Department Agriculture, Forestry and Fisheries (DAFF) interim audit in 2nd quarter: AGSA briefing; Disaster management update by Department, 1st term Committee programme adoption

Agriculture, Land Reform and Rural Development

30 January 2014
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Office of the Auditor-General (AGSA) briefed the Committee on the results shown for the 2nd Quarter 2013 for the Department of Agriculture, Forestry and Fisheries (DAFF), as highlighted in an interim audit.  The briefing gave results in respect of predetermined objectives and key focus areas of the Department and six of its entities. There were instances of overall decline in this interim audit outcome. After briefly describing the background to the audit outcomes, it was noted that for DAFF, targets remained not verifiable, as there was no tool to measure achievements, and there was insufficient correlation between targets in the Annual Performance Plan and Strategic Plan. Although DAFF and five entities’ financial statements were acceptable, it was noted that had this interim investigation not taken place to identify the problems, they would doubtless have been qualified by year-end. For DAFF itself, there was no improvement in the reporting against predetermined objective. There were material errors in the financial statements. The main drivers of internal controls –leadership, financial and performance management and governance – were lacking. The main problems for Onderstepoort Biological Products, National Agricultural Marketing Council, Agricultural Research Council and Marine Living Resources Fund lay in supply chain management, indicating the need for interventions on internal controls. Compliance with laws and regulations was a problem also, and HR management also needed attention. In these instances the situation had either not improved, or actually worsened. The AGSA said that recruitment of competent, skilled and well-qualified management was needed, and recommended that reports be assessed weekly or monthly to check credibility of information. Members were dismayed to hear the report, commenting that once again the DAFF seemed to have failed the Committee and the communities by not delivering. They were very critical of the fact that the audit committee was not taking a stronger stance, noted that less than 50% of targets were achieved, asked how the targets were assessed. The Committee did, however, note that this was work-in-progress. They commented on the need to fill vacancies, and believed that the major causes of continuing problems were leadership incompetence, lack of punitive consequences and lack of credible reporting tools.

DAFF presented a progress report on its plans and response strategy for disaster management in the sector, with regard to veld fires, drought and floods. Disaster Risk Reduction plans included mitigation and prevention strategies, the collaboration by DAFF on a Early Warning Committee, with other departments, an early warning system used to convey information to farmers, awareness and capacity building campaigns on climate change. Specific DAFF programmes included drilling of boreholes, construction of firebreaks, and research. Members asked substantial questions that led to further reports on exactly how DAFF and the provinces and local government operated. Particular effects were asked on the North-West drought and the knock-on effects of a food crisis, and many Members raised questions on how the spheres of government worked together in such a situation. They questioned the likely time to declare a disaster, and to access funding, and called for reports on unspent funds in any of the provinces, the amount spent on service providers, a full breakdown of the R43 million figure quoted, and the responsibilities of the different roleplayers. The policy over feedstock in disaster areas, and the destruction of invasive plant species, were also questioned. More information was required on drought relief farming practices and the roles of extension officers, Land Bank, and other departments. Members asked if the Early Warning Committee was operating ad what its mandate was, whether there was priority given to small scale and rural farmers, and whether there was a specific plan for the fisheries sector. Members agreed that overall the response to disasters needed to be improved, and suggested that DAFF should be holding more collaborative meetings to discuss practical problems and find solutions.

Members discussed and adopted the draft programme for the first quarter, and the minutes of the meeting on 13 November. They received a briefing on the forthcoming oversight to Ncera Farms.

Meeting report

Department of Agriculture, Forestry and Fisheries 2nd quarter 2013 performance report: Auditor-General of South Africa (AGSA) briefing
Ms Meisie Nkau, Business Executive: DAFF Portfolio, Auditor-General South Africa (AGSA), said the purpose of the meeting was to brief the Committee on progress made by the Department of Agriculture, Forestry and Fisheries (DAFF or the Department) on commitments made. She gave a background to the audit outcomes and how they reflected in the Auditor-General’s (AG) report.

Ms Nkau informed members that targets were not verifiable as there were no technical indicator descriptions to measure achievements. She said various targets in the Annual Performance Plan (APP) did not tie up with the targets listed in the strategic plan, whilst some included in the APP were not included in the strategic plan.

Mr Fanie Kock, AGSA, said that the DAFF Portfolio included DAFF and six entities: namely the Agricultural Research Council (ARC), Marine Living Resources Fund(MLRF), National Agricultural Marketing Council(NAMC), Ncera Farms, Onderstepoort Biological Products(OBP) and Perishable Products Export Control Board (PPECB). The Department and five entities received financially unqualified audit opinions, with findings on reporting against predetermined objectives and/or compliance with laws and regulations.

