DIRCO & ARF 2020/21 Annual Report & Audit Outcomes; with Minister

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International Relations

10 November 2021
Chairperson: Mr S Mahumapelo (ANC)
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Meeting Summary

Annual Reports 2020/21

In a virtual meeting, the Committee received an update from the Minister of International Relations and Cooperation on consequence management and the progress that the Department had made in the last financial year. The Auditor-General also briefed the Committee on audit outcomes, and the Department of International relations and Cooperation, together with the African Renaissance Fund, briefed the Committee on their annual performance reports for the 2020/21 financial year.

The overall audit outcomes of the portfolio had remained unchanged from the prior year. The Auditor-General (AG) reported that historic irregular expenditure worth millions in the Department of International Relations and Cooperation (DIRCO) had still not been investigated, which spoke to poor consequence management within the Department. The AG noted that while consequence management was being implemented, this was happening at a slow pace and had not trickled down to all levels of the organisation.

The Minister reported on progress the Department had made on the continent. She said the Southern African Development Community (SADC) remained the primary vehicle for South Africa’s foreign policy to achieve regional development and integration within southern Africa. For South Africa, a stable and prosperous southern Africa was vital if the region was to fully integrate and prosper. South Africa had become the Chair of the SADC Organ on Politics, Defence and Security Cooperation during the 40th Ordinary SADC Summit of Heads of State and Government in August 2020. In this capacity, it continued to work towards bringing peace and stability to the region. As SADC facilitator to the Kingdom of Lesotho, it had continued its mediation efforts in that country and also sought to contribute towards bringing stability to the Democratic Republic of Congo and the Republic of Mozambique.

The Department of International Relations and Cooperation and the African Renaissance Fund provided feedback on the progress they had made regarding the objectives set out in their programmes.

Committee Members asked why DIRCO had not submitted their audit action plan to the Committee, as this had been a request for some time. They also asked the Minister to give them detailed feedback on consequence management, the staffing of the finance unit, issues within the property unit and what was being done to fix areas of concern within the supply chain management unit.


Meeting report

Opening remarks
The Chairperson said Members were back from the local government elections and he hoped they were rested after all the work they had to do. However, the work did not end now that the elections were over, and based on the results there would be continuous discussions. The results showed that South Africa continued to be a democratic and transparent country. The people continued to participate freely and fairly in elections, and no one was barred from electing the party of their choice. Members should be glad that there were no major disruptions, and the country remained stable. The Independent Electoral Commission (IEC) did its best, based on the constitutional court verdict, and dealt with the challenges it faced in the form of the COVID pandemic and its new technology. The Committee applauds the IEC for ensuring these elections ran smoothly.

The Chairperson said the Committee was meeting at a time where there were disturbing developments in some African countries. The situation in Swaziland, Sudan and Ethiopia was worrisome, and hopefully the Committee would discuss these matters at a future meeting. He hoped that all efforts that were being put in place through various forums and engagements yielded fruitful results and ensured that stability and peace got restored to these countries.

DIRCO audit outcomes
Mr Polani Sokombela, Business Unit Leader, Auditor-General of South Africa (AGSA), led the presentation, giving an overview of the audit outcomes, root causes and recommendation for the Department of International Relations and Cooperation (DIRCO) to improve its audit environment.

The overall audit outcomes of the portfolio remained unchanged from the prior year. DIRCO received a financially qualified audit opinion with findings on compliance with legislation, and African Renaissance Fund (ARF) was able to maintain clean outcomes (unqualified opinion with no findings). The prevalent instances of non-compliance were in the areas of expenditure management, supply chain management, consequence management and material misstatements identified in the financial statements submitted for audit. Findings raised were in most instances recurring findings, indicating that audit action plans and a culture of consequence management was not exercised effectively.

The Department was still struggling to resolve the prior year qualification area on current receivables (disallowance and damages account), even though there were efforts to address this matter. As part of the audit action plan for the current year, this was an area that the Department had prioritised to resolve. Even though it had obtained the services of a forensic investigation firm to assist in addressing the qualification area, this did not have a positive impact. The Department had reduced the material misstatements in this account from R186 million to a balance of R73 million, but it was not enough to address the qualification. He commended the Department for this effort and encouraged DIRCO to continue to investigate this account to address the qualification in the financial statements. Compliance with legislation remained an area of concern when compared to the prior year.

The Department had continued to incur irregular expenditure due to non-compliance with legislation. It had incurred irregular expenditure relating to the current year amounting to R14.6 million when compared to the prior year of R7.3 million. This represented a 50% increase in irregular expenditure. The increase in new irregular expenditure in the current year was because of non-compliance with legislation findings on supply chain management (SCM) processes. This was mainly from missions, where procurement prescripts were not followed in the procurement of goods and services -- for instance, quotations not obtained, or expenditure incurred on expired contracts. This was due to lack of oversight and adequate reviews by those involved in the compliance processes. However, AGSA had noted the significant decrease in irregular expenditure coming from old contracts in the current year (R162 million) when compared to the prior year (R209 million). This was due to the Department taking a stance and cancelling contracts that were declared as irregular in the past.

