Department of Agriculture, Forestry and Fisheries 2014/5 performance: Auditor-General; DPME and FFC briefing

Agriculture, Land Reform and Rural Development

13 October 2015
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

Hunger and extended periods of malnutrition not only devastate families and communities in the short term, but also leave a legacy with future generations that impairs livelihoods, undermines human development, and economic growth.

This became apparent when the Auditor-General of South Africa, Department of Planning, Monitoring and Evaluation, and Financial Fiscal Commission briefed the Portfolio Committee on Agriculture, Forestry and Fisheries on the annual expenditure, annual performance, and spending patterns of the Department of Agriculture, Forestry and Fisheries (DAFF) and its entities.

The Auditor-General of South Africa (AGSA) informed the Committee that the lack of improvement in the overall audit outcomes was caused by the DAFF, Agricultural Research Council (ARC), National Agricultural Marketing Council (NAMC) and Onderstepoort Biological Product (OBP) not addressing past material findings on their annual performance reports and compliance with legislation. The Marine Living Resources Fund (MLRF) did address prior year findings and this resulted in an improvement on non-compliance matters.

DAFF, ARC, NAMC and OBP received an unqualified audit opinion with findings. The MLRF received a clean audit opinion with no findings on PDO and compliance. The emphasis of matter raised was on the material under-spending of the budget on fisheries research and development; monitoring, control and surveillance; and aquaculture and economic development to the amount of R92 564 000.

Pertaining to irregular and fruitless and wasteful expenditure, during the year under review DAFF showed a decrease on irregular expenditure, which amounted to R3 093 000 while its fruitless and wasteful expenditure increased to R199 000. The ARC showed a decrease on irregular expenditure. Expenditure incurred was standing at R648 209.00, and fruitless and wasteful expenditure increased to R15 447.00. The MLRF has shown an increase on irregular expenditure. The figure amounts to R144 878 000. Its fruitless and wasteful expenditure has shown an increase and it is standing at R18 000. The NAMC and OBP did not submit figures.

Concerning internal audit, DAFF and OBP did not assess the operational procedure and monitoring mechanisms for all transfers made and received, including transfers in terms of the annual Division of Revenue Act and did not evaluate the reliability and integrity of operational information, and did not evaluate compliance with laws and regulations.

The Auditor-General (AG) identified three top root causes and recommendations. One, there is a slow response by management in addressing the root causes of poor audit outcomes. The AG recommended that slow responses by management in the portfolio and a lack of ownership by the employees of the DAFF and both employees and management of ARC in the areas of compliance with legislation and the quality of performance reports should be improved by timeous development of action plans with clear milestones and deadlines. Two, key officials lack appropriate competencies. The AG recommended that the competencies of key officials and employees should be improved by providing them with both formal and on-the-job training. Three, there is instability in key positions. The AG recommended that key positions be filled timeously with competent and experienced personnel.

The Department of Planning, Monitoring and Evaluation (DPME) focused its presentation on key areas contained in Outcome 7 that dealt with comprehensive rural development and food security. The DPME focused on sustainable land reform contributing to agrarian transformation; improved food security; smallholder producers’ development and support for agrarian transformation; and reduction of rural unemployment. It then briefed Members on the Management Performance Assessment Tool (MPAT).

On sustainable land reform contributing to agrarian transformation, it was indicated that the 30% target on land reform set in 1994 was not part of the 2009 targets. Looking back, the challenges of undertaking land and agrarian reform were underestimated and the target was very ambitious.

The DPME noted that the policy and legal environment related to land ownership and use has in the past not been conducive to agrarian transformation and development of the agriculture sector. With regard to the development of smallholder producers and support for agrarian transformation, the Committee learnt there are areas of concern though the performance of a number of smallholders receiving support is commendable.

Pertaining to the reduction of rural unemployment, Members were informed that the overall impact is minimal though a total of 898 158 work opportunities and 300 475 FTE jobs were created through the EPWP. Employment in agriculture increased by 200 000 year-on-year in Quarter 1 of 2015/16 financial year. Additional jobs (46 998) were created through rural development initiatives, and Land Reform Programmes. However, employment in agriculture has declined from 1,1 million in 2004 and from 710 in 2009 to 638 in 2012, and by 742 000 in 2013 and by 869 000 in June 2015.