However, he indicated that intervention was required for some instances. As far as DAFF was concerned, the reporting against predetermined objectives had shown no improvement and there were material errors in Annual Financial Statements (AFS) submitted for audit. This indicated that it was necessary to take action to correct the drivers of internal controls, these being leadership, financial and performance management and governance.

For Onderstepoort Biological Products (OBP) the predetermined objectives showed some improvement but there were no improvements in Supply Chain Management. Interventions were thus required on internal control.

For National Agricultural Marketing Council (NAMC), interventions were required on supply chain management, as it showed no improvement on the material findings. The audit opinion on compliance with laws and regulations showed that the situation had deteriorated from the prior year.

For the Agricultural Research Council (ARC) there was no improvement in Supply Chain Management, HR Management, Internal control and materials submitted for audit.

The Marine Living Resources Fund (MLRF) would require intervention in respect of Supply Chain Management and predetermined objectives, as the situation had deteriorated from the prior year.

Ms Nkau added that had material adjustments not been identified through the interim audit now, the entities would have received qualified financial opinions. She admitted that these findings were based on 50% target assessment. She recommended the recruitment of competent, skilled and well-qualified management and setting up of a Human Resource management system. The DAFF needed to make weekly or monthly review of reports to ascertain credibility of information presented.

Ms M Phaliso (ANC) asked if efforts were made to address internal audit challenges and Human Resource Management’s apparent struggle to employ graduates to fill the vacancies in the Department. She expressed concern on access to documentation and drop in supply chain level, which should be addressed, particularly given the objectives of service delivery by DAFF to the communities. Clarity on the utilisation of funds allocated to the Department was required.

Mr P Van Dalen (DA) referred to the drastic drop in the MLRF achievements, and wondered why it dropped. He asked why AGSA had not responded to the allegations made in the report of the Public Protector on wastefulness in the Department. He was concerned about the comment on the lack of proper leadership and management in the DAFF and asked how targets were evaluated against outcome, and how performance was investigated.

Ms A Steyn (DA) expressed concern over the inefficiency of the current audit committee to deal with the issues, and the Department’s lack of performance in meeting the predetermined objective. A Management report was requested in order to verify the information given by the Department. She charged that the lack of improvement in the Department was proof that the Department had not performed. She doubted if South Africans would be able to put food on their tables if no change was made by the Department.

Mr S Abram (ANC) thanked AGSA for the report. He believed that if DAFF operated in the business or corporate sector, its members and management would have been fired for such audits. He expressed his anger over the lack of performance by the Department. Only 50% of the predetermined objectives were in progress, while nothing had been done on the other 50%. The Department was accountable to Parliament and the latter’s duty was to check up on the DAFF. He was very distressed at the lack of respect DAFF showed for the Parliament Committee, and he blamed the lack of punitive consequences for bad administration as the main reason why this Committee was simply being taken for granted. Responses were frequently not provided and this made it impossible to correctly evaluate their performance. Lack of delivery in the sector had caused starvation to the masses. He accused the Department of not being reliable enough to achieve the predetermined objectives, and said that the true status of the agricultural sector was unknown. Service delivery was found to be questionable. He asked if plans had been drafted by the Department on disaster management. He asked Ms Nkau why meetings were not held for such a long period, and what plans there were to mitigate subsequent delay of meetings.

Ms M Pilusa-Mosoane (ANC) commented that the internal audit in DAFF had not been functioning for long and wondered why the Department could not change those audit committee members. Reference was made to page 13, listing the ARC decline, and she asked specifically why there was no improvement and charged the Department to assist stakeholders by performing. She referred to the immeasurable targets and wondered if 50% of work said to be in progress would be fruitful.

Mr R Cebekhulu (IFP) complained that the Department was not performing and discussion should be focused on the report.

Mr M Johnson (ANC) replied that the report presented was work-in-progress and was subject to verification by the Portfolio Committee. He added that recommendations and findings should be tested.

Ms Nkau thanked Mr Johnson for acknowledging that the report was work-in-progress. These type of AGSA reports were based on preliminary reviews of the Department and were not in depth findings,  as the full procedures for a full audit were not carried out. She said the mandate of AGSA did not permit it itself to take actions on non-performance, but that AGSA had simply to audit and report to Parliament. However, the responsibility of AGSA was to find out the root causes of inefficiency and non-performance, as highlighted in the key controls, in order to ensure that basic controls were in place and were being applied for effective administration.

