ARC, OBP & South African Veterinary Council on their 2013/14 Annual Reports; Marine Living Resources Fund: follow-up questions

Agriculture, Forestry and Fisheries

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

The Department of Agriculture, Forestry and Fisheries (DAFF) clarified issues arising from the annual report of the Marine Living Resources Fund (MLRF). These included the future of the SAS Afrikaner research vessel, which remained out of commission, the approach to dealing with poachers, irregular tenders and weaknesses in supply chain management, the DAFF’s inland fishing strategy and its support for cooperatives, the strategy for developing aquaculture, and the allocation of fishing rights and review of tariffs.

The Agricultural Research Council (ARC) said that the number of its science publications had doubled in six years, and the quality of scientific publications had improved. Revenue had grown by 23% in 2014 to R1 363 million, compared to R1 104 million in 2013. Operating expenditure had increased by 19%, from R1 015 million to R1 206 million. This had resulted in a surplus of R156 million – a 76% improvement on the previous year. The ARC was faced with some challenges. The Parliamentary grant had been increased by 16% to R866 million, but due to a prolonged period of inadequate funding, higher expectations and increased costs, this remained very inadequate to fulfil the Council’s mandate. There was ageing infrastructure with a high need for replacement and repair, and limited funds were available for capital expenditure. There was limited funding to fill the required number of critical vacancies. Staff retention was a challenge due to non-market related pay scales. Investment by the private sector was limited.

Onderstepoort Biological Products (OBP) told the Committee it was incorporated in 2000 and received funding of R9 million in 2001. By 2011, revenue exceeded R161 million. Today, the total workforce was 176 permanent employees. In the 2013/14 period, the OBP had shown an after-tax loss of R8.6m, which was a reduction from the R21.4m loss the previous financial year. The OBP would be investing in development of new vaccines and replacing critical equipment to maintain manufacturing capacity, supporting emerging sectors, and developing skills as a priority.

The South African Veterinary Council (SAVC), said the Council’s core functions included regulating veterinary practice, determining the minimum standards of tuition and training, and exercising effective control over professional conduct. In order to promote food safety and security, four strategic goals had been developed. These were relevance for the needs of the country and modern legislation, stakeholder relationships, unification of the veterinary professions, and mobilisation of resources. With regard to new developments, the SAVC had objected in 2012 to the requirement of Threatened and Protected Species (TPS) permits for veterinarians rendering veterinary services to the TPS, and would continue to oppose such requirements, because it believed that the Minister had acted beyond her powers in the introduction of such a requirement. A total of 5 194 veterinary and veterinary para-professionals were registered with the SAVC on 31 March 2014, and 425 persons were authorised to perform veterinary or veterinary para-professional services. The administration encouraged members to register and maintain their registration.

During interaction with Members, ARC dealt with the need to collaborate with other entities to overcome budget constraints, the training of farmers in Limpopo, how access to animal health facilities was ensured, and what ARC could do when vaccines were not available. The OBP indicated that funding was need to upgrade old facilities, and acknowledged that competition from other medicine manufacturers posed a threat. The SAVC said vaccination was essential to prevent the spread of animal diseases, and gaps in the regulatory framework needed to be closed.

Meeting report

Marine Living Resources Fund (MLRF): Questions and Answers

Ms A Steyn (DA) sought clarity on why the issue of the Threatened and Protected Species permits could not be dealt with, and remarked that the Department was rather contributing in making people poorer.

Ms Z Jongbloed (DA) remarked that the Department should, according to the Auditor General (AG) report, hold management staff accountable for poor non-financial performance. The AG had raised concern on unfunded activities or paying for goods and services which were not budgeted for, and asked who should be liable. She sought clarity on a vessel which had been operated on a short term contract, and irregular spending arising from it, and whether certification of the vessel was in danger of being revoked. She asked about a statement made by the Minister related to the SAS Afrikaner, the Department’s research vessel, and the outstanding issues related to research, monitoring and evaluation, as raised by the AG. With regard to performance, she sought clarity on the previous process that had been declared fraudulent and unlawful, and on the backlog of cases for which the Minister had not given a response. She said she would like to know about the forensic investigation into the procurement of goods and services, particularly when the report would be available and why the Public Protector’s report into irregular tenders had not been tabled before the Committee. She asked whether agricultural research would be conducted, or not. Referring to the deficit appearing in the annual report, she said R44 million had been spent on transport -- what was it for? She also asked about the surplus of R39 million and irregular spending of R120 million.

Mr C Maxegwana (ANC) sought clarity on the procurement of goods and services, and when the issue of the SAS Afrikaner would be put to rest. On the issue of joint operations between the Department and police in relation to the poachers, he remarked that there were too many arrests of people who were perceived as poachers, and said the place where a crime was committed was problematic. To guard against the poachers, the Department should ensure that poachers had no access to waters to fish illegally.