Mr Sokombela commended the Minister on the consequence management implemented at the highest level within the Department and promoting a culture of consequence management. However, her efforts on consequence management had not filtered down to the rest of the Department. This was since the irregular expenditure arising from 2017/18, 2018/19 and 2019/20 had not been investigated by the Department, resulting in poor consequence management.  He urged DIRCO to investigate all the irregular and fruitless and wasteful expenditure, implement consequence management and continue to put measures in place to ensure compliance with legislation. Failure to implement consequence management encouraged a culture where the disregard for legislation, policies and procedures thrive in any organisation. The Department needed to also ensure that the current action plan was enhanced to address the repeat findings in compliance with legislation.

The action plan must be monitored by the internal audit function, and the audit committee should play an oversight role in the implementation and monitoring of the action plan. The Department had continued to produce a credible annual performance report that was useful and reliable. It had managed to achieve 83.3% and 80% of the planned targets on its key programmes of international relations and international cooperation respectively.

The key root causes in internal control environment included the slow response to improving key controls and addressing risk areas such as:
Basic financial discipline of preparing and performing detailed reviews of monthly reconciliations.
An ineffective action plan on compliance monitoring and the quality of financial statements.

Inadequate SCM compliance monitoring processes.Consequence management not implemented within the Department, as irregular expenditure for 2017-18, 2018-19 and 2019-20 was not investigated.

Recommendations -- to the accounting officer
Implement action plans timeously to address audit findings, especially in compliance with legislation.
Enhance the review by the SCM unit to sustain the improvement made in the prior year findings, address the new non-compliance identified in the current year and prevent instances of non-compliance going forward.

Finalise the process of clearing the disallowance and damages account and ensure that record management was enhanced to prevent repeat limitation finding.

The accounting officer should ensure that a culture of consequence management was maintained in the Department.
The Department needs to relook at its policy for posting officials abroad, as some of the corporate service managers (CSMs) did not have a formal finance background training and experience.

The internal audit function, together with the audit committee, must review the audit action plan to ensure that root causes are properly identified and that it is adequate to address findings reported.

Heads of political branches (Deputy Director Generals) should assist the Department by working closely with the heads of missions and corporate service managers to work out some of the true root causes for repeat findings coming from their respective missions. This would have a positive contribution in the Department’s action plan for 2021/22.

Recommendation -- to the Minister
Follow up with the accounting officer to ensure that the recommendation above is closely monitored and implemented to achieve clean administration in the portfolio.

Recommendations -- to the Portfolio Committee
There needs to be monitoring and regular follow up with the executive authority and the accounting officer/authority on:
Progress on clearing the disallowance and damages account, and audit action plans put in place by the Department and its entity.
Irregular, fruitless, and wasteful expenditure, to ensure there was consequence management.
Implemented controls to prevent non-compliance with applicable legislation.
Monitoring the filling of the DG and chief financial officer (CFO) vacancies to ensure stability of leadership.
The culture of consequence management, which should be enforced in the portfolio.

ARF audit outcomes
The ARF had maintained its clean audit outcome because it had consistently demonstrated basic financial discipline, consistent reviews, and the monitoring of compliance with applicable laws and regulations.

Mr D Moela (ANC) said the internal audit committee of DIRCO should start strengthening its work so that it could identify red flags immediately when they occur and work on them in a timely manner before it was too late to be dealt with. Some of the issues raised by the AG could have been dealt with before they became too serious, had the internal audit committee been strengthened. The Minister and her team should be applauded for implementing consequence management, as this was one of the matters which had been troubling the Department. He said the Department needed to put a focus on the issue of irregular expenditure.

Mr D Bergman (DA) appreciated the report, and said that with the new Auditor General (AG), things would get tougher. The problem had always been the reliance on what Departments fed the auditors and the worry that the information being given had become less and less reliable. He said this report almost seemed complimentary, and half of the presentation was patting the Department on the back. Although these were slight improvements, they were issues that had been troubling the Department for a long time. The spending on allowances could be linked to when diplomats break things at embassies, or leave the houses in such disrepair that DIRCO must repair them, and money is taken from the budget when it is not budgeted for. This money should be recovered from the officials.

He said the Portfolio Committee had not seen consequences for the Minister, and it should be looking to the audit committee to recommend consequences for the Minister to whom the officials were accountable. There should be consequences to the Minister if there was still irregular expenditure five years down the line. When looking at the New York project, officials had got away with it, as had a Minister, and the only person who was being held accountable was someone who was not involved in the project. Maybe it was time to look to the AG and ask what sanctions needed to follow.

Mr M Chetty (DA) said the Committee must be clear -- it had dealt with three steps so far, and each one was very similar in its nature, and nothing much had changed. The previous APP report came through to the Committee, and he and the Whip had been very happy that the ARF had submitted a very good report, and the recommendation from the last meeting was that the good practices from ARF needed to be applied to DIRCO. A year later, the ARF was still receiving good audit outcomes and DIRCO was lagging behind. This meant the recommendation given to the Department at the last meeting had fallen on deaf ears.

He said there was clearly no consequence management in place, and therefore these officials did as they pleased. They did not take the lowest quotes. Until someone was charged criminally, this mismanagement would continue.  The Minister had promised the Committee a report on the Facebook comments the Acting Director General (ADG) had posted about some Committee Members. The Minister was also supposed to report back to the Committee on the dismissal of the former DG. He asked when the Minister would act and investigate other officials involved in the New York pilot project. How long would the Department take to fill the position of DG and CFO? In the absence of these heads, DIRCO would have people acting in these roles and they would do as they pleased. The next time this Committee sat with an AG report, the matter would be far worse and the excuse would be that these positions had not been filled.

