DIRCO + African Renaissance Fund 2016/17 Annual Report, with Minister

Meeting report

Opening Remarks

The Chairperson explained to the Committee that, although this meeting was supposed to take place on the following day, the Minister was very busy and asked the Committee to make time for the meeting on this day. He welcomed the Minister and invited her to provide an introduction to the briefings.

Remarks by Minister

A the outset, the Minister apologised and informed the Committee that she would have to leave the meeting by 17:00 in order to catch a flight to Zambia. With the Democratic Republic of Congo (DRC) “on the boil” and more than 1 000 refugees crossing into Zambia each day, the Department must meet with the Joint Commission of Cooperation between Zambia and South Africa either this evening day or the next day in Lusaka, which is why the meeting had to be today. She further apologised for missing past meetings.

The Minister said the Department is operating at a unique moment in geopolitics. This year, the country is celebrating Oliver Tambo, who promoted a fiercely independent, humble and stabilising international role. She agreed that the Department’s Parliamentary Liaison Office needs to be strengthened, as the Chairperson recommended in the past. She denied avoiding discussing the Grace Mugabe visit – it was already in the media and before the court before she could respond.

The Minister said that the Department will discuss its budget and then the South African Renaissance Fund (ARF). South Africa does not have the funds to respond to every international issue, but when a situation is very bad, other African countries expects the country to intervene.

The Minister explained that Mr Kgabo Mahoai was appointed as the Director-General of the Department because he is a former Public Service Commissioner and could guide the Department through overcoming their administrative issues and maximise the expertise of the Department’s personnel. There was no running away from the policy of Ubuntu, nor from running an accountable Department.

The Minister also explained that there are many unexpected high-level foreign visits that she also has to deal with. Lastly, she added that the Department had received an unqualified audit opinion in the previous financial year.

Mr Kgabo Mahoai, Director-General, DIRCO, began to speak.

Mr M Lekota (COPE) interrupted, saying that he wanted the Minister to speak about issues of consequence. He wanted to know how the experts on her team would be able to answer political questions. How has the Minister allowed for mismanagement or improper expenditure of several hundred million rands? Who will answer to that, and when? What are the MPs then supposed to say to the people who elected them? He said the Department should not allow unexpected visits from foreign diplomats.

Mr Lekota wanted to skip the introductions in order to ask the Minister questions immediately, especially because she had to leave early to catch a flight. If the rest of the meeting then needs to be rescheduled, that is fine.

The Chairperson clarified that, after he wrote a letter to the Minister to invite her to attend the meeting the following day, she requested to come on the day that this meeting was being held.

The Minister said that she has no intention to run from the Committee, but what she must do after this is just as important as this meeting, and that she can stay no later than 17:00. She has no intention of running away from the Committee.

The Chairperson said that it is normal for the Minister to provide a broad introduction, and then for the Director-General to speak and to pull in other delegates where appropriate. If the Annual Report is not presented, that will be unusual.

At 15:40, Mr B Radebe (ANC) asked that the Department present and finish by 16:15 so that they can engage the Minister immediately afterwards, but not stall the meeting any longer. Mr D Bergman (DA) and Ms H Maxon (EFF) agreed.

Briefing by DIRCO

Ambassador Ebrahim Saley, COO, DIRCO, explained that the National Treasury cut the 2016/2017 budget by R153 million, which has a cumulative effect over the medium-term expenditure framework period. Included in the financial report is an unauthorised expenditure of R33.9 million as a result of an outstanding part of the African Union (AU)’s Annual Assessment Contribution; this is simply because the AU’s financial year ends at the end of December, whereas South Africa’s financial year ends at the end of March. In Programme 1: Administration, the identification of Heritage Assets was an issue in the past, but it has been completed.

Ambassador Saley said that in Programme 2: International Relations, there were 26 out of 46 planned high-level foreign visits. The actual number of visits is out of the Department’s control. Unexpected visits occur for good reason; any country has the right to send someone on a special envoy at any time. There will always be a need to engage with the United Nations. Additionally, the Department’s intervention to address challenges with the SADC-EU Economic Partnership Agreement was in the best interests of South Africans. The Department is exceeding expectations in its Economic Diplomacy achievements. South Africa has assumed Chairship of the Southern African Development Community (SADC) for 2017 and 2018, and this will give South Africa the opportunity to pre-emptively address Southern African issues.

