On the first day of meetings on the annual performance reports of the Department of Environmental Affairs (DEA) and its public entities for the 2016/17 financial year, there were briefings by the Office of the Auditor-General South Africa (AGSA), SANParks and the iSimangaliso Wetland Park.
While the meeting was supposed to have started with consideration of the DEA’s annual report, the Department, through Minister Edna Molewa, had tabled a letter to the Speaker of Parliament giving reasons for the delay in the tabling it. Since this was the second year that the tabling of the report had been delayed, the Chairperson recommended that the AGSA should be formally requested to issue the Committee with the special report explaining what the delay was all about, and how it was being dealt with. He was supported by the Committee.
AGSA said the theme it had selected for the current year focused on accountability. Some of the key messages regarding the audit outcomes included that SANParks and the South African Weather Service (SAWS) had both regressed. SANParks had material findings on performance information, and SAWS had material findings on compliance with legislation. The SA National Biodiversity Institute (SANBI) had addressed previous compliance findings to improve their audit outcome, while iSimangaliso had sustained their clean audit opinion. The DEA had not tabled their annual performance and audit report by 30 September 2017. However, the Chairperson and the Committee noted, with concern, that the AGSA did not have the details of the instances of irregular expenditure, and called upon it to help the Committee to do its oversight job.
In the briefing by SANParks, it was clear that it had had a very good year, especially from a tourism perspective. It had achieved 94% of its performance indicators. However, there were concerns regarding fundraising, as it had managed to raise just over R17 million against a R50 million target. It was off-target in respect of the percentage of women represented in management positions (37% against a target of 50%) and the percentage of payroll spent of the skills development (0.29% against a target of 3%). While in the main satisfied with the report, some of the key concerns raised by the Committee pertained to the need for SANParks to reconcile its perspectives concerning performance indicators with those of the AGSA. There were also questions about the reduction in poaching activities, its Information Technology (IT) capacity, and its financial surplus.
The iSimangaliso Wetland Park Authority reported it had achieved 27 of its 31 targets. Although the Portfolio Committee was satisfied with the report, especially the clean audit, a number of concerns were raised, taking into account the complex environment in which the entity operated. These included the legal matters that confronted it, such as a claim from a forestry company arising from a veld fire that had crossed iSimangaliso property. The Park acknowledged that it did not have a good name among the communities in which it was based, as there was a high level of poverty and unemployment, and it was expected to assist more despite its limited resources. It was advised there was a need for its clean audit to be translated into what was happening ‘on the ground’ by putting extra effort into stakeholder engagement.
Opening remarks by Chairperson
The Chairperson welcomed everybody present at the meeting, including the representatives of the Office of the Auditor-General South Africa (AGSA), the Department of Environmental Affairs (DEA) and its entities, in particular, SANParks and the iSimangaliso Wetland Park Authority.
He said that while the meeting was supposed to start with the DEA’s annual report, this would not be possible. The Department, through Minister Edna Molewa, had tabled a letter to the Speaker of Parliament stating the reasons for the delay in the tabling of the report of the DEA for 2016-17. He proceeded to read sections of the letter, which had been tabled on 26 September 2017.
Minister Molewa had said that the dispute between the Department and the AGSA stemmed from a difference in the interpretation and application of the modified cash standards, which had existed for some time. The respective departments had facilitated the appointment of an independent mediator, which was at an advanced stage, to help mediate a process of finding a resolution on the issues in the dispute between the Department and the AGSA. This process, however, would not be finalised before 30 September, when the 2016/17 annual report would be due for submission and tabling in Parliament as required by law. The letter concluded by highlighting that the issues causing the delay would be resolved in due course and that the annual report of the Department would be tabled no later than 30 November 2013.
The Chairperson remarked that it was the second time that the Committee had been unable to deal with the DEA’s annual report. Last year there had also been delays and the Committee had had to wait for the DEA to table the annual report, and it would have to wait again this year. He asked AGSA for a technical explanation that related to the mediation between AGSA and the DEA.
Ms Jolene Pillay, Senior Manager: AGSA, said there was a process which was currently being undertaken, and National Treasury had appointed a service provider to review the contracts that had eventually given rise to the accounting implications that were required in terms of the modified cash standard. While the Auditor-General’s office was engaging with National Treasury (NT) and the service provider, a formal dispute process had not started in the sense that NT had not yet formally disputed it. After considering the contracts that they were currently reviewing, a decision would be made whether or not there would be a formal dispute process.
The Chairperson highlighted the undesirability of the situation. The fact that it was happening for the second time in a row was concerning. These delays put Parliament in the position where it was not able to fully execute its responsibilities, especially in the budgetary review and recommendations report (BRRR) process. Without the report of the DEA, the Portfolio Committee (PC) would be unable to table its own report.
Mr R Purdon (DA) shared the concern of the Chairperson, and queried whether other departments were facing similar problems and, if so, whether it was for the same reasons.
Mr Z Makhubele (ANC) asked for how long the PC would continue to appropriate funds as Parliament, when there were still disputes regarding audits, year-in and year-out. How could it appropriate budgets when there were still issues in these respective departments? The parties that were involved (DEA, AGSA and NT) had to resolve these issues so that Parliament did not approve budgets which three or four years down the line were challenged because the accounting process was not in order.
Ms Pillay said she was unable to comment on the question as to whether other departments failed to table for the same reasons, because the auditors were responsible only for the DEA portfolio. In response to how Parliament could appropriate budgets when the Department’s annual reports had not been tabled, she said it was DEA’s intention to table this year, but she was unable to comment on the appropriation of the budgets.
