DAFF Audit Outcomes & performance: AGSA, DPME & FFC briefings; Committee Report on Ncera Farms

Agriculture, Land Reform and Rural Development

14 October 2014
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

The Auditor General of South Africa (AGSA) briefed the Committee on the audit outcomes for the Department of Agriculture, Forestry and Fisheries (DAFF) and its entities for the 2013/14 financial year. This was intended to provide Members with the necessary information and guidance to enable the Portfolio Committee to effectively execute their oversight function. The financial statements, performance and compliance with legislation were described. The DAFF and the entities Marine Living Resources Fund (MLRF), National Agricultural Marketing Council (NAMC) and Onderstepoort Biological Products (OBP) had received unqualified audits. The Agricultural Research Commission (ARC) required intervention. However, all five entities of DAFF were not doing well in respect of the performance assessments and AGSA noted that interventions were required. Supply chain management was a problem in four entities, with only OBP being acceptable. The financial health of MLRF, DAFF and OBP was of concern. Human resource management was problematic at DAFF and ARC. Interventions were needed into ICT at OBP.  Some common root causes were slow, sometimes regressive responses by management, key officials’ lack of competencies (which had not improved since the last report) and regressed lack of consequences for poor performance and transgressions. The status of key commitments by the Minister was noted, and it was particularly said that the strengthening of monitoring and evaluation units was under way. Matters still to be implemented included the need to make the internal audit function fully effective and functional, improve transparency in procurement, and investigate how the MLRF might have its own board. It was still necessary to implement plans to identify specific areas for service delivery, ensure linkages with targets in the strategic plan, support the agricultural schools, and collaborate with provincial MECs. Finally, a summary was given of the role of the portfolio committees, how they conducted oversight, some guidance to them when dealing with performance monitoring, and the division of assurance roles. The Committee required clarity on the audit outcomes, root causes, assurance levels and material adjustments. They expressed concern that the DAFF had been struggling with internal audit for the past five years and asked what could be done to address the problem. Members were concerned about the ineffective recruitment process, asked why incompetent staff remained and stressed that consequences for providing unreliable information were needed. The relationship between AGSA and the DPME was questioned.

The Financial and Fiscal Commission (FFC) then briefed the Committee on its role and functions, noting that it was established in terms of section 220 of the Constitution, and its mandate was explained. It noted that the National development Plan (NDP) envisaged the agriculture sector as one of the key levers for job creation and ensuring food security in South Africa, and identified some key objectives. DAFF had aligned its plans over the medium term with the NDP by ensuring that the spending focus over the medium term was on increasing food production, by supporting smallholder farmers through agricultural support, food security initiatives and implementation of transformation frameworks to promote broader participation in the economy. FFC summarised the programme structure of the DAFF, noted that the mandate encompassed production and consumption in agriculture, forestry and fisheries sectors, and highlighted some of its strategic goals. A comparison of the budget and programmes was outlined, noting an overall increase in budget of 3.1% between 2013 and 2015, but it was also noted that the allocations were expected to decrease over the medium term. FFC then set out some of the provincial audit outcomes, but noted that no provincial DAFF had obtained an adverse audit opinion or disclaimer since 2005. DAFF was the transferring agent for three conditional grants, and FFC summarised its recommendations in respect of those grants. It had, amongst others, recommended the merger of the Land Care and CASP grants, because of poor performance, and the fact that there were several overlapping initiatives. DAFF should strengthen its ability to enforce conditions in the grant framework to ensure better oversight of the provinces, and FFC suggested that norms and standards must be developed to assess performance. In particular, it recommended a special focus on improving the food security programmes. It further believed that government must ensure that municipalities, possibly providing incentives for environmentally efficient actions. FFC also recommended that governance and institutional arrangements for rural development had to be urgently clarified and the fiscal framework reviewed. There were concerns both on the spending and the achievement of targets, and targets needed to be more measurable. The Committee Members shared the concern at spending without correlating achievements, and asked why local government received such small allocations and the impact of the budget reductions on job creation in the sector. They asked the cost of creating jobs in this sector, wondered why food security was not emphasised in the mandate of local government, and supported the FFC's recommendations on the conditional grants, but urged that this should be done with more speed.

The Department of Planning, Monitoring and Evaluation (DPME) then highlighted the 2013/14 performance of the DAFF, noting the aims and objectives, and explaining how the DPME tracked government performance against 14 outcomes. culture of continuous improvement).DPME tracked government performance against 14 Outcomes. Outcome 7 focused on Rural Development with DRDLR as the lead department and supported by DAFF and other departments, and the sub-outputs were summarised. The target for 2014 was to have 24.5m ha transferred to marginalised groups, but this was unlikely to be achieved, although the delivery agreement to allocate 1.14 million ha between 2009 and 2014 had been reached. Policies that hindered agrarian transformation were explained, and the difficulties posed by current legislation were outlined.  The DPME then presented a comparison of targets and achievements for food security, employment figures, the CASP grant, and summarised again the content of the audit report. DPME also said that improved performance management could have a notable influence on improving management practice. It recommended a greater focus on comprehensive rural development and food security for all, and NDP policy imperatives and priorities. DPME noted that the disappointing growth in the sector and loss of jobs in the sector could be attributed in part to the global economic decline but stressed that DAFF had not been successful in addressing constraints to investment in the sector and its policies did not impact significantly on key indicators or achieve transformation. There were weak relationships between government and the industry, and the DAFF and Department of Rural Development and Land Reform were not working closely enough together. Recommendations by DPME included that DAFF must strengthen collaboration with the established commercial farming sector to develop black commercial farmers, use government procurement more effectively and accelerate initiatives to strengthen agricultural support to black commercial farmers. Members expressed concern on the absence of data measurement and wanted elaboration on employment figures on CASP conditional grants, as well as more information on the root causes of the decline in the sector. They emphasised the importance of addressing food security and suggested that the DAFF must do more to promote food gardens and promote dialogue on improving the sector. Building on capacity of the small farmers including livestock production was a concern and the role of agricultural colleges were required.

