DIRCO and African Renaissance Fund 2019/20 Annual Performance Plan; with Deputy Minister

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International Relations

03 July 2019
Chairperson: Ms T Mahambehlala (ANC)
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Meeting Summary

The Department of International Relations and Cooperation (DIRCO) presented its 2019/20 Annual Performance Plan (APP), with Deputy Minister Alvin Botes. The presentation spoke to the situation analysis in terms of performance environment and operational environment. It was noted the focus of the APP in the period under review would cover South Africa’s bilateral engagements and Mission footprint to contribute to the government drive for inclusive economic growth as articulated in SONA June 2019, implement of the African Union Agenda 2063, by bolstering continental self-reliance so as to reduce dependency on international cooperation, support for the Continental Free Trade Agreement, negotiating and influencing outcomes of key multilateral structures and advocate for reform of the global governance institutions, utilising the Co-Chairship of the G20 Development Working Group (DWG) to promote priorities that support economic development and inclusive growth that would be of benefit to RSA, the African continent and the developing world, chairing the AU in 2020 and serving as a non-permanent member on the UN Security Council (UNSC).

The presentation then looked at 2019 Medium Term Expenditure Framework allocations before moving onto the programmemes of the Department.

The Portfolio Committee Members expressed many concerns in regard to budgeting and asset management of the Department. This was specifically in reference to unauthorised expenditures causing challenges when deciding on the budgetary needs of DIRCO.

The matter of ICT was raised by Members. There was worry that the ICT is so technologically behind that it would need an upgrade before being able to be useful in the international stage. This would become a challenge as the ICT was hung up in improper contracts causing irregular expenditure.

DIRCO then presented the African Renaissance and International Co-operation Fund (ARF) Annual Performance Plan for 2019/20.  In the current financial year, two projects were approved.  The Fund has ongoing projects that are yet to be completed and has requested National Treasury to keep the unused funds. Further, the presentation covered the strategic objectives of the Fund, programmeme performance indicators and annual targets, quarterly targets for 2019/20 and the 2019/20 financial report.

The Committee questioned the progress and impact of current projects within the ARF, who sits on the advisory committee, what money in the Fund is spent on, where leftover money goes to at the end of each financial year, where money of the Fund comes from and who contributes to the Fund and how the Department identifies where to assist.

Several ongoing projects within the Fund are currently under implementation, and some have yet to be implemented. The Department would like to do an updated report on each current ARF project. 

 

The Committee thanked the Department for both presentations.  Moving forward, the Committee would like to be fully informed about the proceedings of the Department.  This includes the Department providing more updates and reports about the Fund and projects within the Fund. 

 

A budget vote on the Department will be happening next week.

Meeting report

The Chairperson opened the meeting by welcoming all Members and representatives of the Department of International Relations and Cooperation (DIRCO). She expressed hope for a strong and efficient cooperation between the Department and Committee to achieve a greater goal in international relations. This is important as the Chairperson noted South Africa’s current international relations is quite volatile, and that with the Committee it may be possible to further the role of South Africa on the world stage. This would be for the betterment of a better South Africa, a better Africa and a better world.

DIRCO: Annual Performance Plan (APP) 2019/2020

Mr Kgabo Mahoai, Director General (DG), DIRCO, began the presentation on the Annual Performance Plan (APP) by looking at the mandate of the Department and structure of the Department - there are two Deputy Ministers, each assigned to different regions. One is responsible for Europe and the Americas (including South America) and the other for Asia, the Middle East, and Africa. The structure of management of the Department would be applied through small groupings of continents which hold missions that are dealt with by the same people daily. This allows gpt specialisation. These missions are delegated into two distinct categories:

-Permanent and multilateral missions such as the United Nations (UN) or African Union (AU)

-Bilateral missions in foreign capitals such as in the Geneva Human Rights Council

Ms Delores Kotze, Chief Director (CD), DIRCO, described how important it is for South Africa to have a greater part in international relations because issues and policies being created abroad are also affecting South Africa. She went on to explain there are many things happening on the world stage such as tensions between US and Iran and trade route shifts due to the South China Sea, which all have an effect on South Africa and is something people need to be aware of.

Ms Kotze continued by outlining the first of five programmemes in the APP: Administration. The strategic objectives of this programme are to:

-Implement effective Human Rights management to ensure adequate and sufficient skilled resources are in place and that performance is monitored

-Provide an integrated Information and Communications Technology (ICT) system that enables delivery of the Department’s mandate

-Effective management of resources through sound administration and good governance

-Accredited training, research, and institutionalised mediation capacity

In programmeme one, the main focus is on compliance and effective management. This included 100% compliance with 30-day payment period, 105 training programmes, 100% of legal services upon request, and 10 programmemes to advance gender mainstreaming, youth development and access for people with disabilities.