The Chairperson reiterates that the concern was very legitimate, because once there was a delay, the Committee was unable to hold the department accountable on a serious matter such as the annual report, one of the instruments through which it held the DEA to account. Moreover, as it appropriated funds, annual reports were a means through which it knew how those funds were being utilised. He expressed the Committee’s concerns and disappointment towards the Department, despite the fact that this matter had been raised earlier on. Since the Committee was concerned that these delays were going to inhibit its ability to execute its oversight functions, the Auditor-General should be requested to issue a special report in line with the Public Finance Management Act (PFMA) so as to understand exactly what was happening before the end of November. Since this was the second year that the tabling of the report had been delayed, the Auditor-General should be formally requested, in line with Section 65 subsection 2b, to issue the Committee with a special report to find out what the delay was all about, and how the issue was being dealt with.
Mr Z Makhubele (ANC) asked, now that the Minister had spoken to the Speaker, whether Parliament was in a position to make this request when there was a process already under way.
The Chairperson said that in his understanding, the Speaker was not expected to do anything other than to receive and to publish in the Announcements, Tablings and Committees (ATC) the letter that would had been received from the Minister. When there was a tabling that was relevant to Portfolio Committees, it was normally referred to the applicable Portfolio Committee. The Chairperson referred to Section 65, sub-sections 2 a and b, which gave Parliament discretion in requesting a special report from the AGSA on the delays in tabling.
Ms Limpho Makotoko, Chief Operating Officer: DEA, said that there were other departments that had been unable to table for the same reasons. There had been continuous attempts to get a resolution of the challenges -- a process which AGSA and National Treasury had agreed to. After the declaration of a dispute, AGSA had advised the DEA that the process depended on National Treasury’s action, for which the DEA had been waiting the entire year.
The Chairperson reaffirmed that the AGSA must exercise Section 65, sub-section 2b.
Mr Purdon asked whether there was a timeframe for the special report.
The Chairperson said that this would have to be ascertained outside the meeting with the AG, to determine how soon the special report could be given.
Ms Pillay commented that the request of the Committee for a special report had been noted, and said that the AGSA was going through a process. The representatives would go back and consider what could be a possible timeline, taking into account the engagement with the DEA and National Treasury, and the responses regarding that.
AGSA review of DEA entities’ annual performance plans
Ms Pillay said AGSA’s role was to brief the Committee on the audit outcomes relating to the 2016/17 financial year, and give the Committee sufficient information to be able to compile the report that it needed to do on the budgetary review and the recommendations report (BRRR). The theme that the AGSA had selected for the current year related to accountability.
Mr Ritesh Ramnanthan, Audit Manager, AGSA, focuses on the audit outcomes and some of the key messages. Firstly, SANParks and the South African Weather Service (SAWS) had both regressed. SANParks had material findings on performance information, and SAWS had material findings on compliance with legislation. The SA National Biodiversity Institute (SANBI) had addressed previous compliance findings to improve their audit outcome, whilst iSimangaliso Wetland Park had sustained their clean audit opinion. The DEA had not tabled their annual performance and audit report by 30 September 2017.
Regarding compliance with key legislation, material misstatements had been noted in the annual financial statements (AFS) submitted for audit by SAWS. The entity had corrected their misstatements to achieve an unqualified opinion. Inadequate monitoring of supply chain management (SCM) legislation had resulted in non-compliance relating to procurement above R500 000. It was further reported that prepayments had been made where SAWS was not contractually required to make such payments, contrary to the requirements of Treasury regulations.
Mr Ramnantlian presented the performance information in the prior year. Material findings had been identified in the usefulness and reliability of the following material indicators at SANParks: the percentage reduction and recorded fatalities of rhinos poached, and rhinos and elephants poached in relation to activities; and the number of visitors to the national parks. For two indicators -- the percentage growth in the total number of local black visitors and percentage growth in overnight black visitors -- there were no adequate systems to actually support the information in the annual performance report.
The reason why only SANParks, SAWS and SANBI’s audit outcomes had been addressed had to do with the AGSA’s methodology, and certain focus areas were not done at iSimangaliso. The DEA had also been excluded. The key controls were directly linked to the findings in the audit report and the management report.
He said that SANParks should implement controls to improve their outcomes relating to reliable and accurate information reported in the annual performance report. There should also be processes in place to address the finding that was raised in relation to black visitors to the National Park. SAWS management had to enhance their monitoring controls over compliance with laws and regulations.
Mr Ramnantlian referred to the slide highlighting the basis for the AGSA’s evaluation of the Portfolio Committee. Regarding the findings on compliance with legislation and the quality of financial statements, there had been no improvement, or there had been a stagnation. Although SANBI had improved from the prior year on the material misstatements, SAWS had regressed. In the procurement of contracts, in the prior year there had not been any material findings, but there had been a regression as SAWS had received material findings or non-compliance relating to procurement.
SAWS had material findings on their annual financial statements. If they had not corrected them, they would have received a qualified opinion, but after the correction they had received an unqualified opinion. In the prior year, there had been a similar issue with SANBI. SANBI had material findings. However, once they had corrected their annual financial statements, they had received an unqualified opinion.
There had been irregular expenditure that was disclosed by SAWS, which was in its annual report. The irregular expenditure related to the procurement of above R500 000, where written approval for a deviation was not obtained, as well as certain payments actually exceeding the quotations.
Highlighting the root causes, Mr Ramantlian said that instabilities in leadership had occurred at SAWS for a portion of the year. The CEO position was vacant, and the CFO had been suspended in the last quarter of the financial year. Similar findings on reported performance information were identified at SANParks in the 2014-15 financial year. In 2014-15, issues surrounding rhino poaching and black visitors were raised. These issues had recurred in the current year.
The proposed recommendations of the AGSA were that the Portfolio Committee (PC) must monitor the implementation of the action plans to address the audit findings identified, and must request management to provide quarterly feedback on the status of key controls, especially around the area of performance information and compliance.
Ms Pillay concluded by highlighting the enhancements in AGSA’s audit methodology.
Ms H Kekana (ANC) asked why all the ‘material misstatements’ identified by the AG were not corrected by the entities? Did they have proper internal controls to identify such errors before submitting the annual report for auditing purposes, or did they deliberately depend on the AG to assist them in identifying their errors, rather than doing it by themselves?
