Agricultural Research Council and Ncera Farms on their Annual Reports for 2012/13

Agriculture, Land Reform and Rural Development

22 October 2013
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

fulfil the Agricultural Research Council's (ARC) mandate.  Ageing infrastructure meant a greater need for replacements and repair, but there had been limited funding for capital expenditure.  Impairment of land and buildings in 2012/13 had required funds of up to R29 million. Limited funding had also made it difficult to fill critical posts, and there had been a high staff turnover due to pay scales not being market related. There had been a decline in research and development investment by the private sector due to the recession, which had limited the extent of external income growth.

Following the meat scandal, the ARC had had to construct a genetic database of the different meats consumed by the population, and the genetic makeup.  It had never been done before but the scandal had necessitated the database, and it had to be updated regularly.  the ARC was not responsible for regulating genetically modified organisms (GMOs), but if the Minister asked the ARC to regulate, then the Council could help.  The ARC had been doing some work on the fruit fly and would report back when the research was completed. The EU situation on SA citrus was the result of an outbreak of 'citrus black spot', which had become a trade issue, rather than science issue.   He could not give a reason for the EU not banning citrus with black spots from Chile, while they refused the South African produce.  Diseases like African Horse sickness and foot and mouth diseases tended to mutate, which meant that yearly research had to be linked to the new mutations. The ARC had new research facilities to develop vaccines that could be exported to other countries.

Members concerns included the challenge of high staff turnover and the ongoing dispute with the Stud Book on the research results of the ARC. They found it difficult to understand the recurrence of irregular expenditure while the entity received an unqualified audit report. They asked about the remuneration of farm workers, and whether they were paid the minimum wage. They wanted to know the source of ARC's 'other income' that did not originate from its government allocation.

Ncera Farms said its achievements were mostly related to the breeding of livestock.  Challenges included the prevailing drought in the Eastern Cape, and plant and animal diseases. On the financial report, Ncera had maintained its record of an unqualified report. There had been no fruitless, irregular or unauthorised expenditure. Most of the allocated funds had been used for salaries and administration, and very little had been left for programmes. The weakest point was governance issues.

Members' concerns included the fact that the Committee had previously agreed to wind down Ncera, but were wary of leaving the beneficiaries destitute. Over the years ,a lot of money had been pumped into Ncera, but it was not making any profit. Some Members felt that the problems faced by the entity had been created long before the current leadership came into picture.
The Chairperson urged the Committee to agree that the Department should come back to the Committee in February 2014, with a vision for Ncera, and a way forward.
 

Meeting report

Briefing by Agricultural Research Council
Dr Shadrack Moephuli CEO of the Agricultural Research Council (ARC), touched on the ARC's focus on national priorities and the strategic objectives which would be implemented through the programmes.   An analysis of performance had shown that it had delivered outputs in accordance with the business plan and client expectations. The ARC had contributed to competitiveness and growth in the sector. It had provided scientific support to disease management.  Employee relations were in a very good state. The ARC had received an unqualified audit and had increased its external revenue sources. However, it had incurred irregular expenditure as a result of goods being received before the procurement process had been completed.

A prolonged period of inadequate funding, high expectations and increased costs had made it difficult to fulfil the ARC mandate.  Ageing infrastructure meant a greater need for replacements and repair, but there had been limited funding for capital expenditure.  Impairment of land and buildings in 2012/13 had required funds of up to R29 million. Limited funding had also made it difficult to fill critical posts, and there had been a high staff turnover due to pay scales not being market related. There had been a decline in research and development investment by the private sector due to the recession, which had limited the extent of external income growth.

(See ARC Annual Report 2012/13)

Discussion
Ms A Steyn (DA) asked, in relation to the recent meat scandal, whether the ARC kept gene banks of animals that were slaughtered for human consumption.   What was the capacity of the ARC to quantify the amount of genetically modified organisms (GMOs) in food?    Were farm workers being paid the minimum wage?   How much money was being spent on employees' salaries?  Was the ARC capable of researching animal diseases like foot and mouth, and African Horse sickness?  How far had it  gone in researching vaccines?  She asked about progress regarding the invasive fruit fly. What were the economic benefits of the Animal Improvement Scheme? Why was the European Union losing interest in South African citrus?