Ms Kotze then moved to programmeme two: International Relations. In this programmeme, bilateral engagements are the basis for strengthening political and economic relationships. This is also reinforced with multilateral engagements to support national priorities and to lobby support. Further, bilateral mechanisms are required to allow for South Africa to address domestic imperatives including: increased exports of goods and services, increase Foreign Direct Investment (FDI), and increased inbound tourism and skills enhancement. These are the engagements that will allow for South Africa to promote its national priorities as reflected in the National Development Plan (NDP) and the State of the Nation Address (SONA) 2019.

This programmeme would also include plans to utilise the mission footprint to engage in economic diplomacy in order to achieve the greater goals of South Africa as was promised in SONA 2019. These goals will be achieved through taking multiple steps such as hosting/participating in trade seminars, tourism promotion, and engagement with chamber of commerce.

Ms Kotze explained that such potential investors and relevant government ministries would contribute to many aspects such as increased value-added exports, attracting FDI to priority sectors (NGP and IPAP), promoting the removal of non-tariff barriers, address South Africa’s skills shortages through the transfer of technology and training opportunities, and enhancing South Africa’s image abroad.

The target of this programmeme was to deploy these missions and strategies in order to explore opportunities in the areas of the seven priorities identified in SONA June 2019:

-112 trade and investment seminars

-126 engagements with Chambers of Commerce

-70 engagements with targeted government Ministries

-90 high-level potential investors and importers

-60 tourism promotion events

These outcomes would contribute to economic development and growth for South Africa. These increases could come in multiple forms such as university scholarships, skills trade, and technology trade: all of which are required to bring South Africa and its image on the world stage.

This then also applies to the direct region South Africa is located in. Regional integration is critical to the economic development of the entire region, including South Africa. Here, it is essential to strengthen political cohesion within the South African Development Community (SADC) and to ensure political stability and economic viability through strengthening governance and institutional capacity within SADC. South African will also continue to take part in election observer missions as part of SADC to help ensure this political strength remains, mainly in Malawi, Namibia, and Botswana.

Ms Kotze outlined programmeme three of the Department: International Cooperation Sub-programme 3.1: Global Governance. In this programme, South Africa is described to be committed to multilateralism and a rules-based international order and to this end, participates and plays an active role in the United Nations system and its specialised agencies, funds, and programmes. South Africa must be represented at multilaterals for engagement, influence, negotiation and to articulate its positions and have these positions reflected in the outcomes of meetings and processes. This is with a particular focus on peace and security, sustainable development (social, economic, and environmental) protection and promotion of human rights and humanitarian affairs, international crime and international law.

The targets for this programme are to become more influential in these multilateral organisations such as the UN, BRICS, and United Nations Educational, Scientific, and Cultural Organization (UNESCO). Another target would be to negotiate and influence the outcomes of one multistate meeting and process such as the G20 Leader’s Summit.

Programme three also carries with it a sub-programme: 3.2 Continental Cooperation. In this sub-programme, South Africa will align its foreign policies with Africa’s Agenda 2063 in order to contribute to socio-economic development of the African continent. This will include South Africa being focused on implementation of continental integration, regional economic integration, and finding ‘African solutions to African problems.’ This will be achieved through strengthening the AU, participating in peace missions, and Peace, Conflict, Reconstruction and Development (PCRD) initiatives. Added to this, South Africa will promote good governance and the protection of human rights as well as continuing to contribute to the socio-economic development of Africa. Ultimately, South Africa will be chairing the AU in 2020.

Targets for this sub-programme were outlined: promote democracy, good governance, human rights, peace, and security in Africa with relation to the vision of 2063 through the participation of Mid-Year Coordination Session of the AU Executive Council and the Assembly of the Ordinary Session of the AU as well as one AUPSC meeting.

Further, the sub-programme will target participation in at least ten identified meetings (e.g. NAM, IBSA, IORA, ACP) of organisations of the South in pursuit of South Africa’s national interest particularly in the seven priorities of SONA 2019. It also included focusing on the BRICS structures to advance the agenda of South Africa to match that of the international relations policy objectives.