Meeting report

Opening Remarks by the Chairperson
The Chairperson welcomed the Committee members and acknowledged the presence of the Auditor General and delegates from Auditor-General South Africa (AGSA), thanking AGSA for its support. 

Audit outcomes of the Department of Agriculture, Forestry and Fisheries and entities for the 2013/14 financial year: Auditor-General South Africa (AGSA) briefing
Ms Meisie Nkau, Business Executive, AGSA, commented that during the last training session, the highlights of the trends of outcomes were given. However, it was now necessary to present the Annual Reports of the Department of Agriculture, Forestry and Fisheries (DAFF) and its entities in depth, dealing with the specific audit outcomes and giving an explanation of what the audit report meant. She noted that she and her delegation would briefly recap the terminology for the Committee Members.

Mr Fanie Kok, Senior Manager: AGSA briefed the Committee on the mandate of the AGSA to strengthen democracy by enabling oversight, accountability and governance in the public sector, through auditing, thereby building public confidence. The purpose of the presentation was to provide Members with the necessary information to enable the Committee to effectively execute its oversight function. He summarised that the financial statements were financially unqualified, in respect of the DAFF, the Marine Living Resources Fund (MLRF), National Agricultural Marketing Council (NAMC) and Onderstepoort Biological Products (OBP) but the Agricultural Research Council (ARC) required interventions. The performance reports of all five entities required intervention. The Supply chain management of DAFF, MLRF required intervention; ARC and NAMC was a concern; only OBP was good. The financial health of NAMC, ARC was good; MLRF, DAFF and OBP were of concern. Human resource management at OBP, MLRF and NAMC were good; DAFF and ARC were not. ICT at OBP required interventions, although DAFF was good, and there were concerns on this point in respect of ARC, NAMC and MLRF.

AGSA noted that the most common root causes were regressed slow responses by management, unchanged lack of competencies by key officials’ and regression on the lack of consequences for poor performance and transgressions. DAFF, ARC, OBP and MLRF had slow responses.  DAFF and NAMC were both plagued by lack of competence in key officials. DAFF showed lack of consequence for poor performance and transgressions.

Mr Kok then highlighted the status of key commitments by Minister. Implementation had taken place in regard to aligning the performance agreements of senior management with the Department's strategic goals. Matters in progress included the strengthening of the monitoring and evaluation unit within the Department. Matters not implemented included the need to empower the internal audit function to be fully effective and functional; to manage deviation from the procurement process in a transparent manner; and to investigate ways to ensure that MLRF established its own board to enable better oversight responsibility.

New areas that still needed to be addressed were:
- the need to implement a plan to identify specific areas where service delivery would take place
- ensure linkage between the budget to the targets in the strategic plan
- implement checks and balances to ensure credibility and completeness of financial and performance reports
- make plans to support agricultural schools and encourage youngsters to study in the agricultural field
- collaborate with the provincial MECs to ensure proper monitoring and evaluation of Division of Revenue Act (DoRA) funds.

Mr Kok then proceeded to highlight the role of portfolio committees on oversight. Their legislative functions were to do with considering, amending, approving or rejecting legislation. In respect of budgets, they were to consider and approve budgets and monitor expenditure of the Departments and entities reporting to them. They were to consider progress reports from line function departments and provincial and local government authorities and entities on their respective mandates. The accountability role involved ensuring that all appropriate executive organs of state in their portfolio were held accountable for their actions, or oversee the executive authority and consult or liaise with any other executive organ of state and make recommendations.

The points that portfolio committees should bear in mind when dealing with performance monitoring were outlined. Committees should ask whether:
- the strategic plans and APP for entities were aligned to the National Development Plan
- entities had adequate human and financial resources available to enable them to achieve their  predetermined objectives
- targets were realistic

Mr Kok made the point that committees should review annual achievements of predetermined objectives by entities (as stated in their Annual Report), and should also approve and track changes to strategic plans and annual performance reports.

He outlined the assurance roles, respectively, for the sector. Senior management should take immediate action to address specific recommendations, and adhere to financial management and internal control systems. Accounting Officers must hold officials accountable on implementation of internal controls and report progress quarterly and annually. The Executive authority must monitor the progress of performance and enforce accountability and consequences.

Assurance also occurred within the oversight roles. National Treasury and the Department of Public Service and Administration (DPSA) were to monitor compliance with laws and regulations and enforce appropriate action. The internal audit should be following up on management’s actions to address specific recommendations and conducting its own audits on the key focus areas in the internal control environment, and reporting on quarterly progress. The Audit Committee must monitor risks and the implementation of commitments on corrective action made by management, as well as quarterly progress on the action plans. The oversight mechanisms in Parliament must review and monitor quarterly progress on the implementation of action plans to address deficiencies. The Public Accounts Committees must exercise specific oversight, on a regular basis, on any report where it may deemed necessary. The National Assembly committees provided independent oversight on the reliability, accuracy and credibility of National and provincial government.

