Department & African Renaissance Fund on their Quarter 3 & 4 performance

Meeting report

The Chairperson noted apologies from the Minister Maite Nkoana Mashabane who could not attend due to other prearranged commitments and Deputy Minister Llewellyn Landers. The Chairperson asked the Director General that at a time of her choice and convenience, the Minister must make time to have a political discussion with the Committee on any subject internationally.

He said there are times when they will call the Minister for details about her work in DIRCO and other operational matters but there are political discussions which they would like to have. For example, why things are happening the way they are happening in Germany, Lesotho, Brazil, Russia, India, China and South Africa (BRICS) to provide a better political context at leadership level. Members of this Committee cannot just rely on the Department but need a greater depth of understanding and they should make the Minister feel comfortable so that the Minister does not feel as if every time the Ministry is called in, they are there to be condemned; but rather the Committee should talk with them.

Department Quarter 3 & 4 performance
DIRCO Director General, Mr Kgabo Mahoai mentioned that in this report they have tried to compress the details. He introduced the Deputy Director General (DDG): Diplomatic Training and Research, Mathu Joyini; Head of the ARF Secretariat, Dineo Mothlako; Chief Financial Officer, Caiphus Ramashau; Chief Director: Strategic Planning, Ms Delore Kotze, and Chief Risk Officer, Ms Motshabi Modukanele.

Budgetary Review and Recommendations Report (BRRR) implementation
Mr Mahoai referred to the Portfolio Committee’s Budgetary Review and Recommendations Report (BRRR) of October 2016 which recommended how DIRCO can strengthen its management administration systems and processes. DIRCO had commenced with implementation of the recommendations as follows:

With reference to training, they can report that training has been conducted in collaboration with the National School of Government on government accounting, including budget and cash flow management. They are still to do further training with officials in finance on Mission Account Analysis. With regards to mission administration, a new curriculum is being revised for more efficiency in Financial Management by those officers that have been posted to missions. A lot of audit findings were being made which is the reason there was a sense of lack of capacity amongst officers.

On the identification of Heritage Assets, they have collaborated with National Treasury to develop an assessment framework on works of art which was utilised to identify heritage assets in London because London is the place where 70 – 80% of the country’s heritage assets are located. In this they were supported by the National Museum of Cultural History in Pretoria whose expertise was very handy when they looked at all the characteristics and physical verification of assets. It is important to have an asset management system to assist them with compiling a credible asset register.

While this is work in progress, DIRCO is satisfied that the system has eliminated a lot of problems which they experienced in the last three financial years that were audited. On “locally recruited personnel” (LRP), they do have an LRP Review Task Team and it has started working on benchmarking. Locally recruited personnel are appointed in terms of the local law which means the legislation of these 126 countries are not one size fits all. The LRP Manual addresses mission specific conditions of employment for each one of their missions abroad. When completed, this manual will form part of the framework for the contract of employment of LRPs. He hopes that by December 2017 the manual will already have been developed.

He noted the Committee’s recommendation to liaise with the South African Reserve Bank and National Treasury on mitigation options to address the challenges brought on DIRCO by foreign exchange fluctuations. Tthe outcome was that Treasury will revise the budget exchange rates in line with the performance of the economy for the two years. For the current financial year, DIRCO has been provided additional funding to augment the budget although it is not exactly what they had requested. They recorded a shortfall of R1.3 billion but they were given R950 million which means over expenditure will be very minimal.

Other recommendations pertain to DIRCO Risk Management Unit structure. They have capacitated it accordingly and he believes this will improve their risk management capacity to the extent that they will identify, mitigate and treat risks as they appear.

The Chairperson commended the Director General for explaining progress on the BRRR. There were a set of recommendations as well as recommendations from the Auditor-General (AG) on risk management and asset management. It does not look like all of them but the principal issues are being dealt with by DIRCO under the DG’s leadership. He is happy with the progress.

Performance for Quarter 3 and 4
Ms Delores Kotze, Chief Director: Strategic Planning, DIRCO, provided the performance information which highlighted some compliance issues. They used a rating system where Green means it has been achieved in its totality while yellow means 75% plus and less than 75% is a red rating. One of Treasury requirements is that they must set up a demand management plan that plans their procurement for the year. They have achieved for quarter 3 and 4 a 100% alignment. They reported 100% processed invoices paid within 30 days of receipt of invoice. For quarter 3 it was 99% while quarter 4 was down to 86% of processed invoices within 30 days. The reason they were able to process only 86% is because they received a large amount of invoices towards the end of the year which made it difficult for them to make payment for all the invoices.
When they come back to the committee they will show that they have it up to about 93%.

