National Research Foundation & SA National Space Agency 2017/18 Annual Report, with AGSA input

Science and Technology

10 October 2018
Chairperson: Ms L Maseko (ANC)
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Meeting Summary

Annual Reports 2017/18 

The Committee was briefed by the Auditor General on the audit outcomes of the Department of Science and Technology (DST) and its entities. Annual reports for 2017/2018 were presented by the South African National Space Agency (SANSA) and the National Research Foundation (NRF). The Auditor General (AG) reported that a clean audit was obtained by SANSA, and that the NRF had irregular expenditure.

AGSA said that three key matters for attention were reported from the audit outcomes:

  • Policies and processes were not always in place to prevent non-compliance with the procurement and contract management prescripts.
  • The review and monitoring processes in relation to performance reporting had improved from the prior year, resulting in the improved audit outcomes. This needed to be maintained and improved to ensure accurate and complete annual performance reporting in the future.
  • Information technology (IT) controls pertaining to security management, user access management and change control were not effectively designed and implemented.

Members wanted to know how effective the auditees’ risk management processes were, and why the South African National Space Agency, the Technology Innovation Agency (TIA) and the Academy of Science of South Africa (ASSAf) had not been included in the AGSA audit. The Chairperson also said it was important for members of the Department to do their internal audits before the audit was done by the AG to ensure proper oversight by the auditors in the Department.

SANSA said the implementation challenges it was currently facing included sub-optimal funding levels, which resulted in it not being able to implement the full mandate for global navigation satellite services (GNSS) and telecommunications. There were also implementation challenges related to its satellite, EOSat1. A five-year strategic plan had been developed with a greater focus on Africa and the neglected areas of GNSS and telecoms. The most powerful international partner that wanted to work alongside SANSA was the United Arab Emirates (UAE). Its annual budget was US$6 billion, and it had an interest in South Africa. The UAE had ambitious plans of going to Mars and building its own local satellites. SANSA had the capabilities but not the resources, so it wanted to work alongside the UAE and see how both partners could benefit from this.

The Committee wanted to know why SpaceOps 2020 was going to be hosted in Cape Town, what SANSA’s relationship with the private sector was, and how it could tap into it, and to what extent the Agency was able to support local industry.

The NRF said it currently supported 9.4% of the total enrolments of students in post-graduate studies in higher education institutions (HEIs). There was an increase in the number of students who were being supported by the Foundation, but the level of support had changed. One of the reasons young people did not progress was because there was pressure on them from society to get jobs and money. Resources had been shown as a major bottleneck in respect of people not progressing in their studies, so the NRF had made the strategic decision as a board to change their funding policy. The NRF would like to fund young, talented and gifted students from start to end, so that they did not have to worry about money and could just focus on performance. It was implementing internal controls to reduce non-compliance in supply chain management.

Meeting report

Department of Science and Technology (DST) and entities: AGSA briefing

Mr Theunis Eloff, Senior Manager, AGSA, said that the auditees in this portfolio were the Department of Technology (DST), the Human Sciences Research Council (HSRC), the National Research Foundation (NRF) and the Council for Scientific and Industrial Research (CSIR). AGSA also included s4(3) auditees within the portfolio that were not directly audited by the AG but for completeness sake, their audit results were included in the presentation. The following results were based on the four auditees that the AG audited.

The portfolio improved from last year’s clean audits of only 25%, to 75% in 2017/2018. The NRF was the only one which was unqualified without findings. There were no qualified financial statements. This was like the previous year, including the s4(3) auditees. All of auditees had unqualified financial statements. There was an improvement in the quality of performance reporting (100%) on service delivery this year. Last year there were issues with two of the auditees (50%) -- this year it was unqualified regarding performance reporting. The findings on compliance stayed the same (75%); the only entity of the four that had a finding on non-compliance was the NRF, which was like the previous year. The NRF in the previous year was non-compliant about performance information and reporting, and this year was non-compliant on expenditure management.

Irregular expenditure for the current portfolio of four auditees increased from last year’s R12.1 million, to R52.5 million this year.

Audit outcomes of the portfolio over four years were as follows:
2017/2018 75% -- clean audit (DST, CSIR, HRSC); the NRF was unqualified with a finding. In 2016/2017, only the CSIR had a clean audit (25%), and the rest were unqualified with findings (DST, NRF, HSRC) (75%), which was like the 2015/2015 year but with different entities, namely the NRF, CSIR, HSRC with clean audits (75%), and the DST unqualified with findings. The improved auditees for 2017/2018 from 2016/2017 were the DST and HSRC. The CSIR remained unqualified with no findings and the NRF remained unqualified with one finding.

