NAC, NFVF, PACOFS oversight updates; with Minister

Sports, Arts and Culture

06 July 2021
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

Video: Portfolio Committee on Sport, Arts and Culture, 06 July 2021

22 Apr 2021: Committee Report on visit to PACOFS; NAC; NFVF

The Minister for Sports, Arts, and Culture said the three entities would give updates on legal action, disciplinary action, job creation interventions and the Presidential Employment Stimulus Programme (PESP). The updates were based on recommendations made by the Committee the during its April 2021 oversight visit to the National Arts Council, Performing Arts Centre of the Free State and the National Film and Video Foundation.

The Performing Arts Centre of the Free State (PACOFS) focussed on its litigation, the appointment of a panel of labour lawyers, and actions taken based on the Morar and Bonakude forensic reports.

Members expressed concerns about sexual harassment and whistleblower cases. They asked about its irregular expenditure, litigation, ministerial consideration of suitability of candidates for Council membership, assets sold by PACOFS, and the grievances of creative artists. The Committee asked PACOFS and the Minister to submit written answers to some of these questions.

The National Film and Video Foundation (NFVF) spoke to the PESP project targets and budget allocation for each of the four streams, project administration and monitoring and evaluation fees, number of jobs secured under PESP, reasons for appeals by PESP projects, the challenges and lessons learned from the PESP.

Members were concerned about the low numbers of applicants and jobs created for Northern Cape and Mpumalanga. They asked about the jobs created, amounts paid per project, appeals on PESP projects, and update on the completion of projects. They asked how NFVF would secure funding for successful bids if funds were depleted by appeals, the reasons for queries on Streams 1 and 2, measures taken by NFVF for the slow progress in reporting from provinces, how it would carry out roadshows during the COVID-19 third wave and if NFVF would recover the number of job losses. Members commended the NFVF for being a role model and encouraged it to continue its good work in building infrastructure and capacity in underserved provinces. They encouraged NFVF to use local radio streams to communicate with the public.

The National Arts Council (NAC) focussed on approved PESP funding for applicants, total number of jobs for beneficiaries in Streams 1 and 2, an analysis of the proposed job creation and retention statistics for each province, updates on the letters of demand from some applicants and on the National Arts Festival (NAF) case, appointment of forensic investigators, CEO and CFO suspension, and the gains of the NAC weekly industry communications briefs on PESP projects.

Members expressed concern about the legal costs as a lot of funds have been expended in resolving legal disputes. They asked about the estimation of proposed jobs created and retained, the reasons for suspension of the CEO and CFO, timelines for implementation and payments for projects, amount spent on litigation, appeals against PESP decisions, next phase for assisting artists under PESP, NAC vacancies, National Arts Festival judgement, letters of regret to artists, and funds paid for Stream 1 and 2 beneficiaries. The Committee asked about industry claims by the Theatre and Dance Alliance (TADA) report, if state agencies are involved in investigating NAC maladministration, why NAC withdrew the court application to take on review the Public Protector recommendations in favour of the Public Protector recommendations in favour of the SA Roadies Association (SARA) and the NAC apology to SARA, and why NAC is still pursuing legal battles with National Arts Festival. The Abahlali Base-NAC complaint to the Public Protector was also discussed. The Committee recommended that the Department mediate between its entities to avoid the trend of continual litigation in future.

Meeting report

The Chairperson reflected on the effect of the COVID-19 pandemic and expressed the Committee's condolences to the Department and the family of their colleagues that had passed on. She asked Members to observe a minute of silence to honour artists and colleagues that had died recently such as Adv Nkosana Mehlomakhulu, the legendary musician Steve Kekana, actors Mutodi Neshehe and Luzuko Nteleko, and Peter Mokoena, the gospel artist. She advised everyone to adhere to the COVID-19 regulations, support the transformation that is promised by DSAC and its entities, and offer guidance on their programmes. The Committee congratulated DSAC on the new structure of its critical associations, the 167 athletes in the Olympics team, and the team of four designers for developing a skilled design. The Committee had to support the Department in ensuring that creative artists develop their talents and ensure employment and development.

Mr T Mhlongo (DA) noted his concern that the number of entities invited to give account to the Committee were too many and Members did not have sufficient time to engage with them.

The Chairperson noted concern but remarked that the Committee had to invite many entities because it had considerable duties to perform. She agreed with his concern and promised to address the issue. She invited the Minister to give an overview to the Committee.

Address by Minister for Sports, Arts, and Culture
Minister Nathi Mthethwa asked for permission to leave the meeting early as he was attending another meeting at 10.00 am. He appreciated the Committee for inviting the Department to give progress reports on its oversight visit recommendations as this reporting assisted the Director-General in coordinating the activities of its entities. He remarked that the entities had been going through some legal action and some steps had been taken to resolve the disputes with the assistance of Dr Steve Kekana who had unfortunately passed away. DSAC is empowering its legal team, it would give progress reports on its forensic investigations and it would not give any room to stall the process by which artists were remunerated. Disciplinary processes are ongoing and DSAC would soon finalise the process for filling the position of the CEO of National Film and Video Foundation (NFVF) however the process was delayed because of the death of the head of its legal team. The Director-General would brief the Committee on job creation interventions and the Presidential Employment Stimulus Package (PESP) which was a relief package that was not be a long-term intervention solution. DSAC was looking at ways to provide sustainable programmes to remunerate artists.