Ms Kotze spoke to the sub-programmes in programme four: 4.1 Public Diplomacy. For this sub-programme, the goal is to gain a better understanding and awareness of South Africa’s foreign policy through targeted public diplomacy partnerships and platforms. The target platforms for this will include participation in and utilisation of the 12 public participation programmes, 120 media statements, four stakeholder publications, and 12 opinion pieces.

For sub-programme 4.2: State Protocol and Consular Services, the objective is to create a professional state protocol and consular services. This objective will be completed by targeting the Coordination of International Conferences, incoming and outgoing international visits for principals, strategic engagements with diplomatic corps in support of facilitating diplomatic immunities and privileges, consular services (for South African citizens abroad), and legalisation services in order to allow South African citizens to be issued documents.

Finally, programme five is described to provide the membership of South Africa to International Organisations such as the UN, AU, and SADC. In this case it would provide economic transfers to these organsations.

Ms Thandiwe Fadane, DIRCO, took the Committee through the financial information. She explained the budget is currently at R6.5 billion, a large number, however not sufficient to undertake all missions and goals of DIRCO. The presentation looked at the breakdown of the budget allocations and where funding was going to. A major flaw was highlighted in the matter of the exchange rate – it was said the

exchange rate between the US dollar and the SA Rand is very poor (1USD=R14.16). This is costing DIRCO’s international work quite a lot. Ms Fadane explained that once this is fixed, the budget will be able to be more efficiently allocated.

There are a total of 125 embassies and consulates around the world for South Africa, and there are also a total of 3 799 employees. This is where the bulk of the money goes towards. The main cost is compensation for employees (48%). Then, 26% goes towards administration such as property costs (accommodation for employees and office space abroad). 13% is then allocated to international transfers as explained in programme five. These are the subscriptions to international organisations such as the UN that South Africa is a part of. 8% of the budget is then allocated to global governance and continental agenda as explained in programme three. Finally, the remaining 5% is allocated to public diplomacy and state protocol. This would also include certain expenditures by the President such as travel or hosting seminars.

The shortcomings of this current budget are estimated to be R429 million on compensation of employees based on the filled positions. Another budget pressure would be South Africa chairing the AU, and the shortfall for 2019 on South Africa’s Annual SADC Member States’ contribution amounting to R43.5 million.

To address these pressures, there are a few strategies that can be applied:

-Reduction of overtime payments

-COLA for transferred staff

-Medical payments

-Annual leave encashment

-Early retirement

-Review of organisational structure

-Natural Attrition – only 20% of identified critical vacancies arising through natural attrition will be filled.

Discussion

The Chairperson expressed her fear of the budget depending on the exchange rate and that the standards of the presentation were not where it needed to be. The Department is accountable to the Portfolio Committee and there must be standards of etiquette towards the Committee. She hoped there would be a mandate for the Committee in order to help Parliament assist in achieving goals.

Rev K Meshoe (ACDP) cautioned that a budget driven by an exchange rate is dangerous and creates many shortcomings. He questioned how DIRCO will respond to these eventual shortcomings and what remedies are in place. He posed the scenario that if the budget is reviewed every six months and a shortfall is to be discovered, what adjustments are able to be made in response to this? He asked whether there is an asset register. Where is this register, who is responsible for it, and how often is it checked to ensure accountability? Why is no legislation being passed that would give the Department the power to do what it needed to do? Mr Meshoe raised the White Paper given to the Fourth Administration yet was never passed. What are the reasons and on what basis should it be withdrawn?

At this point, the Chairperson welcomed Mr Alvin Botes, Deputy Minister of International Relations and Cooperation. The Chairperson also accepts his apology for being late.

Mr T Mpanza (ANC) agreed with the Chairperson that he wished the Committee was accommodated more in the presentation as this is the first meeting. He asked how the Department would deal with the matter of cost cutting measures when it had a particular mandate to fulfill. There must be serious engagement between the Department and National Treasury to find a balance as to how to reconcile the two aspects. He also agrees it is important for the Committee to have oversight of the Department. On the matter of IT, he asked if the Department was up to the technological evolution required to be able to ensure security and keep up with international standards. He asks the Department how it would modernise its ICT to fit the international stage. This is very important as the ICT must be ready to protect sensitive information. He requested a briefing as a Committee on the matter of the RAF and the economic package for Cuba. He would also like to be briefed on the UN Security Council and also on the matter of the UN and AU membership. He touched on the matter of oversight in regard to these missions and that there must be some planning around this. He then asked how far along for review these missions are. He was worried about the APP proposed - an APP must be smart and have basic principles. He wants to know from the DG if the document is smart principled and if the APP is aligned with the budget, as an unfunded mandate brought with it problems.