Mr B Nkosi (ANC) asked how autonomous the internal audit committee's function was, so that reliance could be placed on its reports. He said all issues raised by the AG demonstrated the weakness of the internal audit function to provide accurate financial statements and indicated the financial performance of the Department. There must be a commitment to investigate prior years' irregular expenditure. There had been an improvement in the financials, but there were still large holes which must be taken seriously by the accounting officer.

Ms B Swarts (ANC) said the Committee would always commend improvements which, if they were reduced to the bone, could not really be seen as improvements as long as the Department did not adhere to having a structure with relevant skills within the finance unit. The problems highlighted by the AG would continue to occur because the finance unit was not staffed adequately. The Committee had even requested curricula vitae (CVs) from DIRCO to find out if there was capacity, and the answer was a big "no." DIRCO presentations always state that its structure was being fixed and skills were being sourced, but the sixth parliamentary term would end without this issue being addressed. DIRCO was not meeting the timeframes it had set for itself.

The Chairperson said the matter raised by the AG should constitute 80% of what the Department should be presenting to the Committee going forward. He would request that these issues be parked and allow the Minister to speak on the next two issues.

Minister's overview

Dr Naledi Pandor, Minister of DIRCO, said she would make brief remarks and hand over to her team to continue the presentation.
It was important to recall that during this reporting period, South Africa had entered its first hard lockdown resulting from the COVID-19 pandemic. DIRCO had had to grapple with the pandemic and the impact it had on traditional diplomatic activities. The lockdown also severely impacted economic sectors such as tourism. DIRCO, through its mission on its long-term perspective, had focused on investment into South Africa through focused investment promotion. Work was also done through export promotion and promoting South Africa as the preferred destination for tourists post-pandemic, with the aim of combating the triple challenges of poverty, inequality and unemployment which the country faced. Bilateral economic and political engagements had provided a tool for South Africa to strengthen its political and economic partnerships in various regions of the world.

The Minister said it was not possible to arrange high level engagements, and they rather had to settle for virtual engagements. The impact of the COVID-19 pandemic was highly destructive and unprecedented. This had presented some of the most difficult challenges DIRCO had to deal with. It had followed all the public service prescripts and health protocols to ensure that all its officials worked within a safe and secure environment. Remote working arrangements were made more difficult by the shortage of tools, and officials had to use their own personal devices to continue their work. DIRCO’s employee health and wellness unit did excellent work in enhancing employees' physical and mental health during the lockdown, which included providing intervention counselling. The pandemic had also caused a regression of the developmental goals, with developing countries finding themselves much further from the UN’s Agenda 30 goals than before the pandemic.

The African continent specifically had been severely impacted by the pandemic on its social goals, and many countries on the continent were not efficiently equipped to adapt, as access to WIFI was not readily available in these countries and excluded them from important forums. The Minister said it was difficult to conduct diplomatic activities online, and drafting and forming agreements online was difficult and time consuming, and it was often difficult for South Africa to assert its position on these agreements.

During the year under review, DIRCO had concluded the second year of its third two-year term as a non-permanent member of the UN Security Council. The term was defined, as all Members knew, by peace and justice, which was drawn from the principles of former President Nelson Mandela, following the anniversary of the centenary of his birth. South Africa would spend the rest its term promoting peace, cooperation, the issues of women and youth, and the peaceful settlements of disputes.

The Southern African Development Community (SADC) remained the primary vehicle through which South Africa promotes its foreign policy, and DIRCO believes a stable SADC was vital if the region was to prosper. South Africa became the incoming chair on the SADC organ on Politics, Defence and Security during the 40th ordinary summit of heads of state in August 2020. The summit also approved the SADC Vision 2050 and the revised regional strategic development indicator plan. In 2020 South Africa also became the Chair of the African Union (AU) and presented it with the perfect opportunity to advance the African agenda in both SADC and the AU, and to harmonise the priorities from the UN Security Council in support of the AU initiative of "silencing the guns" on the African continent. The COVID-19 pandemic, however, had negatively impacted South Africa’s strategy of hosting two summits during the year -- one on the African Continental Free Trade Area, and the other on "silencing the guns" had to be postponed, and they were eventually held virtually. 

During the term of South Africa as the Chair of the AU, its priorities were to promote peace and security, the economic inclusion of women, and continental integration through operationalising the African Free Trade Continental Area. South Africa had also focused on infrastructure development to facilitate the development of the Free Trade Area, and promoted good governance and democracy through the African Peer Review Mechanism. Furthermore, under the leadership of President Cyril Ramaphosa, it was able to coordinate a timely responsive to the COVID-19 pandemic and the establish COVID-19 facility to help and aid African countries dealing with COVID-19, and the establishment of the medical supply forum. The highlight of the term was the appointment of President Ramaphosa by the Director General of the World Health Organisation (WHO), along with the Prime Minister of Norway, as co-chairpersons to the Access to COVID-19 Tools-Accelerator Facilitation Council. During this chairship, South Africa promoted equal access to the COVID-19 vaccine. President Ramaphosa was also appointed COVID-19 champion, to allow him to continue the good work achieved.

