DEFF 2020/21 Annual Report; with Minister

Environment, Forestry and Fisheries

16 November 2021
Chairperson: Ms F Muthambi (ANC)
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Meeting Summary

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The Portfolio Committee met virtually to attend briefings by the Auditor-General of South Africa (AGSA) on the performance of the environment portfolio, and by the Department of Planning, Monitoring and Evaluation (DPME) on the performance of the Department of Forestry, Fisheries and the Environment's (DFFE's) seven key government priorities for the 2020/21 financial year.

The Committee thanked the AGSA for doing their work, and stressed that the DFFE needed to stop relying on the AGSA to manage its accounting and financial statements every year. The Department's chief financial officer needed to manage contracts properly, collect reliable evidence and conduct proper accounting.

The Committee emphasised that the DPME had to verify the information they got from the departments with real time data in order to maintain consistency. The Department responded that they had partnered with various academic institutions and StatsSA to ensure data consistency and reliability in all government systems.

Members expressed concern over the potential consequences of the country's "just transition" from fossil fuels to renewable energy sources. It was suggested that a just transition would lead to a lot of job losses and a threat of extinction of the high emitting sectors if the just transition projects were not going to be funded properly. It was pointed out that the Presidential Climate Change Committee was working on indicating which jobs would be at risk, saved and created, to balance the net job gains vs losses. The National Development Commission and the DPME were creating sector plans and methodologies to approve the carbon budget and establish key areas that needed to be prioritised to alleviate unemployment.

Meeting report

The Chairperson said apologies had been received from Ms Maggie Sotyu, Deputy Minister, Department of Forestry, Fisheries and the Environment (DFFE) and Mr Mondli Gungubele, Minister in the Presidency. She appreciated the presence of the Minister, Ms Barbara Creecy, at the meeting.

 

The Chairperson said the beginning of the 2020/21 financial year had been very challenging, as it had affected the way the Department conducted its businesses. She was excited because the financial conditions had improved during the year, resulting in an economic recovery and the gradual opening of the operations and implementation of government plans. There were some notable areas for improvement in the presentations submitted, including intergovernmental relations, integrated planning, implementation, reporting and monitoring.

She appreciated the support from the Auditor-General of South Africa (AGSA) for conducting the DFFE’s financial work. She added that the Portfolio Committee needed to strengthen its working relationship with the Department of Performance Monitoring and Evaluation (DPME) to ensure that the DFFE’s work was aligned with the government policies, such as the National Development Plan (NDP). The Chairperson also highlighted that it was important to monitor the financial and accounting practices of the DFFE, as “it was not right that the DFFE had to rely on AGSA to help sort out its financial statements every year.”

AGSA on DFFE audit outcomes

 Mr Eugene de Haan, Deputy Business Executive Manager, AGSA, was delegated to present the Budgetary Review and Recommendations Report (BRRR) to the Portfolio Committee. He noted the overall audit outcomes in the portfolio remained unchanged when compared with the prior year, with the exception of Marine Living Resources Fund (MLRF) which improved from a qualified to an unqualified audit outcome.

•DFFE: The Department remained unchanged with a qualified audit opinion with findings on the annual performance report and compliance with legislation.

•SA National Biodiversity Institute (SANBI): The entity remained unchanged with an unqualified audit opinion with findings on the annual performance report and compliance with legislation.

•SANParks, SA Weather Service (SAWS) and iSimangaliso: The entities remained unchanged with unqualified audit opinions with findings on compliance with legislation.

•MLRF: The entity improved from a qualified audit opinion in the prior year to an unqualified audit opinion, with findings on compliance with legislation in the current year.

The AGSA found the action plan prepared by DFFE management to address the prior year misstatements was only finalised and implemented late in the year due to the late submission of the AFS and late conclusion of the audit. Therefore, irregular expenditure and the immovable tangible capital asset qualifications received attention very late in the year, and consequentially no interim audit was performed to allow for early risk identification. The reaffirmation of controls implemented to resolve previous year’s qualifications were not always effectively accentuated.

•Irregular expenditure was identified at SANParks and SAWS on critical contracts for service delivery relating to IT systems as poor supply chain management practices were applied.