Performing Arts Centre of the Free State (PACOFS) briefing
Director-General, Mr Vusumuzi Mkhize, gave a brief overview of the challenges at PACOFS. A forensic investigation was commissioned by the previous Council as a result of complaints lodged against the Artistic Director. After the Morar investigation report findings some creative artists staged a sit-in to demand that the Artistic Director be dismissed and they be involved in decision-making at PACOFS. Disciplinary proceedings have started against the CEO suspended by the previous Council. Also Council commissioned a second investigation due to alleged nepotism complaints against the CEO and sexual harassment complaints against the CFO.

PACOFS Council Chairperson, Adv Thato Moeeng, introduced her team. In response to Mr Mhlongo asking if the suspended officials were present, Adv Moeeng stated that only the Acting CEO was present. Updates on PACOFS challenges are that the former CEO was served with a letter of intent of suspension. PACOFS has a lot of legal matters that were being coordinated by Adv Nkosana Mehlomakulu, Head of DSAC Legal Services. As stated by the Minister PACOFS has faced a lot of litigation. The process for the appointment of a labour lawyer commenced with adverts on 24 March 2021 but Council was not satisfied hence management sent out another advert on 26 June 2021 and the progress report is attached. The Morar forensic report is being evaluated but all the recommendations of the Bonakude forensic report were accepted by Council. There were 18 recommendations against PACOFS suspended CEO, Mr Peter Pedlar.

Council action on Morar report
The Council asked Mr Meshack Xaba to step down as Acting CEO/ Artistic Director on 16 April 2021. Council seconded Ms Sharon Snell (CEO of Bloemfontein National Museum) as Acting CEO of PACOFS with effect from 19 April 2021. Mr Xaba was served with a notice of intention to suspend on 21 April 2021 by Ms Snell with guidance from Adv Mehlomakhulu. Council received a response from Mr Xaba on 03 May 2021. Council awaits advice from the Office of State Attorney.

Council action on Bonakude report
The Council accepted all the Bonakude report recommendations and committed to take action. The actions it has taken on the Bonakude report recommendations so far are as follows:

Recommendation 1:
The new CCMA Commissioner appointed to the case of Mr Peter Pedlar requested that both parties sit down and finalise the pre-arbitration minutes before continuing on 13 May 2021. PACOFS attorneys were concerned that the attorneys of Mr Pedlar had drastically amended the final draft of the pre-arbitration minutes. However, Mr Pedlar was not willing. The matter was postponed as the CCMA Commissioner was hospitalised. PACOFS attorneys applied for a senior CCMA Commissioner to take over the case within five days.

Recommendation 2:
Legal expertise is required to implement the effective discipline of CFO Mr Sello Sanyane, a member of Executive Management. The Council has a reasonable period to take disciplinary action as recommended. PACOFS has advertised a tender for a panel of labour attorneys to expedite and finalise all the outstanding labour matters. The tender closed on 25 June 2021. The irregular expenditure is disclosed in the Annual Financial Statements as of 31 March 2021 and has been reported to the National Treasury as required.

Recommendations 3 and 4:
Council is awaiting the finalisation of the panel of attorneys to take appropriate action on the irregular appointment of Ms Tshegofatso Toolo (Senior Manager: Marketing) and Ms Whelan Maarman (CEO Office Coordinator).

Recommendation 5:
Council agreed that appropriate action is taken against the Financial Accountant Mr Tebogo Lengau for failing to fulfil his duty by ensuring that proper documentation was sent to the finance department for rent to be deducted from Mr Sekome’s salary as soon as he occupied PACOFS flats. Appropriate action will be taken once the appointment of the panel of labour lawyers has been finalised.

The Council received one case of sexual harassment complaint and the Council was attending to the matter in conjunction with Adv Mehlomakulu who had been assisting in the review of the approved Sexual Harassment Policy. The South African Liberated Public Sector Workers Union (SALIPSWU) reported sexual harassment by PACOFS management officials; however, no formal grievances were lodged. SALIPSWU has indicated that sexual harassment occurs in PACOFS. Council has encouraged such cases be reported but no such cases have been reported since the indication was made. Council has made commitments to SALIPSWU that it would continually review all policies at PACOFS. Council was committed to ensure the implementation of all investigation reports and recover all money lost to PACOFS in compliance with the PFMA, without fear or favour.

Discussion
Mr Mhlongo observed that Council members served in different entities and asked the Minister if it was viable for them to serve on the Council of different entities. He asked Adv Moeeng to clarify if there were timelines to resolve these disputes and if Mr Sekome’s salary deductions are now completed.

Mr M Seabi (ANC) said that the Minister considers the expertise of candidates before Council members are appointed. He asked why Council is still waiting for a legal panel to take action when the Council chairperson is a qualified legal person. Please clarify why progress in constituting the legal panel was stopped. If the panel is not yet complete, expertise for these positions can be sought from the Department supply chain management because such delays lead to frustration. He expressed concern about the delay in finalising Mr Pedlar’s case because he is compromising the employer/employee relationship. He asked the Council why it had not considered using other available processes to ensure that the matter was finalised.