The Department had finalised the procurement of all digital tools and was set to embark on the distribution of these to all officials within the Department. Despite the best efforts by the finance team, their hard work under review had not led to DIRCO achieving the outcome of a clean audit that it desired. The Minister was pleased to inform the Committee that DIRCO had developed a comprehensive audit action plan which she believed would enable DIRCO to address all matters which contributed to the Department receiving a qualified audit opinion. It would strive hard to address the matters that had been raised by the Committee, and fully agreed with issues raised by Members.

The Minister commended the consular services for their sterling work, especially regarding the repatriation of South Africans who were left distressed in other countries by the pandemic. This was unprecedented and was executed excellently through hard work by DIRCO officials.

The African Renaissance Fund continued to be a vital tool of DIRCO in pursuit of the National Development Plan objectives and Vision 2030, as well the priorities in the medium term strategic framework (MTSF). The projects which had been implemented by the ARF during this reporting period provided significant impetus to enhance the stature and public awareness of South Africa’s profile as a responsible and trustworthy partner. It also reflected on DIRCO’s key priority, which was focused on international relations and that of a better Africa and world.

The impact of the pandemic had been global in scale and reach and this had necessitated cooperation throughout the world to provide capacity to all countries, especially those on the continent, to respond effectively the challenges presented by COVID.

ARF Annual Report
Ms Hlengiwe Bengu, Acting Chief Financial Officer, DIRCO, made the presentation on behalf of the African Renaissance Fund (ARF).
She said that South Africa, through the Department of Science and Innovation (DSI), was co-investing with the European Union (EU) in the European and Developing Countries Clinical Trials Partnership’s rapid response programme to fund research cooperation between Africa and Europe on a broad range of COVID-19 research.

During the 2020/21 financial year, the ARF had processed R177 million in disbursements towards:
Humanitarian assistance through the European Union Pledging Conference and the AU for the following purposes: Africa Centres for Disease Control and Prevention, the African CDC, the special fund for COVID-19, and humanitarian assistance to the Sahel region.

The promotion of democracy and good governance through technical assistance to the Central African Republic elections.

Human resources for the Central African Republic (CAR) VIP training project, and its contribution to the Women Empowerment Fund for development in Africa.

Three SADC elections were held during the period under review -- in the Republic of Malawi, the Republic of the Seychelles, and the Republic of Tanzania. During the financial year 2020/21, no request was made for DIRCO SADC electoral observation missions, so there were no new approvals. Virtual observations were done due to the COVID-19 pandemic and travel restrictions.

South Africa’s Chairship of the African Union (AU) coincided with a number of important milestones on the continent and globally. Among these milestones was the end of the African Women’s Decade, which was aimed at re-invigorating commitment to accelerated implementation of agreed global and regional decisions on gender equality and women's empowerment.

The empowerment of women remained a prominent issue on the African development agenda. In support of women's empowerment, a contribution of R9 245 000 was made to the AU. South Africa committed to fight for women’s economic and financial inclusion, for an end to gender-based violence (GBV), and to ensure accountability to global gender commitments.

Financial reporting

For the financial year 2020/21, ARF committed a significant amount towards supporting African countries in response to the Covid-19 pandemic.
The loss of R158 million reported for the 2020/21 financial year would not have an effect on the entity's going concern, as the projects were funded from the surpluses accumulated in the prior years.

ARF had submitted a request to retain surpluses to National Treasury, as per the requirement of the Public Finance Management Act (PFMA), amounting to R71 million, which was subsequently authorised to be directed to new projects in the 2021/22 financial year.
The cash and cash equivalent balance of R820 million was inclusive of funds committed towards projects.
 Non-achievement of the targets for SADC elections was due to:
During the period under review no request was made for SADC election observers, so there was no new approval made.
Furthermore, South Africa did not send observer missions to SADC elections due to the Covid-19 pandemic and the consequent travel restrictions.
South Africa withdrew from SADC Electoral Observation Mission (SEOM) for the rerun of the Presidential elections in the Republic of Malawi due to the Covid-19 pandemic and the consequent travel restrictions.

South Africa participated in virtual electoral observation missions of the Presidential and National Assembly elections for the Republic of Seychelles and the general elections for the United Republic of Tanzania.

Report of the external auditor
In their opinion, the financial statements presented fairly, in all material respects, the financial position of the African Renaissance and International Cooperation Fund as of 31 March 2021, and its financial performance and cash flows for the year then ended in accordance with the standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the PFMA.

DIRCO’s 2020/21 Annual Report
Ms Noncebo Losi, Acting Director-General, said COVID-19 had inhibited the Department from pursuing a “normal” agenda with bilateral partners. The impact of the pandemic had shifted the focus of some engagements to address the immediate priorities, including repatriation, the sharing of best practices in combating the pandemic, and requests for assistance in the provision of medical supplies and personal protective equipment (PPE). It was not possible to arrange high-level visits or in-person structured bilateral meetings during the hard lockdown. Postponements and uncertainty also posed difficulty in planning for the resumption of a normal programme of engagements.
Review of Structured Bilateral Mechanisms (SBMs)

The focus of the review was to either confirm the status quo or to upgrade/downgrade the level of bilateral interaction, or to find alternatives ways for bilateral engagement. The outstanding reviews had since been concluded.