He emphasised that clean administration improved service delivery by creating a better and dignified life for the citizens of South Africa through timely effective, efficient and economical service delivery.

Finally, he noted that there were remedies to hold people to account and to address transgressions and poor performance. These included calling for reports, investigating any failure to comply with legislated obligations and responsibilities; or unauthorized, irregular and fruitless and wasteful expenditure; possible fraud and corruption; poor work performance of officials and suppliers; and other non-compliance with legislation.

Ms A Steyn thanked AGSA for the information and commented on the need to look at the root causes and the departments/entities involved. She required clarity on the audit outcomes, which looked like a regression. She expressed displeasure over the unreliability of information, pointing out that the predetermined objectives were problematic from the start. There were plans with no specific targets; compliance with regulations was a problem; strategic planning was not happening, and so she asked how it was possible to have an unqualified opinion, derived on the basis of money spent, although this had not translated into performance delivery

Mr Kok replied that the entities showing the root cause of slow responses by management were ARC, OBP, MLRF and DAFF. The entities with root cause of key officials' lack of appropriate competences were DAFF and NAMC. The Department had a root cause of lack of consequences for poor performance and transgressions. He elaborated that the four entities that had good quality of submitted financial statements were OBP, NAMC, MLRF and DAFF while ARC required intervention on the quality of submitted financial statements. He added that all five entities required intervention on the quality of submitted performance reports. OBP had good supply chain management; DAFF and MLRF required intervention on their supply chain management while there were concerns on ARC and NAMC supply chain management. The financial health of NAMC and ARC were good, but that of MLRF, DAFF and OBP were a cause for concerns. The Human Resource management for OBP, MLRF and NAMC were good while DAFF and ARC were concerns. The Information technology for DAFF was good; OBP required intervention while ARC, NAMC and MLRF were concerns.

Ms Nkau commented that there were six focus areas that made up a clean audit. These were:
- quality of submitted financial statements
- quality of submitted performance reports
- supply chain management compliance (rules and regulations)
- financial health (the liquidity and sustainability of an entity)
- human resource management
- information technology

She added that the quality of the financial statements had an impact on the audit report. The financial health may not reflect in the audit report, unless there was an identified risk that was a material concern. Human resource management, depending on the extent of the materiality of the finding, may not reflect in the audit report. Information technology would only reflect in the management report, and not the audit report. There was a regression in the performance information which would be reflected in the audit report. The regressions related to the number of incidences identified, but this did not necessarily mean material regression. If an institution was not financially healthy it would be unable to deliver services. If the information provided by the Information technology security was not what it should be, then the information provided for audit on a quarterly basis might not be reliable, and that would be a concern.

She explained further that if an entity had a financially unqualified report, with or without findings yet did not meet its targets, AGSA would set this out in the annual performance report. AGSA reported factually, and could report that an entity had used the money, but did not meet its targets. In relation to the compliance to rules and regulations, AGSA would have reported that there was irregular expenditure, but this did not have a bearing on the fact that the audit report was financially unqualified, but showed findings in relation to compliance with rules and regulations.

Most departments and entities would give reasons that they did not have sufficient budget to meet their targets, which was why they showed spending, but not reaching of targets. AGSA, in its reports on the performance information, reported on the usefulness of the information (and that involved whether the target indicators met the SMART principles) and reliability (whether sufficient audit evidence was provided). There had been findings on the usefulness of DAFF, NAMC and OBP targets, that  were not measurable and inconsistent, so AGSA could not approve the validity, accuracy and completeness. That indicated that reliability was a real problem at DAFF.

Ms Nkau pointed out that entities and departments had a finance unit that looked at the financial information and service delivery. This implied that the people in those units must be qualified and there must be proper performance management process. Performance management was critical in an organisation, to make sure that the targets and the indicators set in the Strategic Plan and Annual Performance Plan (APP) were met. If individual roles and responsibilities in an organisation were not identified it could not deliver; hence the need to have entities monitored and evaluated for service delivery. The action plans should detail the actions to address the root causes.

Mr Fanie Kok commented that the audit done in 2014/15 showed that the consistency of DAFF information was unclear, hence not useful.

Mr B Joseph (EFF) required clarity on material adjustments which were commented upon in the unqualified opinion.

Ms Z Jongbloed (DA) commented that AGSA had been struggling for the past five years with internal audits, as it had been recorded repeated findings. She asked how concerns about lack of proper record keeping, action plans, daily and monthly controls could be addressed.

Mr M Filtane (UDM) asked if a political head, such as the Deputy Minister, was present at the meeting as some of the questions should be addressed to a political head.

The Chairperson replied that the political heads would be present at the next meeting, and only the teams from entities briefing the Committee were present at these preparatory meetings.

Mr Filtane asked why the recruitment process was ineffective, as the audit committee had only one staff member. The reliability of information was a problem for the Department, but that should be able to be sorted out, if both the political leadership of the Department and top management were to suffer consequences. He said lack of consequences for unreliability of information supplied would not lead to any reduction in the problems. Elaboration was required on the commitments made by the Minister which were not met. He asked for steps taken to improve on daily and monthly controls and asked what the senior management was doing to improve on the quality of performance reports, both in long term and short term. He asked why the DAFF employed incompetent staff and what was done to address the issue of staff incompetence.

