The Chairperson noted apologies of members unable to attend the meeting, and, after discussion, it was decided that a letter be written to the party of one particular Member in relation to his continued absence from meetings.
The Department of International Relations and Cooperation (DIRCO), with an introduction from the Deputy Minister, briefed the Committee on its Strategic Plan, Annual Performance Plan and budget. Deputy Minister Landers said that the DIRCO derived its mandate from the Constitution and the National Development Plan, but it was facing several challenges as a result of budget cuts, and the African Union Summit currently being held in Sandton was an unfunded mandate, with South Africa stepping in at the last minute to host the Summit. Another unfunded mandate concerned the political situation in Lesotho, where South Africa had been unprepared. The Department stressed that the South African foreign policy was informed by the country's global footprint, for it hosted the second largest number of foreign representations in the world and had a current global footprint of 125 missions. The changing global environment impacted upon the execution of DIRCO’s mandate. SA’s Foreign Service Bill was also to be tabled in Parliament. Asia and the Middle East had surpassed Europe as South Africa's foremost trading partner, with trade here increasing 19-fold, from R40.2bn in 1994 to R760.2bn in 2013. In the same period trade with Africa had increased 35-fold, from R11.6bn to R385bn. South Africa attached much importance to its membership of the BRICS. China was now its biggest trading partner, and the second largest economy in the world, after the USA. Other new players on the global market included Indonesia, Turkey, Egypt and Colombia. South Africa had identified new global opportunities and frontiers, including the Blue Economy (oceans) and the Green Economy (renewable energy). The changing migration patterns and increased urbanisation were noted, with increases in mega-cities in developing countries.
The delegation gave details on the strategic direction, allocations and objectives for each of the DIRCO's five programmes. The DIRCO repeated that it faced severe budget constraints, and it had had to institute internal savings on compensation of employees, due to a number of vacant posts, goods and services and transfers to the African Renaissance and International Cooperation Fund. The DIRCO had proposed additional cost saving measures to unlock its fixed cost overhead expenditure items and mitigate the budget shortfall, such as reviewing the organisational functional assessment for both head office and missions abroad, reviewing support for mission operations and implementing a property management strategy. One of the biggest risks facing DIRCO was fluctuation of foreign exchange rates, for the allocation for 2015 did not take that into account, hence the need to review how foreign operations were to be supported. It would address the shortfall through the adjustment estimates budget process. A description of the performance of the programmes in the last year, noting under-expenditure on projects in the Hague, Dar Es Salaam project and Lilongwe project, and the Pan African Parliament, but over-expenditure in the International Relations and International Transfers programmes (as a result of depreciation of the rand against other currencies). It had requested a rollover from National Treasury for the Presidential Inauguration, because of late claims.
DIRCO then briefed the Committee on the African Renaissance and International Cooperation Fund’s Strategic and annual plans. It was noted that the Minister of International Relations and Cooperation, in consultation with the Minister of Finance, must establish an Advisory Committee which would make recommendations to the two Ministers on the disbursement of funds through loans or other financial assistance. Detail on performance indicators, targets and objectives were given. The baselines, after reductions, amounted to R154m, R96m and R431m for the respective financial years from 2015 to 2018, which took into account that the ARF had surpluses in excess of R1bn. During 2014/15 the ARF had appointed a full time secretariat for a period of six months as part of the transitional arrangements, and terms of reference had been adopted for the Advisory Committee and secretariat, whilst audit and risk committees were in place, and relevant policies and procedures were adopted, as well as an operational framework being drawn.
Members noted that the DIRCO seemed to be doing well and commended its enthusiasm, although it doubted that the budget would support all the aims, and it faced a huge workload. Members requested specifics regarding trade relations with China, and asked what was being done for regional integration, and also asked for figures on the trade with BRICS. They asked about the process for international legislation on the Blue Oceans economy and what the timeframes for the Foreign Service Bill were. They asked where DIRCO featured on the infrastructure management project and how the plans would affect the Department of Public Works. Members questioned whether the DIRCO had inferred that the rand exchange rate was expected to improve over the next three years, for they believed that it might still drop. They asked for more explanation on the unfunded mandates and whether DIRCO did not budget for contingencies. They wondered if South Africa or DIRCO had experienced any backlashes from other countries in Africa due to the recent xenophobic attacks, but were assured that DIRCO was satisfied that there had been absolutely no political motivations. Members suggested, and DIRCO agreed, that the visa regulations and migration had to be looked at seriously, as they impacted upon trade and relationships with other neighbouring states, and the DIRCO made the point that transit visas were being abused, with people simply remaining in the country. Members made the point that although global governance institutions like Bretton Woods could do with reform, this was highly unlikely. DIRCO was asked how it intended to liaise with provinces on bilateral engagements.
