The Department of Tourism briefed the Committee on its 2018/19 Annual Report and financial statements. The Minister and Deputy Minister were present.
In her opening remarks the Minister stated that the NDT had regressed on its audit outcome. The NDT had obtained a qualified audit opinion from the Auditor General of SA (AGSA) for 2018/19. It was the first time that the NDT had received a qualified audit opinion. Efforts were however being made to address matters. The NDT’s main challenge was around Expanded Public Works Programme (EPWP) capital projects. Some of the problems around the EPWP projects related to third parties. The EPWP project issues went as far back as 2011. The NDT’s accounting officer had opened up cases against service providers. Action had been taken. Three officials of the NDT had been placed on suspension.
Members were provided with insight into to some of the issues that had led the NDT to the qualified audit outcome that it had received. Detail was also provided on what the NDT needed to do to obtain better audit outcomes in the future. One major challenge identified was capital projects. Projects were poorly conceived and project management practices were poor. There had also been irregular expenditure on procurement. There was a tender process and implementing agents were appointed but the implementing agents had not observed the rules of procurement. Problems that arose were around enforcement of contracts and around the competencies of persons executing the contracts. Remedial action was that implementing agents were being trained and greater monitoring was being done. Another issue that had caused problems was that the NDT had not specified local requirements in specifications. Part of the problem was the design of the system itself. The NDT needed to implement the Infrastructure Design Standard as was required by National Treasury. Real professionals were needed on site. The current situation was an eye opener for the NDT. In the past the NDT had tried to band aid things but to no avail. Now the problem was clear and the NDT could work towards what needed to be done.
The Committee was provided with an overview of the NDT’s 2018/19 targeted performance as per its Programmes ie Corporate Management; Tourism Research, Policy and International Relations; Destination Development and Tourism Sector Support Services.
Total expenditure sat at 98.8%. Members were provided with figures on actual expenditure per programme. 53% of the NDT’s budget went towards SAT. The NDT and SAT incurred irregular expenditure as a result of non-compliance with procurement prescripts. NDT had a material non-compliance relating to fruitless and wasteful expenditure on infrastructure projects. There was an increase in fruitless and wasteful expenditure from R1.065 million in 2017-18 to R120.5 million in 2018-19. NDT was the biggest contributor - fruitless and wasteful expenditure amounting to R119.84 million identified in the current year related to infrastructure projects and fruitless and wasteful expenditure amounting to R723 000 related to interest and penalties and travel delays as a result of visa challenges.
Members were concerned that the Auditor General of SA (AGSA) had in its audit report observed that over the past five years the NDT had regressed. Members asked what was being done to stop the regression. Members lamented the increase in irregular as well as wasteful and fruitless expenditure. They said that there were no proper monitoring systems were in place and asked what was to happen to officials who had not followed legislative prescripts on procurement.
The Committee appreciated the actions taken on consequence management. Members stated that the NDT should have early warning signals before matters got out of hand. Given that an investigation was underway, the Committee asked the NDT to update it on a regular basis. The NDT had to also report to the Committee on all its infrastructure projects. The Committee additionally asked the NDT to provide it with an ongoing report on financial management matters which the Committee expected to receive by the end of February 2020. Leeway was provided due to the ongoing investigation. Members felt that the NDT needed to in-source certain functions.
The Chairperson suggested that the NDT strengthen its risk mitigation mechanism. AGSA officials were asked to bring issues which were in the blind spot of the Committee to the attention of members and the NDT.
The Chairperson at the outset stated that the political heads of the National Department of Tourism (NDT) found themselves in an unfortunate situation in that they had to account for the NDT’s performance even though they did not deal with the daily operations such as supply chain management. It was therefore important for there to be synchronisation between the Executive and the NDT. He noted that the Committee was aware that both Minister Kubayi-Ngubane and Deputy Minister of Tourism Mr Amos Mahlalela were new to the tourism portfolio and had to hit the ground running. He expressed the Committee’s appreciation of the efforts of the Minister and Deputy Minister as well as the capable team from the NDT. The Committee also appreciated the fact that when challenges were encountered they were not hidden from members.