DIRCO set 100% target of 30 days for handling lodged grievances. In the third quarter the three lodged grievances were handled within 30 days while in the fourth quarter two lodged grievances were handled within 30 days. On the filling of posts within four months after advertisement, 97 posts were filled in quarter 4 of which only two were filled within the two months turnaround time. The other 95 posts were filled after four months due to slowed down recruitment processes resulting from the ceiling placed on the compensation of employee budget. On disciplinary cases being finalized within 90 days from date initiated, one disciplinary case in quarter four was finalized beyond 90 days due to unavailability of relevant stakeholders.

On training, they had a target of 25 programmes but only 24 out of the 26 training programmes were implemented for quarter 3 while for quarter 4 they implemented 19 training programmes.

On stakeholder engagement their research unit brings stakeholders together to talk about various international developments and from that they draft policy briefs for their principals. The three targeted engagements held in quarter 3 included: European Union Cooperation, South Africa (SA) – Pakistan and strengthening South Africa’s foreign policy. The targeted engagements held in quarter 4 were reinvigorating South Africa’s leadership role in the UN Human Rights Treaty Monitoring System and international relations strategy for South African small business. They have developed research papers for both the third and fourth quarter. If one looks at their overall ratings, they have achieved their targets.

Programme 2 deals with international relations which means that national interests are pursued through bilateral engagements such as the structured bilateral mechanisms, the high level visit and the various economic diplomacy initiatives undertaken at missions. DIRCO continues to accelerate its economic diplomacy and through diligent work in this area, they are growing regional, continental and global trade and investment. This has brought about increased sales of manufactured value – added exports by R61.9 million which brings the cumulative total for the year to R4.167 billion. Foreign Direct Investment (FDI) inflows pipeline represents potential FDI of R15.3 billion particularly in the energy and chemicals sector. This brings the total FDI to R50.232 billion. A total of 10 044 163 international tourist arrivals excluding transits were achieved during the reporting period and a total of about R75.6 billion tourist foreign direct spend was achieved in the period January to December 2016.

Twelve out of the 14 structured bilateral mechanism targets were achieved in quarter 3 and the remainder not achieved was due to the unavailability of counterparts. And in quarter 4 three were targeted and achieved to promote national priorities. On 14 high level visits and engagements to promote national priorities, only 6 out of 14 high level visits were undertaken in quarter 3 due to it being late in the calendar year while in quarter 4 the 9 targeted visits were achieved. On trade and investment seminars, of the 28 targeted, 45 were held and attended to promote South Africa’s National Development Plan (NDP) in quarter 3 and of the 20 targeted in quarter 4, 30 were held and attended promoting priority sectors such as agro processing, automotive sector, engineering, ICT, energy, financial services and Operation Phakisa.

On engagements with chambers of commerce, 32 out of 48 engagements with Chamber of Commerce were held in quarter 3. The 16 not held were due to unavailability of stakeholders. And in quarter 4, of the targeted 20; 41 engagements were held with the Chamber of Commerce. On bilateral meetings held with targeted government ministries, of the 18 targeted; 31 were held in the third quarter and in the fourth quarter 12 were held of the targeted 10. In the third quarter only 23 of the 30 targeted meetings held with potential investors where investment issues were discussed. And in the fourth quarter only 17 of the 22 targeted meetings were held. Although quarter 3 and 4 targets are not met, the annual target will be achieved. In tourism, of the targeted 20, 32 tourism promotion events in quarter 3 were held where emphasis was on increased exposure of SA as a tourist destination. In quarter 4, of the targeted 12, 18 tourism promotions were held and additional opportunities were identified by the missions.

For peace and stability, socio economic development and good governance and democracy, in quarter 3 the three scheduled meetings were not achieved and they are meetings not convened by the secretariat. These include the SADC - ICGLR (International Conference for Great Lakes Region) ministerial meeting, the SADC - ICGLR Summit and the ministerial task force meeting on Regional Economic Integration. In the fourth quarter the SADC Council of Ministers Meeting took place from 15 - 16 March in Ezulwini. The focus areas in the sub-programme for programme 3 which deals with International Cooperation were the promotion and protection of human rights, and disarmament, nuclear security and non proliferation. The achievements in the third quarter include the fact that SA continues to negotiate and influence the outcomes at various multilateral meetings such as the 33rd session of the UN Human Rights Council (HRC) and contributing to a ground breaking achievement by developing countries to establish a mandate for a Special Rapporteur on the Right to Development. SA promoted peaceful uses of nuclear energy at meetings such as the Eighth Review Conference of the Biological Weapons Convention, the 5th Conference of the Convention on Certain Conventional Weapons (CCW) and the Conference of the parties to the Conference on Biodiversity.