Ambassador Saley then turned to Programme 3: International Cooperation. First, DIRCO advocated on behalf of South Africa for the protection of the human rights of various demographic groups, including refugees. Second, nuclear energy has become more relevant now that new rhetoric has crept into international discourse; nuclear threats are being used once again. Third, the Department hosted CITES-COP17, and negotiated to support wildlife preservation. Fourth, when it comes to the sub-programme on Continental Cooperation, the Department is working towards softer borders within the AU to bolster inter-African trade. Fifth, the Department has promoted peace and security in South Sudan - special attention is needed there, if left unresolved, it could destabilise neighbouring countries. Sixth, the Department provided logistical support for two Pan-African Parliament sessions, which occurred in Midrand. Seventh, the Indian Ocean Rim Association will meet in Durban in a few days, and South Africa may assume Chairship of the association then. Eighth, BRICS has become more and more relevant; the organisation re-asserts the notion that the world will not continue to operate as a unipolar dispensation. It proves that, for the sake of prosperity for all, it is necessary to have a multi-lateral global order.

In Programme 4: Public Diplomacy and State Protocol, the sub-programme on Public Diplomacy has overachieved in its publications and communications – including the Ubuntu radio station, which is also carried by DSTV. Ambassador Saley said that he has “figures for listenership across the continent.”

Mr Caiphus Ramashau, CFO, DIRCO, said that for the period under review, the Department reported a net shortfall of R6,3 million. Compensation of employees reported an expenditure of R3,115 billion against the budget of R3,071 billion and the variance of R44 million. The variance of R44 million relates to the Department exceeding the predetermined expenditure ceiling set by National Treasury.  Programme 1 spent 99.6% of its final appropriation. Programme 2 spent 96.1% of its final appropriation. Programme 3 spent 96.1% of its final appropriation. Programme 4 spent 99.7% of its final appropriation. Programme 5: International Transfers, is where they have challenges; it spent 104.3% of the its final appropriation. In the Assessment of DIRCO as a Going Concern Entity, Mr Ramashau highlighted that the R33 million spent on the AU was an unauthorised expenditure. The unauthorised expenditures will affect the Department going forward in terms of cash. In a nutshell, the assessment table confirms the balance; the Department will be able to meet its obligation, but will have a problem in terms of cash.

Mr Ramashau said that the long-term liabilities include a debt of over R737 million to the Department of Home Affairs. The Department now tracks its external contracts through a tracking system. One challenge is that it is more de-centralised than other Departments, which impedes communication. It is working with the Treasury to work on compliance.

Discussion

The Chairperson recommended that Mr Ramashau pause his presentation in order for the Committee to ask the Minister questions, and suggested that the Committee then return to the presentation after the Minister had left.

Mr Radebe asked the Minister about South Africa’s role as the first foreign direct investment (FDI) destination in Africa.  What engagement does the Minister have with other Departments, such as Economic Development, regarding FDI? Second, how far have the commitments that China made at the successful 2015 Forum on China-Africa Cooperation (FOCAC) come? Third, where is the funding to pay contracts that are irregular expenditures coming from? Would it not compromise the Department going forward? Fourth, what is being put in place to strengthen the capacity of the Department? Lastly, he congratulated the Department on overachieving in monitoring and evaluation.

 

Ms D Raphuti (ANC) applauded the Department for rising to the challenge. She wanted to know that the Department would stringently adhere to the Auditor-General’s requests/recommendations. She said that the Department should renew its contract for the asset register. She wished the Minister a safe journey to Zambia.

Mr M Maila (ANC) commended the Minister for moving a step up in terms of the audit outcome and urged the Department never to drop down. In his opinion, the ARF’s money needs to be paid back. He said that consequence management needed to improve in the Department. With South Africa now the Chair of SADC, he wanted to know what key areas the Committee should focus on. Lastly, he wanted to know if it was wrong of the Minister to grant the First Lady of Zimbabwe diplomatic immunity, given all the criticism.