The Financial and Fiscal Commission (FFC) indicated that DAFF would experience real declines in its allocation in both 2015/16 and 2016/17 as a result of the Cabinet approved reductions due to under-spending. Growth in budget is set to recover by the end of medium term. Cabinet approved reductions with respect to DAFF affected mainly compensation to employees, goods and services, and conditional grants to provinces. This corresponds with the marginal reductions evident for 2015/16 and 2016/17.

Over-spending over the past two years in Administration and Food Security Programmes amounted to R91 million. This is attributed to the upgrading and maintenance of buildings and laboratories that was not completed; and Quarter 4 transfers to Mpumalanga Department of Agriculture were withheld due to under-spending.

The FFC also informed the Committee there is increased pressure on expendable income of consumers. Food inflation has risen faster than the inflation rate. This is affecting poor households the most as they spend a large share of household income on food compared to other income groups.

On the transfers and spending performance of the entities, it was highlighted that the ARC is receiving the bulk of transfer payments compared to other entities. For the 2014/15 financial period, it received just over R1 billion. The MLRF and OBP have consistently under-spent transfers from DAFF yet reasons for under-spending are not clearly presented in the DAFF annual report. The under-spending by the ARC in 2014/15 amounted to R55, 5 million.

Members, on AGSA, asked what the AG looks at when it comes to irregular expenditure; what the Department means by ‘reliability’; wanted clarity on why the MLRF under-spent; and wanted to know the reasons behind the regression of the ARC because it has been receiving clean audits.

Regarding the DPME, Members wanted to know if the DPME verifies the findings of the AG about the Department; remarked it was worrying to learn that the Department is not doing well when it comes to rural development and asked how the DPME is going to go approach this issue; wanted to know how the land reform programme is going to be achieved and made successful; and asked what is being done to address problem areas to make sure things are turned around.

Concerning FFC, Members asked how participation and ownership has transformed in the agriculture sector; enquired how the FFC is going to realise the dream of creating jobs when there is a high level of drought in the country; wanted to know if there would be roll-overs for the Mpumalanga Agriculture Department; remarked that the performance of the Department in terms of finances is fluctuating; and wanted to find out if it has considered the looming drought that is experienced in the country, its impact, and threat to job losses.

Meeting report

Mr Fanie Kok, Auditor-General: AGSA, informed the Committee that the lack of improvement in the overall audit outcomes was caused by the DAFF, ARC, NAMC and OBP not addressing past material findings on their annual performance reports and compliance with legislation. The MLRF did address prior year findings that resulted in an improvement on non-compliance matters. The overall vacancy rate of the Department increased from 9,8% (2013/14) to 13% (2014/15) and this contributed to the overall stagnation in the audit outcome.

DAFF, ARC, NAMC and OBP received an unqualified audit opinion with findings. The MLRF received a clean audit opinion with no findings on PDO and compliance. The emphasis of matter raised was on the material under-spending of the budget on fisheries research and development; monitoring, control and surveillance; and aquaculture and economic development, an under-spending of R92 564 000. This is as a result of the under-spending on its conditional grant for vessels operating costs and on the working for fisheries programme by R35 451 000 and R60 797 000, respectively. This was mainly due to the delay in the appointment of the service providers.

On material errors in submitted annual financial statements, the ARC has been found with misstatements in various line items in the financial statements. The management did not adequately review the annual financial statements for completeness and accuracy prior to submission for auditing. It was recommended that management must ensure that reliable, accurate and complete financial reports and financial statements are prepared on a continuous basis; and that a detailed review of financial statements is performed before submission for auditing.

The NAMC was found to have deferred revenue on a new project and that was recognised without meeting the conditions of the contract with regard to project assets. Management did not adequately apply the applicable financial reporting framework in compiling the financial statements. It is recommended that the management must perform verification against a GRAP checklist to ensure all accounting treatments are correctly disclosed in the financial statements.

