The Committee on Environmental Affairs met with the Department of Environmental Affairs (DEA) to be briefed on the update with the industry waste management plans and second quarter financial performance of the Department. The Committee was first meant to be briefed by the North West provincial department on its donation of high-value species to private individuals. Committee requests for briefings to the department and MEC responsible was up until this point ignored – Members were in agreement that this was unacceptable and a clear contravention of public accountability. The Committee sought parliamentary legal opinion on the process of summoning those individuals to Parliament to account – there was consensus that if there was certainty that all other options were covered, the Committee would go ahead with drafting the summons.
Members were then briefed on the progress made regarding the implementation of industry waste management plans where the presentation covered background information, industry waste management plans in terms of aims and objectives, a summary of the comments made on the section 28 Notice and consultations undertaken by the Department. The Committee was also informed of amendments made to the draft section 28 Notice, the final Notice, further consultations and representations and discussion. The request by the Department was that the Committee note the progress made on the implementation of these industry waste management plans.
During discussion the Committee probed transformation of the industry and the inclusion of new entrants into the industry, responses for new business plans from potential tyre processes, disposal of Pampers and the responsibility of the industry and how the extended producer responsibility worked in practice when certain products were imported such as textiles. The Committee questioned if Members could scrutinise the annual reports and performance information of REDISA as the Initiative was effectively underwritten by a public levy so the Committee deserved to know how funds were being spent – linked to this were questions around when the Department would complete its mid-term review of REDISA and for the Committee to be briefed on the outcome. Further questions were asked about DEA’s long term waste management strategy to address waste recycled vs. waste sent to landfill sites, progress on the implementation action plans for specific landfill sites and the timeline envisaged for the rollout of other waste management streams. The Committee was concerned about the moved date for the collection of the levy and the implications thereof, the slow pace of separation of waste at source and the long time periods for registration and submission of plans.
The Committee considered that its next colloquium should be on the waste industry management. It would also be necessary for the Committee to be briefed by REDISA and DEA on the performance of the Initiative. The Committee noted the progress made with the implementation of the waste industry management plans.
The Committee was then briefed on the financial performance of the Department for the second quarter of the 2016/17 financial year. The presentation covered expenditure for the said financial year per programme, detailed current expenditure, detailed expenditure on consultants, contractors and agency services expenditure and detailed expenditure on current other operating expenditure. Members were also informed of payment for professional bodies, membership and subscription fees, payment of capital assets, allocations and transfers to DEA entities and allocations and transfers to other agencies. The presentation also outlined allocations and transfers to environmental public works projects and foreign aid assistance. Also discussed was the second quarter performance for the DEA entities including allocation to public entities and own revenue for the year ended 30 September 2016, public entities revenue and expenditure as at 30 September 2016 and public entities surplus (deficit) as at 30 September 2016.
The Committee questioned the rollout of funds for the DBSA Green Fund in terms of how much DEA contributed, how the process of funding worked and accountability thereof. Other questions were posed on reasons for the late disbursement of some transfers to entities, the utilisation of the Green Fund, DBSA as an implementing agent and the projects initiated. Of particular discussion were the challenges with the Auditor-General of SA in terms of modified cash standards resulting in the 2015/16 Annual Report of DEA not being submitted. The Committee emphasised that such discrepancies should not occur in the current financial year and a briefing was required on how the matter would be/was resolved for Committee assurance that the Department, and its entities, achieved an unqualified, clean audit.
The Chairperson noted that an apology had been received from the Minister of Environmental Affairs (DEA), Ms Edna Molewa, who was in a special Cabinet meeting. An apology was also noted from the DEA Director-General (DG), Ms Nosipho Ngcaba, who was in Washington attending the Global Environment Facility meeting.
Donation of high value animals to private individuals by North West Provincial Department
The Chairperson outlined that the Committee was due to meet the North West Department on the above agenda item but to date it had not received any correspondence from the Department or even an apology. Last week, the Committee Secretary attempted to follow up with the Department to ascertain whether they would be attending the meeting but there was no indication of whether they would attend or not – this presented a problem to the Committee. The MEC was invited in writing two weeks ago to brief the Committee on the donation of the high value species but no further correspondence was received. When the Committee first endeavoured to follow up on the donation, a letter was written to the Chairperson of the committee in the North West provincial legislature but the requested report was not provided.
