International Relations and Cooperation Budgetary Review and Recommendations Report

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International Relations

18 October 2017
Chairperson: Mr M Masango (ANC)
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Meeting Summary

The 2017 Budgetary Review and Recommendations Report (BRRR) was reviewed by the Committee.

During the review of the report, marriages that occurred outside of South Africa were highlighted. R204 million owed to the African Renaissance Fund (ARF) by the Department was unused and was not in the Reserve Bank as it should be by law. The Committee felt that the Minister needed to discuss contractual issues with the Committee and conduct management should occur out of the Deputy General (DG)’s office.

Currency fluctuation was noted and the Committee discussed changing South Africa’s procedures regarding foreign currency. Members recommended buying powerful currencies when they were weak. It was agreed that this was exactly what the Reserve Bank needed to do. Unfortunately, the Department went to the National Treasury about the matter, when it should have gone to the Reserve Bank.

During the discussion, the Committee agreed with the issues that were raised in the first part of the draft.

Members objected to the Department’s response regarding the Deputy Director-General’s failure to attend meetings that highlighted the risk of repeat audit findings. They believed that the responsibility to attend Audit and Risk Committee meetings had to remain with the DDGs, not the Chief Directors. Members pointed out that the DDGs were often called outside of the country by the nature of their work but added that the Chief Operating Officer (COO) must also always be present at these Committee meetings. Some Members warned against micromanaging the Department.  

Members moved for the adoption of the 2017 BRRR with amendments and the report was adopted.

Meeting report

Briefing of the BRRR
Ms L Mosala, the drafter of the BRRR, said that issues and opinions raised by the Committee during discussions with the Auditor-General (AG), the Department of Planning Monitoring and Evaluation (DPME), and the Department were discussed beginning on page 40.

Paragraphs 2 and 4 stated that the Department and the African Renaissance Fund (ARF) received “unqualified” audit opinions.

Paragraph 6 recognised the unauthorized expenditure of R34 million and the over-expenditure of R6 million by the Department.

Paragraph 7 was about the commitments made by China and tracks implementation.

Paragraph 8 was about noncompliance with Supply Chain Management (SCM) prescripts.

Paragraph 9 recounted how some national pavilions promoting SA trade and tourism did not occur during the financial year.

Paragraph 10 was about the joint cabinet memorandum between the National Treasury and the Department about the ARF’s challenges with loan disbursement.

Paragraph 11 was about the Department failing to invest the ARF’s funds in its possession.

Paragraph 12 was about the SCOPA report.

Paragraph 13 was about the composition of employees.

Paragraph 14 was about how several officials at a higher level have taken many sick leave and disability leave days during the financial year.
Paragraph 15 was about misstatements on the Department’s financial statements; the Department was reminded to conduct a skills audit in the Finance Unit.

Paragraph 16 held higher-level financial officers responsible for editing statements prepared by lower-level employees.

Paragraph 17 stated that the Department did not take action upon the results of investigations into the Chief Financial Officer (CFO)’s misconduct.

Paragraph 18 was about the supply chain findings – the ARF investigated 10 cases, and the Department only investigated two out of 239 cases.

Paragraph 19 was about repeat findings of noncompliance with SCM.

Paragraph 20 explained that, although cases of misconduct were supposed to be dealt with in 90 days of reporting, in some cases more than 200 days went by without finalizing disciplinary hearings within the Department.

Paragraph 21 revealed that, although the Department attempted to solve its problems by appointing a Chief Operating Officer (COO), it still serially achieved unqualified audit opinions.

Paragraph 22 stated that the Department employed a company called NetTrace to identify heritage assets; in 2017 there was no evidence that the contract was not renewed.

Paragraph 23 was about Information and Communications Technology (ICT) deficiencies that were on-going in the Department since 2010; audit and risk committee recommendations about this issue were not implemented.

Paragraph 24 was about suppliers who were not paid within 30 days; this hampered small and medium businesses.

Paragraph 25 was about unoccupied or dilapidated buildings in Namibia, Brasilia and Angola; they were still being used for accommodation for diplomats or offices for missions abroad.

Paragraph 26 noted that the South African Customs Union (SACU) negotiations were on-going, but the agreement reviews experienced challenges.