Ms V Van Dyk (DA) requested information by 9 July 2021 on assets sold by PACOFS, sexual harassment and whistleblower cases. She asked the Council chairperson if she was aware that PACOFS assets were sold at ridiculously low prices. She asked why the irregular expenditure of R369 000 was removed from the register by the CFO when the Auditor General visited PACOFS. She asked PACOFS to clarify why a whistleblower was suspended and clarify its whistleblower / sexual harassment policies. She expressed concern that Ms Tshegofatso Toolo, a whistleblower, was suspended in October 2020 and Mr Morake allegedly informed Ms Toolo and Ms M Motete that they would be dismissed because of whistleblowing. It is quite discouraging that a whistleblower would be suspended or dismissed while other officials with serious allegations are not reprimanded. The Committee needs clarity on what the Council is doing to reinstate Ms Toolo and resolve the matter. She asked for clarity on the case of the suspended CEO Mr Pedlar that was presented at the Commission for Conciliation, Mediation and Arbitration (CCMA).

The Chairperson asked the Minister to answer questions addressed to him as he would leaving.

Minister Nathi Mthethwa replied that people applied to be Council members but positions for the Department's portfolio are not lucrative because these positions are not about money. DSAC wants members that are dedicated to serving as councillors in its entities hence the pool for councillor recruitment is limited. Therefore it has members serving on different Councils in the DSAC entities. He asked Mr Mhlongo to confirm if his question was to clarify that Council members were not effective.

Mr Mhlongo said there was an allegation against the ethical background of a Council member who served in Johannesburg and Free State. The allegations against this Council member are financial and it is a concern that this allegation was not taken into consideration in appointing this Council member. He asked the Minister to clarify how such allegations are scrutinized.

Minister Mthethwa asked Mr Mhlongo to put the question on allegations in writing to the Office of the Minister for a response.

The Chairperson thanked the Minister and released him to attend another meeting.

Mr M Zondi (ANC) welcomed the presentation. Many grievances had been raised by creative artists but the major grievances were for the removal of the artistic director, implementation of the Morar report findings which is in progress, and concerns about timelines for Council's legal processes and actions. The presentation had shown Council has responded to the disputes, there is progress but Council still had a long way to go. He appreciated DSAC for its guidance.

Mr B Madlingozi (EFF) also welcomed the Council briefing and agreed that the timelines for action by Council should be identified. He asked if Council had met with artists to engage on their grievances and confirm the outcomes of the engagements.

Mr D Joseph (DA) asked Council to give clarity on sexual harassment cases (1.19-1.21).

PACOFS / DSAC response
Adv Moeeng replied that the second advert for labour lawyers had closed and the timeline for appointment of the labour panel was 31 July 2021. She said that information on sold assets, sexual harassment case, and whistleblowers would be forwarded to the Committee in writing by 9 July 2021. She appreciated Mr Zondi for complimenting the PACOFS Council on its progress in the disputes at PACOFS.

Ms Mpelegeng Kganedi, PACOFS Council member, replied that the initial advert / tender for the labour lawyers panel was cancelled because of non-response. The tender for the labour lawyers panel was therefore re-advertised to get the calibre of manpower that the Council wanted. The tender process is advanced and by 31 July 2021, the process would be completed.

PACOFS Acting CEO, Ms Sharon Snell, replied that its executives had met with Auditor General (AG) on the R369 000 irregular expenditure on 2 July 2021. Engagements on the irregular expenditure is ongoing as it was declared to the AG upfront, and PACOFS hopes the matter would be finalised soon.

She was not aware that Ms Tshegofatso Toolo is a whistleblower but some of the disclosures by whistleblowers are anonymous so it is quite possible that whistleblowers are being treated negatively. These cases would be dealt with on a case-by-case basis. The case of Ms M Motete (Management Accountant) as a whistleblower who was threatened with dismissal has just come to light at this 6 July 2021 meeting. She asked Ms Van Dyk to provide more information on the dismissal to ensure that the matter is investigated further.

She had been briefed on the case of Ms Tshegofatso Toolo, the supply chain manager, who had been suspended in February 2021 for work misconduct. The labour unit is aware of the matter and has instructed the line manager of Ms Toolo to issue a charge letter to enable the entity to take the matter further. Mr Morake's utterances as recounted by the Member in this 6 July 2021 meeting would be investigated as these utterances bring PACOFS into disrepute. From the review of the Bonakude report recommendations, the officials disregarded the procurement process and contravened Public Finance Management Act regulations and the Council has taken action by ensuring that the official pays back the money owed. PACOFS has measures in place to recover debt, part of the money has been recovered, the contract of the official expired in January 2021, and it would recover and collect the total balance remaining on the terms agreed as the official signed an acknowledgment of debt.    

DSAC DG Mr Mkhize said he was covered by the responses from PACOFS.

The Chairperson said Members could send follow-up questions in writing if they were not satisfied and thanked the Council chairperson and mandated PACOFS to ensure that it submitted written answers to Ms V Van Dyk’s questions on assets sold by PACOFS , information on sexual harassment cases and whistleblowers and its whistleblower/sexual harassment policies.

National Film and Video Foundation (NFVF) briefing
Director-General Mkhize said the challenges faced by NFVF on the Presidential Employment Stimulus Package were the non-approval of some applications due to shortage of PESP funds based on the available budget. Some applicants made appeals as they were not satisfied with the amount of the budgeted funds given to their project while some applicants declined the contracts. DSAC received 17 appeals, 10 were considered, six were upheld and four were dismissed. The process for the Minister’s recommendation is underway.

