Department of International Relations and Cooperation & African Renaissance Fund on their 2016 Annual Performance Plan

Meeting report

Briefing by the Department of International Relations and Cooperation (DIRCO) on its Strategic Plan, Annual Performance Plan and Budget
The delegation comprised of Acting Director General Mr Kgabo Mahoai; Ms Delores Kotze Chief Director: Monitoring and Evaluation; Mr Caiphus Ramashau Chief Financial Officer, Ms Motshabi Modukanele Chief Risk Officer; and Mr Seraki Matsebe Parliamentary Liaison Officer.

Mr Mahoai provided a brief introduction to the work of the DIRCO and how it was impacted upon by the changing global environment. Ms Kotze undertook the actual briefing which spoke to the planned performance of the DIRCO by way of its Programmes.

Programme 1: Administration
With the strategic objective of having an effective management of resources through sound administration and good governance, the 2016/17 targets set were to pay its service providers within 30 days, to improve compliance i.e. demand management plans, financial statements and also to have asset management for state owned enterprises. The Medium Term Strategic Framework (MTSF) target was to have a clean administration.
 
Programme 2: International Relations
The strategic objective identified was to have SA’s political, economic and social relations strengthened and consolidated. The 2016/17 target was to utilise 48 structured bilateral mechanisms and 46 high level visits in pursuit of SA’s national interest, particularly the five national priorities and the nine-point plan whilst pursuing the interest of the continent and the global South. The MTSF target was to see outcomes of the structured mechanisms and high level visits to contribute towards the five national priorities and the nine-point plan.
 
Programme 3: International Cooperation & Continental and Regional Cooperation
Bearing in mind the Committee’s interest in Africa, the DIRCO had a strategic objective to consolidate the African Agenda. The 2016/17 target was to promote democracy, good governance, human rights, peace and security on the African continent in pursuit of Africa’s vision 2063 through participation in four African Union & African Union Peace and Security Council meetings, two Pan African Parliament sessions, two African Peer Review Mechanism Summits, two African Commission on Human and Peoples’ Rights sessions and two New Partnership for Africa’s Development Summits. The MTSF target was to have 80% of resolutions, decisions and outcomes reflecting SA’s national interests and in support of democracy, good governance, human rights, peace and security and aligned to Africa’s Vision 2063.
 
Programme 4: Public Diplomacy and State Protocol
On public diplomacy the DIRCO had a strategic objective to create a better understanding and awareness of SA’s foreign policy through targeted public diplomacy partnerships and platforms. The 2016/17 target was to implement a Public Diplomacy Strategy utilising targeted partnerships and platforms which included having 160 media statements, 10 opinion pieces, 67 publications, 18 media briefings and 12 public participation programmes. The MTSF target was to enhance understanding and awareness of SA’s foreign policy.

Mr Ramashau continued the briefing. The Committee was provided with specifics on the DIRCO’s budget. The DIRCO had to contend with a reduction in its budget allocations. It was thus required of the DIRCO to realign its plans with the allocation that had been received. Cost containment measures had to be implemented. Closing of missions was however not an option. The DIRCO was allocated a budget of roughly R5.9bn for 2016/17. Details were provided on allocations to each of the abovementioned Programmes of the DIRCO.

Briefing on the African Renaissance Fund (ARF) Annual Performance Plan (APP) 2016/17
Mr Ramashau provided a brief introduction on the ARF and on the utilisation of the Fund itself. The briefing entailed outlining the Funds’ programme performance indicators. With the strategic objective to promoting democracy and good governance, the objective statement was to support the holding of democratic elections in identified countries in Africa. The target for 2016/17 was to have 100% of approved disbursement to support democracy and good governance processed. Another strategic objective was to support socio-economic development and integration. The objective statement was to support the implementation of socio-economic development and integration projects. The target for 2016/17 was to have 100%of approved disbursement to support socio-economic development and integration processed. On the Fund’s MTEF Allocation for 2016/17 there had been a huge reduction in the amount of allocated funds due to the Fund accumulating a huge surplus. The appropriation for 2016/17 was therefore only R31 000.  The accumulated surplus amounted to over R1.7bn. The available funds for 2016/17 would therefore be the appropriated funds plus the accumulated surplus. The reduction in appropriated funds was due to cost containment measures implemented by National Treasury. The Southern African Development Partnership Agency (SADPA) was set to replace the ARF in a matter of speaking and the DIRCO had completed all steps for the establishment of the SADPA. The SADPA’s business case had been approved, the Draft Partnership Fund for Development Bill had been drafted and the proposed institutional arrangements were in place. The DIRCO was in the process of finalising institutional arrangements with National Treasury. Once this was finalised then the Draft Bill would be re-submitted to cabinet for approval to be gazetted for public comment.
 