By way of background information to the matter of donation, the North West Department of Agriculture, Environment and Rural Development took a decision to donate around 150 buffalo, 50 rhino and about 50 sable antelopes worth in excess of R100 million to a company of three private individuals. During a briefing by SA National Parks on the wildlife economy was when Members became aware of the matter. It was then that contact was made with the provincial department to furnish the Committee with a report but more than a month later this had still not arrived. The MEC was then invited but did not appear nor anyone from the Department.
The matter was concerning because it spoke to public accountability and it was quite sad that this was not the first thing on the minds of everybody administering public legislation. The actions of public officials were subjected to scrutiny. The Committee had invited Parliament legal services to advice on how the Committee would move forward. When the letter was written to the MEC the Committee did touch base with legal services to ensure the Committee was not acting outside of its mandate – the Committee was informed that its actions were completely within its mandate and that of Parliament. The Committee would also need to ascertain what its options were moving forward. It was also important that the Committee knew what the process was summon people because it could not be that in a democratic country like SA for someone to just ignore Parliament no matter who it was.
Adv Frank Jenkins, Parliamentary Senior Legal Adviser, said the matter did raise some interesting issues but it was within the mandate of the Committee to call a provincial department or MEC to develop a national picture of what was happening in a particular sector. It was important not to emphasise calling someone to account because that person, being the MEC, could easily slip out of it by saying he/she accounted to the provincial legislature. The Constitution was clear that Parliament could call any organ of state for oversight purposes – the oversight mandate was in fact wider than calling people to account. The issue of animal donation was part of supply chain processes and management which started with demand planning, then acquisition, assets management, debtor management before ending with disposal management in terms of Treasury legislation.
In terms of summoning a person or organisation, this was usually a matter of last resort. It was set out broadly in section 56 of the Constitution to compel, in terms of national legislation or the Rules of Parliament, to comply or summon a person to submit a report or give evidence on oath. The Powers and Privileges Act set out the procedure which began with a resolution of the Committee. Once the resolution was tabled, a letter would be drafted for approval of the Speaker to authorise the summons. The summons had a template which set out the time, place, reason and documents to be accompanied. This would be issued by the Secretary to Parliament after the Speaker approved it and it would then be given to the Sheriff or another person to deliver the summons. The summons itself indicated there was a crime or offence and had a criminal sanction attached to it. Between organs of state this was quite a sensitive issue but if one organ of state simply ignored another, this was also in contravention of Chapter Three of the Constitution which dealt with cooperative government.
Ms J Edwards (DA) thought it was clear the request of the Committee was completely ignored as the invitations and requests had been sent some time ago.
Mr S Makhubele (ANC) agreed that the matter was quite sensitive and not to be taken lightly. The summons should really be used as a last resort – the Committee should be sure all other options were exhausted before the last resort was used. Perhaps more thought should be applied to what more could be done and if Members were thereafter convinced there was nothing more that could be done in the power of the Committee, the summons could then be drafted in the spirit of cooperative governance. He did not want the Committee to rush into the summons as a last resort.
Mr P Mabilo (ANC) agreed and thought it was important that the Committee express its displeasure with how its request was ignored which was unacceptable and must viewed in a serious light.
Mr T Hadebe (DA) thought the Committee had done everything it could. The donation of state assets to private individuals was a serious offence and the Committee needed to understand exactly what drove this donation and informed the decision by the North West provincial department. This was also a serious deviation on supply chain processes as the Legal Adviser pointed out. The Committee would need to summon the provincial officials involved to account before Members because the Committee had done what it could to accommodate the matter on the programme of the Committee. The avenue of summoning the provincial department needed to be explored.