Ms Nkau referred to the Pyramid of Accountability which highlighted the basic controls like skills, competence, ethics and integrity of the people, an embedded system of internal audit underpinned by policies and procedures, having a full understanding of requirements as well as cause and effect. She  added that the recruitment of skilled and competent people was management’s responsibility.

Ms Nkau added that the root causes of non-improvement included lack of credible reporting. She noted that reporting should be done on a monthly basis to ensure credibility of the information presented. Individual and management performance should be measurable. She concluded that lack of performance by management and lack of punitive consequences were indeed among the root causes why there was no improvement. In addition, staff should be adequately trained to perform their job functions. Furthermore, the Audit Committee of DAFF was not properly constituted for the last meeting. Targets were not verifiable because National Treasury guidelines and technical indicators to measure up reporting standards were not in place. She had advised DAFF to indicate the elements for evidence verification beforehand, in order to eliminate confusion and to justify target achievements.

Ms Nkau noted that if proper checks and balances were in place, such as weekly or monthly reporting, then the presentation of figures would be credible. The audit fee was too high, which indicated that the  report may not be found credible and reliable. In summary, management incompetence and lack of training were the root cause of non-delivery. She noted that investigation into the R10 million budget would be done, and also noted that and a certain percentage of correspondence received was replied to, according to scale of importance.

Mr Leslie Huaad, Senior Manager, AGSA added that DAFF’s internal audit unit had been functioning, but that quarterly reports should be produced and reviewed. An undertaking should be given to ensure proper documentation, and reports on performance and expenditure should be done quarterly. The responsibility of the accounting authority was to act against any criminal or disciplinary misconduct. The DAFF Audit Committee was responsible for the exercise of oversight, and should  ensure that appropriate controls were instituted, as well as ensure assets and liability management. He advised that the executive authority should ensure that officials were accountable and that consequences would follow for non-compliance with regulations.

Mr Johnson reiterated that the public reports and findings were to be tested.

Mr Leslie advised that a management and leadership improvement check could be facilitated by ensuring the production of credible reports.

Ms Nkau said the DAFF and audit committee showed substantial deviations from the ideal, and said that policies mandated that all deviations should go through the audit committee, to ensure transparency of best practices.

Disaster Risk Management: update briefing
Ms Nthabiseng Motete, Deputy Director General: Forestry and Natural Resource Management, DAFF, presented the DAFF’s progress reports on plans and the Response Strategy for Disaster Management in the sector, with regard to veld fires, drought and floods (see attached presentation for full details). The documentation provided noted the implementation of disaster risk mitigation and prevention activities. It was noted that these were funded through the Medium Term Expenditure Framework (MTEF) allocations. The programmes included drilling of boreholes, construction of firebreaks, creating awareness in the farming communities and conducting research.

Ms Motete added that an Early Warning System was implemented by DAFF to give monthly advisories and daily extreme weather warnings to farming communities, to enable them to formulate a proper response. Awareness and Capacity building addressed the understanding, interpretation and usage of weather and climate to agriculture, for disaster risk reduction.

Ms Steyn expressed concern over the severe drought crises in the North-West, and the likely knock-on effect of a food crisis if this was ignored. She required clarity on how local, provincial and national disaster response teams worked together. She asked if there were unspent funds available in any province. Concerns were raised about North-West funding, and questions were asked about the responsibility of the national Disaster Team for funding and disaster management.

Ms Steyn asked that a breakdown on the expenditure of R43 million should be made available, listing what was spent on which disaster, and including the amounts allocated to service providers for services rendered.

Ms Steyn noted her concern that, apart from drought and death of livestock in the North-West, invasive plant species were taking over some areas, and she wondered why nothing was done to control their invasion, asking if it was this Department that was responsible for the removal or control of these plants.

Ms R Nyalungu (ANC) asked if verification and declaration of disasters took weeks or months, and how funds were monitored to the communities. Reference was made to the drought relief farming practices and she thus sought further clarification on such farming practices, whether farmers were familiar with such farming practices and whether they were used. She also enquired about the role of extension officers in disaster management.

Ms Phaliso requested that the Disaster Management Integrated Plan and copy of the Draft Plan on Drought Management be made available to the Portfolio Committee.

Ms Phaliso wanted more clarity on how disasters were declared, the unit responsible for declaration, how long it took to declare and what such a declaration meant for affected communities. She pointed out that funds were not made available to some communities for disaster management, and requested clarification on funding and resource allocation mechanism. Details were requested on the early warning mandate, those who constituted the early warning committee, , how they operated, and if early warning information was communicated to the relevant parties.