Mr S Mabilo (ANC) viewed the regression in clean audits with concern, asking whether it pointed to negligence or indifference. What was to be done in relation to the structural weaknesses identified? Did the findings raise questions of accountability and, if so, what was the way forward? He asked AGSA what the reasons were given for the non-compliance with the SCM process. In the period of instability, when the CEO had been relieved of her duties, was there no Acting CEO with full powers?
Mr M Mabika (NFP) asked the AG what explanations had been given by SAWS for failing to comply with the regulations.
Mr Purdon asked whether the Committee could expect answers and more detail regarding the pre-payments that were mentioned in the report.
The Chairperson asked for more detail on the compliance issues, especially regarding non-compliance with procurements above R500 000 at SAWS, and also for the details around the pre-payment?
Mr Makhubele referred to the indicators for the current financial year, and asked whether there were measures in place to rectify those which had in retrospect been found to be problematic.
Ms Pillay said that in the DEA portfolio, the BRRR was a mix between unqualified opinions with no findings, and financially unqualified opinions with findings. The regressions that had been noted were mainly around the movements between clean audits versus financially unqualified opinions. Fortunately, in the context of this portfolio, there was no breakdown in internal controls. The findings were very much isolated to specific instances, both for SANParks and for SAWS. So the reporting was very much on an exception basis.
Responding to the questions, Ms Pillay referred firstly to the material misstatements that were corrected by public entities, like SANParks, and said that in AGSA’s audit process there were three types of findings. One was a ‘limitation’, where the AGSA was unable to get enough assurance, and therefore management was not able to adjust as the AGSA did not know what the correct amount was that should be recorded. With respect to SANParks, the issue around black visitors was a limitation in respect of the audit evidence that was provided to verify the black visitors. Therefore, it was not possible for them to determine what should have been the correct amount that should have been recorded in terms of that performance. In some instances, there were errors in the listings that were provided for audits. In respect of the listings, the AG had to consider how long it would take for management to go back and correct, and whether it was possible to correct within the timeframes that the AG had with respect to concluding the audits. For those errors that were identified, it was not possible for management to correct this sufficiently in time to incorporate it into the audit process.
She responded to the question as to whether the entities had sufficient internal controls, answering that while the entities did have controls in place, the AGSA had just found that the controls were not sufficient for the submission to the AGSA. There were errors in the listings, and this resulted in adjustments to the annual performance reports (APRs), resulting in the finding around material corrections to the APR. The AG had not identified any negligence with respect to any of the audits that had been done. There was a need to improve internal controls in order to improve and get back to the unqualified opinions, with no findings, in clean audits.
Regarding the SAWS’ reasons for non-compliance, Ms Pillay said that the first issue was related to no prior written approval for a deviation that amounted to R825 000, and the second related to exceeding the original quotation amounting to R2.2 million. Both these amounts had been disclosed by SAWS in its annual financial statements. The reasons that were provided were mainly around the understanding and interpretation of when they would be required to do a deviation process and getting the deviation approved up front.
The Chairperson asked whether the AGSA had details of the particular transactions and the specific details of the non-compliance with legislation on the procurement of goods and services by SAWS?
Ms Pillay responded that she did not have the information with her, and it would be appropriate to ask SAWS to provide that information. She could only speak to what was in the financial statements and audit reports. In respect of the pre-payments, there were samples that were selected which resulted in determining this to be a material non-compliance. However, information about those specific instances could be provided by SAWS. It had been included in SAWS’ annual report, but it had not specified which service provider.
Mr Mabilo commented that the AGSA was supposed to have the details and that it was odd that it did not. The explanations communicated by the AGSA as to why SAWS had not complied with SCM legislation was unsatisfactory, and did not address the underlying factors.
The Chairperson agreed that it was very worrying that the AGSA did not have the details of the query and that it had referred the Committee to the entity. He called upon AGSA to help the Committee to do its oversight job. He requested the details of the transaction which the AGSA had raised at the meeting so that tomorrow, when the Committee met with SAWS, it had all the information at hand.
Ms Pillay said that the processes and details had been communicated to SAWS’ management in a management report, which was why management would have those details. It had been disclosed in the financial statements of the entity. Explanations given by management for instances when there was no prior written approval for the deviations, had been based on management’s understanding of when a deviation would occur and how they applied their interpretation of SCM rules. The AGSA had disagreed with SAWS, saying that there was no prior written approval.
The Chairperson thanks the AGSA for their presence. However, he stressed that it seemed that the Committee was not being assisted by the AGSA, and asked it to be better prepared with details at the next meeting. The Committee would engage with the AG concerning the special report that would be requested.
Ms Pillay apologised that the AGSA had not met the expectations of the Committee, saying that the AG was constrained in terms of its obligations and what became public information. It was important that the entities themselves should account for the transgressions that were identified.
SANParks: Annual Report for 2016/17
Ms Joanne Yawitch, Chairperson: SANParks Board, apologised for the absence of the COO of SANParks, who was off sick, but Ms Jill Bunding-Venter was in her place as the Acting COO.
Mr Fundisile Mketeni, Chief Executive Officer: SANParks, presented the entity’s annual report.
Strategic Objective One: Improved Representative Conservative Estate
Under the performance indicator, ‘Total area added to National Parks’, SANParks had targeted 1 387 ha of land to be included in the system of national parks, and had managed to acquire certain portions of land of under-represented biomes (3 873 ha). No new marine protected areas (MPAs) had been proclaimed. However, the draft implementation plans for Addo, Robben Island and Namaqua MPAs had been completed.
Under the performance indicator, ‘State of Biodiversity Rating’, a state of biodiversity baseline had been determined at 53%. Under the Management Effectiveness Tracking Tool (METT) Score performance indicator, SANParks had submitted its mid-terms METT report so that it could inform the DEA’s next auditing cycle. In the ‘State of Area Integrity Assessments’, another performance indicator, a baseline of 69% had been determined to understand the threats in the various national parks. In a new indicator, ‘Reduction of fossil fuel-generated energy consumption,’ three parks were identified to be audited during 2017/18. In another performance indicator, ‘Reduction of water consumption’, three parks had also been identified as being ready to be audited.