Predetermined Objectives

  • Programme 5: Usefulness: Planned and reported targets of DAFF were not in line with the ‘SMART’ principles. 20% of the targets were not specific and measurable. 40% of the targets were not well defined in clearly stating where service delivery would take place. This was due to inadequate systems and processes. It is recommended that the management must ensure that proper systems and processes are in place to support the technical indicator descriptions.
  • Programmes 3 and 5: Reliability: The targets of DAFF in relation to the overall mandate of the Department were not consistent to the source information or evidence provided and this made the reported achievements unreliable. This is attributed to inadequate monitoring of the completeness of source documentation received from provincial departments in support of actual achievements and lack of frequent review of the accuracy and validity of reported achievements against source documentation. It is recommended that the Department must conduct site visits to provincial departments on a quarterly basis to ensure that all information is submitted to the national department for reporting.
  • Programme 3 and 5: Usefulness: The planned and reported targets of NAMC were not in line with the ‘SMART’ principle. Targets were not verifiable, specific, time-bound, and measurable. This is attributed to a lack of proper systems and processes for performance planning and management to provide for the development of performance indicators and targets included in the annual performance plan and technical indicator descriptions. Management has already corrected the annual performance plan for 2015/16.
  • Adjustment of material misstatements: DAFF management on the reported achievements in two programmes did not correct Material misstatements. However, the whole population was not corrected and, therefore, material findings were still reported in the audit report. The cause is that management did not address weaknesses identified in relation to proper record keeping and monitoring of action plans over quarterly and annual reported predetermined objectives, resulting in repeat findings being raised. It is recommended the management must hold staff accountable for predetermined objectives accountable for the non-compliance identified.
  • Strategic Goals 2 and 5: The planned and reported targets of OBP were found not to be in line with the ‘SMART’ principle. Targets and indicators were not specific, measurable, and time-bound. The accounting authority and management did not have sufficient monitoring controls to ensure proper implementation of the overall process of implementation and reporting of performance information.
  • Strategic Goal 2 and 5 (Reliability): The OBP could not provide supporting documentation. The entity also reported on a target that was not in the annual performance plan, making the said target inconsistent with target in annual performance plan. This was mainly due to management not thoroughly reviewing and reconciling the annual performance report to the annual performance plan.

Compliance with legislation

With regard to strategic planning and performance, DAFF had repeat control deficiencies on programmes 3 and 5, and the AG was unable to verify whether the quarterly monitoring reports were submitted to the Minister. Management did not address weaknesses identified in the controls over quarterly and annual reported predetermined objectives, and this resulted in repeat findings being raised. Therefore, management submitted an incorrect version of the annual performance report audit. Furthermore, management did not ensure that proper systems and processes were in place to enable the Minister to monitor progress made towards achieving the goals and objectives of the Department. It was recommended that management should hold staff accountable for non-compliance and that it must prepare quarterly monitoring reports that are reviewed by both the directorate: Organisational Performance and internal audit unit.

The OBP did not have efficient, effective and transparent systems of risk management and internal controls in place with respect to performance information and management. This is attributed to the fact that the accounting authority and management did not have sufficient monitoring controls to ensure the proper implementation of the overall process of implementation and reporting of performance information. As a result, it was recommended that management must ensure that the annual performance plan is in line with the ‘SMART’ principle.

Concerning internal audit, DAFF and OBP did not assess the operational procedure and monitoring mechanisms for all transfers made and received, including transfers in terms of the annual Division of Revenue Act and did not evaluate the reliability and integrity of operational information, and did not evaluate compliance with laws and regulations. The AG recommended that the chief audit executive must provide guidance to the internal audit team and conduct a detailed review of all working papers as well as reports of findings issued to management, and to make sure internal audits are conducted according to standards set by the Institute of Internal Auditors.

On expenditure management and transfer of funds, DAFF was found not to have taken steps to prevent irregular expenditure. Expenditure for CASP was not monitored in accordance with the DORA framework.  The AG recommended that all goods and services be procured in terms of all applicable laws and regulations, and management must plan in advance for big events to ensure that SCM processes are followed before the services are rendered.

The accounting authority at ARC tried to implement controls to prevent irregular expenditure but the controls were not at all times effective in doing so.

Regarding human resources, six positions in senior management within DAFF have been vacant for more than 12 months, and five vacant positions in senior management were not advertised within six months. The Department indicated this was mainly due to lengthy recruitment processes caused by the unavailability of members to sit on short-listing and interview panels as well as delays in finalising personnel checks with the South African Qualification Authority and State Security Agents.

Pertaining to irregular and fruitless and wasteful expenditure, during the year under review DAFF has shown a decrease on irregular expenditure, which amounted to R3 093 000 while its fruitless and wasteful expenditure, has increased to R199 000. The ARC has shown a decrease on irregular expenditure. Expenditure incurred is standing at R648 209.00, fruitless and wasteful expenditure has increased to R15 447.00. The MLRF has shown an increase on irregular expenditure. The figure amounts to R144 878 000. Its fruitless and wasteful expenditure has shown an increase and is standing at R18 000. The NAMC and OBP did not submit figures.