The Chairperson thought there was agreement that the Committee was not opposed to summoning the provincial department and that the option should be used as a last resort to ensure there was accountability. The only issue was the timing- he thought it should be started when the Committee meets next week. If someone was invited by a Committee of Parliament and could not attend, an apology would be tendered specifying the reasons why one could not attend instead of simply ignoring the request especially when the request was made well in advance - he found it odd for public officials to simply not attend. If the feeling that Parliament was not doing what it was supposed to be or usurping the powers of other bodied then that should be expressed through engagement instead of simply not attending. Not attending requests was out of order for public officials especially given the value of the species donated which could actually turn out to be even higher and these were serious assets belonging to the people of SA. Over 43% of the money from the national fiscus went to the provinces and Parliament voted for those monies – if it was not for this Act of Parliament the provinces would not have any resources so when they were called to account they had to come. Overall the Committee agreed the officials from the province should be summoned to appear before the Committee – the summoning processes should commence next week if the department did not communicate between now and then to explain why they did not appear. The secretary of the provincial committee did acknowledge the letter was received. There was reason for the Committee to understand how the donation transpired even if it turned out the province acted correctly within its scope but to call the officials to explain themselves was not asking too much.
Briefing on the Progress Regarding the Implementation of the Industry Waste Management Plans
Mr Mark Gordon, DEA DDG: Chemicals and Waste Management, took Members through the presentation which was intended to provide progress regarding the implementation of the Industry Waste Management Plans (IndWMPs). In terms of background to the plans, a draft section 28 notice was published on 24 July 2015 calling for the development of the Industry Waste Management Plans for the following industry sectors:
Paper and packaging
Electrical and electronic waste
Mr Gordon said the commenting period on the notice was 30 days. Requests were received for extension for a further 30 days by the industry sectors to provide comments due to consultation within their various constituencies. Extensions were then granted where the final date for submission of comments was 30 September 2015.
In terms of the Industry Waste Management Plans, an IndWMP for any particular waste stream should ensure the holistic management of that waste stream from the points of generation, collection and transportation, storage as well as processing. All supporting programmes such as awareness, capacity building and research should also be included. The work done through the IndWMPs will promote the recycling sector. The prioritisation of waste streams to be managed through the application of an IndWMP was dependent on several factors including:
the severity of potential impacts of a specific activity or waste stream,
available resources for regulation,
the level of maturity of a specific sector,
the level of organisation existing or possible,
the level of cooperation and a good track record of compliance by the sector,
existing management measures,
existing recycling rates
IndWMPs were the primary tools used in the waste sector to facilitate cradle to cradle (holistic) management of waste streams in a manner that promoted job creation and SMME/Cooperative development. This was contained in part seven of the Waste Act and was based on the Extended Producer Responsibility. There were attempts to respond to most of the goals of the National Waste Management Strategy. Goals of the National Waste Management Strategy included:
promote waste minimisation, re-use, recycling and recovery of waste
ensure the effective and efficient delivery of waste delivery services
grow the contribution of the waste sector to the green economy
ensure that people were aware of the impact of waste on their health, well-being and the environment
achieve integrated waste management planning
ensure sound budgeting and financial management for waste services
provide measures to remediate contaminated land
establish effective compliance with and enforcement of the Waste Act
Mr Gordon outlined the aim of the Industry Waste Management Plans were to provide a framework for the implementation for economic instruments in the SA waste sector. Objectives of the plans included:
mainstream the Polluter Pays Principle
reduce the generation of waste
increase the diversion of waste away from landfills towards re-use, recycling and recovery
support the growth of a southern African (regional) secondary resources economy from waste
Looking at the summary of comments received on the section 28 notice, comments related to:
definition of lightening equipment
definition of paper
definition of processing
definition of packaging
definition of producer
provide clarity on the scope of the “trading document” requirements
the inclusion of the registration number on trading documents
the 12 month period to develop the plan was too short
the 70% requirement as part of the plan
role of the Product Responsibility Organization
incentives schemes must be clearly defined
how will free riders be dealt with
separation at the source
which cost model will be used to fund the IndWMP
empowerment of previously disadvantaged individuals were outside the scope of the Waste Act
the informal sector’s inclusion in the plan
compliance and enforcement issues
objection to the inclusion of offences (already included in the Act)
Mr Gordon said upon completion of the comments and response register, consultation meetings were held with the three affected sectors. The Notice was amended taking into account the inputs received from the sectors. Amendments included:
the removal of the provision to include the registration number on all trading documents
registration limited to only the producers
included a timeframe for responding to the registration of producers
removal of the 70% requirement
30 days for registration
Three months to draft and submit Industry Waste Management Plans
The Final S28 Notice was published on 12 August 2016 for implementation. On the 12 September 2016 was the deadline for registration as “Producers”. The deadline for submission of the Plans was the 12 November 2016. The National Pricing Strategy was published on the 11 August 2016 to work together with the Industry Waste Management Plans. The Draft Waste Tyre Amendment Regulations were also published on the 11 August 2016 to align the Waste Tyre Plan with the Waste Amendment Act, 2014 and the National Pricing Strategy for Waste.