Programme 3
The COVID-19 pandemic led to the postponement of key conferences and negotiation processes at the United Nations related to sustainable development, such as the United Nations Framework Convention on Climate Change (UNFCCC)’s COP26, the Tenth Review Conference of the Nuclear Non-Proliferation Treaty, the start of the intergovernmental process to negotiate an international instrument on cyber-crime, and the United Nations Convention on Biological Diversity’s COP15. South Africa had actively engaged in virtual diplomacy to advance its national interests and those of Africa and the global south in multilateral forums.

System of global governance
South Africa played a leading role in engaging with the WHO and other stakeholders to coordinate a continental response to the COVID-19 challenge and to galvanise developed country partners to push for economic relief measures for developing countries. As one indicator of this process, President Ramaphosa had been appointed as the AU COVID-19 Champion., and by the WHO, alongside the Prime Minister of Norway, as co-Chair of the Access to COVID-19 Tools Accelerator (ACT-A) High-level Facilitation Council in September 2020. The ACT Accelerator was the first and main global initiative to mitigate the COVID-19 pandemic, and was a response for the accelerated development, production and equitable access to new COVID-19 tools, which was launched in April 2020.

Continental cooperation
South Africa’s last year in the UN Security Council coincided with its Chairship of the AU. This presented South Africa with a unique opportunity to advance the African agenda in both institutions and harmonise its priorities of promoting Security Council decisions in support of the African Union initiative of "Silencing the Guns" across Africa. South Africa’s one-year term at the helm of the African Union (AU) concluded at the 34th Ordinary Session of the Assembly on 6 February 2021.  The AU’s theme during the past year was "Silencing the Guns: Creating Conducive Conditions for Africa’s Development."

South-south cooperation
The 12th Brazil-Russia-India-China-South Africa (BRICS) Summit was preceded by a virtual meeting of BRICS Sherpas and Sous-Sherpas from 5 to 16 November 2020. to finalise the Moscow Declaration. Outcomes included:
A review of the strategy for BRICS Economic Partnership 2025.
The launch of the BRICS Women’s Business Alliance.
A memorandum of understanding on cooperation in the field of physical culture and sport.
Extension of the memorandum of understanding on cooperation in the field of competition law and policy.
First projects by the BRICS Energy Research Cooperation Platform.
An inter-departmental working group had also been established to fast track the establishment of the BRICS Vaccine Centre.

Programme 4
The implementation of the comprehensive strategy allowed the Branch to showcase South Africa as a country alive with possibilities, highlighting its foreign policy objectives, positions and achievements during this difficult time. For the period under review, the Public Diplomacy (PD) branch utilised and expanded its current communication platforms with a specific focus on taking “foreign policy to the people” through its public participation programmes (PPPs). The PPPs included public lectures, community outreach engagements and symposia. Most of these engagements were conducted online as webinars due to COVID-19 restrictions and regulations.

State protocol and consular services
After the travel restrictions were relaxed in the second quarter of 2020, the Government resumed the contact meetings between its principals and foreign counterparts. During this period, a total of 16 incoming official/working visits were undertaken to the RSA by foreign dignitaries, and four outgoing visits were undertaken by the President of South Africa.The Consular Incident Command Centre (CICC) was activated twice in the reporting period to facilitate assistance to South African citizens who found themselves stranded abroad due to unforeseen circumstances and the ongoing COVID-19 pandemic. Another instance was during the insurgents' attack in Mozambique.

Financial and asset management
The Department had received a financially qualified audit opinion with findings on compliance with legislation. It was again qualified on the basis of the current receivables balance from prior years (disallowance and damages account). However, it should be noted that the Department had reduced the material misstatements in this account from R186 million to a balance of R 73 million. However, it was not enough to address the qualification.

Audit action plan
The 2020/21 audit action plan had been drafted and consisted of 2020/21 external audit findings raised in the management report, 2019/20 external audit findings that were not resolved in 2020/21 and Internal audit findings for 2020/21. The draft audit action plan also included the information technology and missions’ audit findings. The first workshop was with the Department’s management responsible for various functional areas, namely the internal audit section, the risk management unit, and the strategic planning, monitoring and evaluation unit. The second workshop was with the oversight committee. The Department had consolidated all the inputs as per the workshops held. The draft audit action plan was presented to the Departmental management structures during the month of October 2021.The approved audit action plan would be monitored through the Departmental management structures, as well as the Departmental audit steering committee.

Mr Bergman thanked the Minister for acknowledging the Committee’s efforts on the "home away from home" initiative, and what was done to bring back South Africans who were stranded outside the country. He said all South Africans had the right to receive consular services, and through this experience there were ambassadors that were helpful and deserved a mention, but some were simply shocking. DIRCO could hide behind the lack of resources and funds, but at the end of the day it came down to planning and being prepared to help South African citizens. He said the report was a sanitised in terms of how people see things from a ground perspective, compared to top down. The Department still did not have a detailed asset register. The AG had just presented a very scathing report, and the Department did not seem to take these matters seriously. The asset register was still a problem for DIRCO, and they could have used this time of being at home to sit down at their computers and compile a list of its assets.