In the fourth quarter, SA was able to negotiate and influence the system of global governance to advance SA’s national interest and the interests of the African continent at two multilateral meetings which are the World Economic Forum (WEF) Summit where the key focus was attracting foreign investments to SA and the 34th session of the United Nations Human Rights Council. In Continental Cooperation, SA participated in the 59th Session of the African Commission on Human and Peoples Rights (ACHPR) in Quarter 3 while in Quarter 4 SA advanced the African Agenda through participation at the 28th Ordinary session of the AU Assembly to promote peace and stability, socio economic development, good governance and democracy.

SA is engaged in structures and processes of organisations of the South to contribute to and advance common positions of the South. In Quarter 3 SA’s foreign policy positions were represented and reflected at meetings such as the 8th BRICS Summit, the 18th meeting of the Committee of Indian Ocean Rim Association (IORA) Senior Officials, the meeting of Sherpa in Goa and the 16th Council of Ministers. While in Quarter 4, SA participated in the IORA Leaders’ Summit and the First BRICS Sherpa and Sous-Sherpa meeting with China chairing. In quarter 3 a 100% of requests were responded to for protocol services which includes 7020 visits through the three State Protocol Lounges, 12 incoming and 10 outgoing international visits for principals, and 23 outgoing international visits for provincial (21) and local governments (9). In quarter 4 there were 6787 visits through three State Protocol Lounges, 6 incoming and 7 outgoing international visits for principals, and outgoing visits for provincial (60) and local governments (9).

On requests for consular assistance, in quarter 3 they attended to 175 (100%) of cases reported as per Service Delivery Charter while in quarter 4 they attended to 170 (100%) cases. In terms of legalisation of documents, in quarter 3 they legalised 11 356 documents as per service delivery charter and 13 556 in quarter 4. That this was the performance part of the presentation and stated that she will now over to the CFO to show how they utilised the money that made all these things achievable.

Financial reports for Quarter 3 and 4
Mr Caiphus Ramashau, DIRCO CFO, said the budget for the whole year was R1.4 billion. The money they requested was R1.3 billion yet they only received R900 million and that was given in Quarter 4, around March and this has had a big impact on spending. They had projected for International Relations R765 million but the actual expenditure was R879 million because of the Rand/Dollar exchange which they had to accommodate. For International Cooperation they projected R152 million but spent R129 million. On Public Diplomacy and State Protocol, their actual expenditure of R78 million exceeded that of the projected R62 million. The programme that had low spending was international transfers which had a projected expenditure of R32 million but actually spent R17 million.

Total expenditure reported was R1.4 billion while the projected was R1.3 billion, which was higher by 2.4% than the projected expenditure. The expenditure has variables one of them being the exchange rate which needs to be accommodated. In African Missions, they do not own any assets and they rent but those rentals are due 6 months in advance. In America and Europe they pay on an annual basis and the leases are manageable while in Africa the leases are not manageable. Actual expenditure for International Relations was R879 million while the projection was R815 million. This expenditure is after their mid-term reviews where they review their budget in order for them to remain within their budget especially when they deal with programmes which have not been funded.

The high expenditure for State Protocol is due to the international visits that they facilitated in Quarter 3. Overall, the spending in Quarter 4 was higher by 11.4% than the projected expenditure because Quarter 4 is when they receive allocation so they had to revise their spending to align with the available money. The variances in expenditure are due to the construction of the chancery and three staff houses in Lilongwe and Dar es Salaam completed in Quarter 4 and that is why actual expenditure exceeded the projected.

There are three reasons for the overspending because the expenditure was 71.4% higher than projected for the period. The first is ICT migration project expenditure, the second is the storage and insurance costs for officials transferred abroad and the third is the payment of the New York project in Quarter 4 instead of the first quarter of 2017/18. They bought a piece of land in New York on which they were going to do construction. In New York they not only pay for the land but for the air right (the extent by which the building rises into the atmosphere) for skyscrapers. So one pays for the extent by which they have a view.

