Department of Science and Innovation, NRF, SANSA, CSIR 2020/21 Annual Reports

Higher Education, Science and Technology

12 November 2021
Chairperson: Ms N Mkhatshwa (ANC)
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Meeting Summary

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Annual Reports 2020/21

Auditor-General South Africa (AGSA) briefed the Committee on the audit outcomes of the Department of Science and Innovation (DSI) portfolio. DSI, National Research Foundation (NRF) and Council for Scientific and Industrial Research (CSIR) had clean audits. HSRC regressed from a clean audit to unqualified with findings. Three DSI entities were audited by external auditors: TIA and ASSAf maintained clean audits and SANSA remained unchanged with an unqualified audit opinion with material findings on compliance with legislation resulting from material misstatements in its financial statements that were submitted late for audit.

DSI achieved 87% of its targets and presented its Annual Report detailing its performance against its Annual Performance Plan (APP) followed by NFR, SANSA and CSIR.

The National Research Foundation performed well and produced work in response to the pandemic. This included utilising the capacity at the South African Radio Astronomy Observatory (SARAO) to manage the manufacture of 20 000 ventilators and the design of those ventilators. All internal controls were implemented by management and NRF was a healthy going concern. Irregular expenditure was R12.6 million but full value of the money was realised. It had no fruitless and wasteful expenditure.

SANSA achieved 82% of its 17 targets with only three unachieved. The total budget of R282.5 million came from R200.7 million in transfers and subsidies while R75.6 million came from its own actual revenue, plus R4.4 million interest income and other income of R1.7 million. During the midterm budget adjustment an additional R123.8 million was brought forward from surplus commitments. Capital expenditure was negatively affected by restrictions related to the pandemic. SANSA its audit compliance challenges.

CSIR stated that this year’s performance is a positive reflection of the decision to reposition the CSIR as an industry-focused institution. CSIR performed well in deliver on its agreements and meet the challenges of Covid-19 with increased collaborations and partnerships. It continued its long-standing unqualified audit status. Transformation and increasing the science, engineering and technology (SET) base was a priority. Research programmes were guided by government strategies and frameworks and the Economic Reconstruction and Recovery Plan will remain high on its agenda.

Members were pleased with the performance of the entities and commended those that received clean audits. Members asked about the 129 District Development Model (DDM) initiatives; factors that impacted on the non-achievement of targets; impact of critical vacancies; actions to mitigate irregular expenditure and fruitless and wasteful expenditure; criteria for full or partial funding to students; progress on policy to expand resources directed to leading researchers and scholars programme; progress on NRF research impact framework; satellite progress; stability of finance management; consequence management and navigating the limitation on resources.

Meeting report

AGSA briefing on DSI portfolio audit outcomes
Ms Nozipho Nekhefhe, AGSA Senior Manager, presented the performance of the Department and its entities; their audit outcomes and overall performance of the portfolio; irregular expenditure and fruitless and wasteful expenditure; key findings; the audit outcomes of DSI institutions audited by external auditors; implementation of the audit recommendations and the audit action plan (see document for details).

Discussion
Ms D Sibiya (ANC) asked about the R27 000 fruitless and wasteful expenditure and R29 million irregular expenditure. She asked about the entities that were not audited.

Mr T Letsie (ANC) said that there is a belief that the Auditor-General develops an audit opinion only on the financials of an institution not necessarily on performance; is that so? If that is the case; why does the AG not audit performance of an entity? That would be problematic because we cannot only measure the entity based only on its financial statements and not its performance.

On the HSRC audit regression due to the lack of a competitive bid because of the donor preferring a certain service provider to deliver those services, is there anything that can be done in that instance to avoid a negative audit outcome?

The Chairperson asked for clarity on the material irregularities implementation for DSI and its entities and what it means.

Ms D Mahlatsi (ANC) said that it was important that good audit outcomes were maintained because it gives the Committee confidence. The presentation did not provide clear recommendations on the challenges faced by the entities. One would have appreciated specifics on the AG’s recommendations for each entity so the Committee can probe if those recommendations are addressed.

Can Committee get an indication from where the irregular expenditure comes. She was pleased with the internal controls and the job well done by the Department and its entities.

