Brand South Africa, GCIS, MDDA, Stats SA 2018/19 Annual Reports, with AGSA & DPME input

Public Service and Administration

08 October 2019
Chairperson: Mr T James (ANC)
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Meeting Summary

Annual Reports 2018/2019

The Committee received the Auditor-General’s report on the Department of Planning, Monitoring and Evaluation and presentations of the 2018/19 annual reports from the Department, Brand South Africa and Statistics South Africa (Stats SA).

The Auditor-General reported that the Department and Stats SA both received clean audits, while Brand South Africa received a qualified audit. All three entities showed a level of financial health that would allow them to continue operating in the foreseeable future, although there were some issues. For example, Stats SA and Brand South Africa did not seem to be receiving a large enough budget to support their activities. The root causes of most of the issues were vacancies in key positions.

The Department reported that it had received its seventh consecutive clean audit, although there were still a few improvements that could be made in risk management, performance information and irregular expenditure. It had also completed a review of South Africa’s first 25 years of democratic governance, and this had been approved by the Cabinet. The Department achieved most of its performance targets across its seven programmes. A major problem that emerged in the discussion was a pattern of corrupt medico-legal claims being made of the department of health, which was having knock-on effects on that department’s ability to pay suppliers within 30 days. The State Liabilities Amendment Bill was currently being considered, which was designed to protect the state from such claims by giving it more power over how and when money is paid out to the claimant.

Brand South Africa presented its annual report. It reported that it had not had a board of directors since May 2019, and that it had also been hampered by the introduction of a new financial management system. Committee members asked for greater detail on Brand South Africa’s activities, assurance that it’s problems would be addressed, and clarification of its legal status and mandate.

Stats SA painted a picture of an agency seriously hampered by a lack of funding. It was unable to hire and retain the skilled staff it required. Several important statistical measures were at risk of not being released because of the lack of human and financial resources. Committee members expressed great concern about the state of Stats SA, a critical agency for planning and forewarning, and resolved to write to Minister Mchunu about the need for more financing. If this did not produce results, the Committee would consider releasing a press statement. The Chairperson undertook to draft the letter to the Minister.

Meeting report

The Chairperson, Mr T James (ANC) acknowledged the apologies received from the Minister of Public Service and Administration Mr Senzo Mchunu and Mr B Maneli (ANC), who was chairing the communications committee. He announced that the Government Communication and Information System (GCIS) and the Media Development and Diversity Agency (MDDA) were now responsibilities of the communications committee. He then asked the Auditor-General’s office (AGSA) to present on the audit outcomes of the sector.

Presentation by the Auditor-General’s office
Ms Rami Mpete (Senior Manager responsible for Statistics South Africa) noted the last five years of audit outcomes for the entities in the sector, noting key concerns before going into more detail about the 2018/19 outcomes. In 2018/19, Brand South Africa (BSA) received a qualified audit, MDDA received a qualified audit with findings, and the Department of Planning, Monitoring and Evaluation (DPME), GCIS and Stats SA all received clean audits. BSA had migrated to a new financial system, which had prevented BSA from providing information to back up the financial results they presented to the Auditor-General (AGSA). BSA also faced challenges with daily checks and balances and in supply chain management. All five entities submitted financial information to AGSA by the 31 May deadline. However, BSA had errors, and did not manage to correct the errors pointed out by AGSA. Stats SA provided credible performance reporting that did not require corrections, and also showed an improvement in their compliance with regulations, while BSA had some approval problems in procurement and irregular expenditure. DPME could not provide a risk management strategy for the second year in a row. All the entities showed a level of financial health that would allow them to continue operating in the foreseeable future, although there were some issues. For example, Stats SA and BSA did not seem to be receiving a large enough budget to support their activities. The majority of fruitless and wasteful expenditure resulted from cash penalties incurred by BSA for the late registration of employees with the compensation fund. Irregular expenditure decreased from the year before. Overall, the majority of the findings by AGSA related to the appointment of suppliers. They were not always correctly reported, and one contract at BSA was awarded to a family member. The root causes of most of the issues were vacancies in key positions.

Discussion
Ms C Motsepe (EFF) asked the presenter to account for the underspending by the Department in its programme 1. She also asked if AGSA had found any Annual Performance Plans (APPs) or strategic plans that were not aligned with the Medium Term Strategic Framework (MTSF).