Paragraph 27 was about promotion of structured bilateral mechanisms that promoted national priorities; 26 out of 46 high-level visits occurred in 2016/2017.

Paragraph 28 related to currency fluctuation.

Paragraph 29 was about how the Deputy Director-Generals (DDGs) of the Department did not attend meetings with Audit Committees that highlighted areas of risk.

Paragraph 30 was about consular services for South Africans who required assistance outside of the country’s borders, for example the South Africans who were taken as hostages in Mali. Consulates also served an important function to register births or marriages that occurred outside of South Africa but there were few records of these more mundane scenarios.

The Chairperson asked the drafter about marriages that occur outside of South Africa. Was it difficult for these marriages to be recognised outside of the system?

Ms Mosala reminded the Committee that Ambassadors were also marriage officers, so marriages that occurred at an embassy were deemed to have occurred on South African soil. Apostilles were issued with a marriage certificate to ensure that the certificate was recognised as genuine around the world.

Paragraph 31 stated that the Department’s digital diplomacy was ranked number one in Africa, because of its effective social media networks and website.

Paragraph 32 noted that the International Criminal Court (ICC) matter was not updated.

Paragraph 33 noted that there were fewer trade attachés in South Africa’s missions abroad, even when there were potentials for trade.

Paragraph 34 explained that the Risk Management Committee recognised recurring challenges in the office of the CFO and called for a skills audit.

Paragraph 35 said that South Africa signed the agreement launching the Tripartite Free Trade Area (TFTA); the agreement would make way for the continental Free Trade Agreement, which would be launched in December 2017 by the African Union (AU).

Paragraph 36 committed the Department to quarterly meetings with the Committee and Audit and Risk.

Paragraph 37 detailed risks of cybercrime in the Department’s outdated ICT structure.

Paragraph 38 was about the Department’s lack of consequence management.

Paragraph 39 was about the South African Development Partnership Agency (SADPA)’s ability to resolve ARF issues. The Annual Performance Plan included signing the SADPA Bill, but there were still challenges.

Paragraph 40 stated that South Africa continued to promote peace and security both continentally and regionally as South Africa contributed to the Peace and Security Council of the AU fund.

Paragraph 41 stated that South Africa assumed the Chairship of the Southern African Development Community (SADC) and would soon assume the presidency of Brazil, Russia, India, China and South Africa (BRICS).

Paragraph 42 stated that the Minister apologised and committed to spending more time meeting with the Committee.

Mr B Radebe (ANC) asked Ms Mosala to move into the draft recommendations.

Ms Mosala then detailed the Department’s response. Paragraph 1 explained that top management of the Department took sick leave because of hypertension, cancer, pneumonia, flu, mental health, and adjustment problems (common among diplomats).

Paragraph 2 stated that the DDGs often did not attend meetings with audit and risk committees because they often had meetings outside of the country. From now on Chief Directors would attend these meetings if the DDGs could not.

Ms Mosala said that in Paragraph 3 the Department responded to its public diplomacy and participation platforms.

Paragraph 4 stated that Laser Group’s contract was indeed extended before the tenders where put out. The Department then awarded the tender to Neo Thando, another company. Laser Group challenged this award. There would be an investigation.

Paragraph 5 said that the Department owed R204 million for projects that occurred in 2013/2014 but were not funded. Another R303 million was transferred back to the ARF. The R204 million was recorded in the Department and the ARF’s books, but it was unclear why they were keeping it that way.

Ms T Kenye (ANC) asked how the R204 million was unused and was not in the Reserve Bank as it should be by law. She asked for clarification of what Paragraph 3 was saying.

Ms Mosala explained that the ARF was first paid R303 million during 2016/2017, and was still owed R204 million from the Department. The Department was in the process of paying R92 million of that R204 million.

The Chairperson said that the Minister needed to discuss contractual issues, such as the one with Laser Group, with the Committee. Even after the BRRR was adopted, the Committee should raise these issues.

Mr Radebe agreed with the Chairperson, but asked to move on to the recommendations soon.

Ms Mosala said that, in Paragraph 6, the Department responded to questions about supply chain challenges, explaining its plan of action for such issues.

Paragraph 7 was about the Department reinvestigating the SCOPA report. It would make its findings available to the Committee.