NFVF Council Chairperson, Ms Tholoana Ncheke, said the PESP purpose was to provide an employment stimulus based on public investment in employment, to counteract anticipated job losses due to the negative impact of the pandemic. The desired project target was to create 8000 jobs and so far the project had created and retained more than 8000 jobs already. She outlined the PESP budget allocation for the four streams and disbursements. Under the PESP, 203 contract payments have been processed and projects under Stream 1 are slow because it is the most labour-intensive stream. She outlined the payments made on contracts, the jobs proposed, and the jobs projected. The number of jobs secured is 8477 while 478 jobs were outstanding. R7 million was allocated for administration/monitoring and evaluation (M&E) purposes. R5.1m has been allocated so far as some projects are in rural areas and lockdown has affected the M&E process.

The PESP process was challenged by appeals as allowances were not made for appeals when the project was initiated. The NFVF has resolved 61 of the appeal cases while 17 of the appeal cases have been escalated to the DSAC Appeals Committee. A total of 90 queries were provided with feedback: Stream 1 had 53 queries, Stream 2 had 20 cases, Stream 3 had eight cases, while Stream 4 had nine cases. The Council constituted a PESP Ad Hoc Committee to consider disputes between partners on the PESP agreements (two resolved), objections to the PESP approval for Stream 4 applicants (one objection resolved), and requests to transfer funds (four requests resolved). The majority of the projects could not continue because the beneficiaries stated that the funds released would not be adequate to complete the projects.  M&E instruments have been constituted internally, drawing on an existing framework to assist struggling projects to return back on track. Physical site visits for PESP projects commenced on 6 May 2021 and will continue until 31 July 2021 but this has been affected by the Lockdown Level 4 restrictions. Physical site visits for PESP projects are vital to confirm the number of jobs created. She noted the M&E statistics per province and per stream on verification of jobs created. She outlined the PESP timelines, insufficient funding, audio-visual sector definitions for projects, special purpose vehicles, changing targets, and NFVF internal capacity challenges and the lessons learned from each challenge.

Discussion
Ms R Adams (ANC) expressed concern at the low number of applicants and job numbers expected in Northern Cape and Mpumalanga. She asked DSAC to state the lessons learned from the COVID-19 pandemic.

Mr Seabi asked for clarity on the number of jobs created if NFVF had expressed concern that only physical site visits for PESP projects could be used to verify the jobs created. He noted NFVF’s concern that the projected target of 8000 jobs might not be met despite payments made. He asked NFVF to clarify how much it paid per project, how NFVF would source more funds if the funds were depleted by successful appeals, how conflict of interest was finalised, and the number of successful projects completed.

The Chairperson asked why Stream 1, the most labour-intensive project, had the highest number of queries and had the slowest rate of response, the number of appeals on NFVF and DASC PESP projects. She asked for the measures taken by NFVF on the slow progress of reporting from provinces. How would NFVF carry out road shows during the COVID-19 third wave and if NFVF would recover the number of jobs losses created by the pandemic. 

NFVF / DSAC response
NFVF Council Chairperson Ms Ncheke replied that NFVF had revisited the low number of applications from Northern Cape and Mpumalanga when the trend was observed. NFVF has engaged with both provinces but noted that both provinces were challenged by the absence of infrastructure and capacity. Progress in both provinces has been impacted by the ability of NFVF to provide infrastructure and capacity in these provinces. The targets on job creation and retention were exceeded when NFVF received applications. However, at the time of contracting, some applicants indicated that they could not meet the targets set because of the amount of funds approved. Some applicants declined the contract and hence the number of jobs created has been revised. NFVF stands at the projection of 8 200 jobs creation but this might not be met because of funding challenges. However, the target is a moving target. The NFVF is engaging with beneficiaries and has met a target of 8000 jobs already. Appeals are a huge challenge because of the financial implications of appeals. NFVF has constituted an ad-hoc committee and has been able to resolve some cases. Cases not resolved have been escalated to the NFVF shareholder (DSAC) to get more funding.

No NFVF Council member has been allocated any contracts as Council members applications were taken out before beneficiaries were appointed (2.30-2.31.13). There were directors in two companies – one of them had intellectual property rights – and they were resolved by Council before the contract was concluded. NFVF accepts that jobs were lost during COVID-19 but would give the job loss statistics when economic impact studies are finalised (2.34.54).

Stream 1 has the slowest response rate and conclusion of contracts as most of the applicants declined while some are renegotiating because the funding budget is lower than the funding requirement submitted. Stream 1 also has the highest number of queries for the same reason. The ad-hoc committee ensures that the appeals are concluded timeously. The roadshows have been impacted by the pandemic however NFVF is partnering with local and community radios in provinces. Council has observed that infrastructure and capacity must be built in those provinces affected by this to ensure that applicants increase in those provinces.

NFVF CEO, Ms Makhosazana Khanyile, explained that the NFVF industry was not set up for engagement rates and an agreement was reached before the PESP was initiated. The timelines granted after engagements between beneficiaries and NFVF/DASC were extended to August 2021. NFVF agrees that there were low application numbers in affected provinces in comparison to provinces like Gauteng and Western Cape. Provinces such as Eastern Cape, Free State, and Limpopo are making progress and a lot of outreach have been done in underserved areas.

Mr Mhlongo encouraged NFVF to use local radio streams to communicate as its social media platforms though adequate were not responding timeously to people’s questions. He asked NFVF to clarify how much was budgeted for the Youth Day programmes and if these were successful. Had the workshops and seminars been successful?