Strategic Objective Two: Effectively Managed Ecosystem, Species and Cultural Heritage Assets
Under performance indicator, ‘Total Hectares of Land Rehabilitated/Restored’, SANParks had managed to meet their target. Under the performance indicator ‘Reduction in recorded fatalities of rhinos and elephants poached as a ratio of the recorded number of poaching activities in the Kruger National Park (KNP)’, SANParks had registered an improvement, or reduction.
After changing its indicator as per the recommendation of the AG, SANParks measured its success compared to previous years against the activities of the national parks. In most cases, SANParks and the AG disagreed on SANParks’ achievements. There was a rhino management strategy with activities. These activities were implemented daily, monthly, quarterly and yearly in order to curb rhino poaching. Another performance indicator, Environmental Management Inspectors’ (EMI’s) fines, the annual target was a 2% increase from the baseline for fines. There was also a 2% increase from the baseline for arrests.
SANParks had developed a ‘sustainability threshold’ performance indicator with a view to determining the threat of extinction. Rhinos, elephants, cycads, and penguins were identified as threatened. SANParks’ ‘wildlife utilization strategy’, a key performance indicator, had been finalised and, moving forward, its components would be implemented. Moreover, the SANParks cultural heritage management plan had been finalised.
Strategic Objective Three: Enhanced knowledge for decision making
Under the performance indicator, ‘research projects,’ SANParks had managed to meet their target of 75%, with 80% being SANParks’ actual performance. Moreover, the annual target for peer reviewed SANParks research publications was achieved.
Strategic Objective Four: Enhanced Tourism Returns
Under the performance indicator, ‘Gross Operating Tourism Revenue,’ SANParks had managed to meet their target of an 11% increase, with an actual performance of 14.5%. The total number of visitors to national parks had increased from 6 034 000 to 6 750 083. There had been a growth in black visitors and SANParks had achieved the targeted performance. However, the AG had disagreed with SANParks’ approach and had recommended that all visitors specify their race and the utilisation of source documents. SANParks had taken the approach that, in the descriptor, data would be based on observation only.
Ms Yawitch reaffirmed that people did not like to specify their race on a form. Some visitors objected to this approach. While some did not mind, it was very difficult to get written information.
Regarding the number of accommodation unit nights sold, Mr Mketeni said that SANParks had achieved and exceeded its target of 565 600, reaching 576 289. The Customer Satisfaction Index was looking promising at 81.9%.
Strategic Objective Five: Diversified and Enhanced Tourism Opportunities and Experiences
Under the number of revenue-generating products, SANParks had developed 11 products in order to diversify and to obtain more returns on these kinds of products. Four parks had been highlighted under ‘park visitor management and interpretation plans implemented.’
Strategic Objective Six: Optimised Contribution to the Green and Blue Economy
Under the performance indicator, ‘Full-time Equivalient Jobs Created, SANParks had achieved 93% against its annual target of 6 469. It had targeted 540 SMMEs to be supported, and had achieved 856. Under the number of social legacy projects implemented, it had been focussing in the last four years on building science laboratories. Five projects had been implemented.
Strategic Objective Seven: Enhanced Awareness And Skills
SANParks had not achieved the annual target of 218 000 participants in environmental education programmes, recording only 205 815 participants. It had targeted 54 000 free access entrants during SANParks week and other planned events,’ and achieved 62 312.
Strategic Objective 8: Enhanced Stakeholder Engagement
SANParks had achieved its targeted number of proactive media engagements’. It had a 100% record in responding to Promotion of Access to Information Act (PAIA) requests within time frames.
Strategic Objective 9: Adequate, Appropriately skilled, transformed and diverse human capital
Regarding employees from designated employment equity (EE) groups, Mr Mketeni said that SANParks was experiencing challenges, especially regarding black and female representation in management positions. There had been improvements in the extent to which people with disabilities were represented., SANParks had not met the target for employees meeting minimum educational requirements, achieving 74% against a target of 76%. The percentage ‘spent on the Skills Development Programme had been a challenge for SANParks, which had not meet its target of 3%, its actual performance being 0.29%.
Strategic Objective Ten: Conducive Working Environment
SANParks had achieved its staff vacancy rate target.
Strategic Objective 11: Optimised Business Processes and Knowledge Management Systems
The targeted number of business processes reviewed had been achieved. The information communication technology (ICT) strategy was in place. Although the AG had not spoken in detail, a strategy was in place to address the AG’s concerns.
Strategic Objective 12: Accountable Corporate Governance
Mr Mketeni said that SANParks had received an unqualified audit, which was uncomfortable for SANParks because there had been a lot of emphasis on the language of regression. SANParks had achieved its targets for compliance with shareholder and National Treasury requirements, and in terms of the submission of documents on time.
Strategic Objective 13: Financial sustainability
There had been 11% more revenue generated compared to cost. Expenditure had been 3% over the annual target due to human resources (HR) matters. SANParks’ actual performance (82%) in relation to revenue surpassed the annual target (70%). Direct HR costs were 52% of total expenditure and were therefore within the range below 56%. SANParks was battling to fund-raise, with the entity not meeting its target of R50 million, raising only R17 122 662.
Mr Mketeni concluded by addressing the findings of the AGSA. The management of SANParks disagreed with the AG’s findings, especially regarding the AG’s handling of the ‘poaching activities’ and the growth in the total number of local black visitors’ performance indicators. As per the AGSA’s findings regarding a conflict of interest, SANParks had set in motion an investigative and disciplinary process, and letters had been drafted to summon employees. Eight employees would be undergoing disciplinary processes and two had been exonerated. Regarding the IT challenges, in the last two years, SANParks had not had a Chief IT Officer. SANParks’ IT systems were nearly obsolete. The entity had taken steps to integrate the SANParks tourism infrastructure. To this end, R500 million was needed for the next five years. The board would be approached with proposals.