Mr Lekota noted that the Auditor-General reported an irregular expenditure of R785 million because tender processes were not properly followed. How could the Department have reached such a huge irregular expenditure without first calling for an intervention? How can South Africa afford that? Moreover, the Auditor-General reported that the financial statements submitted by the Department were not prepared in accordance with the prescribed financial reporting framework. Why should the Department be congratulated if it did not follow the Public Finance Management Act? The audit could not express an opinion because the Department results were unqualified. This should not be congratulated; a disaster has happened here. He also wanted to know what the situation was around the CFO being suspended. Is he still suspended?

Ms H Maxon (EFF) understood that the Minister is very busy and apologised for complaining so much about her absence; but she expressed concern that the Committee rarely interacts with the Minister. At the last meeting, it was made clear that the Department’s books are not “healthy.” What is the status of the CFO? She went through the Department’s irregular expenditures including several unoccupied offices in Ghana, Brazil and Uganda. What is happening in South Africa’s missions abroad? She wanted an explanation of why R31 million was disbursed to 89 locally recruited personnel (LRP). The Department has awarded tenders to contractors without SARS certificates.

Mr S Mokgalapa (DA) recommended that the Minister miss her flight, because the Committee needed to engage with her on both performance management and political debate. He was concerned that the Minister did not engage with Parliament about Al-Bashir, the International Criminal Court (ICC) withdrawal and Grace Mugabe. He wants her to appear to discuss political issues with the Committee. He added that the Minister was hiding.

Mr Radebe raised a point of order, indicating that it was improper to say that the Minister is hiding; he said that Mr Mokgalapa was attacking her character.

The Chairperson sustained his point of order.

Ms C Dudley (ACDP) asked for Mr Mokgalapa to apologise.

The Minister said that, whether she is a Minister or an ordinary woman, she did not want to be insulted by someone younger than her. She would prefer to discuss the issues than points of order.

Ms Dudley said that, as a 64-year-old woman, she has often seen women in positions of power attacked like this. She would like to stand in solidarity with the Minister and asked her colleague to take back his comments.

Mr Mokgalapa refused to take back his comments.

The Chairperson asked to move to the next speaker.

The Minister said that this meeting could not move forward with this shadow cast on her.

Mr Maila explained that what Mr Mokgalapa meant was that the Minister was hiding from her obligation to come to Parliament.

Ms Raphuti said that Mr Mokgalapa was undermining the Minister due to sexism. The Minister had sufficiently explained why she could not come to meetings. Mr Mokgalapa should withdraw.

Mr Mokgalapa refused to withdraw and took issue with his colleagues saying that his comment was sexist. In his opinion, she was hiding and running away; he was not using vulgar language.

Mr Lekota made two points. First, he said that no one should be allowed to speak in the meeting without authority from the Chairperson. Second, he did not believe that Mr Mokgalapa’s statement that the Minister was hiding could be sexist.

Mr Maila said the issue is not about the word that Mr Mokgalapa used. It is about his comment that the Minister is running away from her responsibilities, which is incorrect. He should withdraw.

The Chairperson reviewed his options in this situation. He asked Mr Mokgalapa to either withdraw or leave the meeting.

Mr Mokgalapa said that it was not sexist or ageist to say that the Minister is hiding. He lamented the status of democracy in the meeting. He took his leave.

Ms T Kenye (ANC) said that Mr Lekota had asked most of the questions she had wanted to pose. She added that, because this started in 2014, irregular expenditure is clearly a recurring issue for the Department. What is the plan for the Department? Who is supposed to approve the movement of funds (referred to on Slide 9 of the DIRCO Annual Report presentation)? Were the targets that were listed on Slide 11 not met for Programme 2 because they target too high a number of activities per year?

Mr D Bergman (DA) said that chaos seems to follow this Department and emphasised the importance of Ubuntu. Foreign policy has influence on currency fluctuation. South Africa cannot budget for currency fluctuation as it applies to operational costs abroad. He noticed that less experienced diplomats are being sent to diplomatic functions in South Africa – which says that SA is no longer a “beacon of light.” South Africa’s strategy in having the second-most missions abroad has backfired; those funds could be used to create diplomacy and foster Ubuntu through an African conference that unites the continent. The ARF should be used to lead constructive change from consumption to production in Africa.