Opening remarks by Minister Kubayi-Ngubane
Ms Kubayi-Ngubane, Minister of Tourism, appreciated the Committee’s attendance and support during World Tourism Day celebrations in the KwaZulu-Natal. She noted that the NDT had no vacancies. There were women at senior management level. The NDT had a good team and worked as a collective. The NDT’s performance on the achievement of targets was 80%. She had met with SA Tourism (SAT) and was aware of the issues that it faced. The sad reality was that the NDT had regressed on its audit outcome. The NDT had obtained a qualified audit opinion from the Auditor General of SA (AGSA) for 2018/19. It was the first time that the NDT had received a qualified audit opinion. Efforts were however being made to address matters. The NDT’s main challenge was around Expanded Public Works Programme (EPWP) capital projects. More time was needed to deal with issues raised in the audit outcome. She would at a later time return to the Committee to provide detail on what had been done. The NDT had consulted with the AGSA to find out whether it was on the right track. The whole idea behind the EPWP projects was about job creation and providing skills. Some of the problems around the EPWP projects related to third parties. The EPWP project issues went as far back as 2011. The NDT’s accounting officer had opened up cases against service providers. Action had been taken. Three officials had been placed on suspension. There had to be accountability and there was zero tolerance for misdeeds. An investigation was being done. The briefing team would explain many things. The bottom line was about how an impact could be made at grassroots level in communities. Issues had surfaced having worked through the NDT’s performance plan. A decision had been taken to have synchronisation with provinces. Two Ministerial Members of Executive Committees (MinMECS) meetings had already taken place. It was about how national could support provincial. Cohesion was needed. On other issues that had arisen, it was work in progress. She pointed out that a good foundation had already been laid by her predecessors. Key was the need to communicate more. The problems in the NDT would be solved. There was a need to have inclusiveness for communities. She asked what more could be done. The NDT was looking at its EPWP projects. The fact was that money had been wasted. Cases had been opened against persons and were now beyond the NDT’s control. The law would take its course. The money wasted and lost would however remain on the books of the EPWP. As yet the NDT could not recover any funds nor could it write the losses off. The bottom line was for the NDT to improve on its audit outcome. The NDT needed to remove legacy issues from its books.
Briefing by the National Department of Tourism (NDT) on its Annual Report 2018/19
Mr Victor Tharage, Director General, NDT, pointed out that Minister Kubayi-Ngubane had covered most of the areas he wished to touch on. He said that the first few slides of the briefing document would speak to what the NDT needed to do to obtain better audit outcomes in the future. The NDT experienced challenges with capital projects. Projects were poorly conceived and project management practices were poor. There was also poor performance by implementing agents. Projects did not have the necessary certificates from engineers to ensure that the work done was worth the payment that had been made. He said that legally he was required to investigate irregular, fruitless and wasteful expenditure and to take the necessary corrective action. The NDT would have to still decide what could still be recovered or would have to be written off. This process would follow after the investigation was complete. Based on the AGSA’s audit report the NDT had to make changes. Areas of misstatements were problematic but things were being put in place. In some instances, things could not be reported on as it fell just outside the financial year. He felt that a preventative approach would help. This would reduce misstatements. The NDT would endeavour to try to continue to test the system to prevent misstatements. The internal audit committee and the Department’s Chief Financial Officer (CFO) together with the AGSA would work on this. Meetings with the AGSA team were taking place. The NDT would look at things that the AGSA raised and try to clarify things. In 2018 the NDT had brought in the AGSA team to a planning session to address management on what the risks were and how to get the NDT out of the difficulty that it found itself in. He said that there had also been irregular expenditure on procurement. There was a tender process and implementing agents were appointed. The implementing agents were required to sub-contract work but had not observed the rules of procurement in doing so. The problems that arose were around enforcement of contracts and around the competencies of persons executing the contracts. Implementing agents were consequently trained and the CFO would monitor whether implementing agents were doing what they were required to. The NDT would place greater emphasis on consequence management when it came to contracts. Another issue that had caused problems was that the NDT had not specified local requirements in specifications. Part of the problem was the design of the system itself. The NDT needed to implement the Infrastructure Design Standard as was required by National Treasury. Real professionals were needed on site. The Committee would at a later time be provided with detail on what was being done with the assistance of the Government Technical Advisory Centre (GTAC). He wished to thank the AGSA for assisting the NDT in reaching a point where a conversation could be had. In the past the NDT had tried to band aid things but to no avail. Now the problem was clear and the NDT could work towards what needed to be done.