Chairperson's opening remarks
The Chairperson noted the apologies of members who were unable to attend the meeting. He stated that he was uncomfortable with a situation where one Member, Mr L Mokoena (EFF, Free State) was continuously absent without giving reasons for his absence.
Ms E Van Lingen (DA, Eastern Cape) stated that when Members apologised for not being able to attend a meeting then they should give reasons, and if not, the Member should not be sitting on the Committee.
The Chairperson suggested that the Committee write a letter to the EFF regarding the consistent absence of Mr Mokoena. He asked members how they felt about the suggestion.
Mr J Londt (DA, Western Cape) agreed, but recommended that the Committee attach to the letter the attendance list of Mr Mokoena for the calendar year, to back up what was being said.
The Committee agreed that a letter would be written.
Department of International Relations and Cooperation (DIRCO): 2015 Strategic Plan, Annual Performance Plan and Budget briefing
Deputy Minister's opening address
Mr Luwellyn Landers, Deputy Minister of International Relations and Cooperation, gave a brief introduction before excusing himself from the remainder of the meeting. He noted that the Department of International Relations and Cooperation (DIRCO or the Department) derived its mandate from the Constitution and the National Development Plan (NDP). Unfortunately the DIRCO had experienced a cut in its budget, which meant that it faced particular challenges. The African Union Summit currently being held in Sandton was an unfunded mandate for the DIRCO. South Africa (SA) had stepped in to host the Summit at the last minute when the country that was supposed to host it experienced difficulty in doing so. Another unfunded mandate was the political situation in Lesotho, as SA was totally unprepared for what happened there.
Ambassador Jerry Matjila, Director General, Department of International Relations and Cooperation, noted that the execution of SA’s foreign policy was informed by SA’s global stance. SA hosted the second largest number of foreign representation in the world and had a current global footprint of 125 missions. The changing global environment impacted upon the execution of DIRCO’s mandate. He noted that South Africa's Foreign Service Bill was also to be tabled in Parliament shortly.
He said that trade with Asia and the Middle East had surpassed trade with Europe as SA’s number one trading partner. In twenty years, trade with Asia and the Middle East had increased 19-fold from R40.2bn in 1994 to R760.2bn in 2013. In the same period, trade with Africa had increased 35-fold from R11.6bn to R385bn. SA attached great importance to its membership of the Brazil, Russia, India, China and SA (BRICS) Bloc. In 2014 SA sold R90bn worth of goods to China. China was now SA’s biggest trading partner. It was also the second biggest economy in the world after the USA. Other new players on the global market included Indonesia, Turkey, Egypt and Colombia. New global opportunities and frontiers for SA were the Blue Economy (oceans) and the Green Economy (renewable energy).More than half of the global population was urbanised. There was an increase in mega cities in developing countries.
He then proceeded to provide the Committee with insight into the five programmes of the DIRCO, in Administration, International Relations, International Cooperation, Public Diplomacy and International Transfers. Figures were also provided with regard to the MTEF allocations for the programmes for the respective financial years 2015/16, 2016/17 and 2017/18 (see attached presentation for full details). Amb Matjila highlighted the strategic objectives, identified the key result areas and the achievement of targets annually and over the MTEF (see attached presentation).
Mr Caiphus Ramashau, Chief Financial Officer, DIRCO continued with an overview of the Medium Term Expenditure Framework (MTEF) allocation for the Department. In terms of government's stance that departments must achieve more for less money, the allocation to the DIRCO over the medium term had reflected Cabinet-approved reductions of R335.5m in 2015/16, R467.1m in 2016/17 and R168.5m in 2017/18. DIRCO had needed to effect these in relation to compensation of employees due to vacant posts, goods and services and the transfer to the African Renaissance and International Cooperation Fund (ARF). In response to these budget reductions, the DIRCO had proposed additional cost saving measures to unlock its fixed cost overhead expenditure items and mitigate the budget shortfall, in order to accommodate some of the new priorities identified for implementation. Cost containment measures that it was implementing included a review of the organisational functional assessment for both head office and missions abroad. DIRCO was also reviewing the provision of support services for the missions’ operations and intended to implement a property management strategy. The 2015 MTEF allocation did not cater for foreign exchange fluctuations, and as a result the DIRCO remained vulnerable to foreign exchange rate losses, which necessitated a review of how the foreign operations were supported. The DIRCO intended to address the shortfall through the adjustment estimates budget process.
