DIRCO & African Renaissance Fund on Quarter 1 performance

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International Relations

30 November 2016
Chairperson: Mr M Masango (ANC)
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Meeting Summary

The DIRCO Audit Committee, an external body, reported that meeting with DIRCO on the turnaround strategy to address the Auditor-General’s audit findings and qualified audit opinion would only take place on 6 December, so it would be difficult to make any comments before that meeting. The Audit Committee would only be able to report back after that meeting. The Committee was not happy that since DIRCO’s 16 October undertaking to do so, this meeting had still not taken place.

DIRCO said the meeting was scheduled for 6 December because that was the only date where members of the Department and Audit Committee were available. National Treasury has been engaged with regard to the projected shortfall arising from the currency fluctuations in 2016/17. Asset management plans for 20 state-owned properties had been developed and approved. The filing of senior management performance agreements by the due date of 31 May remained a challenge. The Department said there had been a trade balance surplus of R12.53b which was an improvement from the surplus recorded in June 2015 of R4.64b. Exports totalled R105.22b and imports R92.69b. South Africa had engaged at the highest strategic level on regional and global security issues including terrorism and the Middle East Peace Process and high level visits were held with Syria, Lebanon, Jordan, Qatar, Iran, Gabon, Venezuela. Only 23 out of 40 planned trade and investment seminars were held while only five out of a planned 15 tourism promotion events were held.

The budget of the Department of R5.8b was less than the previous year’s R6.5b. In Program 1 – Administration, there was under expenditure due mainly to outstanding invoices for capital projects and for rental payments. In Program 2 – International Relations, the budget for the quarter was R907m but it had spent R1.06b which was 17% over budget and this was mainly due to the depreciation of the rand against major foreign currencies. The projected spend based on depreciation was R1.7b. A big issue was that the Department had plans, but if there were no resources to implement them, it would be problem. The main area affected by the budget cut was the compensation of employees. The Department was also looking at reducing the payment of voluntary membership fees and the value it derived there from. The locally recruited staff establishment was also affected and 193 posts were abolished, as well as the establishment of transferred staff where 72 positions were abolished. Within South Africa, 148 vacant funded posts were also abolished so as to remain within the compensation budget.

The Department also reported on the performance of the African Renaissance and International Cooperation Fund (ARF) which had added two indicators to its performance indicators since the previous year. There were 15 active ARF projects totalling R948m which were being monitored.

Members asked who had been given the responsibility of convening the Department’s meeting with the Audit Committee. Was the development of asset management plans for the 20 State owned properties in response to the audit findings and what was the selection rationale? Were the 20 properties in areas where there were missions? What role was labour playing in the abolishment of posts process? Members said the Audit Committee’s role was to ensure that serial audit issues were addressed and it was unacceptable that they had not met with the Department yet. The Committee’s first meeting in 2017 should be to meet with the Audit Committee. Where was the process regarding allegations against the CFO? What was the value and benefit to South Africa of high level visits to volatile places such as Syria? How far was the Department in reviewing AU contributions? What was the cost of AU membership and how was it engaging with Treasury to get the money? Members said it was a concern that DIRCO spent R1.06b on Programme 2 in Quarter 1 when its budget was only R907m. It was unacceptable that senior managers had not signed performance agreements on time and they should not be paid bonuses. Members said the good trade balance figures should be broken up further so that one could identify how much beneficiated goods and how much raw materials were leaving the country. Members said more should be done to promote tourism. Members wanted more information on what the Deputy President had done about the deteriorating situation in Lesotho, where its parliament could not sit. The abolishment of posts to accommodate for the budget overspend in Programme 2 was a concern as it was equivalent to job losses. Members wanted clarity on what the R7m ARF funding to the DRC and Angola was for and how far the project was. How many ARF projects did South Africa have that were monitored? How far had ARF’s mode of operation changed so that it could be more proactive and not wait for a country to request assistance? Members said Syria needed South Africa’s support but the Committee needed the details of such support. Members said it was a concern that the Palestinian issue was not highlighted and very little was said about Palestine. What mediation was happening regarding the Palestine issue and what mediation was happening in other areas like Lesotho? Members asked for a report on what happened to the CFO. Members said the DIRCO had to engage with Treasury to factor in the depreciation in the currency. Members wanted to see short term and long term solutions being developed for the challenges facing the Department.