The Chairperson commented that some of those questions must be directed to the Department at the next meeting. AGSA, which could be seen as "partner" to the Committee on oversight could not answer some questions. The Auditor-General was to audit the finished product, while the Committee monitored the daily basis of the Department to assess whether the department was performing. AGSA could only confirm if information received from the Department was correct and whether money received was rightly appropriated.

Ms Nkau thanked the Chairperson for clarifying the mandate of the AGSA as well as the role of the Portfolio Committee. She confirmed that the mandate of the AGSA was to audit and to report, while its engagement with the Accounting officers, the Executives, the Oversight Committee was as required by the International Standards of Auditing. Its engagement with the Portfolio Committee was to give the Committee an understanding of the audit report. The Portfolio Committee was responsible for holding the Department and management accountable. The AGSA would indicate the root causes of its findings and the key controls that were lacking, so that the Portfolio Committee could in turn hold the Department accountable for service delivery and work towards clean audit outcomes.

Mr T Ramokhoase (ANC) required elaboration on the role of the Portfolio Committee on assurance. He added that the issue of performance management was not part of the audit opinion and outcomes of the AGSA and asked how deep the issue of human resources had to be to affect the audit opinion. He asked if the key commitments made by the Minister were new, or recurring from past Ministerial engagements, and what impact this had on the DAFF.

Ms Nkau commented that the commitments that the previous Ministers gave to AGSA were sufficient to address the findings raised. The commitments that the new Minister gave would add value to the impact that the Departments would have.

The Chairperson commented on the challenges of strategic plans that were unrelated to the annual performance plans, which hampered the AGSA audit performance, and asked how best the Portfolio Committee could assist the AGSA to get relevant reliable information that would assist them to do their work.

Ms Nkau commented that, on a yearly basis, the AGSA reviewed the strategic plan for the next financial year. The strategic plan for 2015/16 would be reviewed by early next year and only the usefulness of planned targets could be audited. Reliability would be judged on the achievements reported. The report was then submitted to management before being presented to the Portfolio Committee. The Portfolio Committee could assist by interrogating the APP, asking questions around usefulness when engaging with the Department, and monitor achievements on a quarterly basis.

Ms Steyn asked if AGSA and DPME ever met as a team to strategise and plan together, and requested that the financial report be improved for clarity, as had been mentioned last year.

Ms Nkau replied that AGSA met with DPME and had on a number of occasions conducted training together for the Department. The strategic plan and APP of the Department must reflect the impact. She noted requests for the next financial report.

The Chairperson asked if there were responses from the Department to some of the issues raised by the AGSA in the legacy report.

The Content Adviser to the Committee replied that some of the issues had been addressed while some audit outcomes of 2013/14 had not been addressed by the audit committee, and others were ongoing.

Financial and Fiscal Commission (FFC) briefing
Mr Bongani Khumalo, Chief Executive Officer, Financial and Fiscal Commission, noted that the the Commission (FFC) was an independent, permanent, statutory institution established in terms of Section 220 of the Constitution. It functioned in terms of the FFC Act. The mandate of the Commission was to make recommendations, as envisaged in chapter 13 of the Constitution or in national legislation, to Parliament, Provincial Legislatures and any other organ of state determined by national legislation. He gave a brief background into the Commission.

He noted that the National Development Plan (NDP) envisaged the agriculture sector as one of the key levers for job creation and ensuring food security in South Africa. The NDP identified the following objectives for the sector:

-create one million jobs in agriculture, agro processing and related sectors by 2030
-increase investments in new agricultural technologies and research and development
-realise a food surplus with 1/3 of food being produced by small-scale farmers or households
-create security of tenure for communal farmers, especially women

DAFF had aligned its plans over the medium term with the NDP. by putting the focus on spending for increasing food production, by supporting smallholder farmers through Comprehensive Agricultural Support Programme (CASP), implementation of food security initiatives including land care, Illima/Letsema and the recently established Fetsa Tlala food production initiative, as well as by implementation of transformation frameworks to promote broader participation in the economy.

Ms Sasha Peters, Senior Researcher, FFC, briefed the Committee on the departmental overview. DAFF consisted of six programmes: Administration, Agricultural Production Health and Food safety, Food security and Agrarian Reform, Trade Promotion and Market access, Forestry and Fisheries. Six entities reported to and fell under the budget of DAFF. The mandate addressed production and consumption in agriculture, forestry and fisheries sectors. Strategic goals of the Department included increasing production and productivity in the agriculture, forestry and fisheries sectors, enhancing employment and economic growth, food security, and sustainable use of natural resources.

She outlined the budget and programmes of DAFF and noted that between 2013/14 and 2014/15, the budget allocated to DAFF had increased from R6.1 billion to R6.6 billion, representing an increase of 3.1%. Over the medium term, allocations to DAFF were expected to decline due to Cabinet approved budget reductions and shifting the management function of the Knysna indigenous forest to the Department of Environmental Affairs.

Provincial audit outcomes: whilst dropping from the standard set in 2003/04 where all provincial DAFFs received unqualified opinions, had since 2005/06 shown that no provincial DAFF had obtained an adverse opinion, and since 2006/07 no provincial DFF had received a disclaimer.

She noted that the DAFF was the transferring agent for three conditional grants - the CASP, the Illima Letsema and Land Care. FFC had some recommendations to make on the agriculture grants. Its annual submission for the 2007/08 Division of Revenue Bill had recommended that the Land Care Grant and CASP grants be merged into one. The rationale for the recommendation was based on overlapping objectives and poor spending performance. Even to date, the conditional grant spending performance within certain provinces remained poor, particularly on CASP. There was continued implementation of numerous existing (and underperforming) and new initiatives, with overlapping objectives.