Ms Khanyile noted the comment that NFVF social media platforms did not respond timeously and assured the Committee that this challenge would be addressed. Youth Month was largely successful. The cost of programmes was R250 000 because programmes were organised online and NFVF has partnered with the South African Broadcasting Cooperation (SABC).

DSAC Deputy Director-General:  Arts, Culture and Promotions Development, Dr Cynthia Khumalo said the Department was considering the lessons learned and recommendations from all the DSAC entities (2.50-2.53). The Department addresses the challenges as they arise. The due timelines have been extended to August 2021 as mentioned by the NFVF CEO. DSAC is engaging with NFVF on appeals and once the process has been finalised the funding concern would be addressed.

The Chairperson remarked that during the April 2021 oversight visit the Committee had observed that NFVF was a role model entity. She encouraged NFVF to continue with its good work in building infrastructure and capacity in underserved provinces.

National Arts Council (NAC) briefing
In his overview, Director-General Mkhize said PESP challenges faced by NAC  were legal disputes, the forensic investigation, and appeals. The National Arts Council received 22 letters of demand from beneficiaries' lawyers for the NAC to honour original contracts to the value of R34 135 117.  Some beneficiaries have not signed their revised grant notification letters, some have not yet been paid, and NAC legal counsel has sent response letters to some of the complainants. Judgement on the National Arts Festival (NAF) case was served in favour of NAF on 21 June 2021. The NAC legal counsel has filed an appeal on 24 June 2021. The NAC has spent R860 644 on legal fees but estimates that it would incur additional costs of R300 000 – R500 000. Mazars Forensic Services was appointed by NAC on 25 June 2021, given a briefing on 28 June 2021, and commenced work on 29 June 2021. A total of 113 applicants that were rejected for the PESP lodged appeals with DSAC. These appeals have been captured and will be referred to the Appeals Committee.

Newly elected NAC Chairperson, Ms Celenhle Dlamini, introduced her team and asked the acting CEO to brief the Committee.

NAC Acting CEO, Ms Julie Diphofa, said the NAC had approved 1 331 applicants for PESP funding, 98% of the 1,331 applicants had received 70% of budgeted funds, with a total of 26 433 jobs created for beneficiaries in Streams 1 and 2. The NAC has paid about 32% of all beneficiaries their final tranche after their reports had been verified. The highest number of beneficiaries are from Gauteng (35.6%) followed by the Western Cape (12.1%), while the lowest number of beneficiaries are from the Northern Cape (3.8%).

Ms Diphofa analysed the proposed job creation and retention statistics for each province as well as  per male, female and youth demographics. On the 22 letters of demand received from beneficiaries’ lawyers, the National Arts Festival (NAF) and ASSITEJ cases are still in court. The NAF matter was heard on 31 May 2021 and the matter was judged in favour of the NAF but NAC is applying for leave to appeal.

NAC appointed Mazar Forensics on 21 June for the forensic investigation. The tender for the investigation closed on 3 June 2021, the Bid Evaluation Committee met on 8 and 11 June 2021 and the Bid Adjudication Committee met on 15 June 2021. NAC has sent letters to extend the suspension of the CEO and CFO. The NAC established open communication lines to address queries when PESP started. These weekly industry briefs started with about 4000 participants, the number has reduced to 100 which shows that that the briefs achieved their purpose, and that these sessions would be closed once the PESP project has been closed (30 June 2021). The NAC PESP has empowered many beneficiaries by creating and retaining jobs. The NAC has been able to address the earlier challenges and learn lessons. The NAC has received good feedback from the artists and job beneficiaries and it has been showcasing the work of the beneficiaries on all NAC social media platforms.

Discussion
Mr Madlingozi asked NAC to give updates on the suspension of the CEO and CFO, clarify the reasons NAC is applying for leave to appeal in the NAF matter and if there would be a Hawks investigation in NAC matters.

Ms V Malomane (ANC) asked for an update on jobs created, the timelines for project implementation and payments and signed contracts from beneficiaries, amount spent on litigation, the number of appeals against the PESP decisions and where funding would be sourced if appeals are verified as NAC had just declared that its PESP funds were depleted.

Ms Van Dyk expressed concern at the legal costs incurred and where the money to pay beneficiaries would be sourced if the appeals were verified. She asked how it arrived at the figures for proposed job counts for provinces and for the demographics; if Special Investigating Unit (SIU) investigations on NAC maladministration had been initiated; and if other agencies such as the Hawks or Auditor General would be investigating NAC. She asked for a response on the claim by Theatre and Dance Alliance (TADA) that the NAC was setting up beneficiaries for failure based on the set timelines. She asked why the NAC withdrew the court application to take on review the Public Protector's remedial action on behalf of the SA Roadies Association (SARA).  She asked why the process of assisting artists under the PESP was taking too long, and if there would be another phase where artists would be assisted.

Mr Mhlongo asked for the reasons the NAC CEO and CFO were suspended. He asked why the NAC withdrew the court application to review the Public Protector recommendations on SARA, why the NAC finally apologised to SARA President Mr Freddie Nyathela, and the amount spent on the legal disputes with SARA's Mr Nyathela. He asked if there were any Hawks investigations on PESP projects. Given the status of NAC vacancies, how much would it pay in legal costs on the NAF matter and if the NAC would win if it pursues a legal battle with the NAF. He asked for updates on letters of regret to artists.