Members said that the Committee needed to know how the objectives of the NDP, BRICS, SADC and other multilaterals were advanced on a quarterly basis otherwise the Committee would be dragged down into reviewing administrative issues only. The Chairperson said there had to be political principals present at the meeting to cover the political aspects of the DIRCO’s work because in the current format it was perfunctory.
 

Meeting report

The Chairperson said it was odd to be looking at the DIRCO Quarter 1 performance report six months afterwards but that this delay was due to the municipal elections.

Mr Mashile Mokono, DIRCO Audit Committee deputy chairperson, reported that it had met on 16 October with the Committee where it was agreed that before end November the Audit Committee had to give a report on its audit action plan for the audit findings of the Auditor General (AG) and a turnaround strategy, especially to address the qualified audit opinion of the AG. He said the Audit Committee was an oversight body, not an internal body. The Audit Committee was negotiating with the Department’s management on holding a workshop which would include the assets and heritage assets which were a huge challenge to the Department which needed to put a revolutionary process in place, given the mammoth data that had to be worked through. This meeting would only take place on 6 December, so it would be difficult for him to make any comments. With regard to the Quarter 1 Report, the Audit Committee had had engagements and made its inputs. One critical issue was the turnaround strategy to address the AG’s findings. The Audit Committee would only be able to report on this after the meeting of 6 December.

Mr Kgabo Mahoai, DIRCO Acting Director-General, explained the availability of members determined that the meeting be scheduled for 6 December.

Ms H Bhengu, DIRCO Acting CFO, said that the Department had overspent the 2015/16 budget by R134m due to foreign currency fluctuations and a similar impact was anticipated in the current financial year. National Treasury has been engaged about the projected shortfall arising from the currency fluctuations. Asset management plans for 20 state-owned properties had been developed and approved. The filing of senior management performance agreements by the due date of 31 May remained a challenge. The national interest was pursued through bilateral engagements and the overall result was a trade balance surplus of R12.53b which was an improvement from the surplus recorded in June 2015 of R4.64b. Exports totalled R105.22b and imports R92.69b. South Africa had engaged at the highest strategic level regarding regional and global security issues including terrorism and the Middle East Peace Process and high level visits were held with Syria, Lebanon, Jordan, Qatar, Iran, Gabon, Venezuela. 23 out of 40 planned trade and investment seminars were held and attended so as to promote South Africa as a trade destination and to promote government priorities. Five out of a planned 15 tourism promotion events were held where the emphasis was on increased exposure of SA as a tourist destination and the preferred destination for business and leisure.

The budget of the Department of R5.8b was less than the previous year’s R6.5b. In Program 1 – Administration, there was under expenditure due mainly to outstanding invoices for capital projects and for rental payments. In Program 2 – International Relations, the budget for the quarter was planned for R907m but the Department had spent R1.06b which was 17% over budget and mainly due to the depreciation of the rand against major foreign currencies. The projected spend based on depreciation was R1.7b. The Department did have plans to contain costs and remain within the allocated resources and had had discussions with Treasury for assistance to take into account the depreciation of the currency.

She said supervisors had ensured that outstanding senior management performance agreements were subsequently filed.

The big issue was that the Department had plans, but if there were no resources to implement them, it would be a problem. The Department’s budget in 2015/16 was R6.5b and now had a budget of R5.8b in 2016/17. The main area affected by the budget cut was the compensation of employees. Currently the ceiling for compensation was R2.8b but the establishment of the Department required R3b, so either people would be retrenched or vacancies would not be filled. Capital infrastructure projects abroad had been rescheduled and the Foreign Service basket of goods was reviewed to be in alignment with other foreign ministries. The Department was also looking at voluntary membership fees and the value it derived from them. The locally recruited staff establishment had 193 posts abolished; the transferred staff establishment had 72 positions abolished and 148 vacant funded posts in SA were abolished so as to remain within the compensation ceiling.

Mr Mahoai emphasised that only posts that were vacant were abolished. Organised labour said however that it was retrenchments.