Ms Dudley commended Mr Bergman on his respectful manner of addressing the Minister. She further explained her stance against Mr Mokgalapa’s statement. She commented on the Department’s need for internal control over attendance at meetings. She asked for a way to comparatively measure the number of consular requests received and responded to.

Mr L Mpumlwana (ANC) congratulated the Department and thanked them for the respect that they have garnered South Africa across the world. The Auditor-General said that South Africa has 126 missions, but only audited 30 – most likely because it would be expensive to go to all 126. He advised the Minister not to be discouraged by the negative mark on the Department and thanked them for the sacrifices they have made.

 

The Chairperson asked the Minister to make more time in the future to hold discussions with the Committee about international politics and explain the position being taken. The Chairperson liked that the Kagame Report [by Rwandan President Paul Kagame], firstly, recommended that the African Union Commission be restructured and reduced administratively and, secondly, exposed how countries have not been paying what they are supposed to, and that the AU has been relying on foreign funding. He wanted to know how long that has been going on for. Additionally, he wanted to know what sectors the Department targets for its digital public diplomacy. Do they reach them? Is there an outreach programme, for example, for young people at universities in Limpopo, Mpumalanga and the Eastern Cape? Next, South Africa is spending a significant amount of money on the Southern African Customs Union (SACU) in order to keep certain countries in the SADC. Is it more about political considerations than money? Next, regarding Zimbabwean First Lady Ms Grace Mugabe and Sudanese President Omar Al-Bashir: he advised his colleagues to respectfully refer to other world leaders, not calling them like boys and girls. No matter how wrong they are, they retain their dignity. He said they frequently do this only to African leaders, not others.

The Minister replied that the Department has made advances on the Foreign Service Bill. To deal with President Al-Bashir matter, she said that it needs more time. She misses talking to the Committee as her fellow countrymen and countrywomen. The ICC announced that South Africa would not be referred to the UN Security Council for “overenthusiasm in domesticising things that even America does not,” because they followed procedure. She cannot share what has been happening with First Lady Mrs Grace Mugabe, because it is now a court matter, though she wants to. SACU was started for other reasons; those reasons have changed, so the approach to it should change.

The Minister then moved on to give an example of engagement in public diplomacy in Mpumalanga: she had never seen so much love from embassies in an orphanage – she had to leave the delegates there because they did not want to leave. A similar situation occurred in Richard’s Bay. While public diplomacy is not on the books; they do reach out to people. Perhaps the Department should make members of the Committee permanent invitees to their public diplomacy events.

The Minister said that Mr Mahoai was brought in to help the Department. She also thanked Ms Dudley and Ms Raphuti for their solidarity. She thanked Mr Mpumlwana for his honesty and leadership. She said to Mr Bergman that when it comes to Ubuntu, it starts with her relationship with her family.

The Minister said that no country can say that they are fully in control of currency fluctuation. She recently learned that the rating agency is paid a minimum of R100 million per year. Currency will continue to fluctuate. Someone from the EU, said that the leader of their country said that they are coming back to Africa because the EU is falling apart; the economy is stagnating and they do not know how to revive it; the population is aging; and they do not know how to get the economy out of trouble after Brexit. The solution they have settled on is to “come back to Africa.”

The Minister acknowledged that a plan of action to fix the Department’s administrative issues needed to be shared with the Committee. First, the Kagame Report is important because the AU needs to be self-sufficient. The report’s weakness is that it overlooks the AU’s founding principles. Second, Registration of South Africans Abroad (ROSA) is a good way to keep track of South Africans abroad, but many do not want to tell the South African embassies that they are in the country. Third, officials need to come forward with proposals “for us to get out of” the AU annual assessment/adjustment. Fourth, the Minister did not know that the Auditor-General contracted private companies, but she thinks that they are doing a good job. When it points out what needs to be fixed, she wants to fix them rather than let challenges pile up. Fifth, there is a debate over whether DIRCO or the Department of Public Works (DPW) owns South Africa’s properties in Brazil. Sixth, the Department used to operate an embassy in Bonn, Germany, when Germany was divided between East and West. Yet with the reunification of Germany, the embassy was consolidated in Berlin. The Minister noted that the assets in Bonn should have been disposed of in a timely manner.