Ms Mpete said the question would be best answered by the Department itself.

Ms R Lesoma (ANC) asked if the problems at BSA were part of a pattern, or had they only emerged in the last year?

Ms Mpete explained that the problems in the financial statements at BSA had only arisen in 2018, as a result of vacancies in key positions.

Presentation by DPME
Ms Nompumelelo Mpofu (Director-General, DPME) presented the Department’s annual report for 2018/19. She said that the Department’s mandate was constantly shifting as other departments gained clarity on what they expected from DPME. She said that DPME had received its seventh consecutive clean audit, although she admitted there were still a few improvements that could be made in risk management, performance information and irregular expenditure. One of the biggest projects DPME had undertaken this year was the draft MTSF, which included a five-year implementation plan and monitoring framework. It would be approved by the Cabinet within the next few weeks. DPME had also completed a review of South Africa’s first 25 years of democratic governance, and this had been approved by the Cabinet.

She reported on the performance of each of the DPME’s seven programmes. In programme 1 (administration), out of 17 targets, twelve were achieved, four were achieved late, and one was not achieved. The vacancy rate was 11.4% (target:10 %), and the biggest challenge was filling deputy director-general posts, which involved ministerial selection and the Department of Public Service and Administration (DPSA). She said problems observed by the Auditor-General with the risk management plan had been solved.

In programme 2  (national planning coordination), ten out of 14 targets were achieved. The first failure related to an integrated planning bill not being finalised in time. The second failure was that the National Spatial Development Framework (NSDF) had not yet been approved by Cabinet. It would be approved in the following week, she said. The NSDF actually belonged to the Department of Rural Development and Land Reform, she added. The third failure was that the Annual Budget Mandate Paper was not submitted by the 30th April deadline. The reason was that the Ministerial Committee on the Budget of the new administration had not met before June. The fourth failure was due to one plenary meeting being cancelled because of the State of the Nation address.

In programme 3 (sector evaluation), one out of ten targets was not achieved. This was a report by the Inter-Ministerial Committees of Distressed Mining Towns, which had not been produced.

In programme 4 (public sector monitoring and capacity development), all six targets were achieved. In particular, progress had been made to meet the challenge of paying suppliers within thirty days across government. She noted that in the health sector, small suppliers were often paid late because of budget constraints. In many cases there were also medico-legal claims that had to be settled first. These were believed to be largely the work of a cohort of unscrupulous lawyers making corrupt claims, often by exploiting the Department of Health’s (DoH) poor record-keeping.

In programme 5 (frontline monitoring), one out of four targets was not achieved. 68% of citizens who logged queries with the presidential hotline were satisfied (target: 80%). It was unclear if the dissatisfaction was due to the particular department being queried, or to the hotline itself.

In programme 6 (evidence and knowledge systems) four out of 17 targets were not achieved. The failures mainly arose because the 6th administration could not approve a national evaluation plan developed under the 5th administration. A service provider had terminated a contract, and there was also a lack of capacity.

In programme 7 (youth development) all three targets were met. This programme had now been moved to the department responsible for women, youth and people with disabilities.

Ms Mpofu broke down the DPME’s staff according to racial group, noting that the human resources department attempted to hire strictly according to the racial distribution of the country as a whole. She discussed the DPME’s financial performance, and explained that travel costs were so high because of the nature of the department’s work. DPME had spent 91% of its budget, and there had been R1.03m of fruitless and wasteful expenditure, and R375 000 of irregular expenditure. She ended by noting that the transfer of the Spatial Planning and Land Use Management Act (SPLUMA) to the DPME had been delayed because of the change of administration, but it was presently before Cabinet.

Discussion
Ms M Clarke (DA) said that there was confusion in local government about how SPLUMA was linked to other legislation.

Ms Mpofu agreed that responsibilities around SPLUMA needed to be clarified. In particular, the Department of Co-operative Governance and Traditional Affairs (COGTA) had an important role to play when it came to traditional leaders. SPLUMA should guide all legislation concerned with planning. One problem it was supposed to address was schools being built in areas where there was no actual need.

Ms Clarke asked if DPME was able to take action against corrupt lawyers exploiting the DoH. Could the Law Society bar these lawyers?