African Renaissance and International Cooperation Fund (ARF) Quarter 1 performance
Ms Bhengu said the African Renaissance and International Cooperation Fund (ARF) had added two indicators to its performance indicators of the previous year. It had disbursed R1.2m for a rice and vegetable production project in Guinea (Conakry), R417 000 for a Namibia drought relief project and R199 258 for transportation of humanitarian assistance to Madagascar which was done via the Gift of the Givers Foundation.

ARF had started the financial year with a balance of R2.3 billion, had approved grants for 2016/17 of R17m and as at 30 June 2016 had a balance of R1.4 billion.

Discussion
Mr M Maila (ANC) asked who had been given the responsibility of convening the Department meeting with the Audit Committee. He said that if this meeting was left open and did not happen then there would be problems in the future. He said the percentage figure given for lodged grievances was incorrect. Was the development of asset management plans for the 20 state owned properties in response to the audit findings or not? What was the selection rationale? Were the 20 properties in areas where there were missions? He said some targets had not been achieved because they were dependent on other people. What role was labour playing in the abolishment of posts process?

Mr S Mokgalapa (DA) said the Audit Committee’s role was to ensure that serial audit issues were addressed. The Committee’s first meeting in 2017 should be to meet with the Audit Committee. It was unacceptable that they had not met with the Department yet. Could the Department brief the Committee on where the process was regarding allegations against the CFO? What was the value and benefit to South Africa of high level visits to volatile places such as Syria? How far was the Department in reviewing AU contributions? What was the cost of membership and how was it engaging with Treasury to get the money? It was a source of concern that the Department spent R1.06b on Programme 2 in the first quarter when its budget was only R907m. It was unacceptable that senior managers had not signed performance agreements. They should not be paid bonuses and if they were, the criteria used should be given to the Committee.

Mr B Radebe (ANC) said the Audit Committee had to give a full report on the work they did. He said the good performance in terms of the trade balance figures should be broken up further so that one could identify how much beneficiated goods and how much raw materials were leaving the country. Noting that only five tourism events had been held, he said more should be done to promote tourism. He wanted more information on what the Deputy President had done about the deteriorating situation in Lesotho where its parliament could not sit. He said the abolishment of posts to accommodate for the budget overspend in Programme 2 was a concern as it was equivalent to job losses.

Mr Mokgalapa wanted clarity on what the R7m ARF funding to the DRC and Angola was for and how far the project was. How many ARF projects did South Africa have that were monitored?

Mr Radebe said ARF’s problem was that it had to wait for the finalisation of funding proposals. How far had its mode of operation changed so that it could be more proactive and not wait for a country to request assistance? He said Syria needed South Africa’s support but the Committee needed the details of such support. He said it was a concern that the Palestinian issue was not highlighted. He asked for a report on what happened to the CFO.

There was then a discussion on when to hold the meeting with the Department to discuss the Quarter 2 performance report and the Audit Committee’s report.

The Chairperson said that in the absence of the political principals, he did not know how it would be done, but the Committee needed to know how the objectives of the NDP, BRICS, SADC and other multilaterals were advanced on a quarterly basis otherwise the Committee would be dragged down into reviewing administrative issues only. It had to be addressed even if the political principals were absent. He asked how the Committee would know if the six media briefings were fine. Were the briefings benchmarked? The number of briefings should increase. He said very little was said about Palestine. What mediation was happening on the Palestine issue and what mediation was happening in other areas like Lesotho? What was meant by unitary fees? On Programme 2 expenses being higher than budgeted for because of the depreciation of the rand, he said the Department had to engage with Treasury to factor in the depreciation because every year the Department’s budget was short by R700-R900m. He wanted to see short term and long term solutions being developed for the challenges facing the Department.

Mr Mokono said the members of the Audit Committee were external people and not part of the Department so the Audit Committee relied on the Department’s internal audit reports submitted to the Audit Committee. He said the Audit Committee accepted that it was its responsibility to push that the meeting with the Department take place. The Audit Committee was the oversight body and assisted the Department by ensuring that the Department’s plans were achievable and compliant. The Audit Committee was not an operational body so it could not give the plans to the Department. The Audit Committee would make itself available for an oversight meeting with the Committee. The quarterly meetings should be of value so the Audit Committee would only report on its own responsibilities.