The drivers of internal control for the portfolio overall indicated an improvement in leadership, financial and performance management. Governance was the same as the previous year. The Department achieved an unqualified opinion with no findings on performance information this year. The HSRC resolved issues on supply chain management. The NRF had implemented policies and procedures for proper supply chain processes, but those processes were not always followed to ensure compliance with relevant legislation and the prevention of irregular expenditure. At the HSRC and NRF there were still issues with providing some assurance, particularly with performance information. CSIR got a “green,” and the Accounting Officer was doing well.

The irregular, fruitless and wasteful expenditure over the past four years because of interest, penalties and cancellation fees was as follows:

  • CSIR: R78 942
  • HSRC: R185 000
  • NRF: R27 000
  • (Details can be found in their annual reports)

There was an overall improvement -- in 2016/2017 it was R4 million, and in 2017/2018 it was R291 000.

The nature of irregular expenditure in the portfolio all related to contravention of supply chain management legislation. The contributors to the 2017/2018 amount of R52.5 million were the CSIR (R7.4 million), the DST (R14.5 million), the HSRC (R186 000) and the NRF (R30.5 million). However, it should be noted that there was an anomaly within the NRF’s R30.5 million, with one mistake being valued at around R25 million.

Irregular expenditure had increased from R12 million to R52.5 million. R16 million (31%) of the irregular expenditure was for payments/expenses in previous years which was identified and disclosed for the first time only in 2017-2018. R2.7 million (5%) of the irregular expenditure included payments made on contracts irregularly awarded in the previous year. If the non-compliance were not investigated and not condoned, the payments on the multi-year contracts continued to be viewed and disclosed as irregular expenditure. 64% of that R52.5 million was related to non-compliance in this specific year. R52 million of the R52.5 million in irregular expenditure had been identified by the auditees. This indicated that the auditees had policies, procedures and processes to detect irregular expenditure. The NRF had identified 100% of its irregular expenditure.

The DST’s supply chain management findings were reported to management for investigation during the 2017-2018 audit process. Three suppliers had submitted false declarations of interest. The NRF was the only auditee with issues on supply chain management. It had implemented controls on the supply chain environment, as well as reviewed and monitored processes, but there were isolated cases that still flowed through, with people at the senior management level in business units who did not comply fully with the supply chain requirements, and that had resulted in the irregular expenditure. It was identified as a slow response. A status of records review was conducted on all auditees.

Three key matters for attention were reported from the audit outcomes:

  • Policies and processes were not always in place to prevent non-compliances with the procurement and contract management prescripts.
  • The review and monitoring processes in relation to performance reporting had improved from the prior year, resulting in the improved audit outcomes. This needed to be maintained and improved to ensure accurate and complete annual performance reporting in the future.
  • Information technology (IT) controls pertaining to security management, user access management and change control were not effectively designed and implemented.

Entities in portfolio which were not audited by the AGSA in terms of the Public Audit Act (PAA) section 4(3) were the Technology Innovation Agency (TIA), which had clean audit reports for the last four years, with no findings on the audit of predetermined objectives (AoPO) or compliance, and unqualified for the Annual Financial Statements (AFS); and the South African National Space Agency (SANSA), which had a clean audit, and unqualified AFS with no findings on the AoPO or compliance.

There was an issue with the Academy of Science of South Africa (ASSAf). ASSAf had to comply fully with the Public Finance Management Act (PFMA), but because of it not being listed as a public entity and the fact that ASSAf may not comply with the PFMA Act, AGSA as auditors had to report that there was non-compliance in terms of the ASSAf Act, section 2(2), because that required that ASSAf comply fully. That was the only issue that was raised against ASSAf.

The AG’s office recommends that the Portfolio Committee (PC) should request management to provide feedback on the implementation and progress of the action plans to ensure further improvement in the audit outcomes of the portfolio, so that the PC strives for a clean approach and clean administration for all auditees.


The Chairperson said that when the Department had made its presentation on the report of its financial and non-financial issues, the PC had added the question of compliance for all the buildings that AGSA occupied. The PC would take on the final recommendation and pose it as a question to the Department when the Department next presented to the PC.