AGSA response
Mr Lourens Van Vuuren, Business Unit Manager: AGSA, said that this portfolio has quite a clean audit outcome except for HSRC on supply chain management of donor funding. It is only one matter that needs to be addressed – to negotiate with donors that in South Africa all entities need to comply with the PFMA or request a deviation from National Treasury. In the case of HSRC there was non-compliance in a number of transactions. Now this risk has been identified, it means policies and procedures must be updated and the staff adequately receiving training as well as the development of an audit action plan. The action plan must talk to the changes in the policy and the training and also engage Treasury on the matter. The cause of the irregular expenditure was that the service provider was selected without competitive bidding being implemented.

The AG does express an opinion on performance information in the management report. With that said, all the entities and the Department achieved an unqualified opinion on performance information. There were some material adjustments on the part of DSI but overall the Department received an unqualified audit opinion.

The irregular expenditure came from HSRC as outlined on slide 17.

The Chairperson thanked the AG for its presentation. What is important for the Committee is that beyond the financials, we want to see the objectives achieved.

Department of Science and Innovation (DSI) 2020/21 Annual Report
Dr Phil Mjwara, DSI Director-General, presented DSI’s outcome goals; key achievements; performance highlights; overall performance; and financial performance. DSI achieved 87% of its targets. The performance overview of all DSI entities was as follows:
- Some entities’ performance was affected by the COVID 19 pandemic.
- Lockdown restrictions on travelling and hosting of events led to savings in funds which were used in other activities for improved performance.
- DSI entities played a key role in contributing to COVID 19 solutions.
- Transformation targets remain a concern as not achieved by many entities.
- Generally, DSI was satisfied with the Annual Reports as approved by the Minister for tabling in Parliament on 30 September 2021.

Discussion
Ms Sibiya asked from which provinces were the 129 identified initiatives in districts that met the criteria. She asked if DSI procured from companies owned by people with disabilities.

Mr Boshoff asked about the category “black” for the demographics on the students funded and if it meant black South Africans or was inclusive of people from the outside the country.

Ms Mahlatsi referred to the unachieved performance targets. One reason for non-achievement was process delays; how does it intend to mitigate this challenge? It is important to have clear timeframes for the achievement of targets. Covid-19 was the reason for some unachieved targets because it relied on stakeholder involvement. In future DSI will have the challenge of achieving those targets which might be a problem. Does DSI see the possibility of reducing these targets? If not, does it intend to roll these over to 2021/22 and what will the financial implications be?

Given the non-achievement of these targets, ordinarily that should impact on the budget but there was no correlation between expenditure and performance. If you spent 100% of the budget, you should be able to say you achieved 100%. This was not clear in the presentation.

Critical posts were not filled for a range of reasons. These posts will fall into the 2021 MTEF, but what has been the impact of this. Did it have a negative impact on non-achievement of targets?

There was slow spending on Goods and Services, part of which was non-spending on training, maintenance of buildings and so forth. Did the lack of training impact on the service deliverables given the limitations on movement because of hard lockdown? If so, how does DSI intend to mitigate this? Having noted the challenges brought by Covid and its impact on achievement of targets, how does DSI intend to deliver on all non-achieved targets?

Mr Letsie congratulated DSI for adhering to the 30-day payment period. Many SMMEs struggle to stay afloat due to poor cash flow due to monies owed to them not being paid on time. He was pleased with the clean audit outcome of DSI. The DSI team continues to remain professional and the audit report is testament to that. One entity dropped the ball on the good audit outcome.

On the underspending of finances, this makes the Committee's job very difficult because it has been loud and clear about the under-funding of this Department. If money is not being spent it becomes a problem for the Committee to lobby for DSI to receive more money. Has DSI applied to Treasury to keep the unspent money so it can be retained and utilised for other purposes?

The Chairperson said that when we speak of the Decadal Plan, we often refer to it as being a draft document; yet the presentation states that DSI has met the target of finalisation of the Decadal Plan. On the finalisation of the regulations for the Indigenous Knowledge System Documentation Centres (IKSDC), the Committee stresses its concern noting the importance of the centres in promoting and protecting indigenous knowledge in the country.