Paragraph 8 stated that the Department investigated allegations of the CFO’s conduct.

Paragraph 9 said that compensation for Locally Recruited Personnel (LRPs) were governed by the labour laws of the countries in which they resided that was why R30 million was paid to only a few people.

Paragraph 10 responded to the Committee’s queries about the effect of foreign exchange fluctuations on the budget. This issue was discussed with National Treasury and would be discussed with the Reserve Bank. The Department proposed opening the paymaster general account in the foreign currency-dominated option which would entail opening offshore accounts.

Mr Lekota asked why the issue of currency fluctuation was not resolved.

The Chairperson said that from what he perceived, this issue would not go away for many countries, unless it had a dominant currency. That was not a “sin” of the Department but of the currencies.

Mr Lekota gave an example of paying someone in England. If they were supposed to be paid £45, the Department in South Africa had to budget in an amount of ZAR that would convert into £45. There was little clarity as to how much money would actually be required due to fluctuation, and this affected the planning of the budget.

Mr Radebe asked about the possibility of converting the money into a predictable currency. For example, China had USD$4 trillion. China purchased the dollar when it was low and kept the foreign currency in their reserve bank without converting it. South Africa had to change its system and buy powerful currencies when they were weak.

Ms Mosala reminded the Committee that, last year, it was agreed that this was exactly what the Reserve Bank needed to do. It did not help because the Department went to the National Treasury, but needed to go to the Reserve Bank.

Paragraph 11 was about the consular services received from the Department by South African citizens abroad, especially by those citizens in distress. Additionally, sometimes foreign missions in South Africa would contact the Department about foreign nationals in distress.

Paragraph 12 gave examples of the types of assistance that the Department provided in its Consular Services.

The Chairperson then asked the Ms Mosala to move to the recommendations.

Ms Mosala said that Paragraph 1 recommended training for officers dealing with financial statements.

Paragraph 2 recommended that a skills audit be undertaken by the Minister.

Paragraph 3 recommended solutions to the Department’s serial issues.

Paragraph 4 recommended that the Department study best practices for managing LRPs in other countries.

Paragraph 5 recommended that the Department meet with the Reserve Bank, National Treasury and the Department of Public Service and Administration to address fluctuations.

Paragraph 6 recommended an assessment to find out whether it was cheaper for the Department to rent or own property abroad.

Paragraph 7 recommended that the Office of the Account Officer implement turnaround strategies for progress in the Department.

Paragraph 8 recommended that funds owed to the ARF immediately be paid back.

Paragraph 9 recommended a study on causes of loan disbursement issues.

Paragraph 10 requested a dossier on unoccupied missions abroad.

Paragraph 11 offered conclusions on SADPA.

Paragraph 12 was about the delay in payment of newly assessed AU subscriptions.

Paragraph 13 was about the Pan African Parliament.

Paragraph 14 recommended that the Department report about the Neo Thando contracts and cover funds if paid after expiry of the contract.

Paragraph 15 recommended concluding the investigations into allegations against the CFO.

Paragraph 16 recommended the formation of a conduct management unit to handle the Department’s issues with SCM.

Mr Radebe said that conduct management could not be in the CFO’s office. The wording had to specify that this oversight should be in the Deputy General (DG)’s office.

Paragraph 17 recommended internal control systems to detect irregular expenditures.

Paragraph 18 recommended that the Department tabulate incidents of irregular expenditure.

Paragraph 19 called for compliance with SCM requirements and for a report if the requirements were not met.

Paragraph 20 recommended an effective, efficient, and transparent process of financial risk management.

Paragraph 21 recommended referring criminal cases to law enforcement if criminality was established.

Paragraph 22 recommended maintaining a credible asset register.

Paragraph 23 recommended reducing the composition of employees, especially LRPs.

Paragraph 24 recommended proper record-keeping of consular services.

Paragraph 25 recommended that Parliament conduct oversight on missions abroad.

Discussion
The Chairperson thanked Ms Mosala. He asked Members if they agreed on the issues that were raised. The Committee agreed. The Chairperson asked if Members agreed with the issues raised by the Audit and Risk Committees and the AG.