Ms A Mfulo (ANC) asked why the AG’s office had left ASSAf for so long if the irregular expenditure had happened in the previous year and an audit was done by the AG’s office and the irregular expenditure was picked up. Was ASSAf’s irregular expenditure communicated to them? She asked if ASSAf was warned or informed of its non-compliance with the PFMA by the AG’s office, since the AG’s office had had audit outcomes from ASSAf since 2014 until 2018, and ASSAf’s non-compliance with the PFMA had been noted throughout that period.

Mr N Koornhof (ANC) said it was good that 99% of the irregular expenditure had been identified by the auditees themselves. He wanted to know what the other 1% was.

Ms C King (DA) asked if the AG’s office audited risk management. How effective were the auditees’ risk management processes? With ASSAf, this issue had come up last year and it had been decided that the Minister would liaise with Treasury. Was the AG’s office made aware of that? If not, there was a need to do a follow up on this.

The Chairperson said it was important for members of the Department to do their internal audits before the audit was done by the AG to ensure proper oversight by the auditors in the Department. ASSAf was an issue that had existed for years, and perhaps it would be addressed through the Science and Technology Amendment Bill which was supposed to encompass everything that needed to be done. She had raised the issue with the Minister, and the Minister had responded that she was not clear why ASSAf did not want to be a public entity. Its budget was not too large, so it should comply and allow itself to be audited by AGSA.

Mr Eloff said that it must be noted that according to the accounting authority, the entity itself was responsible to ensure that it complied with all the supply chain prescripts. The AG did not do a review of all the contracts each year – it had a sampling basis approach. When audits were conducted it was not only the external auditor who took part in the review -- there were also inputs from management reviewing older contracts that may have been identified in previous years. The Department was a good example. When non-compliance to a specific contract was identified, it was reported to the Department and clarity was sought from National Treasury, and then regulation could begin. National Treasury was the regulator, not the AG’s office, and it was National Treasury that stated whether a particular expenditure in a contract was deemed as irregular. Irregular expenditure had been identified in ASSAf’s contract in the previous year.

There were no outstanding reports this year, and all the audit reports had been issued. If there were any outstanding reports, AGSA notified the Minister. The same issue of compliance to the PFMA in the ASSAf contract had been highlighted by the AG’s office to the executive authority, the Minister. It was a decision to be made by the Minister, and the portfolio must give guidance on this specific aspect. The AG’s office had reported on this issue for the past four years. Any entity must have prevention and detection controls. Prevention controls may not be able to detect all irregular expenditure, so it was important for all entities operating in this environment to also have detection controls. The PFMA was clear on this aspect, stating that “the management must ensure or prevent irregular expenditure,” so the detection control was a second level of control where the AG audited those specific controls. It was therefore not healthy to identify irregular expenditure, but it was healthier if an entity identified and classified it themselves.

Mr Eloff said that as part of oversight, the AG’s office also looks at risk management within all the entities and evaluates it from an audit perspective. In these entities, the AG’s office had identified only specific issues with IT.

Ms A Tuck (ANC) asked why the AG’s office had included the s4(3) entities -- SANSA, TIA and ASSAf -- in the annual report if the AG was not taking responsibility for them.

Mr Eloff said that SANSA, TIA and ASSAf were classified under s4(3) of the Public Audit Act, as auditees that had from a historic perspective appointed their own auditors. After the Public Audit Act, the auditees that fall under s4(3) entities also form part of the AG’s responsibility, but if the auditees that fall under s4(3) entities were appointed by themselves in the past, the AG had the choice to take back that specific auditee. In this case, the three auditees were not taken back to be audited by the AG. The Minister had requested in the past that there be a representation of the overall view of the portfolio, and therefore SANSA, TIA and ASSAf had been included in the presentation. The auditees that fall under s4(3) entities were also not included in the final audit report. The AG’s office had some oversight in guiding auditees’ audit committees to ensure that their audits were conducted in accordance with the AG office’s audit directives. The s4(3) entities were given advice, but it was their responsibility to fulfil the audit accordingly.

The Chairperson thanked Mr Eloff for ensuring entities were complying, and also welcomed the improvement in the audits. She further urged the AG’s office to contact the Department earlier if it detected any “red flags,” so that the issues were dealt with immediately.