On the unachieved performance targets, the Committee must stress the unmet target of 200 farmers with only 71 black emerging farmers being the achieved number. The reason for not meeting this target was the lack of provision of supporting documentation. In a department like this one, this is not something that we would expect from DSI.

On Research & Development and Support, 2 400 PhD students were targeted but only 303 students were awarded bursaries. There were reasons provided for this but in light of the demand for postgraduate funding, this was concerning for the Committee. We want to see an increase in A-rated researchers and increased representation in our A-Rated researchers. For socio-economic partnerships, the challenge of not meeting this target is recurring. The Committee needs to know what is being done to remedy this and what support does DSI require in meeting this target?

DSI response
Mr Yonah Seleti, Acting Deputy Director General: Human Capital and Knowledge, replied that the category "black" was clear from the two policy documents that guide us and he noted the Ministerial Guidelines on Postgraduate and the Postgraduate Policy. The category “black” refers to South Africans. In the Postgraduate Policy there is 5% which refers to “Others”, which would cover non-South African “blacks”.

Secondly, the regulations target was rolled over to this year and approved by the Minister for public consultation. The team was now awaiting supply chain to obtain an agency to conduct the public consultations on the regulations. DSI will be on track on the implementation of the regulations. The work currently happening on bio-innovation, including the centre at the University of Free State, is observing the Indigenous Knowledge Systems (IKS) Act on benefit sharing and IP management. We are not waiting for the National Indigenous Knowledge Systems Office to be established to work on these, we have already started the work and have entered into contractual obligations with the entities engaged in the exploitation of these indigenous products. The value chain has been picked up and is continuing.

On postgraduate funding, we had a meeting on 8 November with the NRF, which focused on transformation and seeking ways of ensuring we have a transformed knowledge producer cohort. Items raised included increasing the pool of A-Rated researchers and numbers of emerging researchers. There was agreement between DSI and NRF on exploring new ways to enhance that.

Mr Robert Shaku, DSI Chief Financial Officer, replied that in the last quarter, DSI was still struggling for the information on people living with disabilities, women and youth SMMEs. The information provided is coming from the system which was disaggregating this information. DSI has engaged Treasury to include people with disabilities and it have also engaged the Department of Women, Youth and People with Disabilities to find out if it had a system. DSI has not had a response but it is engaging with Treasury to ensure that this information is also included in the Central Supplier Database used for procurement so that when the information is disaggregated we are able to see this and give statistics on this. It is possible that we may have procured from them but we are not able to disaggregate that information from the database.

The request for the rollover was not approved by Treasury. The project did not suffer because we managed to reprioritise from within the budget and continue with the work required under the Presidential Employment Stimulus Package.

Ms Gugulethu Zwane, DSI Deputy Director-General: Institutional Planning and Support, replied about the unachieved targets saying 2020/21 was when Covid-19 came into existence and there were challenges in fulfilling the events in the Annual Performance Plan (APP). Most of these targets were centred on events. We have now found a way of working around it and those targets will not be dropped going forward. We managed to find a better way of working and we will also describe them better in the APP for the Auditor-General. The challenge may be around accessing outlying areas.

On the 2021/22 targets, we might still have those targets but we have tried to work around the pandemic. The target that was not achieved due to ‘target formulation deficiencies’ was resolved. The target's technical indicator descriptors (TID) did not record items that would be required. The farmers were trained but at the time of the audit we could not submit all the documents because in the descriptor it was not described as such. We are working on this and have engaged with AGSA to commit to the descriptors as they are. DSI was also tightening things on its side.

On the ineffectiveness in implementation, this was just an internal process delay due to Covid. It was now sorted but just after the year-end deadline.

Dr Mjwara replied that many things were done at the start of Covid that were not understood. From the lessons learnt, we have adapted and have devised a range of strategies on how to co-exist with the virus. We would not want to drop the performance indicators but rather adapt to ensure that the lessons learnt help DSI to engage better.

On training underspending, Covid really affected the rollout of training in DSI because most service providers did not have the resources to conduct virtual training. We have seen an increase in the number of service providers now able to conduct virtual training. As a result DSI was able to rollout a number of training interventions in 2021/22.