In terms of further consultation, a workshop was held on 29 June 2016 at PlasticsSA. The three affected sectors were present during this session. Concerns on the three months period were received and the Notice was amended with timeframes from the paper and packaging sector and lighting sector. The electrical and electronic sector agreed to the new timeframes.
With the representations, the Department received approximately 20 written requests for extension to timeframes. The Department also received a copy of a High Court application to challenge the timeframes by REDISA (the Tyre Plan). Approximately 80 written enquiries on the Final Notice seeking clarity on various provisions were processed. For discussion, comprehensive comments were received and a comments and response register was developed. Meetings with individual sectors were held to respond to the comments while other comments were vague and some demonstrated misunderstanding of the Notice. Clarity was obtained to enable the Department to analyse and respond to the comments. The Plans were part of a process of implementing the Extended Producer Responsibility (EPR). The Plans were not for individual companies but for a group of companies in the same sector, hence the previous requirement for 70% of producers in the Sector. The consultation process, complexity of the sectors, and the time required to develop the plans required that the extension be granted. The extension of the timeframes did not result in any non-compliance by the companies or sector involved. It was mainly during the operation of the Plan where the manufacturers who were not members of a Plan will be in non-compliance with legislation. During recent consultations, industry had raised concerns about the 30 days timeframes for registration of producers and the 90 Days timeframes for development of the industry Waste Management Plans. A decision to withdraw the original Notice on 12 September 2016 was considered based on the comments from Industry inputs. A new revised Notice was published for public comment for 30 days on 12 September 2016 with new timeframes. The New S28 Notice gave industry 12 months to register with the Minister and 12 months from registration to submit the Plans, based on the requests from Industry. Industry requested further engagement on the Notice prior to publishing the final Notice. The engagement will address the concerns relating to amongst others the timeframes, 70% requirement, importers and producers. It was envisaged that based on the above, the final Notice will be published before the end of the year. In 2009, the Waste Tyre Regulations were promulgated. In November 2012, the REDISA Plan was approved including targets for jobs. In June 2014, the Waste Amendment Act was passed, making provision for development of the National Pricing Strategy, establishment of the Bureau and development of the Money Bill. In 2015, the Waste Tyre Levy was introduced. In 2016, the R 2.30 amount for Waste Tyre Levy was announced. Also in 2016, the Schedule for Waste Tyre Levy was introduced for collection of the Levy by the SA Revenue Service (SARS) from 1 October 2016 which had moved to 1 February 2017. The Department was working on the alignment of REDISA Plan with the above. The Department was also conducting a mid-term performance review of REDISA against the approved Plan on the following; Governance, Job creation, Finance, SMME development, Support to Waste Processors, Establishment of Recycling Infrastructure, and any deviation from the Plan subject to the outcome of the performance review, corrective and remedial measures will be instituted.
Ms Edwards asked why REDISA was exempt from publishing a more comprehensive Annual Report that gave a detailed breakdown of its income streams and expenditure – she understood the Initiative was registered as an NPC but consumers were effectively underwriting it through the levy i.e. through tax. The Committee was then entitled to know exactly how the funds were spent. How many responses had DEA received on the recent request for new business plans from potential tyre processes? When would these plans be evaluated and would the names and processes be published on REDISA’s website? She also asked if the forensic audit of REDISA by the Department had been completed – if so, this should be elaborated on.
Mr Gordon replied that REDISA was a not-for-profit company with internal and external financial reports which were made public. As part of the performance review of the Initiative, all of these documents were being assessed by the Department. The REDISA plan was managed through a management company which was a private one so there were issues relating to how much information could be obtained from the private company vs. the not-for-profit company. He did not quite understand the question relating to the other tyre plans.
Ms Edwards explained that a few months when the Committee engaged with the waste programme of DEA, there was talk about local businesses providing business plans to REDISA to take on the “middle man” role.