The Chairperson asked about the working interface between the three spheres of government, and between the local, provincial and national Disaster teams, and how they impacted on the survival of the rural areas.  He was very concerned that there must be prompt disaster response to small scale farmers in particular, and how they and the commercial farmers were prioritised. He asked about the integration or cooperation with the Department of Environmental Affairs in managing disasters, and how exposure for the fisheries sector was managed. He suggested that this Committee should also receive feedback on progress made.

Ms Steyn commented that in 2012, DAFF was asked to draft a plan on disaster responses. She said that feedstock distribution was stopped for some period, costing some small scale farmers livestock losses, while even some commercial farmers were bankrupted.

Ms Motete appreciated the sympathy of the Portfolio Committee for this area of work that involved unpredicted disasters. She said that sometimes the National Treasury was the cause of slow intervention. In relation to the working interface between the three-spheres of government, she pointed out that the Disaster Management Act allowed a municipality to intervene after a disaster had been declared at the local level, which could be the same day as it occurred. Disaster responses may be immediate, or could be around three to six months after verification had been made on a disaster declaration.

Ms Motete added that DAFF did not have an allocated budget to intervene in a local disaster. The Provincial division could intervene if a disaster was too large for a local centre to handle. A response by local government could be delayed if funding was not immediately available, but a request for funding could be made after declaration of the disaster. The precise intervention period was determined at the local level, as the process of declaration involved verification of initial reports from the local sphere through the District Management Centre and provincial levels, prior to the matter being considered at the national sphere.

She noted, in answer to the specific questions on drought, that a verification exercise in the case of drought was determined by the number of animals affected. A new process of animal identification with certain technology would be rolled out to ensure proper animal identification.

She added that the approach to feedstock distribution was based on the number of vulnerable animals against the healthy ones. Farmers were advised to sell-off healthy livestock to avoid deterioration, as it would be unlikely that the feedstock would be made available to all animals.

Ms Motete noted that disaster allocations were made directly to the provincial treasury. DAFF was able to ascertain the figures from the quarterly reports of the provinces, since the funding did not pass directly through DAFF. She added that DAFF was unaware of the money directed to veld fires at the end of the year and assured that follow up would be done to get reports.

Ms Motete explained that applications could be made to roll-over funds from the previous year to the following year. Funds were allocated on the basis of reports received from provinces, so the national DAFF had no immediate control over funds transfer from a specific disaster to another. The Department of Environmental Affairs (DEA) had the mandate on the environmental protection programme and a budget of about R600 million for its Expanded Public Works Programme, to employ more people in the clearing of invasive species. However, DAFF could become involved to the extent that it could assist interested farmers with cleared materials, such as firewood for exportation, and where a particular piece of land was to be used for renewable energy, DAFF could also lend assistance, although the Renewable Energy Programme was not within its responsibility.

Ms Mary-Jean Gabriel, Acting Chief Director, DAFF, also added that research was on-going on electricity and bio-fuel generation, with biomass of invasive species. Early warning systems on disaster and extreme weather conditions were communicated to the provinces and other stakeholders from time to time and funds expenditure was monitored through quarterly reports from the provinces.

Ms Motete said Figure 9 was based on quarterly reports received from provinces .However, National Treasury would not transfer funds allocated to certain disasters to another disaster - for instance, flood funds would not be transferred to a fire disaster otherwise the reports would be considered as falsified claims. Monitoring of funds allocated to provinces was done through quarterly reports received from provinces. Where there had been no spending the province was advised to apply for permission to roll over the funding.

Ms Motete expanded on farming practices and said that good farming practices to respond to or mitigate the effects of drought included cultivation of drought resistant cultivars, which were crops with less water requirements. The information was shared with farmers from time to time by extension officers. She note that whilst there was no clear Integrated Plan for disaster management to the fisheries sector, in the DAFF programme, she would make copies of the Disaster Management Plan, as gazetted, available to Members.

She agreed that in some cases, the allocation of resources and the way in which this was done were slow. However, she said that DAFF would advise farmers to delay planting when drought was imminent, to prevent losses. She repeated that a Disaster declaration could take 3 to 6months. Those taking part on the Early Warning Committee included DAFF, the Department of Cooperative Governance, farmers’ associations and agricultural communities. She suggested that perhaps other sectors of agriculture, and COGTA’s disaster management structures should meet to get a better overview of, and reconsider how disasters were declared and handled. She noted that in the agricultural sector, the survival of small scale farmers, particularly in the rural areas, had been achieved through the Disaster Assistance Scheme, ad the Comprehensive Agricultural Support Programme that ensured that small scale farmers were supported by encouraging them to submit requests for funding through the provincial Departments of Agriculture. There were few intervention schemes at the moment to assist small scale farming.