The Chairperson sought clarity on the inland fishing strategy that had been developed, and what had been done to ensure that the strategy was implemented. Was the strategy succeeding, or was it facing some challenges? She also sought clarity on water rights and on the progress in the implementation of small scale fishing in coastal areas, and whether support was being provided to the cooperatives that had been formed.

Mr Maxengwana that people who formed cooperatives did not know what to do, because they did not have governmental support. If communities did not benefit from the state programme, they would remain in poverty. In Limpopo, there were cooperatives, but the DDG needed to advise what should be done.

The Chairperson sought clarity on the integration of fisheries, which had been on agenda of the Department for five years, for the purpose of having a single resource management.

Mr Mortimer Mannya, Deputy Director General: Department of Agriculture, Forestry and Fisheries (DAFF) replied that fisheries was a sector that attracted a number of people. It was a competitive sector, but was not yet transformed. It had been a white dominated sector. Cooperatives had limited resources, but the Committee had higher expectations. The Department was developing aquaculture to promote fisheries.

On issue of issuing permits, he said that it was a problem that he was dealing with it to ensure it was solved. The matter related to the supply chain management stemmed from the Department’s internal capacity, particularly the resignation of the head.

Referring to the vessels, he said that short term contracts had been procured and the Department had net requirements. Most of the problems were the result of irregular expenditure. He promised that the issue would be resolved by 2017. Tenders had been advertised to move away from short term strategies.

On the question of availability of funds, the Marine Living Resources Fund (MLRF) was generating the revenue from collections it was making. The fund was viable. Some funds were allocated to deal with regulatory aspects, and developmental activities would include small initiatives, aquaculture development, and other aspects which were not necessarily regulatory. The MLRF was sitting with a large number of vacant positions, and had advertised them. There were three posts at the management level.

There were various debates around short term contracts, but the Department had resolved that the short term contracts would continue to be used until the finalisation of tenders.

The SAS Afrikaner was indeed not ready. There was an agreement that the service provider would repair two engines, but the vessel was very old and repairing it was difficult. There was no risk of danger with the vessels that he was aware of. Because the SAS Afrikaner was out of commission, the Department had contracted other vessels to carry out its mandate effectively. The non-operation of the SAS Afrikaner had caused under-spending. The Department also under-spent on the aquaculture project.

Concerning the allocation of rights in 2013/14, the report had been completed and would be presented to the Committee. Tthe Minister had referred the report to the State legal advisor, and he was waiting for feedback. Once the report was released, the Department would take action based on the data base. According to the report’s recommendations and observations, eight months were needed in order to allocate rights. The Department was committed to social transformation. It wanted to support small scale fisheries. It was dealing with finite resources, and was expecting that there might be unhappiness related to the allocation of rights, which would occur in 2015.

With regard to the tender process, he said that the Department was involving the National Treasury to assist with the process.

The Department had concluded nine memorandums of understanding with nine universities, and aquaculture was one area affected by those memorandums. A written report in that regard would be submitted to the Committee.

On the availability of revenue, he said that the tariffs had not yet been reviewed. A plan was being put in place to review them, and to improve on the collection of levies and fines. Fines were collected by the Department of Justice.

On the issue of transport costs and the procurements of goods, the Department was strengthening its internal supply chain management controls, because that was where the Department had weaknesses.

The Department was taking measures to prevent poaching by engaging in joint initiatives and it was doing relatively well. Where there was a high degree of competition, transformation was usually slow, and where communities did not profit from the resources available to them, there would be poverty. He believed that integrated fisheries security would assist in contributing to social transformation. The Department was developing a fisheries policy which would be viable if the Department of Environment came to the table. With regard to small scale fisheries, the Department had embarked on the identification and verification of fisheries within communities, and was registering cooperatives and individuals.

On the issue of arrests, he said that those who had been arrested were not poor people.

With regard to aquaculture development, he said that the Department was supporting small scale fishing through provincial departments, and it was the duty of the MLRF to ensure that the funds got to beneficiaries.

Regarding integration, he said that it would take time before it was fully implemented. To be implemented, it would require a review of the legislation. In this regard, external support was needed.

The Chairperson said that the Committee would continue to engage with the Department on the issue of integration of fisheries, and stressed that this needed to be done within next two years.

Ms Steyn said that the DDG was not in a position to answer some questions posed by the Members. They should have been answered by the Minister, or Deputy Minister.

Mr Mannya replied that the Minister and Deputy Minister could not account to the Committee because they had had to attend a meeting with the World Food Programme and Agri-US Conference in Limpopo. In this respect, agriculture could not succeed if South Africa did not have good collaboration with international partners, so the Minister could not cancel this engagement. He was standing in on the Minister’s behalf, as accounting officer.