The Committee was provided with an overview of the NDT’s 2018/19 targeted performance as per its Programmes:
Programme 1: Corporate Management
Ms Lulama Duma, Deputy Director General: Corporate Management, NDT, stated that 82.25% of targets for the Programme had been achieved. Three of the seventeen targets set had not been achieved. On the NDT’s vacancy rate the target of not exceeding 8% had not been met with the vacancy rate at 31 March 2019 sitting at 9.1%. The reason for the variance was because the NDT could not fill vacancies since April 2018 due to the ceiling on the compensation budget imposed by National Treasury.
Programme 2: Tourism Research, Policy and International Relations
Ms Aneme Malan, Deputy Director General: Tourism Research, Policy and International Relations, NDT, stated that there were twenty one targets set and only one had not been fully achieved but progress had been made on it. On the number of policy development initiatives undertaken the target of having two tourism facilitation initiatives conducted was met. Quarterly analysis reports on airlift and on visa requirements to inform stakeholder engagements had been developed.
Programme 3: Destination Development
Ms Shamilla Chettiar, Deputy Director General: Destination Development, NDT, said that in total there were thirteen targets of which eleven had been achieved. Performance thus sat at 84% for the Programme. The target of having eleven destination planning initiatives undertaken had been achieved. In addition, the target of having fifteen destination initiatives supported had been achieved. The breakdown was that eight destination enhancement projects had been supported, interpretive signage was provided at six national iconic sites and there was the development of the Indi-Atlantic Route.
Programme 4: Tourism Sector Support Services
Ms Morongoe Ramphele, Deputy Director General: Tourism Sector Services, NDT, stated that there were twenty-nine targets in total. Twenty-two of the targets had been achieved with three not being achieved. On the remaining four targets significant work had been done. On the number of initiatives supported to promote Broad-Based Black Economic Empowerment (B-BBEE) the annual target of having three initiatives supported had been met. The target of having non-financial business development support provided to 400 Small, Medium and Micro Enterprises (SMMEs) was surpassed with the actual number sitting at 663 SMMEs.
Mr Ralph Ackerman, CFO, NDT, spoke to the financials of the NDT for 2018/19. Total expenditure sat at 98.8%. Members were provided with figures on actual expenditure per programme. 53% of the NDT’s budget went towards SAT.
The NDT and SAT incurred irregular expenditure as a result of non-compliance with procurement prescripts. NDT had a material non-compliance relating to fruitless and wasteful expenditure on infrastructure projects. There was an increase in fruitless and wasteful expenditure from R1.065 million in 2017-18 to R120.5 million in 2018-19. NDT was the biggest contributor - fruitless and wasteful expenditure amounting to R119.84 million identified in the current year related to infrastructure projects and fruitless and wasteful expenditure amounting to R723 000 related to interest and penalties and travel delays as a result of visa challenges.