The underspending in certain items was due to cost saving measures that DIRCO implemented for Missions and Head Office operation leases where it has revised rental norms for accommodation abroad in line with budgetary constraints as well as negotiated contracts. A number of lease contracts were concluded with no escalation for the tenure of 4 year-term but where it was not feasible only one digit percentage escalations were approved. Projected expenditure for Programme 3 was higher by 7.2% than actual expenditure due to cost containment measures that DIRCO implemented in missions abroad for rentals where DIRCO managed to negotiate a zero percent increase in some leases. For Programme 4 the expenditure was 18.7% higher than projected. The higher expenditure was attributed to international state visits undertaken in Quarter 4.

The area where they had challenges was Programme 5. As indicated, they have a new AU scale of assessment following the 25th Assembly of Heads of State and Governments which was hosted in Sandton which required that they have an assessment of self-reliance. This required their assessment contribution to be revised which included that SA needed to take on more of the AU budget and they are required to pay a levy in terms of the exports to other African countries. The matter is still under discussion with Treasury on how they deal with the modalities. They used to pay $16 million for AU membership and in 2017 the contribution is $25 million which they had to honour fully and not partially. This meant they spent more than they budgeted. In closing, he outlined the budget for the programmes of DIRCO: Administration, International Relations, International Cooperation, Public Diplomacy and State Protocols and International Transfers.

For Administration the expenditure was 99.6%; for International Relations, 100%; for International Cooperation 96.1%; for Public Diplomacy and Protocol Services 99.7% and for International Transfers 104.3% which means the variance was R6.4 million which is less than 1% of the budget. This means that they managed the budget well. He added that all these transfers are incurred at international exchange rates because they are subject to foreign exchange rates. Concerning the expenditure ceiling, their expenditure ceiling for 2016/17 was R3.071 billion while actual expenditure was R3.150 billion which means they exceeded the expenditure ceiling by R44 million. They have requested National Treasury to allow them to move funds under Goods and Services. This further meant that they must pay termination benefits, which increases the expenditure ceiling. The expenditure ceiling is subject to foreign exchange rates but they have put measures in place to ensure that they mitigate the expenditure ceiling.

African Renaissance Fund on their Quarter 3 & 4 performance
Ms Dineo Mathlako, Head of the ARF Secretariat, stated that in quarter 3 they did not receive any requests for funding. Their performance indicators include percentage of requests responded to, number of ARF structures and processes convened to identify and recommend projects, democracy and good governance, socio economic development, capacity building, cooperation with other countries and partners in various areas of development, percentage of project oversight committee reports, percentage of active projects monitored for compliance with the concurrence received and approved project plan, and percentage of closed projects with close out reports. The ARF Quarter 3 financial report showed on 1 October 2016 the cash in the bank was R2.4 billion while the accumulated surplus at 31 December 2016 was R2 billion.

In Quarter 4 they received two project proposals and both of them were processed. These projects are the training of Burundi diplomats and humanitarian assistance to South Sudan. There was variance in Quarter 4’s number of meetings because they had to hold an ad hoc meeting to consider the urgent request from South Sudan for humanitarian assistance. All projects in Quarter 4 complied with the concurrence received and approved project plans. She said that the rice and vegetable production projects in Guinea Conakry were closed. Cash on 1 January 2017 was R2.4 billion while the accumulated surplus was R2.1 billion.

Discussion
The Chairperson said as he was talking about international transfers he was thinking whether they should ask DIRCO what the implications are of being junk status and what the experience of other countries is and has been. When a country is in junk status they have to pay the same amount for UN and AU membership. He asked how junk status affects the country’s capacity to do certain things in this terrain.

Ms S Kalyan (DA) said on ARF she did not pick up exactly what was the project for the Western Sahara. What is the amount and nature of the assistance as it is not indicated in the presentation? On page 5 she asked about the African Ombudsman Research Centre. Where is it situated and are there any South Africans forming part of the staff, and if there are, what are the budgetary implications? The AU subscription is a problem because they find themselves paying amounts for which they had not budgeted. She asked whether there is a long term solution to this or is South Africa going to continue carrying the burden.

Mr B Radebe (ANC) mentioned the heritage assets and asked if the assistance from the Cultural Centre in Pretoria will make a difference in the quality of the audit they are going to have. He asked what was the total amount of the Cuban package and how did it impact the Cubans.