Mr Joseph asked why the NAC filed a leave to appeal application on the NAF matter and what it had budgeted for the NAF legal matter. He asked for the timeframe and costs for the forensic investigation tender approved in June 2021.

Mr Zondi asked the NAC to clarify the PESP targets for job creation and retention and the timelines to finalise PESP projects. He stated that Parliament would support the NAC in its bid to assist creative artists and stabilise the industry.

Ms Adams asked for the NAC amounts allocated to PESP beneficiaries, to provide clarity on the provincial statistics for proposed jobs created and retained, and explain the method it used to verify jobs created and retained by PESP beneficiaries.

Mr Seabi congratulated the new NAC Chairperson on her appointment and appreciated the Minister for pursuing the path of gender equality in appointments. He asked why the participants in the NAC weekly industry briefs had reduced from 4 000 to 100 participants. He observed that the DSAC entities were not complementing each other and they should be rationalised. He expressed concern about the NAC intention to appeal the NAF judgement. He suggested that the DSAC DG mediate in the legal dispute between NAC and NAF. He noted that entities such as PACOFS do not take advantage of transversal contracts. Central supply chain management allows entities to use transversal contracts to streamline their operations. The DSAC entities should look at transversal contract opportunities that have the advantage of reducing delays in contract administration.

The Chairperson asked why the funds NAC paid to Stream 2 beneficiaries were as low as 15% while Stream 1 is 85%. She was concerned about the trend of litigation between entities as a lot of funds have been expended in resolving legal disputes. She recommended that DSAC mediate between its entities to avoid the trend of continual litigation in future. She asked DSAC to give a progress update on its revised White Paper policy to improve this.

NAC / DSAC responses
SARA matter
NAC Council Deputy Chairperson, Mr Phumzile Zitumane, replied that the new Council decided to withdraw from taking the Public Protector's SARA recommendations on review based on its task team's advice. The task team had analysed if the PP recommendations are implementable. The task team advice if the case is winnable but if you look at the fees, it merited a withdrawal to be sensitive to public funds. Based on the PP findings, the NAC had to apologise to SARA and to Mr Freddie Nyathela for the wrong reasons provided and it agreed to implement that. The PP administrative recommendations would also strengthen the control environment on NAC policies. The other cases have not been withdrawn as the same task team is reviewing those so the new Council has not resolved the other cases with SARA and others yet. As the accounting authority, one has to account for why one is withdrawing a case and why one is not withdrawing from a case that would not be saving public funds

Adv Eric Nkosi, NAC Council Member,  said when the new Council were made aware that the Public Protector recommendations on Mr Fred Nyathela were taken on review, the NAC engaged the previous firm of attorneys on whether to accept the recommendations without a court review. The attorneys advised the Council to take the Report on review as there would be prospects for success on some matters.

The Council reviewed the Public Protector recommendations on Mr Nyathela noting the history of the acrimonious relationship between the NAC and Mr Nyathela. The attorneys were of the opinion that if the Council did not review the Public Protector recommendations, the malicious allegations continually perpetrated by Mr Nyathela on social media and other media platforms that NAC was corrupt, that it was condoning maladministration, that friends of NAC management were given sponsorships would prove Mr Nyathela right.

The new Council does not agree that the history of the acrimonious relationship should inform the decision of the Council. The NAC attorneys were also of the opinion that if the Council failed to review the Public Protector recommendations, the case for Mr Nyathela would be buttressed in court. The previous Council had obtained an interdict against Mr Nyathela in his absence to stop his allegations in the media. The timeline for withdrawing this interdict can only be determined by Mr Nyathela. An order has been given but only Mr Nyathela can apply to rescind the order. This matter had been taken on review because the Public Protector mischaracterised the conduct of the NAC CEO. Mr Nyathela requested NAC sponsorship for capital items but at that time the NAC had taken a decision that capital projects would not be sponsored; therefore, Mr Nyathela was unsuccessful. However, Mr Nyathela was incorrectly given feedback that his application was unsuccessful because his application was missing some documents. That was why the Public Protector said the NAC had to apologise to Mr Nyathela for giving the wrong reason although the correct process was followed which the Council felt was fair – hence, the apology.

Also, a former NAC CEO took one of Mr Nyathela’s old proposals for funding for training and development. This was done without Mr Nyathela's knowledge although the NAC did not approve this proposal. Mr Nyathela somehow found out what had happened and was offended. The former CEO’s response was that the policy did not require her to inform Mr Nyathela before using this proposal. The Public Protector (PP) said the policy must be changed as it was open to abuse as it contravened intellectual property rights. The PP was of the opinion that the conduct of the former CEO was tantamount to maladministration. The former CEO was of the opinion that this was a mischaracterisation. However, the new Council agreed that the PP’s recommendation was correct as the former CEO had contravened the intellectual property rights of Mr Nyathela. The Council agreed that this PP recommendation should not be taken on review. The NAC should not continue with litigation but rather the Council and the NAC should support the promotion of culture. However, where relationships exist, disputes can occur and when the disputes cannot be resolved amicably, parties might have to litigate. This leads to the NAF matter.

National Arts Festival matter
Adv Eric Nkosi said when the new Council came in, it found there were more approved PESP applicants than there was budget. It decided it had to review the process so that it was fair and equitable. It could have gone to court to set aside the decisions but that would have prejudiced those artists who had had already been informed and had started. It decided to consult with the industry. However, the NAF took the NAC to court and judgement was given in favour of the NAF.