Ms M Ntuli (ANC) also asked about the DPME’s strategy for addressing this.

Ms Mpofu said progress was being made. Many of the firms involved had previously been engaged in similar activities with the Road Accident Fund (RAF), and they were being traced. Some firms had been referred to the Law Society and some had been de-registered, but the problem was that they could easily re-register under a new name. The State Liabilities Amendment Bill was currently being considered, which was designed to protect the state from corrupt medico-legal claims by giving it more power over how and when money is paid out to the claimant.

Ms Ntuli asked about the DPME’s long-term plan for dealing with vacancies.

Ms Mpofu pointed out that 150 new posts had actually been created in DPME in 2018/19, whereas most departments had cut posts. This was the reason for most of DPME’s vacancies.

Ms Ntuli said that the practice of unannounced visits was very important because of the frequency of protests around the country.

Ms Mpofu offered to provide a schedule of DPME’s unannounced visits so that the Committee could participate.

Ms Lesoma wondered why the change of administration caused so many delays. Couldn’t the Department plan ahead to reduce the disruption? The public expected continuity of leadership.

Ms Lesoma said that DPME should assist other departments ensure suppliers are paid within 30 days. She said that the government could not claim to be supporting small businesses while at the same time pushing them to the back of the queue when it was time to pay them for their services. Small businesses were the most adversely affected by late payment.

Ms Mpofu assured her that the DPME did intervene to ensure prompt payment, and progress was being made. Improvements had been made in the department of Public Works (DPW). The problem of late payment in the health sector was exacerbated by the corrupt medico-legal claims.

Ms Lesoma asked about the DPME’s intervention in the North-West Province, and asked if similar situations could be prevented in the future.

Ms Mpofu expressed pride at the DPME’s intervention in the North-West province. The situation was greatly improved and the outlook was good, though capacity problems had delayed the prosecution those implicated. The only remaining concern was the state of the municipalities. The DPME was also looking ahead to prevent a similar situation arising in the Eastern Cape.

Inkosi RN Cebekhulu (IFP) asked DPME to put eyes and ears on the ground to detect corruption. He was concerned that provincial departments often wasted money hiring buses to bring people to functions.

Ms Mpofu agreed that National Treasury’s stringent cost-cutting guidelines at national level needed to be emulated at provincial level. One problem was that it was not as easy to monitor the budgets that provinces raised by themselves, beyond issuing guidelines.

Presentation by Brand South Africa
Ms Thulisile Manzini (Acting CEO, BSA) presented BSA’s Annual Report 2018/19. She noted that BSA did not have a board of directors at present, the previous board’s term having ended on 31 May 2019. This was causing delays. She accepted the findings in AGSA’s report given earlier in the day, and reiterated that several problems had been caused by the change to a new financial management system. The reasons for the fruitless, wasteful and irregular expenditure was well understood.

BSA had achieved 97% of its performance targets, with the remaining 3% relating to the financial matters raised by AGSA. She described South Africa’s performance in several international governance indicators, such as the Open Budget Index and the Ibrahim Index of African Governance. Overall, the country had experienced a recovery of reputation in 2018/19, after suffering some reputational damage in the year before. She spoke about the highlights of BSA’s activities throughout the year, in the areas of research, marketing, communications, and global South Africans. She discussed the promotion of the national brand to South Africans and abroad. She described the growth of the Play Your Part (PYP) programme and said that BSA would make a presentation to the Committee about this in November. BSA had a vacancy rate of 14%, and women made up 69% of employees (52% at management level). Underspending was due mainly to vacancies and irregular expenditure was confined to a single contract which had since been cancelled due to tender irregularities.

Discussion
Ms MT Kibi (ANC) said that if the financial management problems were due only to the change to a new system, there should not be similar problems in the future. She asked what BSA did to link young people with government opportunities, and what collaborative projects were in place to promote South Africa’s brand.

Ms Sithembile Ntombela (Acting Chief Marketing Officer, BSA) replied that there were many collaborations. For example, BSA had partnered with Business Leadership South Africa to promote South Africa as an investment destination. They also partnered with several film festivals.

Dr LA Schreiber (DA) suggested that BSA’s representation of the country’s image had been very selective. By choosing different indicators, a very different picture of the country’s image emerged. The recent xenophobic violence, for instance, had severely damaged the country’s reputation.