Discussion
Mr W Faber (DA, Northern Cape) noted that the budget of the DIRCO had decreased from R6.5bn to R5.9bn. The highest costs to the DIRCO seemed to be on property and staff. He understood that SA had a global footprint of 124 missions abroad but felt that there was a need to look at the performance of individual missions. Rental costs abroad were huge and he asked why SA could not share premises with other African countries. Countries were already sharing premises in order to keep costs down. The example was given of the V4 group of countries.

Mr Ramashau, on budget cuts and the sharing of costs with other countries, stated that the DIRCO was taking things into consideration in looking at its strategy.  
           
Mr B Nthebe (ANC, North West) understood the difficulties that the DIRCO was faced with as they were not always in control of conditions under which they had to operate. He asked how the DIRCO’s developmental agenda spoke to the Africa that Africans wanted keeping in mind Agenda 2063. There was a need for seamless and proper coordination. There was a perception that SA should be promoted from its status of being a developing country to that of being a developed country. The European Union (EU) had cut its support to SA by almost 75%. The EU wished to enter into agreements with members of the Southern African Customs Union (SACU) on a one to one basis. It was unfortunate but true that SA had to deal with the bulk of the migration of people in Africa. He informed the DIRCO that he was not impressed by the state of SA’s mission in Zambia. The EU used to be SA’s biggest trade partner but the Asian Tigers had closed in from the East to surpass the EU. SA had always been a commodity driven country but the world was shifting towards financials more and more.

Mr Ramashau, on how better to push the African Agenda 2063, conceded that there could be better cooperation on cost related issues. The DIRCO did have a developmental agenda as one of its pillars. Donor countries were withdrawing support to Africa and hence the African Union agenda called for Africa to become self-sufficient. The issue was about how to fast track infrastructure development. He explained that the DIRCO used the Forum for Africa-China Cooperation (FOCAC) and Brazil, Russia, India, China and SA (BRICS) Bloc to focus on specific programmes.  The South African Development Partnership Agency (SADPA) was the vehicle to be used to fast track interventions. Coordination was a problem that the DIRCO was working on. It tried to work better and faster. He pointed out that the DIRCO had to speak to SA’s SACU members about entering into separate agreements with the European Union.

The Chairperson agreed that there needed to be better coordination between the four regions of Africa.

Mr Ramashau responded that the issue was about financing activities. The problem was that most countries in Africa received donor funding. The difficulty was that African countries lacked the means. He explained that the South African mission in Zambia was having problems with its landlord. The DIRCO was working on the matter and by the end of the year there should be a solution and perhaps other premises would be found.

Mr J Londt (DA, Western Cape) asked if it was correct that the DIRCO had built into its budgeting, fluctuations in its exchange rate. What was the margin that was built in? He also asked how the change in Ministers of Finance in 2015 had impacted upon the DIRCO.

Mr Ramashau explained that the budget the DIRCO tabled did not include foreign exchange rate adjustments. The budget tabled worked with the exchange rate of R9.50 to $1 in terms of the Medium Term Expenditure Framework (MTEF) for 2013. The exchange rate fluctuation would be reviewed in the adjustment period. He stated that the DIRCO had not quantified what the change in Ministers of Finance in 2015 had had.  

Mr Londt reacted that at R9.50 per $1 there was a R5.76 difference taking into consideration what the exchange rate was at present. The Committee should be able to be told by the DIRCO what its monthly operating expenses were. This would allow the DIRCO to see the spike in its operating costs for instance over three months. The DIRCO should thus be able to work out what the increases were month to month due to the changes in Ministers of Finance.

The Chairperson explained that the rate of R9.50 per $1 was originally used when the MTEF was done. In terms of the Public Finance Management Act (PFMA) the exchange rate could not be changed. He did not think that the DIRCO perhaps had the need for a system of building into its budgeting fluctuations in the exchange rate. The Committee could propose that the DIRCO consider the practicality of it. He was aware that it was difficult when it came to auditing time. It became a nightmare.

Mr Faber said he had been involved in currency trading for a long time. He asked that if the DIRCO worked with the rate of R9.50 per $1 did it apply to salaries of staff abroad as well. If staff in London were being paid at that rate, then they could hardly survive. Did the DIRCO adjust the salaries of employees?

Mr Londt suggested that when the DIRCO appeared before the Committee in future that the issue be delved into further. It did not make sense to him at all the way things were being done. Month to month expense figures of the DIRCO should be accessible. The DIRCO should know what their monthly expenses were.