•Some pockets of improvements were noticed as some areas of qualifications were resolved due to more active and better functioning from the internal audit departments.

•Material misstatements identified in the annual financial statements could have been avoided had the Department submitted financial statements in time for review to internal audit which would have allowed for a critical and detailed analytical review process to be conducted and significant matters be identified, potentially saving the submitted financial statements from material misstatements .

•IT security and business continuity mechanisms were found lacking in several of the entities and require immediate attention to avoid unnecessary exposure to catastrophic risks and potential loss of data and information.

 [see presentation attached for further information]

Discussion

Mr D Bryant (DA) said that the Portfolio Committee had received another presentation with more specific detail on the DFFE’s audit outcome. Were they going to receive that presentation, or was the supplementary presentation for information purposes only?

The Chairperson said she had requested the AGSA team to enhance their presentation. She had wanted them to prepare more briefing notes for the Portfolio Committee.

Mr Bryant said that the briefing notes had specific details on disciplinary cases and consequence management. The presentation had highlighted that it had completed 51 disciplinary actions and only one person had been dismissed in connection with allegations. Was the allegation proven? Was the allegation referred to the South African Police Service (SAPS)? The brief had also indicated that nine individuals had resigned before the cases went to SAPS, and eight had resigned before the disciplinary process got initiated. If one added up all the mentioned cases, one ended up with only 18 out of 51 cases accounted for. What about the other 33 cases?

Mr Bryant said that the supplementary presentation had mentioned a criminal case that included 14 officials. Could the AGSA team expand on the nature of these offences? What was the directorate of these accused 14 officials?

He said that only one DFFE entity had submitted its financial statement without material errors or misstatements. This was concerning, because these were senior level managers who were not submitting reports for their entities. There was clearly a lot of work that needed to be done. To what extent could the decrease in irregular expenditure be attributed to the COVID-19 lockdown restrictions?

The Chairperson said that the questions on consequence management would be fully replied to during the evening meeting scheduled by the DFFE.

Mr De Haan said no assessment was done to establish how much of the declined irregular expense was due to the COVID-19 restrictions. The DFFE must provide the feedback from its side on the consequence management issue. He added that there were fewer transgressions and non-compliance issues identified during the 2020/2021 financial year, based on the information that they were given. The investigations had been done in terms of the Public Finance Management Act (PFMA) as prescribed by the National Treasury. The actual consequence management investigation was for the Department to decide, based on the severity of the cases. AGSA did not go into further details. It just made sure that the necessary investigations were conducted in accordance with the prescripts of the supply chain management (SCM) principles and frameworks.

Minister Creecy said the Department had detailed information on all 51 of the officials who had been subjected to disciplinary processes. The DFFE could present the information upon the request of the Chairperson and Mr Bryant.

The Chairperson said she had an issue with the AGSA's extended mandate in terms of the amended Public Audit Act. It had been seen issuing some of the certificates with the Heads of Departments, including director generals (DGs). Given the extent of the historical unauthorised, irregular, fruitless and wasteful expenditure, what had been its view in relation to the DFFE portfolio?

Mr De Haan said that AGSA was involved in a phasing in approach. A couple of government departments and entities had been scoped in the 2018/19 financial year. In 2019/20, more departments were scoped, and the following year it scoped a bit more. The DFFE portfolio would now be scoped in the coming 2021/22 financial year.

He said AGSA had not noticed anything from the DFFE ‘s audit that was worth reporting to the DG or the Minister. It had noticed some instances of irregular expenditures that had to be examined next year to see if they could be linked to a loss. He added that the reason the DFFE did not have material irregularity now, as highlighted by the presentation, was because the DFFE and its entities had not been scoped in the 2020/21 financial year.

DPME on DFFE's annual report

The Department of Performance Monitoring and Evaluation (DPME) presenting team was Mr Robert Nkuna, Director-General; Mr Zakhele Mdlalose, Chief Sector Expert: Rural Economy and Environment; and Ms Mmakgomo Tshatsinde, Deputy Director General (DDG): Sector Monitoring.