Ms Motete said that challenges within the forestry sector, such as fire, pests and diseases had been recognised by National Treasury as issues that could affect the competitiveness of the sector, so applications had been made for certain incentive schemes and DAFF could make proposals to see how critical programmes that were not presently supported could be funded.

Ms Phaliso requested clarification on the Early Warning Committee and the role of Land Bank in the campaign and education of farmers. She added that commercial farmers were struggling to find loans from the commercial banks. She asked how many provinces actually had disaster management implementation and disaster response schemes in place.

Ms Steyn expressed concerns how the response to disasters could be improved. She was horrified that the DAFF did not appear to know about the massive amounts that were apparently paid to service providers. She suggested that it must enquire from National Treasury what amounts were paid to which service providers and also to find out how much money remained unspent in the provinces. Confirmation of the rumored reduction of feedstock to 5 bags, and reports on disaster plans were required from the DAFF.

The Chairperson asked if there were mitigating and adaptation strategies being practised, to curtail the net effect of climate change and extreme weather conditions. He sought clarity also on the Early Warning system. He asked if Land Bank could play an advisory role to stakeholders. He made the suggestion that a collaborative meeting with stakeholders and disaster management teams should be held to discuss practical problems and solutions to ongoing disasters,  in order to achieve set goals.

Ms Motete thanked the Chairperson for the suggestion to hold a collaborative meeting with stakeholders and the Disaster Management Team, to find a practical way forward. She suggested that status reports and research data be made available to Land Bank in order that a more informed decision could be made. She said that the number of provinces who had disaster management implementation frameworks in place would be collated by COGTA, for coordinated information on disaster management. DAFF could be partnered with in resolving agricultural crises, which affected both food and feedstock. However, she asserted again that the national DAFF could not intervene directly into issues in the provinces, for which there were set procedures, as this lay outside the mandate of the national Department.

Ms Motete acknowledged that the net effect of climate change could pose a challenge in the agriculture sector and plans would be gazetted for improved adaptation and mitigation strategies. She assured the Committee that DAFF would go back to the drawing board, to work towards better plans with COGTA.

The Chairperson, Ms Steyn and Ms Phaliso agreed that a follow up should be done by DAFF on COGTA to monitor the implementation of Disaster Management Plans in provinces.

Draft First Term Committee Programme and Oversight Visit Report to Ncera Farms.
The Chairperson noted that six members of the Committee – himself, Ms Pilusa-Mosaoane, Ms Twala, Ms Nyalungu, Ms Steyn and Mr Bhanga – would conduct an oversight visit to Ncera Farms from 3 to 6 February. They would also check the status of approved funds to the ARC and OBP.

He further outlined that the Committee would be holding a joint meeting with the Portfolio Committee on Energy on the  Bio-fuel processing strategy on 7 February and would take a briefing from DAFF on 11 February.

Ms Phaliso proposed that DAFF’s Fisheries Branch must brief the Committee on MRLF funds allocations as these affected the fisheries communities. She emphasised that this was urgent, as two deaths had already been reported.

Ms Steyn supported that proposal.

It was decided that the briefing would also be requested for 11 February.

The following dates were also noted:

- 12 February : briefings by DAFF, AgriBEE Charter Council and Land Bank on funds disbursement from AgriBEE Fund and briefing by ITAC on poultry tariffs in South Africa.
- 18 February: Briefing by DAFF and the Department of Mineral Resources on mining activities and prospecting applications on high potential agricultural land.
- 19 February: Feedback by DAFF, Health and Department of Trade and Industry on food labeling in South Africa.
- 21 February: Ms Steyn suggested a briefing by COGTA and National Treasury and Environmental Departments on Disaster Response Management and climate change issue.

Ms Pilusa-Mosoane supported the proposal.

- 25 February: Response by DAFF on the State of Nation address.
- 26 February: Presentation by Professor Maurice Moloney (Agricultural breeding scientist): Update of biotechnology crop development analysis locally, Africa and globally (Agricultural Biotech Industry).

Ms Steyn suggested the participation of other Departments like DAFF, and Department of Science and Technology in order to give comprehensive progress reports. She said a team should be setup to educate South Africans. The Chairperson said that they were to be included.

- 4 March: Consideration of the Strategic Plans and Budgets of DAFF and MLRF.

Ms Nokuzola Mgxaslie, Content Advisor, recommended that the presenter from DAFF should respond to the petition on funds served to Parliament.

11 March: Consideration of the Strategic Plans and Budgets of ARC, OBP and SAVC.

The draft Committee Programme was adopted.

Adoption of minutes
The Committee Minute from the meeting of 13 November was adopted.

The meeting was adjourned.

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