Ms Bhengu said that the Department had responded to an audit where the AG had identified properties that were unused and queried how it would be put into use. Currently the Department did not have enough money to construct. The ideal was to construct South Africa’s own buildings on land that it owned but R250m was not enough for construction abroad. It was looking at testing a finance lease model, utilising the New York project as a pilot and would then roll the model out to other projects. On the number of properties, she said it was arrived at by looking at the strategic and economic importance of the countries where SA had land available. It was spread across Asia, America and Europe.

On what could be done about the budget overrun for Programme 2, she said that even in the beginning of the financial year after the budget had been received, the Department had looked at what could be achieved in terms of reducing the budget. The annual performance plan was relooked at to reduce the number of items that needed to be achieved as well as what needed to be prioritised and what could be delayed as well as the compensation of employees. In the future, there would be midterm reviews for all missions.

On currency fluctuations, she said it was not something that the Department was not aware of. The Department had always projected it. Treasury’s response had always been that it would see at the midterm review what Treasury could afford in terms of compensating for the fluctuating currency. Treasury therefore was fully involved in assisting the Department, even in calculating the projections for the year.

R172m was needed for the AU memberships fees which was requested from Treasury, but Treasury could not afford the R172m so the Department was looking at cutting down on voluntary memberships to find the money to fund critical memberships. The Department was still in discussions with Treasury.

The unitary fee was a finance lease payment for property which included an interest component.

The Department did budget for increases in cost of living allowance in foreign allowances but it was just a question of the timing of when the increases were announced. The cost of living allowance was decided by an inter-ministerial committee and was applied retrospectively. It wanted the cost of living allowance to be for a three-year period like the cost of living adjustment for public servants.

There were 15 active ARF projects totalling R948m which were being monitored.

The R7m was for the tripartite office of the DRC, South Africa and Angola and it was assisting with getting stability in the DRC by monitoring the development projects like the Grand Inga project in the DRC.

Ms Bhengu said the ARF Secretariat was not present at the meeting because it was out in the field doing its monitoring work at that time.

On targets not being achieved due to the Department being dependent on other parties, Mr Mahoai said the comment was true. Only in the last three years was performance information factored into the annual performance plans and therefore audited. Targets had been set and the indicators were done on a trial basis. Some of these targets were very dependent on other factors and this was being addressed in conjunction with the DPME so that the targets could be reviewed, while still retaining the elements the Department needed.

On the abolishment of vacant posts, Mr Mahoai said the Department was not restructuring. It was only dealing with vacant posts that have been vacant for a long time and it was being done because constraints in the economy had resulted in budget cuts.

On the query of the lodged grievances and of the CFO, Mr Mahoai said that DIRCO was undertaking an investigation into the CFO which commenced on 31 October. The investigation had asked for an extension in the time period which had been granted. The investigation was to guide the Department’s actions.

On the senior management performance agreements, Mr Mahoai said that public service regulations required members to file the agreements by the latest, two months after the commencement of the financial year. However, it was at a time when new structures were being implemented in the Department. Of those who had not handed in on time, many had made representations. Three or four of those had not given substantial reasons for not handing in on time and were given written warnings. Everyone had handed in one month later. The policy was very clear no performance agreement meant no assessment and therefore no bonus.

Mr Mahoai said the Lesotho situation had taken a new dimension from what the SA facilitator was busy with. South Africa’s policy was non-interference, so it was monitoring the situation and the facilitation process was still taking place.

Mr Mahoai said Syria was part of high level engagements. The engagements dealt with the Middle East peace process and terrorism, and were not meant to be held to gain economic benefit.

Mr Mahoai said that while there had been no reference to Palestine, the Department would be dealing with Palestine and the Sahrawi issues.

He said DIRCO had not engaged with the BRRR yet but the Department did find that it assisted them in their work and the Department would be submitting a report on the matter.

The Chairperson said there had to be political principals present at the meeting to cover the political aspects of the DIRCO’s work because in the current format it was perfunctory.

The meeting was adjourned
 

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