The Minister said that Mr Lekota’s questions were technical, and would require technical answers.

She said that Mr Maila was right that they needed to look at consequence management. The key objectives of South Africa’s Chairship of SADC are peace, security, and development. The second priority of the Chairship is an industrialisation and beneficiation project in partnership with the private sector.

 

She responded to Ms Raphuti’s inquiry about audit outcomes and a plan of action by saying that FDI is important, but South Africa cannot cut down its mission footprint. The Diplomatic Training, Research and Development (DTRD) programme trains its junior officials in economic diplomacy. This helps the Department train people in the foreign service to put their country first.

The Minister expressed her dismay at having to leave. She said that she learns a lot from her fellow patriots on the Committee. She acknowledged that she did not answer every question.

Mr Mpumlwana applauded her.

The Chairperson requested training for parliamentary caucuses on foreign travel and engagement. He said that Members of Parliament need to know the Dos and Don’ts for travelling. He also followed up on Mr Bergman’s point about using to ARF for constructive change on the continent, suggesting holding events like a Pan-African conference that was once held in Johannesburg among those in the non-aligned movement. The Committee cannot fund conferences like that, but it is needed to encourage and enable people to write about Pan-Africanism and immortalise the contributions of Africans, Afro-Caribbeans and Indonesians. He then thanked the Minister for her presence and the Minister took her leave to catch her flight. The Chairperson requested that the DG launch into the remaining questions and comments.

Mr Mahoai said that financial misconduct would continue to be addressed. He promised that the Committee would be the first to know of changes made. The Department does not have 293 cases of irregular expenditure. Not everything in the report was found by the Auditor-General. The Department will follow all of the procedures and overcome these issues. For example, the regulations define where it is impractical to provide competitive bidding; the Department can prevent some of these irregularities by proving impracticality. When issues arise, cases that require consequence management do not happen at every level; the judgment must balance reason and emotion. The Asset Management System is used to produce a register of assets.

The Chairperson asked the other officials to identify any gaps that needed to be spoken to in more detail.

Mr Radebe raised the issue of the conduct of the COO.

The Chairperson provided context to Mr Radebe’s question, clarifying that in Section 7 of the ARF Act (No 51 of 2000), says that “any money in the fund which is not required for immediate use must be invested by the Director-General and may be withdrawn when required.” Section 2 of the Act says that “any unspent balance in the fund at the close of any financial year must be carried forward as a credit in the fund in the next financial year.” The R204 million which was not expended was not invested. The Department then utilized it on something else. In name, the funds were present, but were supposed to be used to address other things. Last week, Mr Maila asked the Auditor-General if this fund is technically insolvent because of the mismanagement.

Mr Mahoai clarified that the Auditor-General did not say that the money had been loaned, so it would not return; it was not available at all.

The Chairperson said that the Auditor-General picked up the fact that the Department’s supply chain management is unsuccessful; the supply chain team needs training.

Ms Maxon wanted to know about the CFO’s status. Is he suspended?

Mr Mahoai said that Mr Ramashau was present at the meeting and was not presently suspended. The Department plans to scale down the investigation. The matter under investigation does not only involve Mr Ramashau. It would be unfair to discuss it now, but when it is found that the verity of the allegations is known, he will let the Committee know.

Mr Lekota asked for clarification: was the CFO suspended at any time? And how is he still working if the investigation is ongoing?

Mr Mahoai confirmed that Mr Ramashau was on special leave at the time, but that investigation has been concluded. Mr Ramashau is not suspended and the recommendations of the investigation are still being processed. Mr Mahoai committed to responding to the rest of Ms Maxon’s claims in writing.

Mr Lekota raised a point of order that he would like Mr Mahoai’s response to Ms Maxon written to all of the Committee members. The Chairperson sustained the point of order.