Mr Gordon clarified that from time to time, REDISA required tyre producers to submit business plans for waste tyres and REDISA then adjudicated the plans to provide tyres to those processes for free. There were some concerns and complaints of some processes not getting tyres and this was raised with REDISA. DEA then conducted its own audit and inspection of processes in terms of the capability. REDISA did do carefully analysis before providing tyres to ensure the process was capable in terms of quality. REDISA had a host of terms and long adjudication process and the Department was concerned progress was not being made fast enough and so this was also part of the performance audit being done. These matters would be part of the comprehensive report to be made available once the review was completed.
Ms H Kekana (ANC) wanted to know what the Department thought about the disposal of Pampers which were not recycled but just thrown away – what was the responsibility of industry in this regard? What could the Department do to address the problem? She asked if DEA had a long term waste management strategy to address the waste that was recycled vs. the waste that went to landfill sites.
Mr Gordon answered that the problem of diapers/nappies was a big one in SA as the Committee had discussed before. DEA had summoned the industry and there were two big producers in SA, namely, Kimberly Clarke and Protector and Gamble, that produced and manufactured all SA nappies. In terms of the waste stream, DEA reached an agreement with Proctor and Gamble, through a Memorandum of Understanding, for the company to provide infrastructure for the recycling of nappies. Nappies could be completely recycled to be made into new nappies through a simple process where the plastic was taken one side and recycled while the fibres were taken another side to be washed, cleaned and disinfected to be made into new nappies. DEA may call for a special industry plan for nappies and other sanitary waste streams only through new technology available in the US. Companies indicated they could assist with a pilot project in SA to demonstrate that it could be done. With extended producer responsibility, the onus was on the producer to take responsibility for the waste stream. The question was whether the role of government was to take the long route of establishing infrastructure or whether government should put into place enabling frameworks in which the waste streams could be effectively managed and have co-benefits of job creation and minimise the impact on the environment. Progress on this particular stream would be provided to the Committee at another engagement. With the long-term strategy, the waste industry strategy did have some long term targets, for example, a recycling target of 25% up to 2019 – working from the baseline of 10%, the gain had more than doubled.
Ms H Nyambi (ANC) noted the progress made by the Department in terms of the implementation of the industry waste management plans – she asked how the concept of extended producer responsibility worked in practice when certain products were manufactured outside SA like textiles.
Mr Gordon indicated that extended producer responsibility (EPR) was a global principle where there were some very advanced approaches. EPR put the onus and cost back to the industry – the tyre levy was actually an EPR scheme along with the other waste streams like electronics to ensure the waste was managed in an environmentally-friendly manner. Government put the legislation in place to make it law to place the compulsory obligation on industry to manage the waste products. This would also apply to textile products whether imported or not even with the tyre levy, importers too were expected to pay the levy.
Mr Makhubele asked if the instance on the plans limited new entrants into the industry i.e. maintaining the status quo of those already in the industry thus effectively limiting transformation. He was also concerned by the moved date for the collection of the waste tyre levy and the implications thereof. When would the midterm performance review of REDISA conclude?
Mr Gordon indicated that the mid-term review would be finalised by the end of the month if all went well – the comprehensive review process began in February 2016 where huge amounts of data reports were being assessed and analysed together with the audit company. In terms of the national waste management strategy goals, there were concerns around transformation of the sector and empowerment of previously disadvantaged individuals as contained in the Act and Waste Bureau – these concerns were included in the conditions for whether a plan would be approved.
Mr Radebe also sought more information on moving the date for the collection of the tyre levy to 1 February 2017. How far was the progress in implementing action plans for specific landfill sites?
Mr Gordon said he did not have the full rationale behind the decision of the Minister of Finance to change the date for collection to 1 February 2017 – the decision was made just before the end of September 2016.
The Chairperson noted that he did not hear mention of it in the Medium Term Budget speech but noted that it might be alluded to in the 2017 budget speech. It might be best to conclude that there was not absolute clarity on the decision.
Mr Gordon outlined that Members could look at the media statement made by the Ministry of Finance where the initial date of 1 October was postponed.
The Chairperson understood that the levy was being processed by the Standing Committee on Finance and once there was finality, the final date would be received.