Mr M de Freitas (DA) was concerned about the infrastructure projects of the NDT. Basic contractual work had not been done. There were no proper monitoring mechanisms to ensure that contracts were water tight. Furthermore, people were not qualified to check on projects. Going forward, what would it do to prevent such things from recurring? The wasteful and fruitless expenditure of the NDT seemed to be getting worse. The NDT in general had a lack of control.
Mr M Galo (AIC) stated that if the Director General had received the go ahead to investigate fruitless and wasteful expenditure, when had he received the go ahead? Had it been before or after the AGSA’s audit report? He asked what the number of operational projects against the total number of projects were. Based on the skills development programmes that the NDT offered he asked how many of the participants had opened their own businesses.
Minister Kubayi-Ngubane responded that she had signed off on the investigation.
Mr P Moteka (EFF) understood that the Executive heads of the NDT were new at their jobs. The AGSA’s report had observed that for the past five years there had been an overall regression. Why was this so? For the past two years things were worsening. What was being done to stop what was happening? It seems as if the same problems were recurring year after year. He was concerned that there was non-compliance with financial standards as set by law. This opened up things for theft to happen. It also opened up the possibility of officials engaging in nepotism. These were all things that needed to be considered. Having expenditure at 98% was good but members needed to know where funds were spent and on what. Had efforts been made to spend funds in rural areas and townships? The workforce representativity figures looked good but it would help to know how much in rands and cents Africans in the NDT were being paid in relation to the entire salary bill of the NDT. He was concerned that in the North West at the Manyane Game Lodge a building was reported to have been completed but in reality it had not had a roof. This was plain lies and dishonesty. He asked Mr Tharage to follow up on who was responsible for lying. He felt that over and above the three officials that had been suspended there should be more guilty parties. In Mpumalanga a project was reported to have been completed but in reality nothing had been done. The NDT needed to take action. Funds had to be recovered. Internal controls at the NDT were also not improving. Senior management at the NDT were not implementing recommendations. Service level agreements had to be in place to ensure quality of work. The AGSA had pointed out that projects had been stopped without following proper prescripts and processes. No paperwork had been done to halt projects. Irregular expenditure had increased from R4m in the previous financial year to R121m in 2018/19. It was unacceptable.
Mr Ackerman explained that the occupational bands of the NDT spoke to male-female and distinction in terms of race ie African, White, Coloured and Indian. It was not a problem to add a salary component. On the regression of internal controls, he explained that from the NDT’s perspective the biggest problem was EPWP projects. Corrective action was when procurement was to be done; a proper delegation document would be given. The 80%-20% principle had not been applied in awarding tenders to the lowest bidder.
Mr H Gumbi (DA) noted that Mr Tharage, in his input, had pre-empted the hectic concerns of the AGSA. The NDT was not doing the basics correctly. There should be daily and monthly controls. The basics of accounting practices should be adhered to. Mr Tharage had given the assurance that things would improve. He suggested that the Committee in the near future be provided with a report on specific problem areas. It could be sent to the Committee within a month of the present meeting.
Mr T Khalipha (ANC) agreed with Mr Gumbi that the Committee needed to be provided with a report from the NDT. The Committee should be provided with a report on a monthly basis from the Director General’s Office. There was no strong monitoring in place. Minister Kubayi-Ngubane should start to give leadership. Based on the AGSA’s report there should be an action plan that needed to be implemented. He did appreciate the hands on approach by the Minister and the Director General of the NDT. He agreed that the NDT’s expenditure was good but that the Committee had to be provided with detail on where funds were spent. Perhaps the NDT needed to build capacity. Outsourcing would always have its challenges. The problem was that many things were being done through service providers.
Mr Ackerman said that detail on expenditure could be found in the actual Annual Report.
Ms M Gomba (ANC) asked what would happen to those officials who had not followed financial management legislation when it came to procurement. To date no action had been taken. Those that have transgressed should face consequences. She suggested that the NDT appoint project managers and even quantity surveyors as the NDT was being over charged for services. How would uncompleted projects be completed when the funds had already been spent?