South African National Space Agency (SANSA): Annual Report

Dr Val Munsami, Chief Executive Officer (CEO): SANSA, said the Agency had achieved 17 out of the 20 targets it set out to achieve, and so it had a success factor of 85%. The total ring-fenced SANSA revenue secured had been R235 million, instead of the R251 million it had hoped for. SANSA would be hosting SpaceOps in May 2020. A clean audit had been achieved. SANSA’s racial distribution categories for its employee demographics were 63% African, 9% Coloured, 5.5% Indian, and 22.5% White. The gender distribution of the company was 60.7% male and 39.3% female. SANSA had started to pay the Space Engineering Division from the Parliamentary grant.

Implementation challenges currently facing SANSA included sub-optimal funding levels, which resulted in SANSA not being able to implement the full mandate for global navigation satellite services (GNSS) and telecommunications. There were also implementation challenges related to its satellite, EOSat1. The Space Engineering Division was not established. SANSA was able to give only limited support to local industry. A five-year strategic plan had been developed with a greater focus on Africa and the neglected areas of GNSS and telecoms. There had been implementation of a financial sustainability strategy through engagements with the Development Bank of Southern Africa (DBSA), the Small Enterprise Development Agency (SEDA) and the Industrial Development Corporation (IDC). There had been structural realignment in the organisation. There was a stronger focus on marketing, strategic partnerships and communications. Three University of Pretoria student that SANSA sponsored had participated in a moot court competition that was held by the International Astronomic Congress. One of the team members had attended the year before, and was placed second. She had coached the team that travelled, and they had come first this year. One of the students they sponsored from Stellenbosch University had come second in the International Astronautical Federation (IAF).


The Chairperson congratulated SANSA’s new board, and SANSA on achieving a clean audit.

Dr A Lotriet (DA) asked about the neglected areas in GNSS and telecoms. With its limited resources at this time, had SANSA communicated with the Department of Telecommunications and Postal Services, since SANSA’s work was critical to the work of telecoms and it was an important growth point to have in this current world.

Dr S Thembekwayo (EFF) asked what gender category distribution was present within the racial distribution categories of SANSA’s employee demographics. She also asked what racial categories made up the gender distribution of the company (60.7% male, 39.3% female). SANSA’s representative committee that had come to present was not gender-balanced because it had only one woman in it, and had no representation of persons with disabilities. She urged the SANSA representative committee to address those issues. Since the Space Engineering Division was not yet established, why was it not mentioned under SANSA’s “Road Ahead” five-year strategic plan?

Ms Tuck said that it had been mentioned in the presentation that SANSA supported 75 students (78% of them previously disadvantaged individuals), and asked how those 75 students were selected. Were they from all provinces in South Africa, or only from the Western Cape? Secondly with the 62 jobs that were being directly supported by SANSA, how were those jobs selected, and where in South Africa were they selected from? Lastly, Dr Munsami had said that SANSA had won the bid to host SpaceOps 2020 and that it would be hosted in Cape Town. Why was it being hosted in Cape Town? She would like to see all the provinces influenced by the hosting of this event. What were SANSA’s key outcomes with its structural realignment to date?

Ms T Motshidi (DA) said that in SANSA’s road ahead strategic plan, there was a focus on marketing, strategic partnerships and communications, and while this was not SANSA’s core focus, Dr Munsami had said that there were going to be budget cuts. Under SANSA’s implementation of a financial sustainability strategy, the DBSA, SEDA and the IDC had been listed. What was SANSA’s relationship with the private sector, and how could it tap into it? Lastly, how did SANSA plan to market to the general public?

Ms King said that last year SANSA had said it was doing a seven-year strategic plan, and this year it had now been reduced to a five-year strategic plan. Which key elements had been aligned to reduce its plan to five years? Risk factors had also been highlighted in the report -- what measures had been put in place to mitigate against these risk factors?

Mr Koornhof said that last year there had been a considerable shortfall for EOSat1, and it had been quite a concern for the Committee. How much was that shortfall currently and did SANSA still want to end the project, or had it extended the end date? How would the early ending of the project affect it? When looking at the stakeholders of SANSA in the annual report, which countries did it regard as the most powerful and valuable in terms of partnerships?

The Chairperson said that one of the implementation challenges in the SANSA presentation was that it could provide only limited support to local industry. To what extent did it currently support local industry, and what would be the ideal level of support?

SANSA’s response

Dr Munsami thanked the Chairperson for the commendation on the clean audit and extended the thanks to his chief financial officer (CFO) and the team working on it.