Ms TP Msane (EFF) said the presentation in March 2019 showed unauthorised and irregular/wasteful expenditure to the amount of R335 million where R5.5million was fruitless and wasteful. Where in the Department did this come from? What contributed to the irregular expenditure? She questioned if the property in New York may have been at fault for some of this. She said the Public Finance Management Act (PFMA) is part of the challenges in the Department and it is impossible to follow the law to the‘t’ in most countries. How would DIRCO bypass these systems while staying within the law? She then asked which monitoring tools are being used to evaluate the performances of the nations that hold South African interest. Are these nations giving SA what it should be and are targets being met? She then asks how far along the milestones are in regard to the National Development Plan (NDP) and the goal to increase inter regional trade from 7-25% by 2020 and 15-30% on major trade. How does the monitoring work to ensure every target is met? Is there a need for a new development plan? She questioned what projects are going on for this and how they are chosen and whether South Africa participates in determining what needs need to be prioritised in these organisations.

Mr D Bergman (DA) noted that South Africa’s footprint is the second biggest footprint in the world. What cost cutting measures was proposed on missions being downgraded? He put forth the idea that there may be a need to look at missions that since 1994 are not feasible to keep open at this stage. South Africa is not the second biggest country and therefore does not need to have the second biggest footprint. Downgrading or shutting down such missions that are no longer feasible would save on sending personnel abroad and ultimately cut costs greatly. He raised the idea of combining the tourism office and a mission dedicated to increasing tourism to save on property and personnel as well. Mr Bergman explained he once worked in foreign service and was surprised that clause two is under discussion again. He asks what, where, and whose idea was it to bring that clause back into discussion. He also notices that there was an investigation into the previous CFO but he was unsure of the finalisation of that investigation and asked the DG to take the Committee into his confidence about what happened. The Geneva ARP case had a disciplinary dispute taking place and he asked how the matter of DIRCO not being reinstated there anymore was handled.  The President recently traveled to the International Labour Organisation (ILO) with a delegation of 50. The cost for such a large delegation is definitely not cheap – who pays for this?

Gen B Holomisa (UDM) agreed that South Africa should not be the second biggest footprint in the world and agreed that cost cutting must be considered to help with this. The DG must be responsible for all branches in the Department. He wanted to receive a report about these branches and on the asset management policy. He then raised the matter of the South African Parliament being moved to Johannesburg and what challenges lie there. He then also requests information on the financial implications of having chairs in the UN and the AU. Programme two indicated that South Africa is engaging in economic diplomacy – what is the role of the DTI in this? He asked if there is cooperation between these departments and whether the targets are matching with those of the seven priorities outlined in SONA 2019. He questioned the memberships in international organisations such as the AU and UN and how South Africa can take full advantage of these seats it has paid for. How can South African representatives deploy symbolism and idealism in this way on the international stage? Mr Holomisa raised his doubts with the ICT finding it not up to the standards it should be. He asked how the Department intended to modernise the ICT in order to create a real enabler for the Department at home and in its missions abroad. He spoke to the supply chain management practice in missions and projects, highlighting that they are not compliant with National Treasury and the PFMA. Is DIRCO seeking approval in this regard?

Mr DL Moela (ANC) pointed out that DIRCO needs to consider giving extra insight into the Department to the Committee as it is the first meeting the two are having together. The service bill for engagement with clause two requires clarification on what exactly caused these issues, so that the Committee is able to look into it and assist with a possible solution. Under programme one, he noted there is a critical matter of the ICT – it must be a requirement to upgrade this system as security is important for South Africa. He explains that is has already been five to six years and the matter of ICT is still not fully resolved.

Mr M Chetty (DA) was concerned about the budget discussed in the APP presentation. He found some figures were contradictory and some figures did not add up accurately. He wanted these discrepancies remedied.

DIRCO’s response

Mr Mahoai begins his response explaining that DIRCO is willing to share all information with the Committee giving full access to all mission information.

On auditing and the asset register, he explained the Department received a qualified audit in 2015 in regard to completeness or existence assets. This meant that while there could be assets on the floor, it could not be traced in the register.  

After three years of consecutive qualification, the Department “got it right” in 2016/2017 by getting the heritage assets and missions on track. The assets were verified and compiled into a register effectively. There were some challenges in 2018 on the verification of assets as well. This was fault to failing to have a good business continuity causing verification challenges. At this time, the Department is still being audited fully. There is an interim audit granted this year and this translated to the register being fully credible. In regard to proper asset register, the Department had always had programmes that led to qualification.