The Chairperson agreed, but said the apologies were not accepted.

Ms Steyn reiterated that the communication was poor. The Minister was needed, because the unresolved issue of certifications was causing people to suffer.

Agricultural Research Council (ARC) on its 2013/14 Annual Report

The Chairperson called the first presenter and said that questions would follow immediately after the briefs. She requested members to write questions down on the papers. Questions were handed to presenters, after all three presentations.

Dr Shadrack Moephuli, Chief Executive Officer: ARC, introduced the ARC Council members and proceeded to take the Committee through presentation. He said that the ARC mandate derived from the Act and its objectives were aligned to national priorities and policies. The ARC had six objectives, namely:

  • Sustainable use and management of natural resources
  • Enhanced nutrition and food security
  • Improved ability of the sector to manage and mitigate agricultural risks
  • Improved efficiency and a competitive sector
  • Improved operational and organisational efficiency, and effectiveness
  • Transformed agrarian landscape

These objectives are implemented through nine programmes, namely:

  • Crop production, improvement and protection
  • Animal health, production and improvement
  • Mechanisation and engineering
  • Natural resources management
  • Agro-processing, food technology and safety
  • Smallholder agricultural development
  • Training and extension
  • Administration and corporate affairs

Mr Moephuli referred the Committee to the Council’s achievements and successes in terms of these programmes (see attachment). He said that the number of science publications had doubled in six years and the quality of scientific publications had improved.

He briefed the Committee on ARC’s employment equity status, and noted that 46% were white, 50% were black, three per cent were coloured, and one percent was Indian. Female employees made up 42% of the workforce -- 28% African, two percent Coloured, 11% white, and one percent Indian.

Mr Gabriel Maluleke, Chief Financial Officer, briefed the Committee on the financial information.

Revenue had grown by 23% in 2014 to R1 363 million, compared to R1 104 million in 2013. Operating expenditure had increased by 19%, from R1 015 million to R1 206 million. This had resulted in a surplus of R156 million – a 76% improvement on the previous year.

The ARC was faced with some challenges. The Parliamentary grant had been increased by 16% to R866 million, but due to a prolonged period of inadequate funding, higher expectations and increased costs, this remained very inadequate to fulfil the Council’s mandate. There was ageing infrastructure with a high need for replacement and repair, and limited funds were available for capital expenditure. There was limited funding to fill the required number of critical vacancies. Staff retention was a challenge due to non-market related pay scales. Investment by the private sector was limited.

Ondersterpoort Biological Products (OBP) on its 2013/14 Annual Report

Dr Steven P Cornelius, Chief Executive Officer, introduced his team and proceeded to provide a historical background. The Onderstepoort Veterinary Research Institute (OVRI) was established in 1908. In 1992, it had separated from OVRI, which became part of the ARC. It was incorporated in 2000 and received funding of R9 million in 2001. By 2011, revenue exceeded R161 million. Today, the total workforce was 176 permanent employees.

With regards to performance report, OBP had five strategic objectives:

  • Build a successful and high performance organisation
  • Improve business processes and management practices
  • Build a profitable and sustainable economy
  • Facilitate job creation through indirectly supporting its clients and directly creating subsidiaries, joint ventures, incubating, accelerating, and spawning off new business entities
  • Contribute to government priorities with respect to food security and economic growth.

In the 2013/14 period, the OBP had shown an after-tax loss of R8.6m, which was a reduction from the R21.4m loss the previous financial year. The OBP would be investing in development of new vaccines and replacing critical equipment to maintain manufacturing capacity, supporting emerging sectors, and developing skills as a priority.

South African Veterinary Council (SAVC) on its 2013/14 Annual Report

Dr Boitshoko Ntshabele, President: SAVCO, said that the Council performed its core functions in line with its objectives, including regulating veterinary practice, determining the minimum standards of tuition and training, exercising effective control over the professional conduct, determining the standards of professional conduct of persons, encouraging and promoting efficiency and responsibility, protecting the interests of the veterinary and veterinary-para professions, maintaining and enhancing the prestige, status and dignity of the veterinary professions, and advising the Minister on matters connected to the profession.

In order to promote food safety and security, four strategic goals were developed. These were relevance for the needs of the country and modern legislation, stakeholder relationships, unification of the veterinary professions, and mobilisation of resources.

With regards to new developments, Dr Ntshabele said that in 2012 the SAVC had objected to the requirement of Threatened and Protected Species (TPS) permits for veterinarians rendering veterinary services to the TPS, and would continue to oppose such requirements because it believed that the Minister had acted beyond her powers in the introduction of such requirements.