Mr Kok identified three top root causes and recommendations. One, there is a slow response by management in addressing the root causes of poor audit outcomes. He recommended that slow responses by management in the portfolio and a lack of ownership by the employees of the DAFF and both employees and management of ARC in the areas of compliance with legislation and the quality of performance reports should be improved by timeous development of action plans with clear milestones and deadlines. Two, key officials lack appropriate competencies. The AG recommended that the competencies of key officials and employees should be improved by providing them with both formal and on-the-job training. Three, there is instability in key positions. The AG recommended that key positions be filled timeously with competent and experienced personnel.

DPME Presentation

Ms Tsakani Ngomane, Outcome Facilitator on Rural Development: DPME, focused her presentation on key areas contained in Outcome 7 that deals with comprehensive rural development and food security. She focused on sustainable land reform contributing to agrarian transformation; improved food security; smallholder producers’ development and support for agrarian transformation; and reduction of rural unemployment. She briefed Members on Management Performance Assessment Tool (MPAT).

On sustainable land reform contributing to agrarian transformation, it was indicated that the 30% target on land reform set in 1994 was not part of the 2009 targets. Looking back, the challenges of undertaking land and agrarian reform were underestimated and the target was very ambitious. Challenges were pointed out on restitution, redistribution, and recapitalisation.

1. Restitution

Though the pace of settling claims has improved since 2009, claims settled are not necessarily for hand-over. Insufficient attention was given to ensuring finalisation and sustainable development of land restored to beneficiaries. The remaining claims for settlement are largely on high value commercial farmlands and most difficult to resolve.

2. Redistribution

Since 2009, the number of hectares acquired under the land acquisition programme has been rising, benefiting mostly rural provinces such as North West and Limpopo. However, many of the farms transferred under the land reform programme are not productive. The under-utilisation of newly acquired land by beneficiaries is the primary concern.

3. Recapitalisation

The Recapitalisation and Development Programme has provided a partial response to the under-utilisation of newly acquired land. 259 farms have been under the Recapitalisation and Development Programme since April 2014 until June 2015. However, recapitalisation needs to be more effectively coupled with improvements in other forms of support. Many of the new smallholders being counted are not sustainable commercial enterprises.

Challenges that were cited regarding the utilisation of transferred land and development of more commercial farmers are around:

  • Insufficient involvement of the commercial sector in developing smallholders
  • Inadequate agricultural support
  • Insufficient coordination between DAFF, DRDLR and DTI for agricultural development
  • Smallholders not producing enough volumes of produce continuously to be able to compete with commercial producers
  • Lengthy process of land transfer leads to lack of investment by former owner, resulting in deterioration of infrastructure by the time of transfer.

Ms Ngomane said the policy and legal environment related to land ownership and use has in the past not been conducive to agrarian transformation and development of the agriculture sector. The National Environmental Act 107 of 1998 (NEMA) establishes principles for decision-making on matters affecting the environment. However, NEMA does not adequately ensure the protection of high value agricultural land as its focus is on biodiversity and environmental conservation. The Spatial Planning and Land Use Management Act 2013 (SPLUMA) provides the framework for spatial planning and land use, asserting that the use of agricultural land for agricultural purposes is a matter that vests in the national sphere of government.

(Tables were shown to illustrate indicators, 2014 levels, targets for 2019, latest measurements and ratings)

Concerning improved food security, it was reported that South Africa is food secured nationally with high levels of vulnerability at household level. In 2011 about 11,5% of households were vulnerable to hunger and by 2014 the figure was reduced to 11,4%. The government has committed to reduce it by 9,5% by 2019.

However, initiatives by DAFF, DSD and DBE aimed at reducing vulnerability to hunger at household and community levels are not yet achieving the expected impact. But the situation is likely to improve, following the development of an integrated plan to food and nutrition security led by the Office of the Deputy President as well as the implementation of the 9 Point Action Plan. A quarter of the rural population (25,5%) has inadequate access to food.