FFC then summarised what its submissions were to be for the 2015/16 financial year. DAFF should strengthen its ability to enforce the conditions in the grant framework, to ensure better oversight of provinces, so that spending and performance of agricultural conditional grants cold be improved. The Commission would be suggesting  that norms and standards be developed to assess the performance of provinces, and five year evaluations of conditional grants should be institutionalised. The Commission recommended also that there should be a special focus on improving the operations of different food security programmes, especially Agriculture, EPWP and the School Nutrition Programme. All these could accelerate improvements in household food security, without necessarily increasing programme expenditure. Areas that could yield improved results included better joint planning and streamlining procurement processes, with the assistance of the Chief Procurement Officer. The ability to use available resources optimally for the food security programmes had declined over time.

FFC also recommended that Government should ensure that municipalities developed their own climate change mitigation and adaptation strategies and plans for climate change, as part of the Integrated Development Planning process. Government should provide support to municipalities by both location and capacity. Government should consider providing municipalities with performance-based conditional grants which rewarded or incentivised actions that were environmentally efficient and responsive to the adaptation and mitigation challenges of climate change.

FFC also felt that the governance and institutional arrangements for rural development across the three spheres of government needed to be clarified urgently. The fiscal framework (both equitable share and conditional grant allocation) for rural and agricultural development must be reviewed. Government should merge current conditional grants into a comprehensive agriculture and rural development finance programme, preferably administered by one department. The Land Care grant and Comprehensive Agricultural Support Programme grant should be merged into one Schedule 4 grant.

She concluded that the NDP envisaged a major role for DAFF in creating employment and growth, and ensuring food security. Generally there was concern about the spending, but there was also concern that the achievement of targets was low and there was widespread under spending of grants in general, as a result of weak procurement processes in provincial DAFFs. The internal controls within DAFF needed to be improved, particularly to ensure that performance targets were specific, measurable and verifiable, and it must put measures in place to prevent irregular expenditure, and carry out risk assessments and implementing risk management strategies.

Ms Steyn asked how long Mr Khumalo had been acting as the Chairperson of the Commission. She expressed concern at performance of the conditional grants . She asked how the Portfolio Committee could assist to ensure that recommendations worked. She expressed concern on costs, which could be cut down due to under spending and lack of proper spending.

Mr Bongani Khumalo replied that he had been acting as the Chairperson of the Commission for a period of four years (since 2010).The Commission did not need any more power than it currently had because the Commission must advise and make expert recommendations to Parliament. It must strengthen the ability of Parliament to deal with financial and fiscal matters of the state. The Commission was not facing any risk that would affect or impact it from delivering on its mandate.

Mr Filtane asked what the most prevalent risks were that threatened the Commission’s effectiveness to deliver on its mandate, and whether these related to the political or economic environment. He asked why local government always got small allocations from the national fiscus, and how the budget reduction would impact on job creation. He wondered about the cost of establishing a single sustainable job in the agricultural sector. He pointed out that the marine sector had consistently under spent on these grants, and enquired what the FFC findings were on the reasons for the under spending. He enquired who, and for what reason held the view that food security was not the mandate of the local government and why there was playing off of local government in regard to food production.

Mr Khumalo replied that, politically, there was no threat to the Commission's work. The Commission operated directly from the Constitutional mandate, looking to the rights of individuals, the mandate and where they lay. For instance, provinces had a responsibility in terms of education, to ensure that they provided education.  If they were to provide secure school environment, as a right, the Commission should be able to say that the education sector thus needed more money to provide for a secure school environment. If school children were to be fed, the Commission must be in a position to say that school children were entitled to food. The Constitution was clear on progressive realisation, which was possible when there were plans. The Commission must define a set of norms and standards for all the services provided by the different spheres of government.

Local government was the sphere that was closest to the people. If local government did not have the resources to operate and make sure it generated the benefits people would not go to the national level, but to the municipalities. DAFF should be playing a more critical and direct coordinating role across the spheres. Issues of co ordination were critical, especially the issue of job creation, as a working environment must be created for people to be productive. There was an assumption that local government always raised a substantial amount of revenue on its own. Over time, the economy changed and the local government revenue suffered. The share of money that went to the local government remained untouched, and that recognised that there were significant challenges in the local government spheres that should be dealt with. The share of local government needed to be looked at in the manner that the national department could be able to spend on their programmes, which was why it was critical that whatever the national department did was linked to the local government.

Mr Khumalo said that the cost of creating a single sustainable job in the agricultural sector was unknown. Most jobs created in the sector were temporary or seasonal jobs, which were not sustainable jobs.

Ms Peters added that the under spending in the marine entity was driven by continued deferment of funds. If the entity did not spend in a particular year the funds were deferred to the next year, and this happened on a continuous basis. General under spending by the DAFF was driven by the National level or the provinces, and the conditional grants were driven by delays or incomplete procurement processes. This directly linked to the need for tightening the internal controls. The Commission’s recommendation for 2015/16 (which government was yet to respond to) suggested that these procurement processes must be streamlined, that there be consideration of the role of the chief procurement officer and the role that office could play in assisting procurement processes.