Ms Ntuli said that the absence of a board was a serious problem. She wanted to know what BSA was doing in response to the xenophobic violence.

Ms Manzini replied that the presentation considered the period until March 2019. She admitted that she had presented the indicators that showed the country in a good light, and accepted Dr Schreiber’s comment.

Ms Ntombela said that addressing issues like xenophobia was the responsibility of every citizen.

Dr Schreiber asked for an assurance from the leadership that the problems identified in the AGSA report would be addressed.

Ms Manzini replied that the relevant committees and systems had been established, and she could assure the Committee that the problems were behind them.

Ms Motsepe asked for specific details on PYP programmes. Which provinces had been involved? Had rural areas been involved?

Ms Manzini replied that they had involved all nine provinces.

Mr S Malatsi (DA) asked what return on investment had been achieved by BSA’s presence at global forums such as the World Economic Forum. For example, had any bilateral agreements been signed?

Ms Ntombela replied that the mandate of BSA was to contribute indirectly to the four national priorities: poverty reduction, social cohesion, job creation and economic growth. It was not empowered to sign bilateral agreements. Therefore it was difficult to put a number on BSA’s contribution.

Ms Lesoma asked about the legal implications of the lack of a board. She also asked for clarity on the legal mandate of BSA. There seemed to be a missing link in the oversight mechanism.

Ms Manzini replied that BSA was a trust. She agreed that a clarification of their mandate would be welcome.

Presentation by Statistics South Africa
Mr Risenga Maluleke (Statistician-General, Stats SA) said that many of the 7% of performance targets that were not achieved by Stats SA could be attributed to resource limitations (both human and financial) and most related to hiring and vacancies in programme 1 (administration), which failed to achieve 23% of its targets.

Mr Maluleke discussed the highlights of the year 2018/19. He noted that Stats SA had received a clean audit. It had overspent its R2.272 billion budget by 1.7%. There were permanent staff members who had been employed for many years, for whom Stats SA had not been allocated funds since 2016. This situation was causing some panic among staff, and senior managers were leaving or being poached by international organisations. Compensation of employees remained the largest part of the budget at 64.6%. There was R121 million of unauthorised expenditure in 2018/19, up from R64 million in 2017/18, mainly due to overspending on compensation. Despite this, there was still an increasing vacancy rate, especially for technical staff. The vacancy situation was becoming so serious that if even one more staff member was lost from the gross domestic product (GDP) team, Stats SA would not be able to vouch for the accuracy of the GDP figure. Already in 2018/19, some value-added statistical products could not be released. More generally, there was a risk that if the government could not get statistics from Stats SA, it would have to pay outside agencies for the statistics they need. However, basic statistics, such as the 2021 census and the census of commercial agriculture, would be released at all costs.

Discussion
Ms Clarke asked if there was any funding available in the mid-term budget. This very important agency was facing disaster, which would be a disaster for the country as a whole. Had the Minister appealed directly to the President? Could the Committee Chairperson draft a letter to the Minister?

The Chairperson undertook to draft a letter to the Minister.

Dr Schreiber suggested that if no action resulted from the letter, the Committee might consider making a press statement.

The Chairperson agreed.

Mr Malatsi said that the problem was clear and the solution was obvious: they needed more money. What was to be done?

Dr Schreiber asked if there was any indication that the dire financial situation was being addressed. He was particularly concerned about the loss of technical staff.

Mr Maluleke replied that ministers have always been supportive, but the short- to medium-term outlook remained quite bleak. He said that Stats SA had considered approaching international donors and the private sector, but there was a real risk of putting its independence at risk. The loss of staff was particularly serious because it often included a loss of experience that could not be replaced easily.

Ms Ntuli added that without the work of Stats SA, the government would have no warning of crises approaching.

Dr Schreiber asked if there were already statistical products that Stats SA did not have the capacity to release.

Mr Maluleke replied that the actual number of people living in poverty had not been released since 2015. The quarterly labour force survey was at risk, despite being one of their premier products. Even if it could be calculated, Stats SA could not release statistics that they could not vouch for, he explained.

The Chairperson said that the Committee would consider and adopt the third term programme on the 15th of October.

The meeting was adjourned.

 

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