(Tables and graphs were shown to illustrate vulnerability to hunger and access to food, and opportunities in livestock)

With regard to the development of smallholder producers and support for agrarian transformation, the Committee learnt there are areas of concern though the performance of a number of smallholders receiving support is commendable. The areas of concern are around the reported figures which pointed out that smallholder farmers that are receiving government support are already existing whereas the target is to provide support to new smallholders; targets aimed at providing support to smallholders are pursued without a formal database of who is receiving what, where and up to which point; and expenditure performance review on the Micro Agricultural Financial Institutions of South Africa (MAFISA) found gross mismanagement.

Pertaining to the reduction of rural unemployment, Members were informed that the overall impact is minimal though a total of 898 158 work opportunities and 300 475 FTE jobs were created through the EPWP. Employment in agriculture has increased by 200 000 year-on-year in Quarter 1 of 2015/16 financial year. Additional jobs (46 998) were created through rural development initiatives, and Land Reform Programmes.

However, employment in agriculture has declined from 1,1 million in 2004 and from 710 in 2009 to 638 in 2012, and by 742 000 in 2013 and by 869 000 in June 2015. This is contrast to the estimate in the NDP that agriculture has the potential to create 1 million new jobs by 2030.

Current contribution to GDP is 2,5%, far below the capacity sector. Overall, the sector contributes 12% to the GDP through value adding in related manufacturing and processing. The decline in share of the GDP and employment reflects the changing structure of the economy of the country as well as the growing efficiency of the farming sector. Farms that are run as private companies make up 5% of all commercial farming units, but they account for a third of commercial farming income.

It was noted there are few entrants to the sector and those who are farming are aging, and that DAFF has a limited capacity to spend. During the year under review, DAFF spent R6, 6 billion out of a budget of R6, 7 billion, leaving R78, 7 million unspent.

During the 2014/15 financial year, the CASP conditional grant created a total of 5 673 jobs of which1 526 were permanent and 4 188 were temporary or seasonal. The youth represented 74% of total jobs created.

(Tables were shown to illustrate indicators, 2014 levels, targets for 2019, latest measurements and ratings, and CASP employment figures)

Management Performance Assessment Tool (MPAT)

Ms Ngomane informed members that MPAT is one of the initiatives introduced in 2010 with the aim to give impetus to the entrenchment of monitoring and evaluation practices with a specific focus on the monitoring of management practices within organisations. It is designed to build internal monitoring and self-evaluation capacity.

MPAT focuses on management practices in 4 key performance areas:

  • Strategic Management
  • Governance and Accountability
  • Human Resources management
  • Financial management

Main findings about DAFF pointed to an absence of evidence:

  • Strategic Plan: a 3 year strategic plan was submitted instead of 5 years as required by the Framework for strategic plan
  • APP: The 2013 APP was not submitted
  • SDIP: No evidence was provided for service charter
  • Management Structure: Minutes of meetings were not approved
  • Audit Committee: Audit Committee year plan, charter, and process document was not submitted
  • Ethic: Financial disclosure was not completed by SMS
  • Fraud Prevention: No approved structure was provided
  • Internal Audit: Required evidence was not provided
  • PAIA; Did not provide evidence of section
  • Recruitment & Retention: Recruitment policy was not approved and turnover analysis on report climate surveys was not provided
  • Delegations: From HOD to performer levels were not submitted

On managing the five public entities, these organisations were found not to be functioning and performing as envisaged, and have been criticised by industry players and academic institutions.

Regarding the Presidential Hotline, 137 complaints were registered. Of these, 103 had been resolved while 34 are unresolved. Out of the performance standard of 80%, 75% of complaints were resolved. Performance is below standard. A major concern has to do with the inability of DAFF to resolve prioritised cases over time. The average time taken by DAFF to resolve cases is 210 days instead of the 25 days. Satisfaction rating for service is 39%, which is below the 70% benchmark.

Ms Ngomane indicated that the disappointing growth and loss of jobs in the sector could be attributed to the global economic decline but DAFF has not been successful in addressing constraints to investment in the sector. The programmes of DAFF are not having a significant impact on transforming the sector through new entrants so that they become successful commercial farmers because support packages by the government tend to cause dependency. Growth in the industry both in terms of GDP contribution and employment is stunted. Weak relationships between the government, industry, and high senior management vacancy levels appear to cause these problems. The Department is not working closely enough with the DRDLR and is struggling with concurrency on conditional grants.

Ms Ngomane suggested that the DAFF should consider strengthening 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. She emphasised that hunger and extended periods of malnutrition leave a legacy with future generations that impairs livelihoods, undermines human development, and economic growth.