Mr Dirk Fourie, Acting Chief Financial Officer: SANParks, presented on the entity’s financial statements.
Ms Yawitch said that the CFO’s position was vacant. SANParks had conducted interviews last week and was about to make an offer to a candidate. The last CFO had resigned at the end of March 2017. SANParks hoped to have a new CFO by the end of November.
Mr Fourie said that SANParks had had a very good year, especially from a tourism perspective. The balance sheet indicated a situation where total assets had grown by about 19% from last year to this year in terms. Liabilities had also increased by 21%. SANParks liquidity position was currently R11 621 006. This was a good solvency indicator. SANParks had grown its revenue as a result of the 14% growth in visitors. The revenue from non-exchange transactions were primarily received from government grants that were received on an annual basis. Third party donor funding was used for specific purposes. This was accounted for as revenue from non-exchange transactions on an annual basis. The necessary expenditure for these specific projects fell under SANParks’ operational expenditure. For the year under review, SANParks had realised a surplus of R258 million.
Mr Fourie clarified the surplus by explaining that special projects revenue from non-exchange transactions had to be accounted for. This did not speak to SANParks’ normal operational activities. Therefore, if this revenue and expenditure was excluded from SANParks statement of financial performance, the surplus was reduced to R219 million for the financial year. SANParks complied with the South African standards of Generally Recognised Accounting Practice (GRAP), which required it to disclose the revenue it received from the acquisition of land, money received from the selling of rare species, and money received from the DEA via the grant for infrastructure. In both these cases, expenditure was of a capital nature. There was not a direct relation between the money received and the expenses incurred by SANParks. Excluding these expenses, the surplus could be adjusted to R39 million, a more realistic operational surplus that SANParks had acquired in the financial year under review.
The Chairperson thanked the presenters for the precise and to-the-point report. The SANParks annual report was also distributed.
Ms Yawitch alerted the Committee to the fact that part of the increase in tourism revenue was because there were two Easter long weekends that effectively came into one financial year, which had had a distorting effect. Therefore, should there be a dip next year, this should be taken into account.
Mr Purdon asked why only three parks had been identified for energy and water consumption audits, especially considering the water crisis that South Africa found itself in. In light of the magnitude of the rhino poaching crisis, a 2% reduction was very low. While the report spoke briefly about ‘a reduction,’ there was a sense that the crisis was not being approached with sufficient urgency. While SANParks may show some improvement, this reduction could be misleading when considering the disastrous situation at other parks, like in KZN. This was why a combined approach was needed in tackling rhino poaching on a national level. This also applied to the sustainability threshold. Why was there such a big amount on unspent conditional grants? Moreover, some of the findings by the AGSA may be unrealistic.
Mr Mabilo said it was essential to focus on the questions raised by the findings on Information Technology, fundraising, and the surplus. Regarding the surplus funds, a key question was to what extent they contributed to service delivery, or if they were reinvested in SANParks programmes. Why did the presentation indicate ‘achieved’ under total hectares of land rehabilitated or restored, with particular reference to wetlands, when SANParks had not met its target of 6 600 m3, with this year’s performance being 6 188 m3? How robust were SANParks’ internal controls, and were they able to detect irregularities in advance?
Mr Mabika voiced his concern about the disagreement between AGSA and SANParks. How could the Committee adjudicate between the AGSA and SANParks’ conflicting positions regarding the AGSA’s findings? Where were the four labs that SANParks had just built, and what informed a decision to build a lab in a particular area, bearing in mind that there were so many parks in the country?
Mr Makhubele asked what the implications of SANParks’ fundraising shortfall were. Echoing Mr Mabika, he said it was vital, difficult as it may be, for SANParks to reconcile its perspectives with that of the AG. The Committee must not be made to choose between SANParks and the AGSA. What were the circumstances under which the CFO had resigned? Was KPMG involved in the auditing done by SANParks?
The Chairperson agreed with the Committee Members that the report was impressive and that it had been properly presented. SANParks should be commended for the good work that they were doing. What was meant by ‘poaching incident’? What was the status of the benefit structure, which had been a growing concern and an issue that had been raised in the past? With regard to a change in indicators, the Committee should not be too quick to blame SANParks, as consistency was extremely important. Referring to the AGSA, he said that in the case of a change of staff, the next auditor must be able to carry on with what the first had done. Be that as it may, SANParks had to take seriously and reflect on the AG’s findings on a ‘regression.’ In the past financial year, there had been findings of progress in financial and other terms. Having more meetings with the AGSA to deal with these matters was key. Echoing Mr Purdon, he said it was vital that the Committee discuss the way forward in tackling rhino poaching with the DEA.
Ms Yawitch, in response to the question concerning the circumstances of the CFO’s resignation, said that there was no suggestion at all of any impropriety in his resignation. He had taken a decision to leave, but there were no concerns about the way the financials had been handled. KPMG was not involved in SANParks’ financial management at all.
She said the issue of the post-retired medical-aid liability was a matter of huge concern for the board because if the situation remained as it was, there would be an enormous liability into the future that sat on the SANParks balance sheet. The board had taken a decision to renegotiate the terms of the post-retirement medical-aid liability with the beneficiaries,. A consultative process had been initiated by the SANParks management in order to do that. The aim was for the process to be completed by the end of the year.
Regarding SANParks’ relationship with the AGSA, SANParks did not want the disagreement to persist, and in the process of preparing for next year’s audit, it would work proactively with the AGSA to increase mutual understanding regarding the data of the respective entities.
Mr Mketeni said SANParks recognised the need to work with the provinces in combating rhino poaching, and that a 2% reduction was not by any account sufficient. It was only now that one of SANParks members was working in two provinces -- Kwazulu-Natal and the Eastern Cape. There may be a misalignment in terms of the deployment of resources, people and technology. It may be advisable for the Chairperson to call the various provinces for a hearing, including even the SA Police Service (SAPS) and the Defence Force, since in this structure all the members of the cluster were present.