The CEO replied that the ARC had to construct a genetic database of the different meats consumed by the population, and the genetic makeup.  It had never been done before but the recent meat scandal had necessitated the database, and it had to be updated regularly. The Department had been very keen to help with the task. On the amount of GMO, the ARC was not responsible for regulating GMO, but if the Minister asked the ARC to regulate, then the Council could help.  Employees at the ARC were paid above the minimum wage, and the salaries of the lowest paid workers had been increased to reasonable living standards. Some workers were also trained in-house to give them skills relevant to their jobs.

The ARC had been doing some work on the fruit fly and would report back when the research was completed. The EU situation on SA citrus was the result of an outbreak of 'citrus black spot', which had become a trade issue, rather than science issue.   He could not give a reason for the EU not banning citrus with black spots from Chile, while they refused the South African produce.

The African Horse sickness vaccine might not be working because the disease probably developed a hundred years ago and might have mutated and rendered the vaccine ineffective. Diseases like horse sickness and foot and mouth diseases tended to mutate, which meant that yearly research had to be linked to the new mutations. The ARC had new research facilities to develop vaccines that could be exported to other countries.

The Animal Improvement Scheme had been a runaway success – cattle owners had indicated that they were getting four times the previous price for their cattle. The income improvement had raised their financial status and reduced poverty. 

Mr P Nkayi (ANC) Eastern Cape Special Delegate, asked about collaboration projects with other research institutions. He asked how big the shortage of land for agro processing was . He asked for clarity on what 'other income' meant – did it mean money generated by the ARC? How much money had the ARC generated?

The CEO replied that agro processing was related to manufacturing, but the problem was related to land rezoning. The ARC was dependent on the Departmental grant – 'other income' was the money generated from projects that were commissioned by other organisations.

Mr Gabriel Maluleke, CFO, said that other income was also derived from interest that was received while a project to which funds had been allocated, was not yet off the ground.

Ms Anathi Canca, Executive Director: Research and Development, said that a lot of work was done working with universities, information was distributed through newspapers and community media, and the science week was widely publicised to attract matriculants to study science.

Mr M Cele (ANC) asked about the number of employees that had been disciplined, and how many of them had been charged with the SAPS.

The CEO said that the ARC had taken disciplinary action and charges had been laid with the SAPS.  Out of 15 cases, 13 had been resolved and the remaining two were in the conciliation stage.

Ms M Pilusa-Mosoane (ANC) said that the report did not comply with reporting procedures, and the targets did not match the strategic plan. She asked what had been done to fill the vacancies. What were the ARC's plans to deal with invasive alien plant species.

The CEO said that bio technology was much more effective in eradicating alien plants than simply cutting them down.  He added that limited funding made it difficult to fill critical posts.

Mr B Bhanga (COPE) said that in 2012/13, finances had reflected irregular expenditure of up to R1.1 million.    He asked what measures had been taken to fix the problem, which had existed for a long time.  The ARC had complained about staff retention – what plans were in place to retain staff and achieve equity?  All higher education institutions had a problem in reaching equity targets in academic, technical, and administrative posts. It would take the country 200 years to reach equity targets.  He asked why only 47 planned targets had been met out of 103 – why had it set targets that could not be achieved? There must be a tangible programme to empower the young people so that they occupied strategic positions.

Mr Mohamed Jeenah, Executive Director: Research and Development, replied that transformation was improving at the ARC. Many budding scientists were coming into the organisation, but not as fast as the Board would like them to come through. He assured the Committee that the ARC would not take 200 years to transform the organisation. There were two areas where the ARC was not succeeding.   Veterinary scientists were very hard to get hold of. The reason was that the Medical University of South Africa (MEDUNSA) had been closed down when the former Minister of Education had amalgamated higher learning institutions. It had then been left to the University of Pretoria, and most of their graduates preferred private practice because it offered higher monetary returns. The second area was agricultural engineering.  There were very few people interested in this field because most young people regarded it as less attractive than other engineering fields such as electrical, mechanical and chemical.  The few who managed to graduate were quickly snapped up by provincial departments and given senior posts. The ARC did not want to set easy targets for itself, or set the bar too low. The ARC wanted to spend less time in achieving targets that could be measured.