FFC Presentation

Dr Ramos Mabugu, Director: FFC, briefed the Committee on the performance of the Department and aspects highlighted by the AG. Following a 5,8% real increase in DAFF budget in 2014/15, DAFF would experience real declines in its allocation in both 2015/16 and 2016/17 as a result of the Cabinet approved reductions due to under-spending. Growth in budget is set to recover by the end of medium term.

Agricultural Production, Health and Food Safety programme consumes the largest share of the Departmental budget. Funding for ARC and llima/Letsema conditional grant fall under this programme. The Food Security and Agrarian Reform Programme consumes the second largest share of the budget. Transfers and subsidies are significant due to the three conditional grants that DAFF administers to provinces and the six entities that fall under the Department. Cabinet approved reductions with respect to DAFF affected mainly compensation to employees, goods and services, and conditional grants to provinces. This corresponds with the marginal reductions evident for 2015/16 and 2016/17.

Over-spending over the past two years in Administration and Food Security Programmes amounted to R91 million. This is attributed to the upgrading and maintenance of buildings and laboratories that was not completed; and Quarter 4 transfers to Mpumalanga Department of Agriculture were withheld due to under-spending.

The achievement of targets has improved from 75% in 2013/14 to 82% in 2014/15. Only 50% of targets for Food Security Programmes were achieved. During the year under review, 65% of total hectares of cultivation for food production in communal areas and land reform projects were achieved. Out of the 65%, only 3% was according to the agreed upon standard. In relation to the level of spending, achievement of targets is low although this has improved since 2013/14.

Dr Mabugu also informed the Committee there is increased pressure on expendable income of consumers. Food inflation has risen faster than the inflation rate. This is affecting poor households the most as they spend a large share of household income on food compared to other income groups.

For the 2014/15 financial-year, DAFF received an unqualified opinion with emphasis of matter. Regarding the matter of emphasis, the AG pointed out that the internal audit did not assess monitoring mechanisms over all the transfers made and received. Effective steps were not taken to prevent irregular expenditure. The accounting officer did not ensure the CASP team had adequate resources to monitor disbursements and support provinces. This matter re-emphasises the recommendation the FFC made in 2014 related to the Department improving its capacity to monitor conditional grants according to the DORA framework.

The AG also pointed out that management did not address weaknesses in the controls over quarterly and annual reported predetermined objectives. Some performance indicators in the Forestry programme were not measurable.

Concerning the assessment of conditional grants, Dr Mabugu indicated that the spending of the agricultural grants has significantly improved in 2014/15 compared to historical spending patterns although the quality of spending is still a major concern. Some of the major challenges in the sector include poor planning, contractor challenges, late changes to business plans and weak and ineffective procurement processes. Spending allocations to agricultural grants are expected to decline over the MTEF period as a result of under-spending and re-allocation of resources into other priority areas.

Effective intergovernmental coordination is crucial in order to achieve optimal grant performance. Besides establishing IGR forums in each province, it remains unclear how DAFF intends to address some of the practical implementation challenges related to the conditional grants.

On transfers and spending performance of the entities, it was highlighted that the ARC is receiving the bulk of transfer payments compared to other entities. For the 2014/15 financial period, it received just over R1 billion. The MLRF and OBP have consistently under-spent transfers from DAFF yet reasons for under-spending are not clearly presented in the DAFF annual report.

The under-spending by the ARC in 2014/15 amounted to R55, 5 million. Given the significant share of funds that are transferred to the ARC, under-spending by a small percentage amounts to large amounts in absolute terms and, therefore, should be closely monitored.

Dr Mabugu stressed that internal controls within DAFF need to be improved, especially in relation to putting measures in place to prevent irregular expenditure, and ensuring that performance targets are specific, measurable and verifiable. Under spending on grants is a result of weak planning and procurement processes in provincial departments. This means the oversight role of the Department in relation to provincial counterparts needs to be strengthened. The budget is generally spent but the achievement of targets is very low. The coordination between DAFF and Public Works needs to be strengthened, as existing delays and under-spending in capital projects are a result of this weak coordination.

Discussion

AGSA Presentation

Ms A Steyn (DA) asked what the AG looks at when it comes to irregular expenditure, and what the Department means by ’reliability’.