Mr C Maxegwana (ANC) commented that the background of the presentation spelt out what was expected from DAFF, in relation to the National Development Plan, on food security and employment. The 2008 economic downturn and its effect on the economic wealth of the country was an unanticipated shock. He asked how the country could be expected to deliver on the National Development Plan despite the unexpected problems and how the country could "cushion" the effects. He asked for more elaboration on budget spent and low achievements, reminding the Committee that funds were disbursed to Provinces for specific purposes, but there was no service delivered, and that needed to be interrogated.

Mr Khumalo replied that when budget increased without meeting the set targets it meant there were inefficiencies in the system that needed to be addressed. Either resources were allocated to the wrong place or technically the wrong factors of production were being used.

The Chairperson commented that the work of FFC helped government to have fiscal policy that responded to the needs of people on the ground and assisted government on the areas of focus to achieve a particular objective. The 2003 decision of the Heads of State of SADC was that all African Countries should budget 10% of their budgets to agriculture. However, given the recommended reduction in budget due to under spending, she asked how the Portfolio Committee could ensure that there was service delivery. She asked if FFC had a relationship with the Public Service Commission which was to ensure that the public services did their job and that the structure of government was responding to the needs of the community, like creation of employment. She added that rural development was a national function and there was no coordination of government in terms of the rural development structure developed by National Government. She agreed with the merging of grants, but was worried about the speed with which the Department had moved with the merger. Targets had to be implemented. Food security policies needed to be implemented and social grants needed to be looked into, as these occupied a big space in the national budget. The challenge of value for money was a problem that should be addressed in the country. She was impressed at the recommendations. The Portfolio Committee would fight for the implementation, as it was in the interest of the community. She asked how the Committee could work together with the Commission to ensure that things fell into place with the reduced budget. She commented that there was no department that made proper research into climate change and response of the sector to climate challenges. A lot of work had to be done in fisheries transformation. Transformation was not an easy process but must be done. She asked how growth could be assured in the country.

Mr Khumalo replied that some work was taking place in the merging of conditional grants but he was not sure of the pace. The issue of grants in agriculture came up after 2003 and a task team was set up to look into it. The grants had shown some improvements in terms of performance, compared to the long history of poor performance where there was zero spending in some provinces. The Land Reform process and the utilization of land for food security purposes were two linked processes. In designing funding or a  financial framework, the bigger picture had to be considered. The person that made decisions at the lower level must be able to respond to the local circumstances otherwise the whole purpose of decentralization would lose its meaning. In times of tight fiscal frameworks, the non performance became the first victim and the key challenges had to be dealt with by the department. The recommendations were processed by the National Treasury and sent through the various budget process forums. Over time, a lot of recommendations had been made, with which government could agree or not. Where government did not agree it meant there was no follow up. The expectation when recommendations were made was that Parliament had been empowered and that recommendations were being referred to the relevant Minister and Parliament would take responsibility for taking the Commission to task on what informed these recommendations. Parliament would be able to engage with the executive while National Treasury officials coordinated the process. There was a process whereby if there was no response from the various departments, then National Treasury must respond. If job creation was one of the programmes that government was looking at, then programmes that were aimed to facilitate job creation would be designed. If the programmes were not met, then there was a challenge. The tight fiscal environment had been sustained through foreign savings.

The relationship between the Public Service Commission (PSC) and FFC involved looking at programmes which dealt with corruption, looking at how resources were being utilized, identifying wastage of resources and allocating resources in order to deal with the challenges. It had to do with the efficiency of how work was done and that was what PSC was interested in. The FFC was mainly interested in technical efficiency and efficiency of allocations, such as whether resources were allocated to the areas of greatest need, to deal with the challenges; allocating efficiency; whether resources were allocated to the areas of greatest needs in order to deal with the challenges. The Commission had been working together with the Food Agriculture and National Resources (FANR), UCT and two other universities on a report about the vulnerability of communities and their coping mechanisms, with specific reference to some areas of Eastern Cape and Limpopo. The report would be finalized and tabled before the Committee.

Ms Steyn expressed concern that there was not enough planning in the Department and asked if it was possible for a province to get more money for specific projects.

The Chairperson commented that some questions should be left over for deliberation among the Committee members. The Department could not account for grants as they did not know the number of small farmers they had assisted or whether the money appropriated was given to someone else. MPs should be demanding space to pay oversight visits, to ensure that things were being done properly, and show commitment.

Mr Khumalo commented that the Commission had tried to ensure that accounting officers at national level must be equally accountable for the conditional grants they transferred. In some sectors, for instance the Deportment of Human Settlements, where provinces had not performed, the money could be shifted to another province that was performing, but there should be solid plans around those grants. When the reviews of these grants were completed the way forward would be known. He suggested that the reviews must be treated urgently.

The Chairperson thanked the Commissioner and said that the merging of grants would be prioritised and DAFF had to be pressurized to finalise on this. Parliament should never allow the people to pay for sins that they had not committed; instead, the officials must be made to work and government should take action where there was no service delivery.

Department of Performance Monitoring and Evaluation (DPME) on the 2013/14 Annual Performance of DAFF
Ms Tsakani Ngomane, Deputy Director General, DPME, briefed the Committee on the outcomes system which was introduced in 2009 to achieve more effective spending and performance. The aims were to increase the strategic focus of government by focusing on a limited number of priority outcomes,increase focus on measurable results, improve coordination across departments and spheres of government by introducing holistic government plans, move away from a culture of doing the same activities the same way again and again without consideration of the impacts of those activities to develop a culture of continuous improvement). DPME tracked government performance against 14 Outcomes. Outcome 7 focused on Rural Development, with DRDLR as the lead department, supported by DAFF and other departments.