The aim of SANParks in selecting the parks, which were in three provinces, for water and energy audits was with a view to accurately ascertain, depending on the existing resources, the feasibility of various models of energy and water provision. For this financial year, SANParks had attempted a full feasibility test in all the parks with respect to costs, readiness, and the various types of transactions --for example, would public-private partnerships come into play.
Regarding the conflict of interest, Mr Mketeni said that SANParks had a system of people recording this data. Employees of SANParks who were also doing private work were supposed to declare this. Due process regarding suspension and discipline would be followed with regard to the applicable SANPark employees. There were no timeframes, but the SANParks would detail in writing how it had progressed regarding the said employees.
Regarding the relationship between the AGSA and SANParks, the big question was how one changed the descriptor to suit AGSA’s understanding, without diluting the bigger objective or plan, due to a misalignment between the scope of the AGSA and what SANParks wanted to achieve. SANParks would continue engaging with the AG on these matters.
On the issue of the science labs, Mr Mketeni said that the labs that were delivered last year were constructed in Cradock, Thabazimbi, and Clarens, while the fourth he could not call to mind. This year so far, labs had been constructed in Mpumalanga, Limpopo (in Phalaborwa), and Northern Cape (in Mokala). There was an element of adjudication, based on the need -- for example, the Vuwani schools -- and the proximity of the school to the park.
He said there were areas that would suffer from the fundraising shortfall. The combating of wild life crime, research, and community-park interface activities were likely to suffer due to a lack of funding.
Mr Mketeni said that there had been a relationship between SANParks and KPMG, which reviewed SANParks’ IT strategy, but this was before the commencement of the current board’s tenure. KPMG had also assisted National Treasury in the past when there had been an issue of rhino sales. Treasury had determined that KPMG did not have experience in the disposal of assets (i.e. rhinos). Nevertheless, KPMG had been involved in the process, doing the due diligence, for example, the tenders that were turned out, and even the memorandums od understanding (MOUs).
Regarding the poaching activities, SANParks had a tracking system which recorded everyone who had entered. Rangers also patrolled the park and if they found a camping site, it was recorded on the system. What was recorded was the particular time that potential poachers had entered and camped in a park, or shot at an animal. ‘Poaching activities’ therefore referred to ‘attempted’ killings. There were many ‘attempts,’ and fewer ‘actual’ killings of elephants and rhinos. SANParks was interested in measuring the ratio between ‘attempted’ killings and ‘actual’ success, with a view to working against the tide of attempted killings. This was a measure with which the AGSA and SANParks were in agreement.
He said SANParks would take seriously the issue of regression and would have more meetings with the AGSA.
Mr Fourie responded to the finance-related questions.
Firstly, regarding the question of the unspent conditional grants, he said this was primarily related to money that was received from the DEA for infrastructure project costs to be incurred. What had caused a delay was the appointment of contractors, by having to follow a proper governance process. There were three components to these unspent grants. The money was paid over to SANParks based on business plans being submitted to DEA, which were approved by them, and they would fund them through the grants. Grants were also received from the national Department of Tourism for specific infrastructure development. Grants were also received for the Expanded Public Works Programme (EPWP) for poverty alleviation projects from the Department to fund SANParks for the quarter lying ahead and were yet to be implemented. Note 5 indicated that SANParks’ cash resources on hand had also increased by about the R300 million that the conditional grants had increased, which meant that the money that had been put aside for this purpose had been put into either short-term investments or was still currently in the bank, thereby reflecting the same situation that SANParks had with the grants.
Regarding the reduction in trade and other payables, Mr Fourie suggested that this reflected, among other things, a timing difference and reflected primarily the status of unpaid suppliers at the end of the last day of the financial year, which had come down significantly, with a drop of about R30 million in the outstanding amount left to suppliers.
Regarding the SANParks surplus, SANParks was not supposed to make a surplus, or incur a deficit, but it was generating about 80% of its operational revenue from its non-exchange transactions and tourism and commercial activities. There was a need to reinvest this money into the operational side of the business. However, that investment did not necessarily happen in the same financial year. Part of the surplus would be used to incur capital expenses for the business in the new financial year and this would come through only as a delayed expense through the depreciation on those capital expenses.
The Chairperson said that he had asked the question about poaching activities because he wanted to know how SANParks was measuring its success. Was it by reducing poaching, or achieving a lesser number of animals being poached, or by reducing poaching ‘attempts’? There was a significant distinction between these two approaches. While it was important to register ‘poaching attempts,’ SANParks’ primary preoccupation should be to save the rhino. SANParks had to measure what its primary responsibility was. It must measure how many rhinos were being poached. The ‘poaching activities’ indicator must be revised. It was important for the South African public. A separate indicator ought to be created for poaching ‘attempts.’
Ms Yawitch said that SANParks had just undergone two processes -- the mid-term review for 2017/18 Audit Development Programme (ADP) and the first draft of the 2018/19 edition, in which SANParks had attempted to do what the Chairperson had indicated, i.e revising the ‘poaching activities’ performance indicator. It was being work-shopped with the board next week.
iSimangaliso Wetland Park Authority: Annual Report for 2016/17
Ms Barbara Schreiner, Deputy Chairperson: iSimangaliso, apologised for the absence of the Chairperson, who was unable to attend because he had an engagement which he was unable to get out of. She introduced Prof Anis Karodia, the interim Chief Executive Officer of iSimangaliso, and Ms Abeeda Kadir, Chief Financial Officer, who would be doing the formal part of the presentation.
Prof Karodia said he had assumed the position of interim CEO knowing that it would be a challenging task, and since assuming the job 70 days ago, he had travelled to understand the organisation and to deal with issues that emerges everyday in the wetlands at St. Lucia. He presented a summary of the results of the 2016/17 annual report, indicating that the entity had achieved 27 of its 31 targets, and then provided details of the park’s four programmes.