A total of 5 194 veterinary and veterinary para-professionals were registered with the SAVC on 31 March 2014, and 425 persons were authorised to perform veterinary or veterinary para-professional services. The administration encouraged members to register and maintain their registration.

Dr Ntshabele concluded by indicating the SAVC’s assets had grown to R11.7m in 2013/14, from R10.2m in 2012/13.

Discussion

Agricultural Research Council

Clarity was sought on unclear issues, including why it was not possible to collaborate with other entities, given its budget constraints, how access to animal health services was ensured in cases where animal health facilities were the competence of the provinces, whether farmers were trained in Limpopo, the conversion output in terms of technological innovation and how it contributed to generation of income, and whether there was a comprehensive plan to improve animal health facilities.

Dr Moephuli replied that the ARC was working hand in hand with various provinces, as well as the Department of Trade and Industry. Farmers in Limpopo were trained under the PlantWise programme. The ARC was the leading entity in technological innovation and research, and had generated more than R8.2 million in this area.

On plans to improve animal health services, he replied that these had been linked to plans to provide expertise on animal health, and how to cure certain diseases. The ARC still had to sit with the Department to enter into a formal agreement for the Council to be able to deliver. The ARC had visited various facilities and hoped to be informed of any problems related to facilities or services requiring improvement.

On the question related to an increase in Parliamentary grants, he said that an increase was needed because of the competitive market situation.

On the issue of maintaining property, he said that the ARC was facing a shortage of skilled staff, and R80 million had been allocated to maintenance. However, R150 million was needed to deal with backlogs. R70 million had been spent on security costs. Electricity costs were standing at R50 million, which was a major expense.

On the question of what the ARC could do when there was no vaccine, he replied that nothing could be done if no vaccine was available. ARC had to ensure that it had vaccines at all times.

Regarding what the ARC was doing in terms of contributing to climate change, he replied that it had made a presentation on the matter, illustrating changes and shifts in rainfalls, and a strategic plan that could provide a response to climate change.

Onderstepoort Biological Products

Asked whether smallholder farmers were also buyers of OBD products, Dr Cornelius responded that the OBD income stream came mainly from white farmers. To smallholder farmers, the OBD sold less than a million products, simply because they had no money. They received products through subsidy schemes. However, the number of commercial farmers had dropped and smallholder farmers were on the rise, so the OBD’s future growth would depend on small scale farmers.

Regarding how the OBD would maintain efficiency, he replied that there had been some changes in terms of upgrading manufacturing facilities. Money received from National Treasury was not sufficient. If the OBD could upgrade its facilities, it could maintain its efficiency. It had defined its weaknesses, and how to improve on them. Upgrading a facility could take about six years and building a new facility could take two years.

Dr Cornelius remarked that some questions could be made clearer if the Members of the Committee were on site. A site visit was suggested, as it was essential for Members to understand what the OBD was doing.

Dr Cornelius agreed that the OBD could be threatened by the birth of competitors in the industry, and there were other medicine manufacturers in the region that were also a threat. What was needed was the support of government to ensure it remained competitive and efficient. The OBD had 53 vaccines, but only four vaccines were not manufactured by other medicine manufacturers. The main challenge that OBD was facing was having to use old equipment. It was the manufacturing equipment of the 1990s. New equipment was needed. Upgrading might take at least between six to ten years.

He concluded that if the OBD had no vaccines, it could place an order to other medicine manufacturers. There was staff in marketing who worked on the basis of commission.

South African Veterinary Council

Considering that It was the first time the SAVC had briefed the Committee, the Chairperson apologised for not allocating enough time to the Council, and remarked that it was not deliberate, but was due to the Committee’s time constraints.

Dr Ntshabele accepted the apology. On the question relating to audit statements in respect of short-term investments and accrued interest, he replied that he had received financial reports and there had been various meetings to determine the gaps in the investments. With regards to complying with reporting in terms of financial frameworks, he said that the SAVC was reporting to relevant institutions.

Regarding community services, he said that the SAVC was engaging the Department in pushing for an amendment to the regulatory framework. There were gaps that were needed to be closed. The proposal was sitting with the Department, which had sent it to the state legal advisor to seek his or her opinion. Some officials were of the view that the gaps should be addressed by an amendment to the legislation, while others were objecting. Different opinions became problematic.

On the issue of non-availability of vaccines, he replied that it would be a devastating situation if there was no vaccination. Vaccines ought to be available, especially at critical times or when they were needed most. The spread of animal diseases was due to the absence of animals for vaccination. Animals were expected to be vaccinated at particular weeks or months from their births, and if a vaccination was missed, in some cases it could not be vaccinated at a later stage. A vaccination facility could not be closed at a critical time, otherwise it would be a disaster for animal health services in South Africa.

The meeting was adjourned.

 

 

 

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