Ms Meisie Nkau, AG, on irregular expenditure, indicated that the Department has to identify it. She said if the AG finds more irregular expenditure and discovers that some mechanisms do not identify it, the Department has to go back and correct things. In terms of regulations, if there is no compliance, that gets reported in the audit report. Once that is done, the AG sits down with the Department and sees if both parties agree to the issue under discussion. Regarding reliability, she said it refers to unsatisfactory performance information that is submitted.

Ms Z Jongbloed (DA) wanted clarity on why the Marine Living Resources Fund under-spent. She also wanted to know about the investigation the AG talked about.

Ms Nkau said under-spending is around the operating costs of the vessels. One vessel has not been repaired, and that the MLRF policy for Expanded Public Works Programme was approved very late. Details would be sent to the Committee in writing. On the issue of the investigation, she explained that it relates to the period between 1999 and 2011. The report has not been made available. No communication has been done with the Department. They could not comment on it because the Minister has not yet signed it.

The Chairperson wanted to know the reasons behind the regression of the Agricultural ARC because it has been receiving clean audits. Pertaining to the reliability of information, people need to be penalised for giving their managers wrong information. If provinces are not giving the Department the information it requires, the provinces then must come present that information to the Committee, and punitive measures must be in place because repeated mistakes are deliberate.

Ms Nkau, concerning the ARC regression, informed the Committee that the ARC implemented a new system and the implementation was not done properly. There were no proper controls over the changeover. The management has agreed to make sure its systems work properly in terms of management principles and material adjustments This goes back to the monitoring and evaluation processes of the ARC. The AG had problems with the reliability and credibility of the information of the entity.

Ms Steyn remarked that if quality reports to be submitted to the Minister could not be verified and that the Minister has not received them up to now, that means no achievement has been recorded. That is not the fault of the Minister. The Committee would like to see the quarterly reports of the Department sent to Treasury. Currently, the Committee focuses on the figures. It does not focus on where the expenditure went.

The Chairperson commented that the Marine Living Resources Fund is not operating like other entities yet it receives funds from the Department. Its incorporation into the Department is something that should be taken into consideration.

Ms Nkau said that is a policy decision that has to be taken on how it should account to the powers that be and if it should be part of the PFMA.

FFC Presentation

Mr N Paulsen (EFF) asked how participation and ownership has transformed in the agriculture sector.

Dr Mabugu said no analysis has been done regarding that matter for the presentation, but indicated that the FFC would do an analysis if the Committee is very interested in that.

Mr R Cebekhulu (IFP) enquired how the FFC is going to realise the dream of creating jobs when there is a high level of drought in the country.

Dr Mabugu explained that although agriculture is prone to natural disasters, planning does not involve such eventualities. Plans are for normal situations. There are grants that deal with natural disasters. The present financial arrangement addresses the effects. The frequency with which droughts are happening suggests that the Disaster Management Plan should be taken into consideration.

Ms Steyn expressed concern about food price inflation in the light of the current drought, and suggested the Committee should get a briefing on the issue by a relevant entity. She further wanted to know if there would be rollovers for the Mpumalanga Agriculture Department. The Committee should think seriously about the proposed massive budget cuts by Treasury.

Dr Mabugu, on food price inflation, advised that the Committee should engage with an institute that deals with food price inflation. The institute is based in the University of Pretoria. There were key drivers for 2014 food price inflation. Issues around electricity and wages and compensation for employment had a knock on effect on food price inflation. For 2015, drought is becoming a determining factor for food prices. At this stage, the sector is not collapsing but food prices are going to be driven up by other internal processes.

Regarding the Mpumalanga rollovers, the Parliamentary Liaison Officer should communicate with the Committee Secretary to find out if the rollovers have yet taken place. Responding to the comment on budget cuts, he pointed out that service delivery is usually defined loosely as output. People need to think of the maintenance of investments made in the sector. The reduction of budget by 31, 2% means something has been happening which most people were not aware of.

Mr C Maxegwana (ANC) said inter-governmental relations are very important. Most agriculture departments should start working with other departments. The Department has done well in contextualising the issue of employment in agriculture. There is a need to get deep into the contextualisation of the issue of employment.

Dr Mabugu, pertaining to inter-governmental issues, informed the Committee that the FFC next year is going to look at the instruments of inter-governmental relations to see if they are compatible with rural development and growth. A round-table discussion could bring a solution to these problems, for instance, on ‘who is going to deliver what’. These need to be ironed out. The FFC is halfway into the research plan. The main challenge with areas is remoteness, poor transport infrastructure, and ICT linkages. There are lots of linkages that happen when rural development takes place. The research project or plan would be tabled in May 2016. Responding to the issue of employment categorisation, he said everything is based on the figures presented in the quarterly labour force surveys.