Mr M Maila (ANC) commended DIRCO for the report and also asked the ARF about the Western Sahara project. He commended DIRCO for being responsive in light of the fact that the Committee has been hammering on about Western Sahara. It was mentioned that the Public Protector is involved and he would like clarity about that. He asked about the South Africa - Pakistan round table meeting and asked what was discussed and if that discussion included the influx of Pakistanis in South Africa and its implications.

Ms D Raphuti (ANC) asked if they can be given details about the heritage assets and their meeting with the Auditor General. On page 8, she asked why they are setting such high targets for themselves when it comes to meetings, noting the Programme 2 scheduled meetings were not achieved. Peace and stability is their hallmark, and she asked who is supposed to be the secretariat because she does not see any urgency concerning peace and stability. She further remarked that this is irresponsible and said that “our lips will be down” in Sepedi.

The Chairperson said Ms Raphuti must be careful of translating African proverbs into other languages.
 
Ms T Kenye (ANC) was concerned about one committee meeting which was the target but not included, she asked that they state the challenges that caused them not to have that meeting in Quarter 3. She asked if there are any time frames in the payment of projects. She asked about the underspending and said she understands that it is due to the delay of operational costs. She asked why there was overspending on international state visits – were these not foreseen, and if unforeseen, why were they not foreseen?

Mr L Mpumlwana (ANC) congratulated the delegation on the good report and remarked that he was satisfied even before he got to the meeting.

Ms Raphuti asked what does an expenditure of 100.1% mean.

The Chairperson referred to page 8 of the ARF presentation and ask for the cost of humanitarian assistance to South Sudan because it is not stated in the report and for the Western Sahara project. The training of Burundi diplomats was paid by DIRCO. He thought that if their training institute is the best on the continent, it should be paid for by their respective governments and not by South Africa because diplomats represent the presidents of their country. This is something he will pick up as a matter of discussion in his party. He spoke about international transfers particularly the 25th Conference of Heads of State which was held in Sandton. It is shocking that 87% of the donated money for the AU came from other non African countries. If the African Union is dependent on other countries for funding, it brings into question the sovereignty of African States because it means that if other countries fund the AU, they can dictate what decisions and policies are made within the AU the same way in which the IMF or World Bank dictates to indebted countries what they should do with the money lent to them. He read a report that called for self-sustainability of the AU. If other countries in Africa are dependent on Africa, that will be problem. He does not see that any money has been given to Palestine because a surplus of R2 billion was stated. South Africans who were exiled in Palestine know that the Palestinians depend on foreign aid for a lot of things, thus it is important that they are afforded humanitarian assistance.

Ms Kalyan agreed with the Chairperson that the dependency on private donors is really not good for the sovereignty of African states because the donor dictates what should be done with the money they donate.

Ms Dineo Mathlako replied that this is the first time the ARF has had so many questions. The African Ombudsmen Research Centre is a project of the Public Protector which was approved by the ARF in 2012 and a budget of R22 million was allocated to the Centre. The mandate of the Centre is to train African ombudsman on increasing the standards of good government on the continent. The Centre is managed by Arlene Brock who is the former ombudsman of Bermuda. There is one South African and a Kenyan employed by the Centre. The Dean of the UKZN Faculty of Law sits on the board of the Centre.

The Cuban Economic Package was R350 million and it was divided into three facilities. Facility A was for the purchase of seeds in South Africa with an allocation of R35 million and 4.5 million of the seeds were purchased in South Africa and the rest in Europe. Facility B was R100 million allocated for the purchase of South African goods which include Dunlop tyres. Facility C was R210 million allocated for the purchase of South Africa goods which include trucks used in mining.

ARF has committed R10 million to the people of Western Sahara through an organisation active in the region. Those funds will be used for food and shelter. For Palestine, they allocated R10 million to assist the women and children in Gaza which will be done in the next month. They are not only in solidarity with Palestine but they are committing funds to them.

Ms Delores Kotze replied about the SADC-ICGLR meeting that was missed, saying it was that secretariat who was responsible for setting up the meeting even though there is normally a calendar issued a year ahead so they are able to prepare for it; but this particular meeting was not part of that calendar. It is the secretariat of that organisation which was responsible for setting up the meeting. On the question of the high targets for Programme 2 and whether they are realistic, they are set in conversation with the Presidency and they confirm these targets which are in turn influenced by domestic and international developments. She remarked therefore these targets realistic.

The meeting was adjourned.