Regarding the neglected areas and limited resources, SANSA had been engaging with the Department of Telecommunications and Postal Services (DTPS). From a DTPS perspective, it had been trying to construct a national strategy for telecommunications, and SANSA had been helping since it had experience through developing the space strategy policy. The process was ongoing, and SANSA was part of the committee, and there were options in terms of securing South Africa’s telecoms satellite, which was what the DTPS was currently considering. From a Global Navigation Satellite Services’ perspective, the other key department was the Department of Transport. This raised an important point -- even though SANSA’s line department was the Department of Science and Technology, it was not established for DST alone, it was an agency of all government.

Dr Munsami said that the racial and gender distribution was shown in SANSA’s annual report on page 101. In the executive team there were four women -- one was in Geneva, one was defending a contract currently at risk, and the Executive Director for Enterprise Services was also away at the moment. SANSA’s executive female colleagues were very busy -- it was not that it had not brought them to the meeting.

The Space Engineering Division had now been formally embedded into the SANSA structure by ensuring that it was paid for out of the Parliamentary grant from April 1 2018. The reporting period was for the previous financial year.

Regarding the key deliverables of the structural realignment, a number of managers were also reporting to the CEO, but not all of them, which was creating an impression that the managers were above the executives. As of 1 April 2017, all executives were reporting to the CEO, and the managers no longer reported directly to the CEO. There were been a process of resetting the human resources (HR) Division, because there could not be change management without a well-functioning HR Division.

Dr Munsami said hosting the SpaceOps in Cape Town as opposed to Durban or Northern Cape was because the Cape Town Tourism Board had given huge support for the SpaceOps bid, and had put in additional funding for tourism. When looking at the facilities and infrastructure based in the Western Cape, including the Space Operations facilities based there, the only other option had been to host it in Pretoria, but its Space Ops facility was 80km away, and did not seem practical to drive that far every day.

With marketing strategic partnerships and communications, SANSA had given R78 million to support local industry.

In the National Space Strategy in 2017, the ideal budget for an effective space programme would be R1.7 billion, but SANSA currently worked with R131 million. If the R1.7 billion had been invested, the return on investment would have been nine to one, but because there was limited investment, the return on investment was also limited, so the private sector had suffered too. Limited support in terms of funding had an impact on the Agency’s industrial capability, and with the funding that it had, it had tried as far as possible to contract the industry. The major share of the Satellite Engineering Project had been contracted to industry, and not to SANSA itself. From the space engineering and the earth observation perspective, SANSA had started engaging with industry. It had met with the space Applications Industry a month ago to understand what it required from SANSA and what the current bottlenecks were.

Dr Munsami said SANSA was engaged with 23 000 learners directly. A sample of stakeholders had been taken, and close to 80% of them knew what SANSA was doing. It had been prominently featured in the media, and had launched a new website that would be more engaging to stakeholders.

With the strategic plan, there had been seven goals in the previous year, and there were now five goals going forward. When looking at the current annual report, there were five goals that were externally orientated, and two of them -- goals six and seven -- were internally orientated. An operational plan should not be internally focused, but should be externally focused and very strategic. Goals six and seven were about creating better performance and looking at demographics.

Dr Munsami said that the racial and gender distributions were reported to the Department of Labour, and so they should not be set as a target. It was set in legislature, and so SANSA was meant to do it. By separating strategic goals with operational goals, SANSA had managed to reduce its goals from seven to five.

He said the most powerful international partner that wanted to work alongside SANSA was the United Arab Emirates (UAE). Its annual budget was US$6 billion, and it had an interest in South Africa. The UAE had ambitious plans of going to Mars and building its own local satellites. SANSA had the capabilities but not the resources, so it wanted to work alongside the UAE and see how both partners could benefit from this.

The European Space Agency (ESA) was a partner whose connections had yet to be formalised, but it had shown interest. A meeting had been held last week in Bremen, Germany. There would be a workshop early next year, looking at some of the models that the ESA had with Europe. There were business incubation centres that it had set up in many European countries where they looked at new start-ups, where the ESA puts in the intellectual property (IP) and new companies can come and use and commercialise it, and spin it out into other non-space sector industries. That had proved very successful in Europe, so SANSA would like to try it, and ESA had agreed to give SANSA access to some of its IP to see if SANSA could commercialise it without any exchange of funding. SANSA was exploring other initiatives, such as ESA laboratories which would be based at the universities to see what the students could do with them, so it was a promising relationship.