Mr Mahoai addressed the question of unwanted expenditure noting it comes in the form of unauthorised, irregular, and fruitless expenditures. The irregular expenditure began to be noticed in 2017. This led to an investigation led by DIRCO to determine who is accountable and what losses were caused and where did these losses affect the state. With irregular expenditure, there are three options that cause these mistakes: it could be intentional, complete disregard, or unintentional.

This investigation led to the finding that a former Accounting Officer and CFO were liable. There was a disciplinary process completed, and the report was started last week. Based on the way the investigation went and what the chairperson found, the CFO was deemed not guilty as he was not the decision maker for expenditure. The preliminary findings of the investigation suggest that someone who did not provide adequate information was the cause, and therefore it does not qualify as an irregular expenditure.

In regard to the accountability of the APP, Mr Mahoai said with this new APP, the Department is directly accountable.

Mr Mahoai explained there is no legislation that governs the Department directly. However, the Deputy Minister did put forth a piece of legislation which was processed in Parliament. Further, the application of Clause 2 was in discussion because it was believed the Deputy Minister’s proposed legislation may be in violation of the Public Service Act, and Clause 2 was meant to be a safety net in this case. Clause 2 is a standard clause for subsidiary legislation.

Regarding the White Paper, it was referred to the Committee to be processed and there were no issues. The reason it never passed was that in 2012, 2013, or 2014, the Paper was lost in transition and forgotten. He attempted to revive the Paper but the attempts were fruitless.

On the matter of foreign currencies, South Africa operates on foreign currency so international fluctuations on the market matter greatly. He linked this to unauthorised expenditure explaining that the root cause for this overspending is due to the exchange rate. In future, authorisation must come from Parliament and this will need to wait until the exchange rate is fixed.

Mr Mahoai further explained the fruitless expenditures arised most often when properties are unused. He gave the example of the capital of West Germany being Bonn. In this city, South Africa has a property but is unable to use it to operate from as it is no longer the capital of Germany. They are only allowed to operate in the capital, Berlin, and therefore are fruitlessly spending money on an unused property. Unfortunately DIRCO has no power to dispose of properties as this power is vested in the Department of Public Works. DIRCO attempted to get this mandate so it has control over immovable properties but failed in this. Another example of common fruitless expenditure is when a world event is cancelled. This is fruitless as the trips are all booked and accommodations as well, but when it is cancelled, officials cam no longer go and the money is lost.

On the UN Security Council, Mr Mahoai said the Department could present to the Committee what the last six months were like and what the future six months have on the agenda. In October, all of this information will be shared once it comes out. There is a mechanism in place to ensure every Friday there is an interdepartmental mechanism looking at what the previous week entailed and what the following week has on the agenda. This ensures accountability as well and ensures there is no wasted time or expenditure to be part of the Council.

On the matter of cost cutting measures is spoken on, Mr Mahoai admits DIRCO will need the full assistance of the Committee. He asked the Committee to put forth suggestions to assist in this. He agreed with the sentiments of Members regarding SA’s footprint. The challenge was that the budget is too small for the workforce employed. He used the analogy of the Department having the budget for seven employees when in reality, it is paying ten employees. One of the major challenges of DIRCO is that it has approximately 1 500 local personnel employed who are inexperienced and do not fully understand their jobs yet.

Mr Mahoai went on to describe the facts of diplomacy for South Africa explaining there are 170 countries represented in South Africa while South Africa has below 120 representations globally (embassies and consulates). He raises the question of why these are not equal because if a country has a mission in South Africa, South Africa should have a mission in that country as well. South Africa is more modernised and developed and can therefore offer services and luxuries that other countries could not offer South Africa in return. This is where the opportunity cost comes into play. The benefit of having an embassy in one of these less developed countries may not be worth the cost of property and personnel. This ultimately reduces representation but increases other aspects that are equally important.

Mr Mahoai briefly touched on the matter in Geneva explaining there were indeed two cases. South Africa locally recruited an employee in Geneva who was dismissed. The principal says that SA uses the local law to regulate employment. Disciplinary matters will be reported to the Committee.

On the matter of the President’s delegation to ILO, Mr Mahoai did not know or understand why 50 delegates were required. In future, DIRCO might have to lay down rules regarding delegation sizes.