He said the Committee could go to Namibia and discover property that DIRCO did not even know it owned, and the state of some of these properties was appalling. This happened because DIRCO was not sure of what it owned, so it could not manage when it did not know what it owns. The AG could not really help the Department because DIRCO was a complex organisation, and abroad it was largely unmonitored. The Committee had to prioritise its oversight over DIRCO. There were four reports that already existed, and the Committee should start with those reports. Each of DIRCO’s Ministers had asked for independent reports, and these reports had not seen the light of day. The Committee must look at these reports and see what had been reported, what had been suggested, and what the outcome was. These reports should be the basis of the Committee’s oversight.

Mr Nkosi welcomed the detailed reports on DIRCO and the ARF. These reports helped because they gave the Committee an opportunity to understand what was being done. The pandemic impacted everyone, and it could not be business as usual. This should be DIRCO’s focus going forward. The pandemic had reconfigured the economic and political relationships at a global level, and this should be reflected in DIRCO’s immediate short term and long-term plans. He asked DIRCO to be detailed about country strategies, and it would be helpful if it provided information on what these country strategies were and how were they assisting South Africa in its international engagements, and how were they contributing to the economic development of the country.

He said the Committee had asked for a detailed report on South Africa’s tenure on the UN Security Council and the AU Chairpersonship. He asked DIRCO to provide the Committee with a report on the revised structure in the CFO’s office once it had been implemented. He also asked for a progress report on the implementation of a digital strategy. He had expected the CFO to go into detail on what had led to the audit outcomes. The Committee had never received an audit action plan, despite continuously asking for one. He asked how far DIRCO was in operationalising the South African Development Partnership Agency (SADPA), what the issues around the Foreign Service Act were, and if the work streams were still in place.  He said the culture of non-compliance continued within DIRCO, and asked why no consequence management had been applied, as raised by the AG. DIRCO should have gone into detail on these matters.  He said the Committee should in future ask the internal audit committee to make presentations before the AG. The issue around the DG making comments on Facebook about the Committee should not be overlooked and must be dealt with, as it was disrespectful towards the Committee.

The Chairperson said the matter of the DG had been raised and brought to the attention of the Minister. The Committee was still waiting for a response from the Minister, and she would indicate what she had done on this matter and when she would report back to the Committee.
Mr W Faber (DA) said he was worried about the DIRCO’s financials. There were quite significant losses, and this had escalated each year. The CFO needed to explain this escalation, and she could not blame it on currency fluctuations. It was the CFO’s job to make sure there was as little a loss as possible. These big losses were quite a concern, and the CFO should speak on these amounts.

Mr T Mpanza (ANC) commended the Minister on how she had handled the dismissal of the CFO in terms of communicating with the Portfolio Committee and the public in general. He said the Minister must brief the Committee now that the issue had been resolved, and it must include the issue of the DG. He also commended the ARF on receiving a clean audit. He asked if DIRCO could inform the Committee what was hindering them from learning best practices from ARF. The high rate of vacancies and the number of acting positions was of concern, and the Committee should look at this as it was a risk. DIRCO should prioritise the filling of key strategic positions, and should present timeframes to the Committee on the filling of vacancies.

The submission of the audit action plan was long overdue and should be a standing matter on the Portfolio Committee’s agenda until it was finally submitted. The audit action plan should have specific timeframes and quarterly reports on how the implementation of this report was going. It would benefit the Committee if DIRCO gave a detailed report on the impact COVID had on Southern African countries, and what innovative ways the Department would use to ensure that bilateral relationships were strengthened. He asked how the Department was assisting South African companies that were dealing abroad and were unable to repatriate profits, or were dealing with difficult trading circumstances in specific countries. He said South Africa supplied defence related products to the Middle East --what was the assessment of these dealings, and what were the security risks that may arise from this?

Ms Swarts said the Department had been supposed to deal with the issue of asset management during the 2019/20 financial year. This had affected their audit opinion in 2019/20, and DIRCO had tried to come back with a credible asset registry. The issue of cash-on-cash equivalents had also not been dealt with, and she asked DIRCO what the issues around this matter were, and why had it taken DIRCO so long to investigate the suspense account. What were the specific challenges being faced in dealing with the matter?  DIRCO had once again not concluded the acquisition of information communication technology (ICT) services and equipment, and the implementation of the digital strategy had also not been concluded. She asked what the specific challenges within the supply chain were which had caused DIRCO to take three years to purchase ICT equipment. The bandwidth provider’s services had been extended, despite it being classified as an irregular tender. She asked how the process was going with procuring a new service provider and when the old one would be terminated.

She commended the ARF for achieving a clean audit, but said the funds ARF dispersed had a limited impact on South Africa’s developmental agenda. What was being done to ensure these funds demonstrated that South Africa was contributing to the objectives set out in the ARF Act. She asked what the turnaround time was for the objectives to be implemented, and how this impacted countries that were beneficiaries.

Ms T Msane (EFF) referred to the travel waiver, and said she knew the Department of Trade and Industry was also involved. How far was DIRCO with this project, as India had a vaccine in the process of being approved? She asked what the effect of this waiver on other countries would be. What was the effect of the cancellation of the AU observer status that had been granted to Israel? Was there an investigation being done on a video that had been circulating, where a South African was being assaulted by the Cuban police? Would DIRCO work with the Department of Health and go on a fact-finding mission? She asked if DIRCO still had debt towards the Department of Home Affairs, as this posed a liquidation challenge to DIRCO. How much had been spend on leases in countries where South Africa owns property? Had the issue of staff laptops been resolved? She asked what interventions had been made regarding dilapidated property abroad. The Committee had gone on a virtual oversight, and an asset register list had been requested for a very long time and was not forth coming. The Acting DG had insisted that DIRCO was busy looking at interventions to deal with dilapidated buildings -- what were these interventions? How much the Department had saved or gained from these interventions? She asked how far DIRCO’s appeal for the setting aside of the New York project was. During the virtual oversight in Botswana, DIRCO had building plans which were designed in Pretoria but had been rejected by the municipal council in Botswana. Payment had already been made, and she wanted to know what the status of the property was.