Mr Mahoai said that they have not yet received the SCOPA Report to which Ms Maxon was reading. He wants to finish it.

The Chairperson asked the Committee Secretary to make the Auditor-General’s Report and the SCOPA Report available to the Department.

The Committee Secretary noted that the Office of the Speaker would communicate the SCOPA Report to the Department, because it originated in the House.

Briefing by ARF

Ms Dineo Mathlako, Head of Operations of the ARF, only had a short amount of time to brief the Committee on the ARF’s 2016/2017 report. She said that the ARF is reaching most of its targets in line with its strategic objectives. The Cuban Economic Package oversight has been deferred to this financial year. The ARF received an “unqualified” audit report due to the money that was not invested in the Reserve Bank. As of 31 March 2017, the ARF had R500 million available.

Amongst the flagship projects being implemented during the financial year are:

-The Veterinary Laboratory Network (VETLAB) project supports that  the (International Atomic Energy Agency) IAEA’s efforts to strengthen animal disease diagnostic capacities in regional veterinary laboratories in Sub-Saharan Africa through the Joint FAO-IAEA Division's veterinary laboratory network. The Botswana National Veterinary Laboratory, acts a reference laboratory for SADC regional laboratories. This is an important milestone in deepening the integration agenda of SADC

-The Rice and Vegetable project in Guinea Conakry, which has officially been handed over to the Government of Guinea Conakry, is a blue print for South Africa as a modality to eradicate food insecurity on the continent. The project will be replicated in other countries as part of South Africa’s contribution to Agenda 2063

The Fund received an unqualified audit report from the AGSA. Eleven out of twelve audit recommendations accepted by management in the prior year on matters included in the auditor’s report were implemented and actions taken to resolve the findings. The one outstanding matter affecting the Auditors opinion is “Any    money in the Fund which is not required for immediate use must be invested by the Director-General, and may be withdrawn when required.”  The amount of R 204 million relates to projects from prior years were      ARF disbursed funds to DIRCO as an implementing agent as per the approved concurrence letter. There are ongoing negotiations between DIRCO and ARF to resolve the matter.

Discussion

Mr Lekota asked for clarification on the over-R400 million.

Ms Mathlako said that the funds are recorded as receivable from DIRCO, and are with DIRCO.

Mr Ramashau clarified that, for example, for a particular DIRCO project close to USD$5 million was not paid. The money is at DIRCO. It is still determining how the obligation of R340 million will be serviced.

Ms Maxon asked if the Auditor-General was clarified on that. According to the Act, that money should be invested somewhere; why has it not been paid back?

Mr Radebe wanted to know how much in interest would have accrued on that amount when it was transferred back to the ARF.

Mr Ramashau said that the transaction has been with the Department for a long time. The money that sits with DIRCO is not accrued interest. The ARF used the accrual. All money can only be invested in the Reserve Bank.

The Chairperson said that the Department is in breach of something, whatever it is. If those funds are supposed to be ring-fenced, they should be earning interest. But when DIRCO takes it out and uses it, it loses the opportunity to accrue interest, which would go back to the ARF. Each time the Auditor-General will asks DIRCO about it, it will not be where it is supposed to be.

Ms Maxon pointed out that the Act says that the funds must be invested; they should not wait until the AG reports on it.

Ms Kenye asked what happens with the money in the ARF’s joint cabinet memorandum.

Ms Mathlako responded that it is not an audit issue but a process issue. The joint cabinet memorandum was requested by the ICC and Cabinet Committee that addresses the challenges listed in the Outcome 11 Report by the ICC. There was a target that was not speaking to the objectives of the ARF. The ARF is working to correct that, and the memorandum is still being drafted.

The Chairperson said that something at the ARF did not sit well with him, particularly the mismanagement of funds. The funds should be used to elevate the profile of South Africa.

Mr Mahoai emphasised that the ARF is a reactive fund, and that is the source of the problem. The ARF’s reliance on National Treasury impedes its budget. The ARF cannot disburse its funds quickly because it cannot be disbursed without sending a request to National Treasury.

The Chairperson adjourned the meeting.