Ms Kotze responded to the question of smart targets by explaining that the targets are indeed smart - the Auditor-General has been auditing the Department’s performance information for three to five years and has not raised any challenges. Therefore, the targets are smart.

Regarding Inter Africa Trade, the export fees in 2017/18/19 grew by 7% and are worth USD25Bn. Furthermore, imports have increase by 35% and imports from the African continent into South Africa are estimated at USD11.5Bn.

Ms Fadane confirmed Mr Mahoai’s statement that in 2015/16, there was a qualified audit report and that in 2016/17 this was unqualified.

Ms Fadane then went on to explain the situation with immovable, tangible assets by describing that the asset register inconsistencies is an important matter and she is pleased that it is getting the attention it requires. The audit report was immediately embarked on in an action plan. This action plan would not only looking at findings of the Auditor-General but also those of internal audit. A developed asset management project was created as well. This would allow the Department to analyse what causes such challenges and what can be done to remedy it. The Department saw little results with this project during the interim audit, but there is more work being done now in the area. There are teams in place that troubleshoot from the office to the missions. At this stage, she ensured the teams have been doing their absolute best. It is challenging because there is a total of 140 000 assets, 18 000 of which are in South Africa while the rest are international. Asset management would have to intensify to help take care of all these assets. The Department is working with National Treasury to develop a better asset management system.

Regarding managing expenditure, a major cause of irregular expenditure is expired contracts from missions. The Department has addressed these contracts, but because due process was not fully followed, some of contracts are improper and therefore all monetary expenses are considered to be irregular. To fix some of these problems, one process the Department changed was to give Ambassadors the power to make decisions on their own instead of constantly needing to report to head office for permission.

The biggest contracts that were irregular were found in head office, one of which included that of the ICT. In this situation, there was a company appointed to remedy the contracts, and cancel many that are causing irregular expenditure however until all contracts have been remedied these improper contracts must remain.

In regard to wasteful expenditure, the Department has reached an agreement with National Treasury. Properties that are not occupied are still required by the PFMA to be maintained and held to a standard. This is a cost inefficient process as this maintenance is being unused by personnel.

Another form of wasteful expenditure comes through employees using money without necessary approvals. Actions have been taken in this scenario, and some have even paid the money back directly.

With regard to shortfalls due to an exchange rate driven operation, Ms Fadane said National Treasury was briefed on this situation and solutions are being sought after. Once the exchange rate gets better, the budget will also increase, and the challenge of shortfalls will become rarer.

With cost cutting measures, there are many places that need to be looked into. One major challenge with this is many vacant positions cannot be filled because there is not enough money to pay the compensation.

Further, employee leave is unpaid unless special circumstances make it impossible for an employee to work.

Ms Fadane went onto speak on unfunded mandates. She gave two quick examples of what this may entail. Scenario one would include an outbreak of instability in a country to which South Africa needs to assist financially. In this case, this financial assistance comes in the form of an unfunded mandate as it is not something that can be fully prepared for. Further, another example would be the AU chair. This chair is not part of the APP budget baseline and therefore falls under an unfunded mandate.

In regard to contradictory figures in the presentation, the Department notes the error, appreciates that it was brought to attention, and apologised. This will be corrected.

Mr Mahoai reiterated that with the situation with the New York property, there was an attempt made to acquire it. This attempt was found to be irregular causing irregular expenditures. Further details will be given to the Committee as it requires much more context to fully understand.

He then briefly spoke to mission performance explaining the current system for this is not adequate and assured the Committee that mission assets will be looked at and managed by those empowered to do so.

Rev Meshoe questioned the unused properties and if there is a plan to sell them or get rid of them to save costs. What was the Department planning on doing? If these properties are not going to be sold, why not? The unused properties have become white elephants.

Ms Msane asked about huge, irregular contracts – she felt the response the Committee received on the matter was too casual and did not answer why these contracts could not be stopped even though they were irregular in nature. Despite AG findings, these contracts were often allowed to run their course until the end. What measures would be put in place to stop such problematic contracts?

Mr B Nkosi (ANC) asked if the Department had a clear SCM policy.  

Mr Mpanza suggested the Department respond to questions in writing. He asked about the agenda between the USA and Africa.

DIRCO’s Response

Mr Mahoai responded that unused properties are a big challenge. Some are being identified to require renovation before they can be disposed of and the Department cannot simply donate them. Therefore, the question is in what condition should the properties be in to be disposed of. The Department hopes the power to dispose of the properties will be granted to it immediately so it can remedy this challenge. The Department already had to send teams to make assessments on what the most cost-effective way of disposing the properties would be.