Mr Ramashau gave some insight into the 2014/15 expenditure preliminary outcomes for each of the Programmes, as follows:
Programme 1: Administration - the underspending was as a result of delays in capital projects due to unforeseen and unavoidable circumstances. The projects in question were the Hague project, the Dar Es Salaam project and the Lilongwe project. The slow spending was also seen as a result of insufficient cash flow available to meet the DIRCO’s operational needs due to the impact of foreign exchange rate fluctuations.
Programme 2: International Relations - the Programme reported an expenditure of R3.1bn and had overspent as a result of the depreciation of the rand against other major currencies. The exchange rate was R12 to $1. The DIRCO had asked National Treasury for assistance.
Programme 3: International Cooperation - the expenditure for the Programme was R485m.The underspending was as a result of the office accommodation for the Pan African Parliament not being concluded.
Programme 4: Public Diplomacy and Protocol – The Programme had underspent due to late claims received from partner departments for the 2014 Presidential Inauguration activities. The Department had requested National Treasury to approve a rollover.
Programme 5: International Transfers – Overspending resulted from foreign exchange rates losses in relation to the payment of membership fees and SA’s compulsory assessment contribution to international organisations.
The total 2015 budget allocations for the respective financial years 2015/16, 2016/17 and 2017/18 were R5.6bn, R5.9bn and R6.5bn.
African Renaissance and International Cooperation Fund’s (ARF’s) Strategic Plan and Annual Performance Plan
Mr Ramashau then briefed the Committee on the African Renaissance and International Cooperation Fund’s Strategic Plan and its Annual Performance Plan. He firstly gave some background into how this Fund was used. The Minister of International Relations and Cooperation must, in consultation with the Minister of Finance, establish an Advisory Committee which would make recommendations to the two Ministers on the disbursement of funds through loans or other financial assistance.
He provided further details on Programme Performance Indicators. Strategic objectives were identified and targets were set for each. Each strategic objective had an objective statement. The Committee was given detail on MTEF allocations. Indicative baselines set for 2015/16, 2016/17 and 2017/18 were, respectively, R366m, R412m and R433m. The reductions for each of these financial years, due to the need to cut expenditure, were R-212m, R-315m and R-1.6m. Once the reductions were subtracted from the indicative baselines the appropriated funds for the respective financial years were R154m, R96m and R431m.
Mr Ramashau noted that the recapitalisation took into account that the ARF had surpluses in excess of R1bn. During 2014/15 the ARF had appointed a full time secretariat for a period of six months, as part of the transitional arrangements. It had also adopted terms of reference for the Advisory Committee as well as the secretariat. The Accounting Officer had appointed the audit and risk committees. The ARF had also developed an operational framework and adopted the DIRCO policies and procedures relevant to the ARF.
The Chairperson stated that Members of the Committee were representative of the provinces and would thus like to see suggestions made by DIRCO with regard to provinces.
Mr B Nthebe (ANC, North West) commented that it seemed that DIRCO was doing well. He asked the DIRCO to elaborate on the plans that China had in SA. He referred to the Southern African Development Community (SADC) and asked for specifics on regional integration and what possibilities there were there.
Ambassador Matjila noted that over the past nine years there had been an increase in capacity and industry in China. Hence China was "on a scramble for resources" and Africa was its target. He stated that China had $3.2 trillion in reserves. China thus had the finances backing it, and hence could do a great deal, and it was in fact moving into countries all over the world. China invested in mines and infrastructure in Africa, and was also transforming commodities into products in SA. Iron ore was converted into steel. SA had established an inter-ministerial committee with China which would deal with any blockages between the two countries.
Amb Matjila spoke to the substance of regional integration. The focus was on the beneficiation of commodities, but the next matter to consider related to enablers, like having more power, more roads and more agriculture. The next step was to have market integration, to establish the same standards. For example there had to be the standardisation of monetary policies and railway gauges across the region. He said that there would be a fund which would finance SADC programmes.
Ms E Van Lingen (DA, Eastern Cape) felt that the DIRCO’s budget was a bit problematic, given the enthusiasm of its Director General and the plans of the DIRCO. She referred to page 7 of the presentation and noted that this made reference to 2012/13 figures, but questioned why the 2014 figures were not given. She asked for specifics on trade figures relating to BRICS. If migration in Africa sat at 40%, she asked if there were comparative figures for sub Saharan and migration into SA? She was concerned that there was a migration to cities, saying that this would place a tremendous strain on resources. She asked about the process regarding the international legislation on the Blue Oceans Economy and also asked what the timeframes were set for the Foreign Service Bill, and whether there were implementation plans in place for that Bill.