On the underspending on compensation of employees (COE), DSI has a number of senior management and critical positions that will be filled in this financial year. We have in place acting arrangements in DSI to assist in achieving targets and in some instances individuals were seconded to critical positions where there was a need for a skill to ensure that work is done. We filled a number of positions towards the end of 2020/21.

Mr Imraan Patel, Deputy Director-General: Socio-economic Innovation Partnerships, replied on the 90-day turnaround time target. This is something that has not been achieved since its implementation. Every year there is a different reason such as a staff member resignation. Each year there has been a different reason. DSI has been averse to reducing the 90-day turnaround time because of the signal it would send to stakeholders. There was a concern about it affecting the credibility of the tax incentive. We decided to maintain the commitment to a 90-day turnaround time. Over time, we have made some tweaks to the formulation of the target and even to the technical indicator descriptor to provide a better reflection of what DSI can do. DSI is not likely to achieve this target again this year. The initial indications are that we are not likely to achieve it but there are gains made with the online system now coming into place.

The whole tax incentive has come up for review; there was a sunset clause when the tax incentive was introduced about 20 years ago. That clause states October 2022. It is the Minister of Finance that can make an announcement around the future of the R&D tax incentive and this is likely to happen in the 2022 Budget Speech. There is a discussion paper out, which motivates for the tax incentive to be continued but it is not yet a final decision. Should it not continue, it will not continue beyond September 2022 and there will be no need for this target. If it continues, some changes may be introduced. We will continue maintaining it and improving it to try and achieve it.

On the 129 initiatives in districts, DSI came to the Committee with a full briefing on the DDM. It is spread out across the country. The 129 DDM Initiatives was a process started to map and identify the projects in the different districts. There is a service provider on board to help with the GIS map – it will be provide ‘view only’ access and people will be able access that system to see the projects. In the meantime, there is a detailed spreadsheet on the nature of the projects which can be shared with the Committee.

Dr Mjwara responded to the correlation between 98.4% budget spent and 87% performance saying that the correlation is not that simple and direct. The budget is aligned to the targets but it is not a one-on-one correlation. As for the draft Decadal Plan, when DSI sent the document to Cabinet, it was a draft at the time. When it was captured as an output of the Cabinet meeting, it stated "Decadal Plan". We still have to figure out what this means for the consultations. Lastly, on the underspending, DSI takes the point made by Members about this.

Ms Mahlatsi said that if there was a challenge in the interpretation of the TIDs between DSI and AGSA, it clearly means we will the same challenge in 2021/22. Did DSI do its process mapping with Treasury when developing the TIDs? What is the understanding of DSI and AGSA on the TIDs which now have to be re-looked at?

The Chairperson sought clarity on the status of the CFO in DSI as well as the Women Leader Development programme.

Dr Mjwara replied there was no problem with the TIDs. We agreed on them and the documents were sent to DPME and AGSA and signed off on the basis of the TIDs that are there. The problem is when the agreed interpretation of the TIDs start to be understood differently by the auditors during the audit process. This has been discussed with the auditors that one cannot raise a different interpretation of the TIDs later. We have since agreed with the auditors that the practice should be agreed to and signed off at the beginning of the year and they cannot at the audit stage start to raise issues. This matter has been now resolved.

The CFO position has been advertised. The Women Leader Development programme was now up and running as well as the training programmes.

National Research Foundation on its 2020/21 Annual Report
Prof Fulufhelo Nelwamondo, NRF Chief Executive Officer, presented an overview of the NRF Strategic Plan and progress towards achieving the five-year targets; achievements against performance targets in APP; five-year trend for KPIs; overview of financial performance and current and future work.

Under performance information, the NRF touched on the advances and responses to Covid-19 such as the use of capacity at South African Radio Astronomy Observatory to manage the manufacture of 20 000 ventilators as part of the national COVID-19 response. SARAO led the design and manufacture of the ventilators project.

As for its financial overview, the NRF received a clean audit. All internal controls of the organisation were implemented by management and NRF was a healthy going concern. However, R12.6 million irregular expenditure was disclosed but full value for the money was realised. The NRF was pleased to report that it had no fruitless and wasteful expenditure.