The Chairperson asked DIRCO to provide a way forward in their response to the matters raised by Members. The Committee approved the recommendations of the AG, and a briefing on the matter of the CFO and DG was expected from DIRCO. DIRCO should also explain the audit outcomes' challenges, and matters around currency fluctuations should also be discussed. There should also be a report on the filling of vacancies, and it should be concluded by the end of this financial year. The audit action plan would be a standing item on the agenda of the Portfolio Committee meetings, which meant DIRCO needed to prepare for this. The internal audit committee needed to prepare itself to meet with the Portfolio Committee and DIRCO also had to prepare reports on specific missions.

The Chairperson said the Minister must report back on what had been done regarding the Acting DG’s Facebook comments, and what progress was being made with the asset registry. He asked why DIRCO could not do reconciliation statements on a daily basis, and why this must be done only once.

AG's response
Mr Sokombela said DIRCO was best placed to respond to most of the questions raised. The key issue was to appreciate the tone of the Portfolio Committee, especially around consequence management. The issues that Members raised had been raised by the AG a number of times. He said the AG was working with the internal audit committee, and there were similarities in terms of findings, but he could not speak on the behalf of the internal audit committee. His office would not mind coming to the Portfolio Committee regularly to assist as an audit office, specifically on the issue of the audit action plan. He said DIRCO had provided them with an audit action plan, and they were in the process of reviewing it and advising on key areas that the AG was worried about.

Minister’ s response
The Minister said she had spoken to the Acting DG about the Facebook comments, and the Acting DG would give a response to the Committee on what had been discussed regarding this.

She said she disagreed with Mr Chetty and Mr Bergman, and said a lot had changed in the Department. On a daily basis, DIRCO was working hard to make improvements. Everyone at the Department agreed that the situation needed to change and there was a great deal work that needed to be done, but there was change and progress was being made.

She said the Acting CFO would speak on the issue of asset management and outline what improvements had been made on this matter. The Acting DG would also provide feedback on the progress that was being made around consequence management. A process was under way to capacitate the finance unit, and the Acting DG would give further details on that.

The Minister said the position of the CFO had been advertised. Regarding the position of the DG, delegation was needed from the Presidency. This had been requested and was granted, and the position would be advertised. DIRCO hopes to fill these vacancies soon. The Minister said she was not certain if they would be able to provide CVs of applicants, and DIRCO would have to follow the procedures set out in terms of filling of posts and setting up a panel. DIRCO would then provide the Committee with the CVs, but she was not sure if this could be done prior to following these channels.

The Minister said the next audit report would be better, as DIRCO was working hard to improve and was taking steps so that management was more responsive towards the internal audit reports.

The Minister asked Mr Bergman to provide her with the names of ambassadors which he felt were unhelpful and posed a barrier to DIRCO providing consular services. She said most embassies went beyond the call of duty when it came to giving South Africans consular services. The repatriation initiative was successful, and there were only a few South Africans who had pretended to be stranded abroad. DIRCO had returned them to South Africa, only for them to spend a few weeks and then requested to go back, saying they had been forcefully returned by DIRCO. She said DIRCO took legal advice very seriously.

She said COVID-19 had impacted the delivery of the ICT equipment, but these had been supplied to DIRCO now and would be disbursed to employees. The inadequate staff funding had negatively affected the Department, as it did not have enough resources to fully capacitate its structures as required. She said the World Trade Organisation (WTO) travel waiver, which was being sponsored by India and South Africa, had received support from 104 counties, but there was also resistance from some WTO members such as the European Bloc, which was totally against the waiver being granted. They had proposed that India and South Africa use the trips' flexibility, but South Africa did not believe they gave countries enough space and scope for local production.

DIRCO’s response  
ADG Losi apologised for the comments she made on Facebook about the Portfolio Committee. She had been wrong to make such statements, and had spoken to the Minister about it. The comments were wrong, and she unreservedly apologised to the Committee. She had erred in her behaviour and was emotional when she made the comments. and her intention had not been to personally attack anyone on the Committee .
DIRCO would provide the Portfolio Committee with a detailed report on what was being done about consequence management. This report would cover from from 2016/17 to 2020/21. This would also include an investigation into irregular expenditure during these years. DIRCO’s labour relations unit was currently in the process of implementing the recommendations of the reports. This formed part of the matter of the DG, CFO, and members of the different bid committees. DIRCO would report in full on these matters.