Programme One: Conservation and Park Operations
For its strategic objective of ensuring the world heritage values were conserved, iSimangaliso had met the annual targets of all of the performance indicators, except for the number of environmental monitors deployed. The annual target was 30, but the entity had achieved only 28. Two environmental monitors had resigned at the end of the third quarter to take up permanent employment. The entity would need to put corrective measures in place, subject to budgetary constraints. For the percentage completion of annual controlled burning programme performance indicator, the entity also did not meet its annual target. The target was 100%, but 21% was achieved. Unseasonal rain had made it difficult to burn to the full extent. The burning programme had been revised to take into account vegetation changes resulting from climate changes.
Programme Two: Transformation.
For its strategic objective of optimising the empowerment in all activities of the Park in a way that would improve the livelihoods of the previously disadvantaged, iSimangaliso had met the annual targets of all of the performance indicators, except in the number of training days. Its target was 4 800, and it had achieved 4 785. The cost of the training had been slightly higher than the budgeted cost. The entity would review its budgets to remedy the situation.
Programme Three: Tourism/Commercial.
iSimangaliso met all its targets for optimising the Park’s revenue generation in a commercially and environmentally sustainable manner, that fostered job creation and empowerment of historically-disadvantaged communities, except for under-achieving in relation to the implementation of plans in respect of new tourism developments. The annual target was 60%, yet the entity achieved only 50%. While the Charter’s Creek contract had been awarded, the project had been reduced to the camp site and day-visitor facilities, to come in on budget. The environmental impact assessment (EIA) for Bhangazi had been published for comment. Delays would be included in the timeframes.
Programme Four: Finance and Administration
The strategic objective was to ensure that iSimangaliso’s operations were properly funded and cost-effectively managed while maintaining an appropriate system of internal control and reporting of accounting, management, and statutory information and to provide scientific, technical and policy support services. All performance indicators were achieved.
Ms Kadir gave the 2016/17 financial performance summary. Revenue had increased by 79% from the previous financial year due to an increase in project-related grants. Expenditure had increased by 51.9%, with the major contributors to the increase being project costs, loss on the disposal of assets, and legal and professional fees. The surplus of R145.6m was as a result of the requirements of GRAP standards. There was one contingent liability related to Siya Qhubeka Forestry (SQF) in the amount of R35.1m in respect of a veld fire that had damaged plantations. Total net assets had increased by R145.6m.
The big difference between the final budgets versus the actual budgets was mainly due to saving from other projects and the World Bank funding, which had been redirected. For example, the variance in grant funding of R103 249 423 -- the target budget was R160 029 197, while the actual budget was R297 948 966 -- was due to differences in the bases of accounting between the budget and the financial statements. The balance of R34 670 346 was due to additional funding which had been secured from PATH, the Global Environment Facility (GEF) and the National Department of Tourism.
The R145.6 million variance in the net surplus could be attributed to a difference in the basis of preparation of the budget, as required by the PFMA, and the financial statements as required by GRAP. The 2016/17 AGSA findings had given the entity a clean audit for performance and finances. The Auditor General brought to attention in the report that the entity was a defendant in a fire claim lawsuit, as disclosed in note 19 to the financial statements. The entity had referred the claim to legal counsel. The ultimate outcome of the matter could not presently be determined.
Ms Kadir concluded by highlighting the performance indicators regarding the 2016/17 staff demographics. The percentage African was 70%, females 51%, females in management positions 54%, and persons with disabilities 2%.
The Chairperson congratulates the entity for a clean audit report. Nevertheless, was the claim for veldfires not something that could be claimed from insurance? How did this liability arise? What had been damaged? Was iSimangaliso responsible?
Ms Kadir said that there was no insurance since the land belonged to the state.
Explaining the context of the lawsuit against iSimangaliso, Ms Schreiner commented that there was a fire that had affected a commercial plantation. R35 million was the claimed cost of damage to the plantation. The question was whether the fire started on iSimangaliso property or whether iSimangaliso was responsible for the fire having spread to the plantation and the cost of damage to the plantation. It was not a controlled fire. The court would decide on whether iSimangaliso was responsible.
Ms Kadir commented that the fire had started in a village nearby and spread on to iSimangaliso property before going over to the commercial plantation.
Dr Guy Preston, Deputy Director-General, Environmental Programmes, said that according to the National Forests Act, one had to be a member of the Fire Brigade Services Act (FBA), which iSimangaliso was. iSimangaliso must have taken ‘reasonable measures’ to stop the fire from moving across the property and affecting an adjacent property. Plantations were such a huge risk that people were reluctant to burn adjacent to them. Plantation owners had an obligation to work with their neighbours because of the risk that they imposed on their neighbours. These arguments should be taken into account in court. If iSimangaliso had done everything they should have done, they had a reasonable claim against being held liable. But on top of this, plantations had an obligation to help minimise the risk on their borders.
Mr T Hadebe (DA) queried how iSimangaliso had arrived at a 100% completion for their annual performance in terms of the implementation of its annual marketing and PR programme. This was especially crucial when considering the comments from the public on the Marine Spatial Planning Bill and how the comments from the area where iSimangaliso was based did not bode well for iSimangaliso’s public image. It was vital that stakeholder engagements featured within the entity’s performance indicators. Engaging the community was vital to increasing public understanding and input and improving public relations.
Mr Mabika said that while it was good for an entity to achieve a clean audit, it was even better when the audit was translated into what was happening on the ground, since iSimangaliso did not have a good name among the communities in which it was based. A related matter, the use of the term corporative governance, had to be clarified in light of the realities on the ground. He asked where the entity had got the additional funding from for the 36 bursaries. Moreover, how were the bursaries distributed? How did the entity ensure a fair geographic distribution of bursary beneficiaries? Regarding the percentage procurement from black-owned suppliers, where were they from? How many were from the district where Isimangaliso was based?
Mr Purdon asked about the increases in legal and professional fees, and what other legal matters were being faced by iSimangaliso.
