the Department.

Mr Ismail Akhalwaya, DPME Acting Deputy Director-General: Public Sector Administration and Oversight, said that the DPME was finalising the results of the management performance assessments of all departments. The EDD was the second department to have been finalised after the Department of Rural Development and Land Reform. Management performance was targeted because it was important as the key to service delivery.

The Management Performance Assessment Tool (MPAT) was implemented in 2011/12 to drive improvements in management performance. 103 departments took part in the first year and the results were available on the DPME’s website. Since then it had implemented improvements to the tool.

The assessments were done over 17 management areas and comprised 31 core management standards based on legislation and regulations.  It was a joint initiative of the DPME and the Office of the Premier, the Department of Public Service and Administration (DPSA), the National Treasury, the Public Service Commission (PSC) and the Office of the AGSA. Management rated itself and the results were audited to verify that there was evidence to back up the answers given in the assessments. The results were moderated and feedback given to departments to allow for comment from the participants and for the provision of further information. The department then had to implement an improvement plan. The DPME would do this assessment annually. The 2011/12 results were the self-assessment scores only, while the 2012/13 results would be the moderated scores. Moderation clarified the policy intent of departments and identified shortcomings. Moderation also allowed for good practices to be identified and written up as case studies. The results for 2012/13 would be published in July 2013, after having been presented to Cabinet. There were four MPAT ratings: Level One for non-compliance with the legal/regulatory requirements, Level Two for partial compliance, Level Three for full compliance, and Level Four for full compliance and for doing things efficiently. The 31 management standards were such that if a requirement was missing, then the management rating dropped to a lower level.  Some departments had reached Level Four, which meant that level was not impossible to achieve. All regulations applied to all departments.  He then went through the documents explaining how the MPAT document was read in conjunction with the Management Performance Assessments Standards document.

A summary of the MPAT self-assessments for the year 2011/12 together with the national departments’ average could be found on the second last page of the MPAT document. The final moderated scores of the EDD for 2012/13 could be found on the last page of the MPAT document. He said the DPME was encouraged by how departments were engaging with the process. 

Discussion
Mr Ntuli said that the Committee needed a workshop to fully engage with the report. Could entities be assessed similarly? Was there a need for an audit if the Department was satisfied with MPAT? Who were the Department’s partners?

Dr Phillips replied that the DPME was not doing assessments of public entities, but only of national departments and municipalities. Later it could consider assessing entities, but it would be difficult and different, as entities fell under different types of legislation. The Committee could ask the relevant department for the improvement plans of an entity. The DPME used its internal staff and no consultants. The DPME also worked with the Office of the President, National Treasury and the DPSA and shared their results with the AGSA. It presented its results to Cabinet and to the Presidential Infrastructure Co-ordinating Commission (PICC).

Mr Ngonyama said that the issue was non-compliance. Was there any enforcement programme and was this part of the Department’s mandate? What time was required to reach Level Four? Was there any strategy to overcome any limitations of the MPAT or any new instrument to ensure that the outputs were at the required standards?

Dr Phillips replied that enforcement was only possible within the existing legal framework, the Public Service Act and the Labour Relations Act. Discipline could be enforced via a supervisor, a head of department, the accounting officer, or, ultimately, the executive authority. A time frame had not been set. One of the risks was that the wrong outputs could be delivered efficiently, but the DPME had separate monitoring mechanisms where delivery and its impact were monitored with reference to Government’s stated outcomes. The 2012/13 results were moderated because the moderation process had been refined.

Mr Mubu asked if the assessment results were in the public domain.

Mr Philips replied that the 2011/12 results were published and that the 2012/13 results would be published in July.

Mr Akhalwaya said that after one more cycle of assessments it would be clear which departments had been unable to improve. 

Principles of Performance Auditing: Auditor-General of South Africa (AGSA) briefing
Mr Yusuf Essack, AGSA Business Executive, said that the presentation would address the question of what the focus of the Committee should be when engaging with the Department or one of its entities. He emphasised that the presentation dealt with the predetermined objectives of the Department and not on performance audits, that is, it dealt with what the Department had done with reference to what it had planned to do. The audit of predetermined objectives focused on compliance with laws and regulations, the usefulness of the information given as seen from a planning perspective, and the reliability of the reports generated. The audit of the predetermined objectives was in the management report not in the audit report. He then commented on the planning, budgeting, reporting cycle and said that goals and targets had to be specific, measurable, attainable, realistic, and time bound. Strategic and Annual Performance Plans and the budget should be consistent.  He said that the Committee’s focus should be on what was achieved with reference to what was spent. The Department had to demonstrate the link between the actions taken and the budget (the money spent). The Committee should check to see if, for example, the entity had used the whole budget but only reported a 40% achievement of targets. Quarterly reports should be interrogated.

Discussion
No questions were raised on the presentation.

The meeting was adjourned.
 

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