Discussion
Ms Sibiya expressed appreciation for the work NRF has done particularly as no irregular or fruitless and wasteful expenditure was incurred with a clean audit outcome.

Mr Boshoff also commended the NRF on its report. He asked if the Programme 4 infrastructure projects are located within NRF itself or does it cooperate with institutions within DSI?

Ms Mahlatsi noted the R12.9 million irregular expenditure primarily due to contract non-compliance. What contracts are these and has NRF done to deal with the irregular expenditure? Is there an audit action plan in place to deal with the irregular expenditure? She noted the CEO’s comment that there was value for money for this irregular expenditure. This cannot be because regulations must be complied with. Systems must be followed and adhered to.

AGSA also indicated that NRF was not doing well in its systems and internal controls to avoid irregular expenditure. There is no clear translation of its mandate as far as demographics are concerned on Slide 8. The demographics were still not speaking to the South African population. On Slide 6 it indicated a slow transformation pace at NRF which is a concern. She wondered if the NRF Board chairperson was happy with the transformation agenda of the NRF.

Slide 10 outlines research funded by NRF but agriculture has only 6% of the funded research. What informed these percentages? Agriculture and manufacturing are key economic drivers for decades to come because of industrialisation. When NRF gives 6% to agriculture it is not moving in sync with the trajectory of government on economic drivers. During hard lockdown, the agriculture sector was the only sector that did very well in for GDP. Now, when NRF as a strategic entity for research gives 6% to agriculture, that is a concern.

Ms Mahlatsi said there is a clear indication that NRF did not achieve all its targets. What does the NRF intend to do to ensure that it meets its planned targets? There was no clear indication in the presentation on the reasons certain targets were not met. You cannot spend 100% of the budget but only achieve 50% of the targets. Finances should be planned in line with the planned targets.

Mr Letsie commended the NRF for its clean audit. He noted there are students not funded fully for their research for various reasons; what are the criteria used to determine who to award full or partial funding? On the bursaries awarded to postgraduate and PhD students, NRF reported approximately 11 000 students supported. DSI confirmed that although this number of students were awarded bursaries, verification information was not available from NRF hence DSI recorded this as a non-achievement in its Annual Report. What circumstances led to the verification information not being available for the DSI audit? Was there audited information to verify the number of students is correct? What actions have been implemented to prevent this re-occurrence in future? Given the current funding constraints, what alternative funding streams were being considered? What progress can be reported on the policy to expand resources directed to the leading researchers and scholars programme? What progress can be reported on the development and implementation of the NRF Research Impact Framework? What level of support does NRF provide to the 10 OR Tambo research chairs that were launched in seven African countries?

NRF response
Mr Nelwamondo replied that the science system is a complex system. You could have a field that is critical but find that the people studying in that field are white male dominated. We cannot just pull out funding because it may affect the field and end up with it being crippled. The NRF is aware of the challenges of transformation. We are focused on changing the system but it must be done in a manner that does not negatively impact or affect the field.

On Programme 4, part of the NRF mandate is to host the national facilities such as SAAO. NRF provides and manages infrastructure for researchers and it also performs research on its own.

Mr Bishen Singh, NRF CFO, replied that NRF provided AGSA with a full procurement report and SCM processes allow for various sourcing strategies. The NRF acquired access to various scientific databases for an extended one year period. It chose to procure through a sole supplier deviation method as these databases consist of sole suppliers. The Auditor-General was of the view that this has to be procured through a variation method as NRF had a five year contract but the funding for that five year contract was exhausted in year four for legitimate reasons. For the fifth year, NRF opted to procure through a deviation method and AGSA was of the view that the one year should have been a variation method. Subsequently, NRF in procuring access to these databases chose the deviation method and it was reported to Treasury, which Treasury acknowledged. Therefore the CEO said the expenditure was not incurred in vain. Had it gone through a variation method, NRF would have required Treasury’s permission up front. The fact that NRF chose to pursue this through a deviation method meant that it was bought and then Treasury was informed. This was explained to the AG. We looked at if we should pursue this matter legally but thought it would not be fruitful to spend money on legal fees. We accepted the final outcome despite the difference in our opinions. This was disclosed in the financial statements with the full permission of and explanation to the Board. NRF has since submitted a request for condonation to Treasury and was now awaiting approval from Treasury.