Ms T Xego (ANC) said that during the fifth parliament the Committee had applauded the NDT for its clean audits. Things have regressed over the last two years. There had to be a balance between good governance and service delivery. On EPWP projects, things should be done correctly the first time round. She suggested that persons with experience in the build environment should be used. Was there a risk unit in the NDT? The role of the internal audit committee in the NDT was after all was about early detection and thereafter to advise. She on recruitment of people for projects suggested a road show where Minister Kubayi-Ngubane could speak to municipalities so that pressure could be put on provinces. People should be aware of what programmes there were and what skills were needed.
Mr Z Peter (ANC), on programmes that the NDT provided for youth, said that there should be a mechanism/programme where persons who had dropped out due to pregnancy could be readmitted. Perhaps there was a need for the Committee to visit red flagged projects. He said that the whole point of EPWP projects was to create employment for the youth. As such projects should be reflected across all provinces.
Ms Ramphele said that the matter of pregnancies had come up when the NDT had presented its 4th Quarter performance report to the Committee. If people that dropped out were tracked then they could complete the programmes that they had participated in. Most of the dropouts were in the hospitality sector. It could be because of the hard work and the long hours in hospitality. For new mothers it would be difficult to come back. Dropouts could also be because the person had gotten a better opportunity. Perhaps it was necessary for the NDT to educate persons about how intense programmes were. She did point out that when people dropped out they had taken away the opportunity from someone else that could have completed the programme.
Minister Kubayi-Ngubane, tongue in cheek, said that responsibilities of the Department of Social Development should not be apportioned to the NDT.
Ms L Makhubele-Mashele (ANC) agreed that officials who were responsible for wrongdoing should be suspended. The NDT however should have early warning signals. If it was not for the AGSA to have done on site visits the NDT would have reported projects as being completed. She assumed that bursaries were provided for youth. Where were the youth to be found in the system?
Mr Ackerman said that the NDT had given bursaries. There were however no new bursaries awarded. Bursaries were for existing participants. However, in the new financial year the NDT expected to get additional funds.
The Chairperson applauded the actions taken that were in line with consequence management. The Committee would do its best to try to fast track matters by interacting with the relevant authorities like the South African Police Services (SAPS). On the preventative approach that Mr Tharage had spoken about, he was sure there was to be an intensive investigation. He would appreciate it if the Committee could be updated at regular intervals. On infrastructure projects, he suggested that unemployed rural youth participating in the NARYSEC Programme should be brought on board.
The Chairperson asked how many temporary jobs had become permanent jobs. What opportunities were there for the youth if not absorbed to find job opportunities elsewhere? Encouraging entrepreneurship would go a long way to alleviate poverty and create employment. A study needed to be done on entrepreneurs that were already in the sector and where they were since government had intervened. How many of the entrepreneurs had sustainable businesses? The NDT was also asked what the total number of skills and what category of skills had been created. He felt that the NDT needed to consider packaging good things and have a communication strategy to get them across. This could be done by way of testimonials. He stressed the need to strengthen the EPWP. The problem was the persons managing it. The Committee would interact with the NDT’s internal audit committee on a quarterly basis. The Committee in turn would provide feedback to Minister Kubayi-Ngubane. He too felt that consequence management should take place. Employee wellness was important. People should not be afraid to do their jobs. Fear and anxiety affected productivity. He added that society should be educated on what the AGSA did and on what different audit outcomes meant. The average person could be under the impression that all wasteful and irregular expenditure was due to corruption.