Mr Z Mandela (ANC) indicated that the performance of the Department in terms of finances is fluctuating. He wanted to find out if it considered the looming drought that is experienced in the country, its impact, and threat to job losses.

Dr Mabugu said everything is still happening according to MTEF plans. Other issues would be dealt with as they happen.

The Chairperson, on the issue of inter-governmental relations and coordination, remarked that research on conditional grants needs to define the role of each department. For instance, rural development and land reform issues have been separated from agriculture, forestry and fisheries. When it comes to project planning and implementation there is a linkage between these areas. She also wanted to know how far the country is on rural development and infrastructure because there is a high movement of people from rural areas to the cities in search of a better life but they still remain poor. With regard to budget cuts, she noted that National Treasury has cut on areas that do not have an impact on service delivery but the Department says the cuts are going to have an impact. The Committee is going to try and involve the Appropriation Committee.

Dr Mabugu, on the issue of migration to urban areas, pointed out that 1994 brought the freedom of movement, and urban areas are struggling to cope and adjust. The issue is not to keep people in rural areas. There is a need to focus on innovation. A new game needs to be found to address these concerns.

DPME Presentation

Ms Steyn remarked that during the oversight visit the Committee saw sheep with no lambs. The Committee did not understand why at this time of the year there were no lambs. The Department could not provide an answer to their concern. She further went on to say it is hard to believe the statistics about job creation the Department presented but the AG says the information is not reliable. She wanted to find out if the DPME verifies the findings of the AG on the Department.

Ms Ngomane enlightened Members the DPME highlights areas of weaknesses so that resources could be allocated accordingly. The reliability of statistics is still a big challenge in government but it is getting better in giving direction for allocation of resources. DPME uses national data that comes from surveys, quarterly reports and indicators. The Department submits documents to DPME that are accompanied by evidence including work in progress.

Mr L Ntshayisa (AIC) remarked it was worrying to learn that the Department is not doing well when it comes to rural development. He asked how the DPME is going to go approach this issue.

Ms Ngomane said sustainability of the interventions should be looked at thoroughly. There is a need to look at issues of collaboration and go back to basics. This means identifying who is going to do what, and collaboration should start at the beginning of the process. She further stated that DAFF should accelerate the PITALFA policy so as to protect vulnerable land.

Mr Paulsen wanted to know how the land reform programme is going to be achieved and made successful and asked what is being done to address problem areas to make sure things are turned around.

Ms Ngomane stated that the ambitious 30% target set by the government for land reform is going to stay because the government made it. It is agreed there have been weaknesses but interventions are being done to accelerate the issue. It is still possible to turn things around. Point 1 of the 9 Point Action Plan deals with the revitalisation of the agricultural sector and this needs strong involvement from other role players.

The Chairperson remarked that commercial farmers along the borders of the country are making use of foreigners. She wanted to know if that contributed to job losses and if the laws of the country take that into consideration because most of those workers are not registered with the Department of Labour. She also wanted to know what mechanisms are in place to force the Department to attend to problems of people who are vulnerable to food insecurity. Lastly, she asked if punitive measures are in place to address some of the problems highlighted regarding the Presidential Hotline.

Ms Ngomane, concerning the issue of foreigners working for commercial farmers, stated there is no evidence that suggests that contributes to job losses. That has to be checked with the Labour Department. Regarding food security, he pointed out there is a nutrition programme that is spearheaded by the Deputy President. She is not sure if the target is going to be met, but there is work in progress. Pertaining to the Presidential Hotline, she indicated there would not be punitive measures. Results are published in terms of accountability and this is linked to the agreement the Minister entered into with the executive.

Ms Ngomane further enlightened the Committee that DAFF has committed to improvement plans on a quarterly basis with regard to under-expenditure. Accounting officers are going to give a rationale for the reports. Lastly, she mentioned that the DPME is not there to punish but to improve weak areas. This is done by looking at the objectives of the programme and its achievements. Sometimes overlaps and duplications do surface.

Adoption of Minutes

Minutes of Committee meetings held on 18 August 2015, 25 August 2015, 4 September 2015 were adopted unamended.

The meeting was adjourned.

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