On the topic of irregular contracts, it became a challenge when the Auditor-General picks it up. It has been like this for a while and it cannot continue, there have already been steps taken towards fixing this.

Irregular expenditure was a challenge that existed before he came into the DG position. Therefore he explained he is not entirely at fault but knows steps must be taken. A cautionary approach is required to ensure this does not happen in the future. These are challenges being taken head on similar to that of asset management.

Supply chain management is still being revised with Treasury and the Auditor-General to ensure there are enough internal controls. Mr Mahoai said this is at a developed stage and can be approved soon.

The Chairperson asked the Deputy Minister if he would like to add anything.

Mr Alvin Botes, DIRCO Deputy Minister, said the Department is aware of the economic situation in South Africa and so it has been unambiguous with its Accounting Officer as it is likely there will be no additional resources dedicated to DIRCO from the public purse. Reconfiguration will also be done as a response to help with the footprints of all South African missions abroad. This will entail a number of factors including ensuring there is no compromise on multilateral engagements, taking into account political considerations specifically to those that are historically allies with South Africa and realigning the architecture of missions with the current reality. If the African Free Trade Agreement is ratified, it implies that South Africa will need to have a bigger footprint in Africa to compensate and maximize its benefits. The ministerial assignment of duties to the two Deputy Ministers will be brought before the Committee to ensure there is a minimum expectancy from the Committee that DIRCO is upholding, which would be performance-based.

The Chairperson thanked Mr Botes for his remarks on the previous presentation and requested to move on to the ARF presentation from DIRCO. She noted the prior presentation was lengthy and that DIRCO has flouted the Public Finance Management Act (PFMA) a lot.  She stated that a Department with no internal operational systems is doomed to flout the PFMA.  She reminded the Deputy Minister that everything the Department does abroad is linked to everything the Department does in South Africa.

The Chairperson told Mr Mahoai that his Department is one of the most important Departments within a country.  DIRCO must be ready to pull up its socks, and make sure things are in order as there are new Members in both Parliament and in Pretoria.  She ensured that herself, and the Committee, would not be afraid to hold the Department accountable. 

The Chairperson reminded the Committee that the Department uses taxpayer’s money.  DIRCO needs to reconsider approval of certain projects from head office.  If the Department puts correct systems in place, then it will not have problems with seeking approval.  The problem in New York is that the person who was investigated, was found not to be the one conducting the authorisation. This kind of action in the missions will be problematic. She requested a report on all litigation the Department was involved in.  The Chairperson also ensured that with each report the Committee requires from the Department, the Committee will tell it what needs to be included. This way, the Committee will be able to better assist the Department.

The Chairperson told the Department that it should view the Committee as people who are here to assist, and act as human resources.  She stated that while the report does not look good, the Committee is here to work with the Department, and she hoped the Deputy Minister had noted the matters she felt need to be resolved.

The Chairperson called to begin the second report.

Mr Mahoai thanked the Chairperson for the constructive advice. 

African Renaissance and International Co-operation Fund (ARF) Annual Performance Plan 2019/20

Mr Mahoai prepared the Committee for the next presentation.  He explained the mandate of the ARF, organisational structure and purpose of the Fund.

Ms D Mathlako, Head of Operations: ARF Secretariat, presented the ARF Annual Performance Plan for 2019/20.  Ms Mathlako presented a general overview.  The work that is done in the ARF is in line with the strategic objectives, specifically as classified in the ARF Act. 

She noted that in the 2019/20 financial year, ten African countries, including South Africa, will hold elections. Five are from the Southern African Development Community (SADC) region.  The ARF will support the elections of the SADC region. Of the other five, South Africa has already received a request from the Central African Republic to assist with technical support, which is still under consideration. 

In the current financial year, two projects have already been approved for socio-economic development for the two countries that are affected by Cyclone Idai, Mozambique and Zimbabwe.  R400 million has to be allotted to help communities rebuild their livelihoods. 

As outlined, an example of the ARF contributing to South African economic activities is a R350 million facility given to Cuba.  R140 million was a grant facility and R210 million was a loan facility.  Of the R140 million grant facility that has already been utilised, R110 million was used for the purchase of South African products.  R30 million was used for the purchase of seeds in Europe.  For the R210 million loan facility, R70 million was used for the purchase of South African products.  Cuba has already paid back that portion of the loan.  Now, R140 million is available for Cuba to purchase South African products.