The CEO explained why the ARC had not achieved some of its targets. Voluntary resignations would often disrupt the progress of certain projects, as in the case where the head scientist had resigned. It took a lot of time to recruit a single scientist.  One PhD graduate would sometimes be head over up to ten people, and they would not able to continue with a project. This affected the targets that were set for the organisation.  Some projects came with different results, and then they had to be stopped and re-evaluated.  R1 million of fruitless expenditure out of a R1 billion was not even 1%. 

The CFO replied that irregular expenditure was sometimes caused by an oversight.  For example, a motor mechanic might be called to fix a tractor and forget to fill in the necessary paperwork. The Auditor General (AG) then regarded that as irregular expenditure. Sometimes in small towns, quotations could be sourced from only two suppliers, while the supply chain regulations stipulated that three quotations should be solicited from suppliers. The whole process was supposed to be recorded, but then it appeared as irregular expenditure. The AG did not distinguish between harmless oversight and fraud.   Even the Members might think it was related to fraud. The objective of reporting to Parliament was that it was required by the PFMA.

The Chairperson said that there had been a surplus, but the ARC was still asking for more money.  He asked the reason that the ARC reported to Parliament, besides being forced to by the PFMA. The Maputo Declaration had not been met by South Africa, while the neighbouring countries had already met it. He suggested that the ARC should design a restraint of trade agreement for its personnel, to stop the high staff turnover. The Makhathini Flats project had the potential for creating jobs, but the ARC was complaining about it, and the following year the problem would still be the same. The Chairperson said that a certain entrepreneur had offered to harvest all the alien plant species for free, while the Department had been offering R600 million to any person or entity to do the same job. He then asked for an update on the issue of the stud book for breeders.

The CEO said that there were three researchers based on the Makhatini Flats permanently.  It costed a lot of money to relocate scientists from their home base, but then matters had necessitated the move to Makhathini Flats. The Department could help in explaining why the genery at the Makhathini Flats had been closed. On the Maputo declaration, he said that regional agreements were dealt with by the Department, and not the ARC. The neighbouring countries' GDP was derived mostly from agriculture, while SA agriculture comprised only 2% of the GDP. The South African stud book had copied the research results, and did not want to return them to the ARC.

Ms Makgomo Umlaw, Senior Manager: Human Resources, ARC, said the ARC did not have a restraint of trade clause in its employment contracts. This was a very complex process. The ARC had been doing some research on the issue.  The ARC had been losing staff in the diagnostics section.

Mr Jeenah said that Onderstepoort Biological Products (OBP) and the ARC had a working relationship.  OBP was doing similar work to that being done by the ARC. The ARC paid for research and development being carried out by OBP, and he hoped that the politicians would sort it out the issues affecting the two organisations.  The ARC funded the research, but the commercialisation was done by the OBP.  The R&D spend of the ARC was given to the OBP. In 1990 the ARC did not have even a single black scientist, so any progress achieved should be viewed from that angle.

Mr Moephuli said that the ARC did not deal with policy – this was done by the national Department.  The ARC simply provided expertise and helped with advice and assistance in managing the procurement process.  It also provided specifications regarding the type of tractors to be used for specific purposes, but had no role in the designing of the tractors. ARC engineers would sometimes assist provincial departments on jobs that the ARC had been contracted to do.

There were no problems between the OBP and the ARC, which had been working together on some vaccines. The OBP had been losing the about 50% of the vaccines, and regulations stipulated that the safety of machines used on the vaccines should be a priority.  The ARC had  bought new state of the art machines.

Mr S Abram (ANC) said that the greatest asset in any organisation was the staff, so resignations were a worrying phenomenon. There was something wrong for the ARC to be 'bleeding' scientists.  The cause was not only about the salaries, sickness or death. He asked how many employees had taken the ARC to court.  People with experience had been coerced. The ARC needed to nurture people with the scarce skills that were needed in the field of agriculture. The ARC should take care of its staff if it wanted to hold on to them. He asked how the ARC's strategic objectives were linked to the National Treasury guidelines. Targets should be aligned to the needs.

The CEO said that there had been no coercion of workers to leave the ARC.  Instead, some of them wanted to stay beyond the legal age limit of 70 years.  Only 2 % of employees had left the organisation, while other organisations had up to a 10% staff turnover.

Ms Umlaw said that the ARC had 3 000 employees compared to the previous year, when there were 3 220 workers. The average age was 44 years.