Mr Mabilo noted the progress made with the implementation of the industry waste plans – he was personally deeply encouraged by the progress. He was interested in the timeline envisaged for the rollout of the other waste streams referred to in the context of effective utilisation of waste and the economic benefit of waste such as empowerment, job creation, enterprise development etc. He concerned the separation of waste at source to be a low-hanging fruit because at many locations, like airports for example, waste was separated at source with the different colour-coded bins. This mattered most at residential areas– the progress made with separating waste at the source of homes was moving at a snail’s pace. When would a pilot be launched to encourage this for it to be rolled out? It was not difficult to explain to people that different waste materials should be placed in different colour-coded bins – if progress was slow at this level what did it say about higher levels? He wanted to know if there was a projection of what Treasury stood to collect, per annum, from the waste tyre levy when it became operational. Would the funding for the environmental sector improve if the environmental levies were ring-fenced? If yes, were there talks between DEA and National Treasury in this regard? He understood if some of these matters were too sensitive to be responded to.
Mr Gordon answered that with the progress made with waste streams, around 40 waste streams were identified and as society evolved and became more modern and complex, about 300 new synthetic chemicals were introduced into the world each month – with this came new products and with that came new complex waste streams. Streams were prioritised according to the size of the waste stream, impact and volume going to landfill sites. The primary focus was to divert waste from the landfill site where landfill disposal was the very last option. Other waste streams being prioritised were plastic bags with the levy introduced, glass bottles where there was a very high recycling rate linked to them, collect-a-can also with a high recycling rate, plastic bottles which could be recycled over 100 times being managed by private companies etc. There were lessons to be learnt from the first industry plan and REDISA tyre plan and these lessons would be applied to anticipated plans. The total amount for the tyre level projected could be made available to the Committee.
The Chairperson noted that the separation at source was happening at most areas and countries as it was something that did not require extensive infrastructure to begin to rollout. At times he thought the separate bins were not properly marked and he felt there was not enough being put into this space. This could even occur at government and other functions but did not seem to be prioritised. He felt that the long periods of time to register and submit plans to be ridiculous – it was a matter for the Department to really look into and industry should be engaged if necessary. Was the Department also certain that all money to be collected by SARS would be reinvested into the industry to move towards a green economy taking into account that there was no ring-fencing? Perhaps the speed of operationalising the Bureau needed to be speeded up to begin taking into account all these intricacies.
Mr Gordon agreed with the concerns around the separation at source – a number of models had been researched and a number of models had been instituted for separation at source but the question was what happened to the separated waste streams. The question was if local government was organised with the backend infrastructure to deal with the separated waste. Radical transformation was needed in the value chain for local government to rethink the way waste managed – it was not efficient to have a large truck that used a huge amount of diesel and was expensive to maintain, pick up waste and transport it 40 kms away to a landfill. A model used in Australia was for homes to have two bags – one for recyclables and one for non-recyclables. This would require a change in the vehicle fleet to bring in smaller vehicles because the emphasis was on volume not weight. Kitchen waste, or organic waste, was an issue of weight while recycles were an issue of volume. These were the kinds of discussions to be had with local government – a pilot programme was launched in Tshwane on waste separation at source. A separation at source guideline or by-law was a function of local government. While DEA could enforce separation at source legislation, the issue would then be the local-level infrastructure to manage it. The opportunity should be taken to relook the value chain in terms of enterprise development, SMME development, co-operatives, public-private partnerships, beneficiation before moving to disposal. He would consider the concerns of the Chairperson around the long period for registration and submission of plans – the final Notice had not yet been submitted.
Ms Limpho Makotoko, DEA Chief Operating Officer, added that with the two year timeline, there were processes which could run concurrently to shorten the period to at least 12 months and not 24 so that one did not have to wait until the registration was done.