Ms Losi said the post of CFO had been advertised, and approval had been received from the Presidency through the Department of Public Service and Administration (DPSA) to advertise the post of Director General, as there was a new process for filling a Director General post.  The chief director’s post in the infrastructure and build environment unit had been finalised, and DIRCO was awaiting the Ministry to approve the appointments.  This information would be given to the Portfolio Committee once the appointments had been made. DIRCO was also in the process of short-listing for other critical posts, and interviews should happen soon. Given shortage of funds to hire new staff, the DDGs had been tasked with relooking and restructuring vacancies at some of the missions, and would report back on this process soon. The audit action plan had been sent to the AG, and once the AG had given DIRCO feedback, the plan would be submitted to the Portfolio Committee.

Ms Bengu said the audit action plan had been developed earlier than previous years, and a number of stakeholders had been consulted. DIRCO wanted to benchmark this plan internally and wanted to bring in different units. It had also consulted with the audit action committee, and they had approved the plan. There was an agreement that when DIRCO achieved its milestones, the external and internal auditors would verify the actions DIRCO said it would complete. They would be able to inform independently whether DIRCO was on track. The audit steering committee was chaired by the CFO, but this would change, and the Acting chief operating officer (COO) would chair this committee now. The management structure was currently being dealt with, and all these initiatives would help meet the challenges faced by DIRCO.

The main issue within supply chain was the lack of review processes in each of the procurement stages, and when reviews did take place, they were inadequate. The solution was to have a checklist that would be signed at each procurement stage. This would assist DIRCO to see what loopholes existed during the procurement process. The contract management unit within SCM was a new unit which would assist supply chain with managing and monitoring contracts, and this would strengthen the supply chain. 

The disallowance accounts investigation had highlighted three problem areas on this account. The funds that were being transferred to missions on a monthly basis compared to the funds that were received by the missions involved a foreign exchange fluctuation and registered as a loss or a gain, and these were not accounted for appropriately. This dated back to 2012/13 financial year. The second issue was that there was a sale of currency and a purchase of local currency, but this was not accounted for and the money sits in the disallowance account which was currently in the process of being cleared by the finance team. These transactions also dated back to 2012/13 financial year. The last problem was that missions transfer funds back to South Africa for DIRCO to pay over to National Revenue, but there was a timing issue that happened between when the mission sends the funds and the time DIRCO receives it in its bank account. This creates a foreign exchange fluctuation which leads to balances that are not accounted for sitting within this disallowance account. These balances were being dealt, and by the end of this financial year the balances would be cleared. Reconciliations were supposed to be performed daily, and this was what DIRCO had tried to implement this year. The problem was that while DIRCO tried to perform reconciliations regularly, the account system in place was problematic and did not allow this. The accounting systems used by missions were also different from those at head office, and this also creates a problem. This was in the process of being addressed through National Treasury.

On the issue of properties, the Department had made some progress, and there were currently 19 projects that were being implemented. Ten of these maintenance projects were on the African continent. The main focus of the projects was maintenance, condition assessment and repair. Condition assessment reports were being done at other missions abroad, and these reports would inform further on new maintenance projects.

The disposal process of some properties would start as soon as the Minister of Public Works had given approval. The missions had been given a term of reference for the assessment and valuation, based on the recommendation of the Portfolio Committee. As soon as these reports were completed, the process would begin. DIRCO had appointed a Committee to take this process forward. Of the 18 properties up for disposal, ten of them were under assessment and valuation, and the other eight already had reports. When the Committee sat at the end of November, they would deal with these properties.

There were design challenges with the property in Botswana, but that had been addressed, and the plan was subsequently approved.
DIRCO had noted the comments made by the Committee on the fixed asset register. It was dealing with the issue and there was an asset register system in place where all assets were being registered. DIRCO was also doing a physical verification of all its assets, which would happen twice a year.

Further discussion
Mr Chetty said the apology of the acting DG did not do justice to the comments she had made. She had slandered the Portfolio Committee on a platform which included members of the international community, and there should be serious repercussions on this matter. He did not accept the apology, and the sanction should be far worse. This should be put on the agenda of the next meeting of the Portfolio Committee. He said the Minister had still not given feedback on the New York report and the issue around the CFO and DG.

The Chairperson said the Committee did not have time to discuss the matter of the DG’s apology. Because the expressions were done through Facebook, he asked what the view of other Committee Members on this apology were.

Mr Mpanza said he had thought this issue was going to be discussed at another meeting, but notes the apology and said the Committee must take some time to engage on it and close the matter in a proper way. He did not see any harm if it was discussed at a future meeting.
The Chairperson said the issue would be dealt with at a future meeting.

Minister Pandor said Mr Chetty had referred to her as "Mrs" Pandor, and said she would accept this because that was how Mr Chetty saw her.
Mr Chetty apologised for this, and said the Minister had also referred to him as "Mr" Chetty.

Minister Pandor also apologised for not referring to him as "Honourable" Chetty. She was not sure which report he had been referring to, and was under the impression that the report on consequence management would be discussed in an upcoming meeting with the Portfolio Committee. The matter of the former DG had not arisen, and there currently no provisions that allowed DIRCO to report, since the DG had decided to retire. These matters would, however, be discussed at an upcoming meeting.

The Chairperson thanked the Auditor General for the work done, and congratulated the Department on improving its audit outcome. The Committee would develop a resolution implementation tracking system to track the performance of the Department and see whether DIRCO was implementing resolutions taken by the Portfolio Committee. He thanked the Minister and officials for availing themselves, and said the issue around consequence management needed to become embedded within the management function of the Department.
The meeting was adjourned.

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