The Space Debris Tracking in Sutherland had come about because of SANSA’s relationship with the German Aerospace Centre (DLR), so strong points of synergy had come about from this collaboration.

Mr Amal Khatri, Executive Director: Space Programme, SANSA, said that on the topic of mitigating risks and shortfalls, it had been indicated in the meeting the year before that there was a shortfall in the satellite development programme. The full acquisition phase of the satellite cost R1.4 billion, and it ran from the design stage to the flight model, to launching the satellite in to space. To date, SANSA had spent just over R300 million on satellite development. The whole acquisition process had various segments that SANSA was developing, the key focus at the moment being the satellite segment. To build a satellite cost around R695 000. The rest of the cost was for the ground segment, the data segment that needed to be developed, including launching the satellite. Launching was expensive -- one was essentially buying a rocket and sending it into space. The current cost of launching was between US$20 000 to $30 000 per kg, so launching can be up to an excess of R300 million, particularly with the current exchange rate. So the first challenge was the funding.

The other risk involved Denel Dynamics, where Spaceteq was the contracted party, and they were the previous SunSpace employees. Under the Denel environment -- its non-core businesses and space being seen as non-core business -- it needed to redesign its business model and space did not seem to be in its long-term vision. This did also create an opportunity to see how best to reorganise the space industry to be more suited to the broader space industry development.

For the completion of EOSat1, SANSA had to first stabilise the environment and get funding, and to mitigate risk on the funding side it had to come up with alternative options. The satellite originally designed was meant to be world class and able to compete with other countries. It also had a unique design. Satellites of a similar class tended to be double the size. The Chinese were building a similar satellite and there were 600 people working on it -- SANSA’s satellite had 50 people working on it, which showed their capability.
The issue was, how could SANSA maintain the high capability and design an effective space programme for South Africa? Space had socio-economic benefits such as food security and disaster management. However, there was a need to rethink the approach to satellite development, so the space programme team was currently engaging the broader space industry to understand how collectively, as the broader space industry, what it could do to build a satellite that met the requirements of the user but was slightly different. Hard decisions had been made to look at doing very linear satellite development which had some redundancy, but not too much, which would bring the cost of the satellite down. If the mass of the satellite was reduced, then the cost of launching the satellite would also reduce. SANSA wanted a world class satellite, and it had learnt from the initial process and was redesigning the satellite so that it served the needs of South Africa. It had started planning for future satellites for the country, where it could start building more advanced systems within them.

SANSA’s capabilities were known internationally. It was currently working on a proposal with Algeria on nano-satellite installation. There was also ZEQ 2, which was SANSA’s first satellite for the Automatic Identification System (AIS), which was to detect ships. There was a need to think of satellite engineering more broadly and pursue various missions that support the needs of the country. Nearly every government department could benefit from satellite imagery. So much information could come from those images and it could empower the nation to be sustainable. Sustainable development goals could be covered through this and so there was a need to manage risk. There was a need to change direction, and stabilise the space industry by making a plan to retain current staff. SANSA would be reviewing the programme at a board meeting at the end of the month. SANSA did not want to stop the programme -- it wants to continue with the satellite development programme. It may mean taking a different route, leveraging the current investment and applying it in a different way.

The Chairperson thanked the SANSA delegation for its presentation and responses. The PC knew SANSA had been reporting for the previous financial year, but as part of its oversight, it wanted to know how compliant the buildings from which SANSA operated were, considering the tragedy that had happened in Gauteng.

Dr V Munsami said that SANSA had three sites. One was in Pretoria at the Innovation Hub, which was very sound, and there had been discussions with developers for a new building at the same site. SANSA was just assessing what the implications would be. The Space Operations Facility in Hartebeesthoek was a national key point, and there were no problems there. The same could be said for SANSA Space Science -- it owned and maintained the building itself. SANSA had its own facility managers on both sites. All the maintenance was done by SANSA and it followed the International Organization for Standardization (ISO) standards in terms of the environmental management standards.