Some of the ARF projects are interlinked.  A project might arise from a humanitarian crisis that also helps with socio-economic development in a country.  The ARF continues to promote peace and stability and mediate conflicts.  The ARF has contributed R34 million as a part of the Lesotho peace process.

Ms Mathlako noted that the ARF is a demand-driven fund.  The Advisory Committee sits four times a year, to consider project proposals.  In the current financial year, five projects, to the value of R138 million, has already been approved.  This was done in the first quarter.  In the following quarters the Advisory Committee will sit and consider more projects.  Ms Mathlako also noted that sometimes the matters brought to the ARF are urgent, so the advisor of a committee may call a meeting if it is immediately necessary.

Ms Mathlako ended by presenting the 2019/20 Financial Report.

Discussion

Mr Holomisa asked about the Financial Report and R777 million in commitments.  In terms of projects being run currently, was Department able to achieve them, or not?

Rev Meshoe asked about the R140 million grant facility.  What was the facility used for?

Mr Mpanza asked when the Committee would help the ARF.  He noted the Chairperson wants to start moving in a direction where the Department complies with legislation.  When is this going to be realized to respect the dictates of legislation?  Why is there an Advisory Committee? If the Fund was well established, there would not be arrangements outside the law.  These arrangements should then be dealt with speedily.  Is the money not being used going back to the ARF?  If not, where does the money go?  Why is the ARF still under supervision of the DIRCO Director-General?  There is nothing in the law that requires it.

Ms Msane asked how the ARF identifies where to assist.  Where does the money in the Fund come from, and who are the main contributors?

Mr Nkosi asked who is on the Advisory Committee. Sometimes it is said the Fund is used as a “cash cow” – is this a fact or simply perception? He thought it would help if Members were given insight on the impact of the Fund in terms of interventions vs. objections and what was achieved.

DIRCO’s Response

Ms Mathlako explained the R777 million is based on projects approved in the 2017/18 financial year.  ARF projects can run for a long time.  The R777 million is a cumulative balance over several financial years.  Projects in the R777 million are still active projects.  Some are under implementation, and some are still to be under implementation. 

She suggested the Department prepare a report on all ARF projects to include where the project is, when each project started, what has been achieved, what the impact has been, and why the project is still within the ARF.

For the R140 million grant, it was split.  R40 million was for the purchase of seeds.  R30 million of the seeds were purchased in Europe and R10 million of the seeds were purchased in South Africa.  The R100 million was used for the purchase of tyres in South Africa.  This was tyres for trucks to assist with the tourism sectorin Cuba.  Also, plastic raisins to assist with their drainage system and pipelines.

The South African Development Partnership Agency (SADPA) was presented in 2013 as a government component.  It exists in the Department of Public Service and Administration (DPSA) handbook as a component.  When SADPA was created, it was envisioned that the ARF would be repealed by the Partnership Development Fund.  This legislation will likely come before the Committee by the end of this year.  Thus, the ARF would be repealed and SADPA would be the administrative agency of the Partnership Development Fund.  Because of the delay of that fund, the Department has decided that SADPA will then be operationalised to run as a secretariat for the ARF.  It will therefore be outside of the Department and run as a government component.  Once the ARF is repealed, SADPA will take over the partnership fund for development.

Ms Mathlako explained the ARF Act stipulates the Minister of DIRCO and Minister of Finance must establish an Advisory Committee to make recommendations to.  The advisory committee members and alternates were listed.

The Department has requested from National Treasury that the R86 million surplus that is left in the ARF be retained. If the request is not approved, the funds will then return to the fiscus.

She stated that most assistance is given based on demand from other countries and through consultations.  Sometimes South Africa offers assistance, like with Mozambique and Zimbabwe receiving aid for Cyclone Idai.

ARF funds are appropriated hrough Parliament.

Ms Mathlako suggested a list of ARF projects be provided to the Committee that would state: how much money was allocated, which countries the projects are in, and what the impact of those projects are.

Mr Mahoai responded to the ‘cash cow’ and said the term ‘slush fund came from the Department and Members should note that the Fund is fully accounted for and has received an unqualified audit opinion.  The Department will present a report on it to the Committee.

Closing Remarks

The Chairperson said the Committee had a fruitful and productive day.  She thought a comprehensive report on the ARF projects would assist the Committee.  She thanked Mr Mahoai, DIRCO, and Mr Botes for attending the meeting.  She reminded everyone that next week is the Budget Vote of the Department.

The meeting was adjourned.

 

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