Ms D Raphuti (ANC) thanked Ms Mosala for her excellent report. She objected to the Department’s response in Paragraph 2.  If the DDGs failed to attend meetings that highlighted the risk of repeat audit findings, as listed in the findings on page 45 in Paragraph 29, they would experience the same issues. She believed that the responsibility to attend Audit and Risk Committee meetings had to remain with the DDGs, not the Chief Directors. They had to be held responsible for planning for and honouring those meetings.

The Chairperson said that the Risk Management and Audit Committees had to meet with an accounting officer. He believed that everyone had to account for not attending.

Ms Mosala directed the Members’ attention to page 48 Paragraph 2, saying that the Department was aware that the DDGs had to attend those meetings, but they were often called outside of the country by the nature of their work. To satisfy Ms Raphuti’s objections, the last sentence could be changed to be a recommendation.

Mr Radebe said that he agreed with Ms Raphuti that the DDGs should be present but the ultimate decision-maker was the Chief Director, who made recommendations to the DDG. He would like the BRRR to say that the COO (a DDG himself) must always be present at these committee meetings.

Mr L Mpumlwana (ANC) thought that the Risk Management and other committees had to be assisted. The COO had to coordinate everyone to ensure that what was said in each committee was implemented. The Committee should not micromanage the Department; it could trust the COO.

Mr M Maila (ANC) thought that the bottom line should be that nonattendance as Risk Management and Audit Committees prevented the Department from being hands-on so he agreed with Mr Radebe that a senior-level official should be at all of those meetings. Even if some members of staff at that level could not be present, at least one should be there to brief everyone else.

Ms Raphuti said that it was not about micro-management; accountability could not be delegated. These meetings were only quarterly. The DDGs who were COO or CFO had to be accountable.

The Chairperson thought that the DDGs did not attend the meetings because they did not want to take responsibility for the risks that were raised there, so the COO had to be appointed to do so. He wanted the Committee to recommend that the DG either attend or be represented by the COO and no-one else.

Mr Radebe thought that, even if the DG was available, the COO should still be at the meetings. The DG was the ultimate accounting officer, but the COO had to still be there. He did not see a problem with calling for such an arrangement.

The Chairperson said that the DGs were not coming to the meetings; when they did, they arrived late. The committees were unable to do their work.

Mr Maila reminded the Committee of why it was decided that the Department needed a COO in the first place. Regardless, the DG remained accountable. Either the DG or COO had to be present at the Risk Management and Audit Committees’ meetings, as well as all DDGs who were available. If they were not available, they had to be represented by their Chief Directors.

Ms Kenye said that on page 52 in Paragraph 3, it seemed like ICT was always forced together with other issues. The AG noticed recurring ICT deficiencies. The Risk and Audit Committee also made recommendations about this. She would like a separate point stating that ICT was a matter of urgency, without being connected to security.

The Chairperson said that he thought this point was about serial, recurring issues. ICT, cybersecurity, and other issues could then be grouped below that point.

Ms Kenye said that it was serious because it was an information matter.

Mr Radebe did not see the issue that Ms Kenye raised as a problem, because those issues were in every report. ICT did not need to be listed as a standalone issue.

Mr Mpumlwana said that on page 46 in Paragraph 35 the paragraph needs to be explained further.

The Chairperson explained that there was a tripartite free-trade area among SADC, the East African Community (EAC), and the Common Market for Eastern and Southern Africa (COMESA). The AU encouraged these areas in order to eventually create a continental free-trade area.

Mr Mpumlwana wanted to know what SADC would mean in that context.

Mr Radebe suggested putting the three intergovernmental organisations in brackets to indicate which tripartite free-trade area was being identified. The Chairperson agreed.

Ms Kenye moved for adoption of the report with amendments. Ms Raphuti seconded the motion.

The Chairperson asked if there were objections. There were none. The report was adopted. It was kindly noted that the DA reserved its right to vote, since none of its Members were present.

Mr Radebe said that the advisor, researcher and drafter should be thanked for their hard work. He said that the draft BRRR was highly comprehensive.

The Chairperson announced that the Committee was invited to a Portfolio Committee on Home Affairs meeting, during which a researcher would present notes on statelessness and migration. On Friday 20 October there would be a meeting with the Departments of Public Works and Public Service Administration.

The meeting was adjourned.

 

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