National Research Foundation (NRF): Annual report

Dr Molapo Qhobela, CEO: NRF, said the Foundation currently supported 9.4% of the total enrolments of students in postgraduate studies in higher education institutions (HEIs) in 2016. There was an increase in the number of students who were being supported by the NRF, but the level of support had changed. South Africa’s contribution to global research outputs had increased from 0.63% in 2012 to 0.79% in 2017. The NRF had missed its target for female and for black researchers because of the reduction in the Department of Higher Education and Training (DHET) Scarce Skills Development Fund, which had resulted in 920 students not being supported. The 2018 allocation for black and female researchers was R467 million, compared to the 2017 allocation of R494million. The increased 2018 targets may therefore have been set too high. 1 563 black and 1 699 female researchers had been supported in 2016/17, compared to 1 698 black and 1 786 female researchers in 2017/2018. The number of applications received from black and female researchers had declined by 7% and 11% respectively between 2017 and 2018. This may be due to the decreasing growth in the research grant size, which had declined in real terms and had not kept up with year on year inflationary growth. There had been complaints about the rigorous nature of the grant application process for so little money, which had become a discouragement.

Expenditure on the iThemba LABS Tandetron had occurred in the previous financial year, reducing the expenditure for the 2017/2018 financial year by 2%. NRF’s target for corporate overheads was always less than 3%, and this year it was 1.8%. The under-performance in the number of active grants emanating from bi-national, multinational and agency to agency agreements was due to international partners not always being able to adhere to the NRF timeframes.

A general lag period between the commissioning of equipment and the outputs produced had been factored into the APP planning process. It had negatively affected the number of publications emanating from the use of the equipment funded by the National Equipment Programme (NEP) and the National Nanotechnology Equipment Programme (NNEP) programme. Currently there were 55 053 research and instructional staff at universities, of which 13 055 had doctoral degrees, and only 4 708 researchers were supported by the NRF. Paleo-anthropology was unique to this country, and the NRF spent only R30 million on it. It made payment a year ahead on one of its projects. It had approval to acquire a 70 MV Tandetron Accelerator for advanced materials science research. It was transforming marine sciences through funding 24 Honours, 40 Masters, and eight Doctoral black and female students on the South African Institute for Aquatic Biodiversity’s (SAIAB’s) Phuhlisa programme.

The NRF was spending 12% of its budget on capex. The target had been set for under 10%. All of its irregular expenditure had been identified through internal monitoring. All expenditure had resulted in value for money being received. The increase in the 2017/2018 irregular expenditure had been mainly due to one incident involving R26.8 million for a variation on the Square Kilometer Array (SKA) road construction in Carnarvon, which had subsequently been approved by National Treasury.


Dr Lotriet sought clarity on the iThema LABS, and whether that was were the R25 million issue lay.

Dr Molapo Qhobela said that for iThemba LABS it was a performance issue, and that the R25 million was related to the SKA road project.

Dr Thembekwayo asked about the fruitless expenditure mentioned in the AG’s report, as it painted the NRF in bad light. Secondly, Dr Qhobela had said that the Honours and Masters’ students could not progress, but what were those students’ reasons for not pursuing their studies further? Did the NRF have a questionnaire that it could use to establish why they had not pursued their studies further? It may not always be about supervisors -- the students may need some other form of support to ensure they progressed.

Ms Tuck asked what measures have been implemented to mitigate against incurring further irregular expenditure that had resulted in the findings by the AG’s office.

Ms Mfulo asked about the summary of irregular expenditure, in particular the nature on the non-compliance. There were pre-requisites when giving out a tender. Why were people who were not complying, still being given business? Had the AG said anything to the NRF about issues surrounding buying things outside of South Africa, and how that incurred tax? Had iThemba been paid in advance, and was that the challenge? In terms of building maintenance, the NRF should be aware of the price of the overall maintenance costs for a building so that it could structure its expenditure well, because the way it was laid it out showed it had spent 12%, instead of the planned 10%. How did it plan for the overall maintenance of its buildings? It seemed the NRF spent a lot of money on renovations and maintenance of the buildings over time.  

Ms King said that the NRF had reported its research outputs as being at 0.79%, which was below the 1% the Committee would have liked to see, and it would pose a challenge for the NRF moving ahead in the future. For NRF’s staff turnover, the target had been 6%, but the current rate was 8.8%. How did it make up for the funding, especially since it was already facing funding challenges? Last year it had been discussing its funding structure with the Department – had there been any progress on that?

The Chairperson said that issue of the women was a “Catch 22” situation, because it could seem like nepotism. It was good that the administration received the least of the overall expenditure, sitting at 2%. She acknowledged that the NRF needed more money, and attending the Foundation’s awards was testimony to the work being done and the amount of money needed to ensure innovation was being funded, and recognising other work being done.

She reiterated the Committee’s statement that had been sent to the NRF to congratulate Dr Bernard Fanaroff, special adviser and former director of the SKA on his NRF Lifetime Achievement Award.