The DPME presented on only two of the seven governmental priorities -- priority 2 (Economic, Transformation and Job Creation) and priority 5 (Spatial Integration, Human Settlements and Local Government). There was not enough to report on the remaining priorities, although the remaining priorities were still applicable. The DPME also highlighted that the DFFE also contributed to priority 3 (Education, Skills and Health) and priority 7 (A better Africa and World), but they were not included in the presentation.

The DPME presented its analysis of the DFFE annual report 2020/21. Key considerations for the Department for the next six months include:

• The Department needs to report its performance against the set target

• Improvement plans for the MTSF deliverables lagging behind

• Improved coordination at sector levels for outcomes and impact need more focus

• Priority reports analysis need to focus on the outcomes and impact of interventions whilst determining the key interventions to drive massification of outcomes and impact yielding interventions

• Government will need to act fast to maintain, intervene and protect infrastructure assets to reduce the backwards slide caused by theft, vandalism and abuse of public infrastructure. This was emphasised in the last POA Cabinet meeting (June 2021)

 • Sector report need to take into considerations the ongoing work against the progress gained from the previous interventions to avoid recreating old and avoid lacking of accounting for the progress made

• Uplift the execution of the identified action items and milestones outstanding from the Forestry and Ocean Economy Master plans. Focused validation on the ground of the existing bottlenecks and scale up recommendations

• Upscale implementation on the sector high impacts intervention

(see presentation attached for further details).

Mr Nkuna stressed that the report from the DPME included reporting of the DFFE’s work only until March 2021. The latest developments on DFFE’s performance from April to September 2021 were included in the report that was going to the Cabinet next week. He was happy to come and present to the Portfolio Committee early next year. He emphasised that government was grappling with implementation. They were aware that when they came to the principals like the Committee to present, the question was always, what was the impact on the ground? On some of the programmes the DPME could account for performance. It spends a lot of time focusing on the entities within the Department that struggle with implementation because they are unable to measure their performance.

Discussion

Mr Bryant said that the presentation had been very comprehensive, with a lot of information. He asked what the DPME thought must be done with the recommendations they had made for the DFFE to implement. What was the way forward?

The Chairperson said he wanted to confirm whether the information on the "just transition" provided by the DPME agreed with the current updated nationally determined contributions (NDCs).

Did the DPME verify the information it receives from all the government departments to ensure consistency? Does the information in the book match the real ground information?

The Chairperson said that the DPME must explain some of the terminologies used in the presentations. What was "full time equivalents" or "work opportunity" in a real time environment?

The DPME had been invited to come and present because the Portfolio Committee (PC) thought it was the relevant department to present. The PC was later told that it was supposed to invite the Department of Public Service and Administration (DPSA). The DPSA had replied and said that the invitation was supposed to go to the DPME. That’s when the DPME had submitted its presentation very late. If the PC had received the presentation on time, it would have had ample time to engage with them. Why did they take so long to respond to the PC's invitation? He appreciated that they later apologised.

Could the DPME send the PC the performance reports of the DFFE during the 2014-2019 period, including the associated recommendations?

Were they also monitoring the quality of the jobs that were created under this portfolio? The goal was to have sustainable, opposed to temporary, jobs and diversified sectors.

How much evidence was there to show that there were measures in place to secure jobs through the just transition programme, instead of creating job losses, inequality and poverty? During a parliamentary webinar last month, the Council for Scientific and Industrial Research (CSIR) had indicated that jobs in the renewable energy sector were mostly temporary, especially during the construction phase. What was the DPME's view on the CSIR statement?

So far, the renewable energy resources were distributed along the Northern, Western and Eastern Cape. What was their view on the fact that renewable energy transition would create jobs for communities along the coast, whilst creating unemployment, poverty and inequality in areas where the communities currently sourced the energy through the use of fossil fuels?

What indicators did the DPME have to examine in order to check whether the economic growth was inclusive or not? For example, were previously excluded land groups capacitated to meaningful participate in the energy sector?

Did the DPME have the tools to check if the DFFE’s medium- and long-term targets for 2014-2019 were realistic -- for example, jobs, economic growth and gross domestic product?