The necessary controls are in place and this matter would have been explained to the AG. The internal control mechanisms were able to identify the fact that NRF was going to reach full contract value in year four, not in year five.

Mr Gansen Pillay, NFR Deputy CEO: Research and Innovation Support and Advancement (RISA), replied about the percentage spent on agriculture. NRF invests in various knowledge domains and 6% was the NRF portion spent in that research area. The 6% is not the total spend for research in agriculture. In the last NFR budget, despite the significant budget cuts, we needed to factor how much can be spent and where it should be spent.

DSI/NRF student funding policy is very explicit on the criteria for partial cost or full cost of study depending on financial need. NRF works closely with the National Student Financial Aid Scheme (NSFAS) and Ikusasa Student Financial Aid Programme (ISFAP) in determining that financial need. Where there are indications of excellence in the research, this is also considered.

On the lack of verification of numbers, the stability of universities in the last eight months had not been ideal. As a result, student uptake and functionality of universities has been interrupted and there was difficulty in correlating the data required. NRF has good controls in place to ensure that in conversations with the universities, we are not faced with this situation in the future.

The NRF does look into alternative funding streams. It was sad this year where there were thousands of students at Masters and doctoral level from designated groups who qualified for funding but NRF was unable to fund them. The profile of the students and all this data could be shared with the Committee.

On the leading researcher and scholar programme, the framework document has been shared with the executive, the board, research development committee, DSI and DHET. There has been a number of inputs and that document was now being revised. NRF was only able to secure partial funding but it is in conversation with DSI about funding this programme in the future. DSI needs to have a level of comfort that NRF is proceeding in the correct direction. This is a very high impact programme and it requires a good investment.

On the OR Tambo chairs, NFR has submitted an annual progress report and it is still early days. It is a 15 year funding programme. NRF has provided funding for the first five years and it was now in the third year of funding. The team would be pleased to share the details of each of the researchers.

Dr Phethiwe Matutu, Group Executive: Strategy Planning and Partnerships, replied about progress on the Research Impact Framework. NRF developed the Framework which was shared with the university community, science council community and DSI. Following that it was approved by the Board in July. The document is available and it was sent to the Committee through the former Committee Chairperson. The team was busy drafting the implementation plan for the Framework.

NRF Board Chairperson, Dr Nompumelelo Obokoh, responded about the NRF transformation agenda and said that when the Board first convened in 2018 the priority was transformation; hence when looking at Strategy 2025 it speaks to transformation as a top priority but all the pillars are inter-dependent, you cannot have one without the other.

SANSA on its 2020/21 Annual Report
Dr Valanathan Munsami, SANSA CEO, presented on the strategic goals; performance; key highlights; Earth Observation Data Centre; finances and external audit outcome; employment; transformation initiatives; key challenges and the road ahead.

SANSA achieved 82% of its 17 planned targets. Key highlights included:
- Supported 45 postgraduate students (76% Africans and 47% females);
- Minister turned the soil for the new 24/7 Regional Space Weather Centre on 9 March 2021;
- In 2020/21 SANSA researchers produced 44 peer reviewed publications in high impact journals.

The financial overview reported total revenue of R282.5 million of which R200.7 million came from transfers and subsidies while only R75.6 million came from its own actual revenue. The rest came from interest income (R4.4 million) and other income (R1.7 million). During the midterm budget adjustment an additional R123,8 million was brought forward from surplus commitments. However, capital expenditure was negatively affected by COVID-19 restrictions.

SANSA obtained an unqualified audit opinion for 2020/21. The Agency was confronted by challenges with section 55(1)(c)(i) of the PFMA and submitted financial statements late. Leadership viewed this matter in a serious light and necessary steps were being taken to ensure all significant matters raised by the external auditors are adequately addressed. Compliance with legislation, policies and procedures continues to be monitored. Concerted efforts are being channelled towards strengthening SANSA internal control systems to enhance effectiveness.