The Chairperson supported the idea of 12 months because 24 months was too long. The Committee was considering whether waste management should be the subject for interrogation in the next Committee colloquium in January/February 2017. The colloquium was a good learning platform for Members and those in the industry for the discussion of new ideas. The Committee’s colloquium last week was on climate change were papers were presented on the effectiveness of mitigation strategies as part of the response to climate change and it raised interesting points especially for those in the policy development/implementation space. It might be useful for the Committee to get advice on the publication of REDISA annual reports – the Initiative was a non-profit-one which was performing a public function. It was empowered by a plan approved by the Minister and the plan had been provided for in the legislation as an Act of Parliament i.e. these operations were occurring in a public space. There was also the inclusion of levies paid for by the industry in terms of legislation which further added to the public nature in which the function was performed. This was why he did not see why the reports of REDISA could not be subject to public scrutiny but advice would be sought. There was then a possibility that REDISA could be invited to the Committee to brief Members on the issues on annual reports etc. but this would be only once the Department had concluded its performance review. The Committee would also need to be briefed on the outcomes of the review.
Mr Gordon pointed out that DAE had also embarked on the Phakisa process for waste management as had been done with oceans and biodiversity.
Briefing by the Department of Environmental Affairs on the Second Quarter Performance Report for 2016/17 Financial Year
Ms Esther Makau, DEA CFO, took the Committee through the financial performance of the Department for the second quarter of the 2016/17 financial year. The presentation covered expenditure for the said financial year per programme, detailed current expenditure, detailed expenditure on consultants, contractors and agency services expenditure and detailed expenditure on current other operating expenditure. Members were also informed of payment for professional bodies, membership and subscription fees, payment of capital assets, allocations and transfers to DEA entities and allocations and transfers to other agencies. The presentation also outlined allocations and transfers to environmental public works projects and foreign aid assistance. Also discussed was the second quarter performance for the DEA entities including allocation to public entities and own revenue for the year ended 30 September 2016, public entities revenue and expenditure as at 30 September 2016 and public entities surplus (deficit) as at 30 September 2016.
The Chairperson saw the statement from the Standing Committee on Public Accounts (SCOPA) that the Department would be appearing before it – when was the meeting occurring? Was another delegation sent?
Ms Makotoko answered that the Department tendered an apology to SCOPA because it wanted a response on why the Annual Report was not tabled. The Minister had sent a letter on the reasons for late submission and it was indicated that there were still engagements with the Auditor-General of SA. It was hoped that the Annual Report would be tabled by the end of November.
The Chairperson indicated that SCOPA might not be pleased about non-attendance of the Department. He was no convinced about the expenditure on the working for fire programme for quarter two as the Committee heard last week – was equipment procured every financial year? The Committee might require a detailed briefing on this by the working on fire programme along with the detailed report on the experience in Canada. He emphasised that explanation was needed for the expenditure on the programme for the two quarters of the current financial year.
Mr Mabilo noted that in 2014 the Committee received the chance to visit the green building head office of DEA and Members were impressed with just how “green” it was which represented value for money. He questioned the roll over funds for the Green Fund and sought more detail on how much DEA was contributing to the entities referenced. What was the reason for the Department at time disbursing monies late to the entities?
Ms Makau responded that DEA contributed R300 million to the DBSA Green Fund last year – the two processes involved where, one, the approval of projects to be funded and, two, using the surplus retained. She did not have the figure currently for the amount of money the Fund retained. The reviewing and approval of projects was a timeous process as it involved different board levels. DEA usually transferred funds towards the end of the last quarter because of the long process of approving green projects. With the late transfer of infrastructure grants, the challenge was the public entities not submitting their business plans on time. The grant was not operational in nature and therefore could not just be transferred so it was withheld until the business plans were approved.
Ms Makotoko added that very often the projects of the Green Fund were multi-year in nature.
The Chairperson asked how the process of funding worked. How did DBSA account to the Department on how the money was used?
Ms Makau indicated that money was received from National Treasury and then the Department transferred it as is to DBSA. With the accounting of funds, a number of DDGs sat on the board of DBSA as well as on the audit committee, of which she was a member.
The Chairperson questioned if this meant there was no direct accountability but rather accounting by virtue of DEA representatives sitting on the board.
Ms Makau clarified there was formal accountability where the DBSA submitted financial statements to DEA as well as through the Green Fund accounting to the DBSA audit committee. This was in addition to the DEA DDGs represented on the board and audit committee.
The Chairperson wanted to understand better – DBSA was responsible for administering the Fund through allocations from DEA? Was funding also received from other departments?
Ms Makau explained the Green Fund only received funding from DEA.
The Chairperson asked if the DBSA was then responsible for compiling the detailed reports and statements of the Green Fund. Was this correct?