Ms Van Lingen asked where the DIRCO came in on the infrastructure management project, and also wanted to know how the Department of Public Works was to be affected on property management. She noted the request for rollover of funds. She wondered why the VIP Protection Services taken so long to submit claims. She asked whether the DIRCO was inferring that the rand exchange rate was to improve for 2016, 2017 and 2018 notwithstanding the fact that the growth rate was probably to drop to 1%.
Ambassador Matjila said that information on formations like BRICS would be forwarded to the Committee. Information on trade with specific countries like India and Russia would also be provided. There was a shift from commodities to value added products. Migration to cities in Africa was taking place all over and this was not limited to South Africa. Cities like Cairo, Lagos were huge. Intra-migration was taking place. This was an opportunity for South African companies to do business, as there was a greater need for schools, houses and other infrastructure. However, he did agree that South Africa had to look closely at its migration policy. The influx into SA was undoubtedly having an impact on resources.
He noted that the intention behind the Blue Economy was to create opportunities and jobs. A need existed to revisit the by-laws of SA’s coastal cities. Port cities around SA, like Saldanha, needed to be rebuilt. He said that oil rigs passed SA when they went from the Gulf Of Guinea to Singapore, and South Africa was thus losing out on opportunities. 80% of ships passed SA ports en route to Europe.
Amb Matjila said that it was hoped that the Foreign Services Bill passing was imminent, and he hoped that this Committee would support the Bill when it came to the NCOP.
Mr Ramashau answered that in relation to infrastructure management the DIRCO had an arrangement with the Department of Public Works. The DIRCO managed properties abroad and also took care of maintenance. He noted that the Presidential Inauguration had been in May 2014. The DIRCO had requested a rollover of funds, but it was not yet approved. He said that the DIRCO did not have much control over foreign exchange.
Ambassador Matjila explained that the DIRCO hedged against changes in exchange rates. There were instances where the DIRCO requested funds, but because of exchange rates National Treasury would instruct the DIRCO to absorb it in its baseline. He noted that DIRCO’s baseline was already eroded.
Mr J Londt (DA, Western Cape) referred to the unfunded mandates of the DIRCO such as the African Union Summit presently held in Sandton as well as the recent political situation in Lesotho, and asked for an explanation of why these situations were regarded as unfunded mandates. He said that there should have been some sort of projection that these things could happen. He asked what the estimated costs for these two particular unfunded mandates were. He agreed that the African market was untapped but China had already moved swiftly into Africa. SA seemed to be late out of the blocks regarding the race into Africa and he wondered if this country would be able to catch up with China? He also asked whether the DIRCO had picked up backlash from elsewhere in Africa regarding the recent xenophobic attacks. It was felt that the new visa regulations needed to be sorted out, as they impacted upon tourism.
Ambassador Matjila made it abundantly clear that there was nobody funding the xenophobic attacks in SA. The SADC countries had been assured by the measures that had been taken by SA. The attacks had no political sponsorship. The Department of Home Affairs had a duty to uphold international law and human rights laws. SA needed comprehensive migration laws ,as there was a need to regulate the flow of people into SA. On the matter of the visa regulations, he said that the DIRCO was liaising with the Department of Home Affairs on an ongoing basis. A balance needed to be found between the security interests of SA, business and tourism. The fact of the matter was that the term “transit” had been misused to gain entry into SA. 40% of people who came to SA on a tourism visa overstayed their time. Swaziland, Lesotho, Botswana and Zimbabwe were now transit countries en route to SA. A broader regional discussion was needed on the issues.
Mr Ramashau responded that the DIRCO did not have a contingency fund to cater for unfunded mandates. The DIRCO was forced to be reactive, and could not be proactive.
The Chairperson spoke about the plans to reform global governance institutions like the Bretton Woods and stated that he got the impression that these types of institutions were not capable of being reformed. He referred to page 17 which covered Programme 2: International Relations and asked how the DIRCO was to liase with provinces on bilateral engagements.
Ambassador Matjila stated that DIRCO had guidelines for provinces on international relations. Provinces did not have legal mandates to enter into international agreements, as only national government could enter into international agreements. However opportunities for provinces and cities needed to be created. What was allowed was a memorandum of intention between a province or a metro with overseas countries. This could be incorporated into the framework of international agreements between SA and the county in question.
The Chairperson thanked the DIRCO for updating the Committee on a range of important developments. The Committee would await the Foreign Service Bill and collaborate with the DIRCO on it.
The meeting was adjourned.
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