The NAC lawyers and the Council have gone through the judgement, and the NAC agrees with paragraph 32 of the Judge Lamont judgement. Paragraph 32 stated that ‘the fundamental premise upon which the NAC based its conduct was that all approved applicants were entitled to receive monies from the programme hence constitutional fairness dictated that the NAC when it considered the applications was obliged to embark upon a balancing process to achieve the objective of funding everyone’. Hence, the NAC had a right to find a way to ensure that all beneficiaries received funding for all the PESP projects.

However, the NAC did not agree with paragraph 31 of Judge Lamont’s judgement which stated there was no requirement stipulated in the PESP that the applications had to be considered in such a way to ensure all applicants whose applications had been approved would receive funding or the amount of the funding. The judgement stated the NAC should have stopped the process when the budget was exhausted and say there is no more funding and write back to all the other applicants that they had been unsuccessful as the budget was insufficient.

The NAC recognises that if the applicants have been reviewed and approved then it has the obligation to give the beneficiaries some money even if the money given was lower than the amount proposed by the beneficiaries. The NAC took this stance as otherwise some applicants would receive funding while others would not. Hence the NAC does not agree with Judge Lamont that it should have put in a disclaimer that funding was not guaranteed even if the applicant had been approved as the disclaimer would be unlawful and unconstitutional. This is the reason NAC wants to appeal some paragraphs in the Judge Lamont judgement.

Mr Madlingozi interjected that NAC was taking too long to answer questions and was not specific.

The Chairperson agreed that the Committee had time constraints with Zoom meeting bookings but appealed to Members to allow NAC to give the information required by the Committee.

Adv Eric Nkosi said he was giving the background to ensure Members understood why the NAC filed an application for leave to appeal. The Council is of the opinion that the NAC had good prospects of success on the NAF matter but that the NAC does not have good prospects of success for the Public Protector's recommendations about SARA.

Adv Eric Nkosi explained the reasons for the CEO and CFO suspensions. The new Council relied on management to guide it on the challenges in implementing the PESP. Council realised that the information given was either inaccurate or changing on each occasion and management were distracting from the little progress the Council was making and it had to keep on changing its resolutions. Hence the Council decided to suspend the CEO and CFO while the forensic investigation was ongoing.

Abahlali Base NAC matter
Mr Zitumane said the Abahlali Base-NAC lodged a complaint with the Public Protector with allegations about the NAC management of the PESP that amounted to improper conduct, maladministration, undue delay in disbursement of PESP funds, and violation of artists’ constitutional rights to privacy. The NAC responded in detail to all the allegations to the PP and disputed them all. This detailed response to the allegations was not shared with some members of the PP and with the complainant, Abahlali Base NAC and their lawyers. Hence the meeting in the week of 2 July 2021 was called off after an hour as it would not be fruitful. The NAC is arranging a meeting with the PP and Abahlali Base-NAC for later in July or early August 2021.

Adv Nkosi said the NAC did not have the mandate to bear legal costs hence the NAC tries to avoid litigation. However, the NAC has to litigate when it has to defend its corporate brand which incurs legal costs. Entities always have budget for legal disputes and Ms Diphofa would speak to this.

Dr Sipho Sithole, NAC Council Member,  acknowledged that the COVID-19 pandemic had negatively affected the Theatre and Dance Alliance (TADA) group. Also, the NAC and its Council acknowledged the comprehensive TADA report and maintain that the report could assist the NAC to address the challenges of creative artists. Although the Council notes that the report comes from a good place, the NAC would not be able to make comments on the TADA recommendations without an independent forensic investigation because the report was not commissioned by NAC. The number of participants at the initial weekly communication briefs was high (4,000) but the numbers reduced to about 100 after approvals and funds were disbursed and beneficiaries started implementing PESP projects. The participants that remain are the ones waiting for the links to the second report which is delaying their second funding tranche. Other participants are attending the weekly industry communication briefs are the ones that have queries on the PESP contracts.

The Chairperson noted Dr Sithole's explanation showed why the funds paid to Stream 2 beneficiaries were as low as 15% while Stream 1 is 85%.

NAC Acting CEO, Ms Diphofa, replied to many of the questions:
- There is a budget line item for legal costs as and when they occur.
- When PESP project applicants signed their contracts they had to give information on job opportunities.
- The NAC indicated the individual timelines and the timeline of 30 June 2021 was communicated during the weekly communication briefs.
- There were 75 appeals recorded by the NAC but 130 appeals were received by DSAC.
- The final figures on job counts in contracts would be based on PESP project implementation.
- Forensic investigations would be carried out by Mazars and audits would be undertaken, and Hawks would investigate if criminality is observed.
- The NAC has two vacant positions in the Arts Development department and the position of the human resources manager is also vacant. The NAC would respond with accurate figures once a strategic assessment of the organisation has been completed.
- A total of 1154 beneficiaries was declined and NAC has since sent out regret letters in May 2021.
- The original target for job creation and retention was 14 000. The contract figures show that the target has been met but implementation figures would give the final figures. The NAC anticipates that the PESP reports would be finalised by August 2021. Initially, a target of 7 000 had been set by National Treasury but the NAC responded that it would exceed this target by 6 000 so the original target was about 14 000. The numbers so far have exceeded this target but the numbers would be verified from the implementation figures to give a sense of the final numbers.
- Initial timelines were set for July but this has been reviewed to August 2021.
- The NAC is currently dealing with Stream 2 where beneficiaries need to give substantive evidence of their activities.
- A total of 1 331 PESP projects were approved, 1 307 of the beneficiaries have received payment of the 70% in Stream 1, and a breakdown of the amounts paid for Stream 1 and 2 were noted.
- Gauteng received the highest allocation traditionally. The number of applicants from Limpopo and Northern Cape are low because artistic merit is considered when cases are considered. The reports on demographics are drawn from the Grants Management System.
- The requirements for payment in Stream 1 are evidence only that artists have been paid but requirements for Stream 2 is complicated. It includes proof of activities and salaries for job creation. Challenges are observed when validating the expenditure reports against proof of expenditure items. This makes the process slow but NAC has to ensure that it accounts for public funds. It understands that the process is a bit slow but it has to account for disbursed funds.