Discussion
The Chairperson noted that SANSA once again received an unqualified audit opinion with material findings. Has there been reflection on what can be done to get the organisation to a point where it receives a clean audit? He asked for an update on the stability of the office of the CFO. What is needed to resolve the matters related to Denel and Spaceteq so SANSA can conclude on that?

On page 86 of the Annual Report, the Audit and Risk Committee report expressed concern about the expertise and adequate resources within the finance function. Has that been assessed and what mitigating actions have been implemented to improve this? What analysis has been made of the key skills and capabilities lacking nationally within the space sector and were contributions made in the recent National Skills Conference?

Mr Letsie noted the Earth Observation Satellite Development programme which has been placed on hold since the 2019 financial year. What options are you considering to ensure funding and how much funding is needed to complete the satellite build? Over R340 million has been spent on that build since it commenced in 2015 – what has been realised from this investment to date?

He was pleased that consequence management was implemented on those who could not provide sufficient answers for the audit opinion regression. There were serious material findings on compliance with legislation resulting from material misstatements identified in the financial statements, which were also submitted late. Hopefully, in the implementation of consequence management these matters will be considered. What progress has been made on the recruitment of the CFO? Lastly, he asked if it was indeed true that people’s cell phones could be hacked.

CSIR on its 2020/21 Annual Report
Mr Thokozani Majozi, CSIR Board chairperson, said the 2020/21 performance demonstrates a positive reflection of the decision to reposition the CSIR as an industry-focused institution. The CSIR has performed well in making every effort to deliver on its agreements and to meet the challenges brought by the Covid-19 pandemic. We increased collaboration and partnerships to help maximise our cross-disciplinary expertise, accelerate innovation and develop technological solutions. The organisation continued a long-standing unqualified audit status. Transformation and increasing our SET base is a priority and we have seen encouraging progress in these areas. Our research programmes are guided by government strategies and frameworks, and the Economic Reconstruction and Recovery Plan, post-Covid-19, will remain high on the CSIR agenda.

Mr Thulani Dlamini, CSIR CEO, presented the Annual Report covering the key performance indicators; human capital; financial stability and good governance as well as research, development and innovation highlights.

Discussion
The Chairperson commended CSIR for receiving a clean audit and taking action against the four officials for the offences mentioned. He noted there were two instances where no action was taken as those employees had left CSIR. Even though they may no longer be with the organisation, action should still be taken.

On page 73 of the Annual Report it states that Treasury regulations tamper with CSIR contracting directly with government and state owned companies, which results in a loss of revenue opportunities amounting to about R450 million annually. She asked DSI to provide clarity on this matter and if there had been action by DSI to assist them with this matter. Through the Decadal Plan, there should be conversations around the coordination of the budget to assist in addressing this. DSI should provide some light on Treasury's reasons for this.

Mr Boshoff said anything from CSIR is always stimulating. He commented that the CEO did not explicitly say that transformation must also translate to excellence. He asked about the agriculture information system, which focuses on remote rural areas and it is not focusing on commercial farmers; how would the farmers access the information that is available?

Ms Mahlatsi was pleased with both SANSA and CSIR and commended the implementation of consequence management on the transgressors. She was pleased that both entities were able to flag transformation very well. She asked about SANSA’s inability to get TID classifications correct and if it was due to lack of capacity or if DSI failed to play its fundamental role in the process mapping of its APP. Such classifications are critical – as it has led to an unfavourable audit outcome.

How does SANSA intend to navigate its resource limitations given the expertise needed? How much would SANSA need to become operational at an optimal level?

The Committee was pleased with the work done by CSIR but the process of consequence management must be expedited.

Mr Letsie said that the DSI DG has said many times that the National Treasury regulations on procurement hamper the portfolio's growth, which has resulted in the loss of revenue opportunities. The DG has also pleaded with the Committee to assist in this matter so that DSI entities can procure from government departments and state owned companies.

Mr Letsie asked what mitigations have been implemented to improve industry development support.