Ms Makotoko affirmed this. DBSA would get its financials audited inclusive of the Green Fund while DBSA submitted to DEA the audited report on the Green Fund – this formed the check and balance in terms of accountability.
The Chairperson thought what was of interest was how the Green Fund was utilised and how the DBSA was an implementing agent on behalf of the Department on the Green Fund. Also of interest were the projects initiated etc. This was information to be received from the DBSA. The Committee would invite both the DBSA and DEA to jointly brief Members on the Green Fund itself. On the environmental programmes, he wanted to know what action was currently being taken to avoid a repeat of the problem experienced with the AG in the 2015/16 financial year – the same challenge could not be seen in the current financial year.
Mr Hadebe was grappling with the issue of the AG and the accounting office in terms of the modified cash standards – what was the discrepancy between these two offices which currently led to the Annual report not being tabled. The Committee needed to be equipped with the facts as to what was really the issue.
Ms Makau replied that the problem had existed for two years – the Treasury modified cash standards for transferring funds were being used by the Department with the assurance that the entity the Department was transferring to was complaint with the relevant Treasury regulations in terms of audits, reporting etc. The funds were also not just dumped – the audit committee, project management, quarterly reporting, annual reporting and financial statements were all assessed. The same challenge arose last year but the departure opinion was reversed by the AG. For the 2015/16 financial year, the AG said that DEA had a departure for the second time and it was thus being qualified. There was disagreement between DEA and the AG with going on tender for expanded public works projects (as the AG was in favour of) – DEA had its own quantity surveys for projects and the Department did not want to be overcharged by the private sector. DEA argued that it should be audited against the Treasury regulations as DEA was dealing with the outputs. Some of the projects had already begun many years ago, some in 2003, being approved by Treasury back then. The emphasis then was not just on providing grants but teaching and training individuals. The transfers covered accredited training, non-accredited training, wages, clothing and transportation as part of expanded public work projects. The AG argued that these matters should go on tender instead of receiving transfers. A draft determination was provided to the Minister of Finance to outline that the AG should prove DEA was dumping funds or correct the conflict. The Chief Procurement Officer also reviewed the supply chain of how the Department employed the implementing agent and found the processes to be correct. Having seen that the Minister would not accept the qualified audit, the AG then began discussions with the accounting office.
The Chairperson thought the information was detailed and so necessitated a briefing by the Department to the Committee on the modified cash standards and why DEA was not able to comply. According to the AG, the modified cash standards were introduced three years ago and for two consecutive years, DEA was receiving an exemption from complying with the standards and according to the AG, the last exemption was clear that it would be the final one for the Department. The Department of Human Settlements was experiencing a similar exemption with the transfer of funds for the building of housing – the modified cash standard was however not applicable in this case because the asset would eventually belong to the beneficiary. The issue would have to be finalised through the DGs forum. The Committee was interested in understanding how the Department did not comply with the modified cash standards and how to avoid possible conflict with the AG – this necessitated the need for a detailed briefing with reports in writing.
Mr Hadebe agreed because the situation needed to be resolved so that the same occurrence was not repeated in the audit of the current financial year and caused the Annual Report not to be tabled. A report back on the progress made resolving the matter was required.
Mr Makhubele emphasised that resolving the matter with the AG should not be prolonged.
The Chairperson said the Committee wished to see the matter resolved – if it was resolved before a detailed briefing on the challenges was arranged, the Committee could be briefed on how it was resolved.
Ms Makotoko outlined that in the last engagements with the AG, an arrangement was reached on how to reach the standards – the CFO was merely providing background to the challenges experienced in terms of classification. Common ground with the AG was since sought and the matters were being reclassified for the AG to re-audit the Department.
The Chairperson said a briefing could be provided when the Annual Report was tabled. The view of the Committee was that the Department worked smoothly and three of the entities received unqualified, clean audits and the Committee was hard on the environmental portfolio to achieve sound performance and obtain unqualified, clean audits. There was reason for the Committee to worry when matters did not seem to be running smoothly – the Department could not afford to drop the ball which explained the importance of the briefing so that the same challenges were not repeated in the current financial year. Apart from that, the financial and general performance of the Department was pleasing thus far.
The meeting was adjourned.
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