Outcome 7 envisaged vibrant, equitable and sustainable rural communities and food security for all. Under this outcome, the outputs included:
- Output 1: sustainable agrarian reform with a thriving farming sector.
- Output2: improved access to affordable and diverse food.
- Output3: improving rural services to support livelihood
- Output4: improved employment and skills development opportunities
- Output 5: enabling institutional environment for sustainable and inclusive growth.

If achieved these would result in sustainable agrarian transformation with a thriving farming sector:

The target for 2014 was that 24.5m ha be transferred to marginalised groups, from 1994, but this was unlikely to be achieved. A delivery agreement was acquired, and the target to allocate 1.14 m ha of strategically located land between 2009 and 2014 had been achieved.50 000 new smallholders by 2014 could possibly be achieved.

Various policies were restricting agrarian transformation. The policy and legal environment related to land ownership and use had in the past been conducive to agrarian transformation and development of the agricultural sector. A number of Acts had, however, dealt with subdivisions, changes in land use and agricultural land, resulting in a duplication of legislation and overlapping of departmental actions and responsibilities. This impeded on DAFF's ability to protect and preserve agricultural land and to ensure its productive use.

The target for Food Security, by way of establishing community, institutional and school food gardens to enable at least 30% of poor households to produce some of their own food, was that 68 000 be established by 2014, and this had been achieved.

However, between 10% and 15% of households were still vulnerable to hunger in 2011 and 22.7% had insufficient access to food.

HE noted the employment figures and said that the CASP conditional grant created a total of 9 932 jobs (permanent: 2 085; temporary or seasonal jobs: 7 847).

Moving on the findings by AGSA, he summarised the findings again, particularly the matters of emphasised in relation to Predetermined objectives (performance information, strategic planning and management); Audit Committee not in place; Ineffective Internal audit; Procurement and contract management (e.g. quotations not obtained);insufficient oversight on reporting; insufficient human resources (internal audit, regional offices and SMS positions);Risk assessment not conducted; Risk management strategy not in place; expenditure management(to prevent irregular expenditure) and transfer of funds.

Some key lessons emerged from the analysis of data and good practice, in relation to :
- Commitment: accountable leadership and consistency of purpose and a professional service culture.
- Management Practices: aligned policy, planning and performance review systems; organization, structures, processes, resources and norms.
- Improved performance management could have a notable influence on improving management practice.

DPME suggested that for the future, there should be a comprehensive rural development policy and food security for all approach, which would be based on the NDP policy imperatives. The NDP identified the following priorities which now comprised the focus of Outcome 7 for the period 2014-2019.
- Improved land administration and spatial planning for integrated development.
- Up-scaled rural development as a result of coordinated and integrated planning, resource allocation and implementation by all stakeholders.
- Sustainable land reform
- Improved food security
- Smallholder farmer development and support for agrarian transformation.

DAFF must now implement the comprehensive food security and nutrition strategy and develop under-utilised land in communal areas and land reform projects for production. Under sub-outcome 5, for the development and support of small producers, DAFF must develop and implement policies promoting the development and support of smallholder producers; expand land under irrigation; provide support to smallholder producers in order to ensure production efficiencies; develop and implement the Agricultural Policy Action Plan (IAPAP); develop, resource and implement the Agricultural Value Chain.

Ms Ngomane concluded that the disappointing growth in the sector and loss of jobs in the sector could be attributed in part to the global economic decline, but DAFF had not been successful in addressing constraints to investment in the sector. Although DAFF had embarked on some  strategies such as mechanisation aimed at stimulating production by smallholders, the following concerns remained:
- DAFF’s programmes were not having significant impact on key indicators
- there was not yet sufficient transforming of the sector through new entrants becoming successful commercial farmers
- there was slow growth of the industry both in terms of contribution to GDP and employment
- household food security and under-utilization of agricultural land remained of concern.

Causes of problems appeared to include weak relationships between governments and the industry, and high senior management vacancy levels. In addition, DAFF and DRDLR were not working closely enough together. The DPME recommended that the DAFF should strengthen collaboration with the established commercial farming sector to develop black commercial farmers, use government procurement more to create opportunities for black commercial farmers, and review and accelerate initiatives to strengthen agricultural support to black commercial farmers.

Ms Steyn thanked the presenter for the broad overview and noted that there was a statement in the agricultural sector that it was not possible to manage what could not be measured. She stressed that the country would not move forward if there was no data measurement. She needed more explanation on employment figures of CASP conditional grants. The agricultural sector contribution in growing the domestic sector had declined, hence the need to find out what the problem was. She wondered if the policy uncertainties were in part to blame and pointed out that farmers were not making money in South Africa any more, due to high electricity costs, expensive land and other matters. There was a need to look at the problems and address them squarely. The number of farms in South Africa had declined over the years. 26% of the South African population was facing hunger, while 28% were at risk and food security had become a massive problem, withe people not having money to buy food, or there being no food available. Proper plans were needed to address these problems, and hence the need for dialogue.