The Chairperson said that she took issue with outside partners and stakeholders, like Mongolia, who agreed with entities such as the NRF, who then put its international agreement as part of its annual performance plan (APP), and then if the international partner did not comply, the issue sat with the NRF.

At the launch of the SKA, it was interesting to see how the Deputy President had been interested, as well as the representatives from the BRICS (Brazil, Russia, India, China and South Africa) Summit, with its focus on science and the telecommunications. The President had kept referring to science and technology, so the Presidency was taking science and technology seriously.

During the study tour to South Korea and Japan, the Committee had seen the importance of research and development, with science and technology being right at the top in the Office of the President, so that it was monitored, implemented and funded well. The Committee was currently thinking of questions to pose to the President and Deputy President about their interest.

NRF’s response

Dr Qhobela said that the issue of iThemba LABS had been that the NRF did not pay people up front. The project had been concluded in the prior year, and NRF was reporting on 2017/18, but iThemba LABS had been paid in 2016/17 because the project had been finished early. From AGSA’s point of view, it was an issue because the NRF had planned to pay later.

One of the reasons young people did not progress was because there was pressure on them from society to get jobs and money. Resources had been shown as a major bottleneck in respect of people not progressing in their studies, so the NRF had made the strategic decision as a board to change their funding policy. The NRF would like to fund young, talented and gifted students from start to end, so that they did not have to worry about money and could just focus on performance.

Regarding research outputs, he said it would be difficult to reach 1%, but the NRF may fall short based on the current trajectory.

The staff turnover was high at 8.8%, but NRF was losing the people it did not want to lose, which was a challenge that many organisations faced. The Vice Chancellor of the Nelson Mandela Metropolitan University (NMMU) had just hired two bright young women who the NRF was grooming for executive positions.

The NRF had had a productive meeting with the Director General of the DST about the funding framework, and the matter would be brought back to the board.

Dr Qhobela said the NRF was not worried about the maintenance of the buildings so much as the maintenance of the equipment in the buildings. At some point, the telescopes would have to be replaced. This was an issue of sustainability, and it was about the renewal and replacement of essential infrastructure.

Mr Bishen Singh, Chief Financial Officer: NRF, said the Foundation had had a good five years of consecutive clean audit awards, excluding last year. The NRF was dismayed at the lack of a clean audit award, and was committed to deal seriously with the irregularity. He had personally taken up the issue of the irregular expenditure with the AG in the last week of the audit. The AG had escalated the matter in the last week of the audit because of a number of transactions. There had been 19 transactions worth R435 000. The second issue had been the value of one of the irregular expenditures, which was the issue of the road, despite the NRF getting approval from Treasury for it. There had been things that the staff had not done right, such as issuing procurement orders without tax certificates, and the issue of foreign procurements was addressed by the CEO. The CFO had compiled an eight-page report to the AG around the various preventative measures that had been taken by the NRF, and they ranged from changes in policy to systems in the NRF to prevent things from by-passing to the next level, and training. However, some of these things do fall through the cracks because of the complex nature of the NRF, primarily because of the uniqueness of some of the things the NRF buys. Mr Singh had relented because some of the things it procured were downstream work, but the argument from the AG’s side was that the NRF should have got three quotations.
Last year, the NRF had been one of the entities that had challenged the AG on the technical matter of procurement from foreign entities that did not have a resident company or subsidiary in South Africa. Last year, the AG gave the NRF a major audit owing to the Annual Financial Statement (AFS) that the NRF had contested, and the National Treasury had done an investigation and found that the NRF did not need a tax certificate if the company it was buying from was not resident in South Africa, or was a subsidiary. The iThemba LABS issue had been dealt with.

There was a definite difference between fruitless and irregular expenditure. Fruitless meant the NRF got nothing out of it. With irregular expenditure, the NRF may have missed one step out of 20 steps in the procurement process.

The Chairperson excused herself as she had to chair another meeting and requested Dr Lotriet to close the meeting.

Dr Lotriet asked if there were any more questions or statements before she closed the meeting.

Dr Qhobela said that next year the country would be had reached 25 years of democracy, and the NRF would be turning 20. It was hoping to host their awards in Cape Town, and the he would like to invite the whole Committee.

Dr A Lotriet (DA) said that the Committee appreciated the hard work that the NRF does, and understood its dismay about the lack of a clean audit.

The meeting was adjourned.

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