Ms Mary-Anne Makgoka, NAC Company Secretary, observed that the previous Council had not reviewed the Public Protector’s recommendations but noted that some of the recommendations were correct. The new Council decided that it would approve some of these recommendations as they would assist in strengthening governance at the NAC.

DSAC DDG Dr Cynthia Khumalo informed the Committee that R284m had been disbursed out of the R300m. At 15 000 jobs, the NAC has doubled the projected number of jobs created but DSAC awaits the final job creation numbers after the project has been implemented. DSAC meets with the NAC on Tuesdays for technical meetings and on Thursdays for monitoring meetings on PESP projects. The process of verification of appeals by NAC is ongoing and it has assured DSAC that the process would be completed soon. The NFVF appeals committee has finalised its appeals but the NAC appeals are ongoing. She agreed with Members that the entities should complement each other. However, during monitoring meetings, best practices are shared between entities.

Director-General Mkhize said the impact of these entities on PESP should be appreciated and the NAC initiatives have shown that the objectives of PESP have been met. The PESP has been implemented and the number of jobs created and retained is above 26 000 which is encouraging.  Although the budgeted funds might not accommodate all projects, DSAC is making efforts to ensure all projects are accommodated. DSAC agrees with the Committee that litigations must be avoided and DSAC tries to avoid litigations. According to Advocate Eric Nkosi, the NAC does not initiate legal disputes and parties might have to litigate when matters could not be resolved. The Committee should note that the NAF is not under DSAC it is a private agency. DSAC is also concerned that funds are disbursed to legal disputes instead of creative artists. DSAC would always mediate between entities to ensure that funds would not be misdirected to legal matters but would be received by creative artists. DSAC notes the points at the revision of the White paper and would be able to make presentations when invited by the Committee. The White paper recommends the amalgamation of entities and/or Councils to ensure that there is better efficiency with governance.

Follow-up questions
Mr Mhlongo suggested that PESP funds should go towards the employment and remuneration of creative artists, especially in this pandemic. He asked DSAC to clarify when the next phase of PESP would take place to ensure artists get jobs. He asked the Minister to clarify who appointed the forensic investigators. He expressed concern that NAC matters end up in court while NFVF is able to resolve matters out of court. DSAC must find a way to stop the trend of legal disputes and resolve conflict instead of expending R860 000 on legal costs.

Mr Madlingozi said the reason for the NAC appeal had not been addressed clearly. He asked NAC to give answers in writing. He asked DSAC why the NAC uses people’s intellectual property, why the NAC apologised to SARA if the funding of capital projects could not be honoured, and when the NAC would do its next funding call for PESP projects.

DSAC response
DG Mkhize replied that DSAC would await guidance from National Treasury and the Presidency on the next phase of the PESP. He agreed that the Constitution could not be flouted hence the NAC needed to respect the intellectual property of an individual. He agreed with the Committee on its guidance on conflict resolution. DSAC and its entities should work for the creative artists and not the lawyers.

Minister's response
Minister Mthethwa said the next phase of funding PESP projects could only be addressed by Parliament based on the budget. DSAC would welcome the Committee's assistance in securing more funds for PESP projects as the Department is working on sustaining the PESP funding. The NAC PESP should be judged on its job creation and retention gains and not on ‘populist views’.

Mr Madlingozi raised objections against the Minister's statement.

The Chairperson overruled his objections and allowed the Minister to complete his address.

Minister Mthethwa explained that when there is a challenge with the Council of an entity, the Minister would make the forensic investigation appointment. However, if the challenge arose within the entity itself, then the Council would make the appointment. In this case, the challenge arose based on the conduct of the CEO and CFO. It was thus in order for the Council to appoint the forensic investigator. The Committee should note that the Special Investigating Unit has indicated its availability, if and when needed.

The Chairperson allowed Mr Madlingozi to ask his question.

Mr Madlingozi asked the Minister to clarify who the 'populists' were.

Minister Mthethwa replied that Members of Parliament were familiar with the budget constraints in the country so Members should explain to creative artists that based on the budget appropriated not all creative artists would benefit from the PESP. The funds from the Mzansi Golden Economy (MGE) was a relief package and it has been expended for the current year. The President does not have funds for the relief programme. He apologised for his choice of language that offended Mr Madlingozi.

Mr Mhlongo raised a point of exigency that the Minister should appoint a forensic investigator if there were challenges in a DSAC entity.

Minister Mthethwa maintained that the Council of an entity had a fiduciary duty to appoint the forensic investigator.

The Chairperson said that Members may send follow-up questions in writing if needed. She thanked everyone and adjourned the meeting.
 

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