Briefing by Ncera Farms
Mr Mzi Titimani, CEO, Ncera Farms, said the strategic goals of the organisation covered the development and implementation of effective and efficient management.  They included mechanisation of the Ncera farms to improve production and output, to produce good quality livestock for breeding, to produce fresh produce for the market locally, and to provide training to the communities and farmers around Ncera.  Some targets had not been met due to a lack of funding, such as board meetings and audit committee meetings not being able to be held. Achievements were mostly related to the breeding of livestock. 

Challenges included the prevailing drought in the Eastern Cape, and plant and animal diseases. On the financial report, Ncera had maintained its record of an unqualified report. There had been no fruitless, irregular or unauthorised expenditure. Most of the allocated funds had been used for salaries and administration, and very little had been left for programmes. The weakest point was governance issues.  Some animals had contacted diseases from plant poisoning, while some had pneumonia. 31% of the animals had conical fluke, a parasite that affected cattle, sheep and goats. Ncera had no board of directors, no audit committee, and no internal auditors.

Discussion
Ms Pilusa-Mosoane said that Ncera had come a long way in turning the farms around from their previous state. She was happy with the progress made.

Ms Steyn asked what would be happening to Ncera in the future, saying “we can’t fund a dying horse”.  Entities should not wait for the Department to fix things -- they would have to find solutions themselves. Ncera was supposed to be a model for emerging farmers.

Mr Banga said the Department was mandated to wind up Ncera, but the beneficiaries would be affected. The Committee had made it clear that there should be no casualties.  He suggested that Ncera should come up with a plan to keep it afloat.  The farmers in Ncera were in limbo, not knowing what would happen next. The Committee was not being hard on Ncera, but they also had the welfare of the farmers at heart.

Mr Abram said that Ncera had access to thousands of hectares of land leased by a few farmers who were not paying anything for maintaining that land. He asked about the number of goats and cattle bought and sold, and how much income was made from sale or auction. If he had access to all the money pumped into Ncera, and access to the beautiful land, and still did not make profit, then he would not be a farmer. A farmer was a businessman who made a capital investment to make a profit. Ncera had been given close to R5 million, but the money had not produced any returns.  The Committee could not continue to subsidise a loss-making concern.

The Chairperson said that Ncera did not have a budget to work on – not even a programme.

Mr Abram said that the Committee was dealing with an entity that was giving a report on its operations. He asked what was involved in the inventory, and how the cash equivalent was derived. He asked for clarity on the reserves. The Committee should look at issues rationally, without being emotional. Ncera should be self-sufficient, rather than depending on grants. The Department should not skirt around issues as they had been doing in the past.

Mr Nkayi thanked the Committee for inviting him. The Committee was being very hard on the delegation.  Magwa Tea in the Eastern Cape was getting R50 million just to pay farmers' salaries. He asked how long the Department would pump money into projects that were not viable. He cautioned Members about killing initiatives that were working. The problem was not the entity, but the lack of support from the Government.  It was not wise to simply give out money and not provide the necessary support.

Ms Pilusa-Mosoane asked for a progress report on the disputes regarding land rights.

The Chairperson said that the Department should report to the Committee about the way forward regarding what would happen to Ncera in future.  Another important issue was the asset register.

The Committee should invite the provincial department.

Mr Nkayi said that the Department was responsible for most of the problems in Ncera, by letting the irrigation scheme go to waste.  The Committee should not blame the current leadership of Ncera, because they had not been there in1994.

Ms Pilusa-Mosoane said that the Committee was being unfair in expecting a report that dated back to 1994. If the Committee wanted that information, then there were reports available from the previous parliament. She suggested that the Committee should rather look at the way forward, not backwards.

The Chairperson urged the Committee to agree that the Department should come back to the Committee in February 2014, with a vision and a way forward.

Mr Abram said that that the Committee should look at the reports and minutes to be able to grasp the real problems behind Ncera.

The Chairperson said that the Committee had agreed to meet with Chief Jongilanga, the management and the people involved in the land dispute in Ncera.

Mr Titimane said that the Committee was supposed to deal with the report. It was unfair to expect the management to account for all the problems that had started long before he was even appointed. No other entity received such a small amount and was expected to deliver on programmes. The little money allocated to Ncera was equivalent to the allocation of a sub-directorate. He would forward answers to the Committee at a later stage.

Meeting adjourned
 

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