Mr Makhubele asked whether, considering that iSimangaliso operated in a sea of unemployment, the nine tourism activity licences awarded to local community-owned operators were enough, and if these kinds of programmes were being continued. Since iSimangaliso had signed eight co-management agreements with land claimants and land claims had been a problem, how many were to be signed? Had iSimangaliso achieved it goals in this regard? iSimangaliso had established 14 agricultural gardens towards food security -- how far was this project, especially since funding of it had been stopped? What activities would the entity be doing to combat corruption? Had conflict of interest been a problem at the entity?
The Chairperson asked what had happened to the CEO.
Ms Schreiner said there was a very serious challenge being faced by iSimangaliso precisely because it was situated amid a sea of poverty and underdevelopment. The budget of the park was small, and it had a small staff. There were enormous expectations about what the park could deliver developmentally-speaking, and iSimangaliso was very aware of this need and committed to addressing it. A lot of the work was locally sourced, but more could and would be done with a view to creating jobs. The entity was well aware of the fact that it did not have a good name in the area, and there were pressures from some part of the community to allow mining, and concerns around land claims. In terms of cooperative governance, the board was well aware of the need to be building a relationship with the municipalities in the area, the KZN wildlfe and tourism bodies, and the DEA. The greatest threat to the park was the fact that economic development was not happening in the area, inside and outside the park.
Ms Kadir referred to the additional 36 bursaries, and said the entity had received additional funds from the 1% community levy for accommodation and activity bookings, and the CEO had taken the decision to use some of the money to provide additional bursaries. The entity went to every school within the iSimangaliso Wetland Authority, and the bursary process was explained. The application form was distributed and it was asked that the form be resubmitted within a certain timeframe. An interview was conducted and, based on the interview, beneficiaries were selected. Every school within the park were informed and engaged. There was a list that specified the geographical area which the entity could make available.
As for the percentage procurement of the 76%, iSimangaliso also had a list of suppliers that could be made available. The majority of the suppliers were from the park. The legal fees related to the opening of the St Lucia Estuary mouth, the sugar cane contractors, Umfolozi Sugar Planters (Pty) Ltd, as well as other legal developments that took place within the park.
For the benefit of Members, she said that PATH stood for Programmes for Applied Technology in Health, an international programme, which was related to HIV/Aids training, and GEF stood for Global Environmental Fund, which was sponsored by the World Bank. With regard to the co-management agreements, the entity would have to get back to the Committee as to how many agreements were not in place at the moment.
Prof Karodia said that he had engaged the entire 22 trusts in a meeting. The area was very volatile. There were demands all the time, and there were unrealistic expectations all the time on iSimangaliso. Much time had been spent trying to understand iSimangaliso’s constituencies. WIthout the cooperation of the Amakhosi, nothing could be done. In civil society, there was a perception that iSimangaliso could do everything for the entire community. The issue of mining versus tourism did not fall within the entity’s jurisdiction. It was a DEA concern, but iSimangaliso handled it because it was on the ground. It would not be easy going, but efforts to appease the people would continue. A cardinal principle was stakeholder relationships with the Amakhosi. Nevertheless, it was important for Committee members to see the issues for themselves.
Mr Hadebe said it was important for iSimangaliso to base its annual controlled burning programme on solid research of the endangered species or particular vegetation that could be threatened as a result of the programme. SANBI had a wealth of information that could prove useful in this regard. There must be closer collaboration and interaction with SANBI.
The Chairperson reaffirmed the point that there must be closer collaboration and interaction with SANBI in order to get this kind of expertise.
Mr Makhubele raised the issue of ‘conflict of interest,’ which had not been addressed by the speakers. Across the board, it was a matter of concern that people deprived other entrants in the participation of economic activities because they were ‘inside’ and abusing their own stage. While the entity had not addressed this issue, it was a matter that must be addressed by iSimangaliso.
Ms Schreiner said that at present, they were not aware of any conflict of interest in the park, but it was something that as a board they were very conscious of, and were looking at quite closely. The entity would work very closely with the DEA to make sure that all the necessary procedures were actually in place.
Regarding the 14 agricultural gardens, the entity would forward the information to the Committee.
Regarding the particular activities to combat corruption, iSimangaliso would get back to the Committee.
The Chairperson referred to the resignation of the CEO, and asked what was meant by ‘an amicable parting of the ways.’?
Ms Schreiner said that in a statement released by the Minister, it had been stated that the CEO had left to go and pursue studies and other interests. It had been an amicable parting of the ways. There had been no issue, or tension or hard feelings. The CEO was working with the interim CEO and would continue to give support to the park with various development projects. The entity would make the statement available to the Committee.
The Chairperson said that the interim CEO, Prof Karodia, was very competent and passionate about his work, but he would be there for only six months. In the time the interim CEO was there, he must help the Committee with his experience, to bridge the divide between the community and the park. The expectations of the communities might also be caused by the social conditions they found themselves in. It was the responsibility of the leader to communicate what was possible, which could only occur when there was interaction, transparency and ownership. There was a sense that the people felt that they did not own the park. There were things that the park was doing which were not being properly communicated. What was being communicated was the ‘enforcement’ part. The dialogue to break barriers must be started. First and foremost, the mandate of the park was conservation of the environment. The farm must also facilitate economic activities, but it could not resolve the social problems that were there. This was the function of a combination of actions from national, provincial and local government. Since Mr Mabika hailed from the area, it may be important to touch base with him as and when the entity interacted with people.
The Chair concluded by thanking the iSimangaliso delegation for coming, and gave a brief summary of how the second day’s meeting would be structured.
The meeting was adjourned.
- Letter from the Minister of Environmental Affairs
- SANBI 2016/17 Annual Report- Annexure A
- SANBI 2016/17 Annual Report Presentation
- SAWS 2016/17 Annual Report Presentation
- AGSA: Budgetary review and recommendations report Environmental Affairs Portfolio
- SANParks Annual Report Presentation 2016/17 Financial Year
- iSimangalisa Wetland Park 2016/17 Annual Report Presentation
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