Mr Ramashau said National Treasury set the rate that the DIRCO had to use. He explained that during the adjustment estimate the DIRCO would recalculate due to currency exposure. The DIRCO in overseas countries paid their staff in local currencies. For example, in the UK payment was made in pounds. The DIRCO did have the information but it still needed to be calculated. The DIRCO worked with the Reserve Bank on how to fund its missions.   

The Chairperson referred to slide 5 which spoke about only 46 bilaterals. What about bilaterals with the rest of the countries in Africa? There were after all 54 countries in Africa. What were the dynamics of being limited to 46 bilaterals? He also referred to slide 12 where reference was made to the United Nations Economic and Social Council (ECOSOC). Was the ECOSOC alive in SA? He asked whether the reference was in relation to ECOSOC with Africa. If it was then it should be in the domain of civil society.  

Mr Ramashau said there were 46 missions in Africa even though there were 55 African countries. Due to budgetary constraints SA could not have permanent offices all over and hence engaged in bilaterals with countries. SA did have relations with each country in Africa. In some countries like Nigeria and the Democratic Republic of Congo SA had two offices.

Ms Kotze said that on the ECOSOC, SA’s missions paid attention to meetings i.e. South African representation.
 
Mr Mahoai noted that in 1994 SA only had seven missions in Africa now the figure sat at 46 + Addis Ababa. SA had the highest number of missions in Africa. It was true that due to changes in economic and trading patterns, Asia and the Middle East had surpassed the EU as SA’s number one trading partner. The US and the EU used to be SA’s main trading partners. In 1994 SA’s trade with China was 1.1% the figure now sat at 12%. Most of SA’s finished products found markets in Asia and the Middle East. The DIRCO carried out a scenario analysis and looked at trends.

Dr Y Vawda (EFF) asked what percentage of the total budget of SA the DIRCO’s budget comprised. He knew that the Department of Health’s budget comprised 10% of SA’s total budget. He also asked what justified the DIRCO in having the most missions. SA was in the top ten ranked countries in terms of visiting other countries. To which countries did South Africans visit the most? Was there good return on investment in having so many missions abroad? Given the growth in trade to Asia and the Middle East were SA’s missions in these regions adequate. What business and tourism benefits were the missions bringing in for SA? SA should only try to assist countries socio-economically if it first dealt with its own domestic problems. He cautioned the DIRCO about using the term terrorism loosely. If SA wished to grow its trade with Africa it should be remembered that two thirds of Africa was Muslim.  He informed all present that ISIS and Al-Shabaab were mistakenly believed to be Muslim and that they had nothing whatsoever to do with the religion of Islam. These groupings were formed by monopolist capitalists. He asked whether SA was prepared for what was currently happening in the US. US Presidential candidate Mr Donald Trump was about to be elected as the US President. 

Mr Ramashau said that the DIRCO’s budget was R5.8billion and the total budget of SA was R1.8trillion which made DIRCO’s portion to be 0.5% of the total budget. He noted that the DIRCO, the Department of Home Affairs and the Department in the Presidency were some of the Departments which got the lowest allocations.

Mr Mahoai said there was a direct correlation between the number of missions and SA being an accepted country by other countries. There were also many countries that opened up missions in SA even to service neighbouring countries. SA had opened up missions in Asia and the Middle East. He pointed out that missions were clustered. There were three groupings i.e. US, Caribbean and Europe; Asia and the Middle East and lastly Africa. He explained that the DIRCO was not defining terrorism but only stating a phenomenon. The world was constantly in flux as there was no peace in certain parts of the world.

Mr Nthebe said there was a mushrooming of political powers around the globe due to shifting political dynamics. He asked what could be done to mitigate economic migration.

Mr Faber, still on the rand/dollar exchange issue, said his wife had worked at the Polish Embassy and had been paid in US dollars. He asked if a DIRCO staff member earned $100 overseas was the person paid in Rands based on the current exchange rate or was the person paid in dollars. Was the DIRCO staff paid according to South African salary structures or according to salary structures of those countries?

Mr Ramashau stated that salaries were paid in foreign currencies according to where staff were stationed. 

Mr S Mthimunye (ANC, Mpumalanga) asked if the Committee could get a separate report on the African Renaissance Fund.

The Chairperson asked what work the DIRCO did at the New Partnership for Africa’s Development (NEPAD).

Mahoai said that when the DIRCO presents its Annual Report to the Committee then all additional information requested would be provided.

Committee Minutes
Minutes dated the 4 May 2016 were adopted as amended.

The meeting was adjourned.