SANSA response
SANSA Board member, Ms Nomfuneko Majaja, commenced with the Assembly Integration and Testing (AIT) Facility and said that there is an engagement between DSI and the Department of Public Enterprises at the Director General level; however, there is more engagement at the ministerial level with commitment. Discussion is underway at DG level and should be escalated to the ministerial level on the SANSA concern about the exchange of money between institutions and the purchasing of a government facility that is going to be used by another. On the audit and finance section capacity, SANSA has started the process of appointing the CFO and trying to resource that unit. We have noted that the Committee indicated that it would like more information on finance section and the audit outcome. The audit finding was about the classification of items and the fact that the entity has been using manual excel spreadsheets.

The International Astrological Congress is an annual event that takes place across the world. Prior to this event there is a two day session for parliamentarians to discuss issues pertaining to space. She suggested that SANSA through DSI should consider inviting the Committee to this event.

SANSA has been working on the Space Industry Regulatory Bill with DSI and other stakeholders. It is at a mature stage and it can be sent for gazetting. Perhaps the DTI and DSI Committees can have a joint meeting on this. The Space Affairs Act was enacted in 1993 and it was outdated given the developments in the country and the world.
 
Dr Munsami replied about the finances and audit that two staff members were put on suspension and were now going through the disciplinary hearing process after the investigation was conducted. It is a people issue, as well as systems and processes; the systems have been there for the last ten years but were currently being revamped.

Ms Anita Engelbrecht, Acting CFO, said the audit outcome was unqualified with material misstatements due to the late submission of the financial statements, the classifications as well as prior year adjustments. The main challenge was the late submission of the financial statements, which was being addressed with the investigation. The finance team was undergoing ongoing training but we are also focusing on capacity building of individual skills. We also implemented a number of initiatives to instil financial discipline to improve outputs.

Dr Munsami talked about navigating through the limited resources. A number of the projects that have come through are mainly focusing on CAPEX but there is limitation on the continued support of the operational aspect. We get funding for putting up infrastructure but the operation of that becomes a challenge. SANSA is moving towards increasing its income generation and the new business model is looking at SANSA from a commercialisation perspective rather than a Schedule 3 entity.

As for the Earth Observation Satellite (EOS1) build, the R340 million was spent but much of it was spent on R&D. There is a lot of intellectual property developed in terms of the satellite segment itself. We have taken full stock and due to Denel's woes it is looking at taking up the IP from Denel. The industry is already localising and exporting products from the IP that was generated locally.

Ms Anita Engelbrecht, SANSA HR Manager, said that SANSA did not participate in the National Skills Conference this year although it has been putting in a lot of effort in developing scarce skills and capability in a variety of areas SANSA needs. We look at the entire pipeline and our science engagement programme has been concentrating on space clubs that are built around robotics and preparing young learners for the Fourth Industrial Revolution. SANSA also developed a research portal, which is currently being upgraded to have both the research side and student side so that students can access research work and find out what projects they are working on.

SANSA has registered itself as a host institution for the DSI/HSRC internship programme and is hosting six interns this year. SANSA did ask for 29 interns from the HSRC but it was granted only six. All our researchers are required to supervise students and participate in university programmes so that they are accessible to students. We look forward to participating in the National Skills Conference next year.

CSIR response
Mr Dlamini took note of the comments on consequence management and replied that this is taken seriously at CSIR. The team is pleased that it had no instance of irregular and fruitless and wasteful expenditure. This is ascribed to the heightened level of awareness created within the entity using education because most of this comes from people not understanding process. There are a few instances of malicious intent but we believe that this awareness is making a difference. Improvements were also made in procurement processes and tightened up in areas where the entity was exposed from a risk point of view.

In instances where people leave the organisation we are somewhat curtailed in what can be done unless there was a loss to CSIR or the individual benefitted unfairly. There have not been instances like this in the recent past. Most cases were really about following CSIR procedures and processes, so if someone has exited the organisation, CSIR is limited in pursuing a disciplinary process for someone who is no longer a CSIR employee.

On the comment about the Treasury regulations, Mr Dlamini said that DSI has been involved from the DG to the Minister and there has been a lot of support. However, progress is very slow on the part of National Treasury.

Due to time constraints, the Chairperson requested that the remaining few questions be responded to in writing by CSIR.

The meeting was adjourned.

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