Mr Tharage stated that as the accounting officer he took responsibility for the state of affairs. It did not mean that he has not been taking responsibility. He was not trying to exonerate himself or anything. He added that when one looked at the actual Annual Report he was not part of senior management. There was no regression in the work of the accounting officer of the NDT. The audit committee and internal auditors could attest to the work that he had done and was doing. He confirmed that consequence management was taking place as cases had been opened. He explained that the accounting officer worked through a relationship of trust with his officials. There was a vast array of projects across SA and it was not possible for him to be at every stage of each project. If an official said that a foundation had been laid then he accepted it as fact. The suspensions that had been done were precautionary suspensions. It would allow matters to be investigated. He clarified that he was in no way saying that the suspended officials were guilty. The investigation would shed light on what had taken place. Thereafter efforts could be made to recover funds. Recovered funds would go back to government and not to the NDT. There could be civil claims and cases could be opened for the SAPS to investigate. Once the process was complete there was a need to separate processes. There was no wrong doing on the part of communities. He fully agreed with in-sourcing but at the moment there were challenges around the NDT’s vacancy rate. The NDT would not be receiving additional funds for new posts. The question was also about whether a permanent position should be created for specialised skills like architects and quantity surveyors and whether the skills would be regularly required. He noted that at least the person managing projects should have some technical competency in this regard. On the investigation initiated the basis of it was from 30 September 2019. However, it did not mean that nothing was done prior to that date. He pointed out that had it not been for modified cash then all these issues would not have been known. He now understood issues better and knew what needed to be done. He pleaded with the Committee for some time before providing specifics as the investigation was sensitive. 2-3 months should be enough time for the investigation to run its course. He preferred not to divulge substantive detail as yet given the SAPS investigations and matters going to court. Once detail was provided to the Committee then it was in the public domain. Things could be dealt with once consequence management was done. The NDT had zero tolerance for corruption. However, everyone was human and sometimes mistakes did happen.
Mr Amos Mahlalela, Deputy Minister of Tourism, asked that the Committee allow for the forensic investigation to be completed. Once it was complete then the Committee would be updated. The forensic investigation was a sensitive matter and processes could be compromised if one was not careful. On preventative measures, the NDT would come up with an action plan. Reports could be provided to the Committee on a quarterly basis. He pointed out that there was never a 100% match between expenditure and deliverables in departments. One of the reasons for this could be planning but sometimes costs also changed. If there was monitoring and evaluation then the desired outcomes could perhaps be produced. He pointed out that there were some good stories to tell on capacity building programmes. There were those participants who had become entrepreneurs, managers etc whilst others had not been absorbed in the private sector. It was all about what impact was made in the lives of those individuals. He said that the suggestion made by the Chairperson on involving municipalities in advertisements would be taken into consideration. There was a need for municipalities to become active on tourism. Municipalities simply did not prioritise tourism. The District Service Delivery Model would push everybody to work as a team.
Minister Kubayi-Ngubane reiterated that the investigation was underway. Action had already been taken against officials. She too asked for more time so that the investigation could be concluded. Thereafter the Committee could be provided with a comprehensive package of what had been done. The internal audit function of the NDT was working well and she was provided with specifics on issues. A risk register was on the books.
The Chairperson said that the NDT needed to update the Committee on consequence management. A delegation framework would be provided to service providers. The NDT had to strengthen its early warning systems. The NDT also had to report on all its infrastructure projects. The Committee further required an ongoing report on financial management matters which it expected by the end of February 2020. The NDT should also gradually consider in-sourcing of functions. Attempts had to be made to reduce fruitless and wasteful expenditure to 2%. The Committee would be briefed by the NDT when its forensic investigation was complete. The Committee wished to see an impact analysis of entrepreneurship and job creation efforts by the NDT. The NDT had to strengthen its communication of its achievements and its weaknesses. The NDT should strengthen its risk mitigation mechanisms.
Addressing, Ms Keamogetswe Ruiters from the AGSA, he asked that issues which were in the Committee’s blind spot should be brought to members and the NDT’s attention. He was aware that reporting of immoveables on financial statements had only been done in the last 18 months. By and large the Committee was pleased with the performance of the NDT. He did note that complacency had a tendency to creep in when one did well.
The meeting was adjourned.
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