Ms Ngomane agreed on the need for dialogue in the sector. It was important that there be honest engagements that considered the realities. The methodology of operation could give  that platform or opportunity for dialogue, from the commercial sector or subsistence producers or financial institutions. It was becoming more urgent f to have a discussion as the longer the delays, the more that people became impatient and resorted to undesirable actions. She agreed that data that could not be measured could not be achieved. She said DPME was drawing lessons from the previous administration to provide numbers by focusing more on performance measures and functionality, such as how many of the distributed farms were engaged productively by pushing for portfolios of evidence to go with the reports that came through the system, unlike the system followed prior to this, and by carrying out physical oversight work to sites. The medium term strategic framework was the framework of government, which was a direct translation of the objectives as identified by the NDP, to say what was to be implemented and assigned to the Ministers. For instance, DAFF should engage with the Provinces to get their share of the targets set out in the MTFS which are split - based on areas of potential for each province. She commented on the food security data analysis that 10% to15% of households were vulnerable to hunger, while 22.7% had insufficient access to food.

Mr Ramokhoase commented that the presentation was fair and transparent. He said it was a political mind shift that was needed, and asked if political decisions should be allowed to prevail as political issues must be dealt with the aim of addressing poverty in order to secure food. He was happy that the Presidency itself was able to determine the issue of the poor numbers, and said that poor numbers were getting the country deeper into problems every day, and some people merely fought to hold on to the current situation, but that was not resolving any problems.

Ms Ngomane replied that the impact of the commercial sector was due to high cost of farming and challenges of the commercial sector in making reasonable profit margin within the sector. The transformation agenda would determine the extent to which the commercial sector would continue to thrive, with the participation of many. The experience around recapitalisation was not good enough as lands were transferred to beneficiaries but in effect these lands were still owned by the strategic partners; hence the need for political will and the manner in which dialogue had been used to get to this stage.

Mr Maxegwana commented that food gardens only addressed a component of food security, so that  other production interventions needed to be considered, such as increasing livestock productivity. He agreed that there was not a focus on where the strengths lay - such as Eastern Cape, where livestock production was prevalent - because those strengths were not developed. He suggested that there was a need to improve interventions in livestock production in Eastern Cape. The Department was not doing enough on food gardens, as it should ensure that activists within the Department ensured the sustenance of food gardens, which addressed hunger, and would in turn offload social grants. Rural development gave lands to people for agriculture; hence the need to improve interventions on small holder farmers.

Ms Ngomane replied that food gardens should not be undermined. The challenge was for that everyone should be tackling community gardens at all scales across provinces and in urban settings.

The Chairperson commented that the target for agriculture for last year on Fetsa Tlatla was a problem and there was need for a dialogue on how to improve on agriculture. She was happy that the DPME was starting to pick up on issues. The challenge in government was that many officials were "taking chances" - for instance, hiding information or hiding parts of budgets in goods and services. She agreed that critical issues were raised around baselines and data. Dialogue must be created to understand the sector betterment that it was seeking to achieve between national and provincial levels, but she was not sure how   to make the Department and Provinces work together as there were no norms and standards. Building on capacity of the small farmers, including livestock farming, also required veterinary services. Provinces and the national Department all had different programmes with funds for those programmes but no one was making sure that those programmes actually reached the people. There cannot be livestock farming without providing veterinary services. Occupation Specific Dispensation (OSDs) was a problem with unresolved veterinary services. There was need to build human capital, to have functional agricultural colleges and to consider the role of the Department of Higher Education. The DPME should get DAFF to have a working monitoring subsection, and she wondered if this could be done under the Department. Evaluation tools were important as the performance management system had loopholes.

Ms Ngomane replied that DPME was trying to encourage departments to move away from reporting on activities and outputs at the macro level. The Committee could request the Department to come and present the evaluation report that focused on specific programmes. DPME was evaluating the Extension Recovery Programme translating into quality extension services. Alignment was also required at the national level between the Department of Agriculture, Rural development, and National Treasury having a common funding. DPME had a budget review or hearing process involving a joint sitting between Agriculture, Rural development and Treasury, looking at their budget cases. Agricultural colleges needed to be strengthened, with strong collaboration from established higher education institutions. Some colleges did not have programmes for supporting extension services, and no allocations to strengthen the colleges. Development of the curriculum was required to strengthen colleges. Weaknesses in the Public service were to be addressed by establishing generic tools to strengthen the service.

Ms Steyn asked why the agricultural census was terminated, which was a massive blow to the industry and country.

The Chairperson replied that DAFF would answer that at the next meeting. She noted that in most communities that faced the fight on restitution of land, the people involved were public servants and she asked that this phenomenon be researched. She noted that the DPME did not talk about Fisheries and Forestry and how performance could be measured.

Ms Ngomane replied that the systems were not that good, so it was difficult to work with alignment. A person would need to be an activist to have a sense of ownership. DPME carried out monitoring on officials causing fights.

Committee Oversight Report: Ncera farms (Pty) Ltd, 23 September, 2014: Consideration and adoption
Mr B Joseph (EFF) indicated that it was difficult for him to support the recommendation of the previous Committee of the Fourth Parliament on the winding up of Ncera farms.

The Chairperson replied that there was a decision to de-register Ncera Farms as an entity, which was the main reason for the oversight visit.

Mr Joseph contested the phrase in the draft Report expressing “in-principle support “as he was not part of the decision.

The Chairperson commented that the objection of Mr Joseph was noted.

Ms Steyn suggested that it be rephrased, to say that the majority of the Committee agreed in principle.

The majority of Members, whilst noting the objection of Mr Joseph, adopted the report and the decision to de-register Ncera Farms.

Committee minute adoption
The Committee unanimously adopted the minutes of the meeting held on 16 September 2014.

The meeting was adjourned.

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