DPME's response

Mr Nkuna said that the structure of the presentation originally reported on the annual report, but they had been asked to disaggregate the information into two priorities. In future, they would ensure that they do not report some of the things when we disaggregate into priorities that would have been said in the actual analysis of the annual performance report. He also asked to follow up on the other critical issues that had to be prioritised. He highlighted that the DPME was very small, and was dealing with a lot of issues from all the governmental departments.

He said the quality of the targets that went into the annual performance reports (APPs) and the medium term strategic framework (MTSF) were maintained through departmental engagements guided by the budget allocations. The DPME first gave feedback to the departments. They receive the APP drafts by 30 October every year to offer them further guidance. However, they do not see the APPs that are then resubmitted to the Portfolio Committees. This matter was raised in their last economic recovery report (ERP) with the Cabinet -- that before the APPs were resubmitted to Cabinet, the DPME must do some analysis.

Mr Nkuna said in terms of inclusive growth, they relied on Statistics SA’s figures on poverty, unemployment and inequality in South Africa. There were too many opportunities to be maximised in the environmental sector, as indicated in the report. However, the challenge was on budgeting. The DPME said they advised the National Treasury to identify areas that had huge potential for job opportunities, especially in agriculture and the environmental sector, so that the budget had to focus on where the DPME could quickly attend to the job biases the country was experiencing. The Minister had to emphasise the areas that would create job opportunities

One question needed to be addressed -- why was it that one was not seeing renewable energy projects in areas like Limpopo? The DPME's point of view would be that if this pattern persisted, it would slightly undermine the just transition. He would consult with the Departments of Traditional Affairs and Rural Development, and come back to the Portfolio Committee with feedback. The DPME shared the sentiment that if renewable energy followed a certain geographic pattern, there was a risk of undermining the credibility of such an important undertaking. The DPME believed that something could be done to massify and spread the energy opportunities across the country. The people who made money in the energy sector were usually lawyers during the early stages of projects. Those in engineering, construction and procurement (ECP) would be the second people to make money.

The communities and the BBBEE players would not even make a cent during the first five years of the energy projects. This posed a serious challenge, if black people could make a living only after five years. The DPME believed that if the energy sector jobs were spread across the country, maybe people in the rural areas would become owners. The DPME had engaged the Department of Labour regarding unsustainable government jobs in the energy sector. In their next engagement on energy jobs with the Department of Labour, they would need to talk about how they could create holistic and sustainable jobs. They could always tell the Portfolio Committee that 1 000, 2 000 or 3 000 jobs were created, but the reality on the ground was that there were still about eight million people who were unemployed in the country.

Mr Nkuna emphasised that the DPME and DPSA roles and functions were clear and different, so he did not understand how the Portfolio Committee had confused the two departments. He highlighted that the DPME did some verification of the science of the programmes with limited capacity. A lot of time was spent on programmes that were still stuck in implementation, with lower level inputs and outputs. If there were area that the Portfolio Committee want them to prioritise, they would be willing to focus on those areas guided by the Committee. They could then report back with verified science and views from some of the programme's beneficiaries.

Mr Mdlalose said a just transition would lead to a lot of job losses and a threat of extinction of the high emitting sectors, if the just transition projects were not going to be funded properly. He said the Presidential Climate Change Committee was working on indicating which jobs would be at risk, saved and created to balance the net job gains vs losses. The NDC and the DPME were creating sector plans and methodologies to approve the carbon budget and establish key areas that needed to be prioritised to alleviate unemployment.

Ms Tshatsinde said that the DPME was sharpening its monitoring tools and was redefining the areas where they would be able to conduct their evaluations. The evaluations took a bit of time, but the Department was working on rapid analysis that offered quick feedback. The DPME had limited capacity and capability, so they had partnered with research institutions and Stats SA to aid them with surveys. The DPME was also sharpening the verification tools used by various government departments because it was important that the data that goes to the government systems was clean and verified from the beginning, to propel quicker results and development.

Follow-up discussion

Mr Bryant said that PricewaterhouseCoopers (PWC) had done a comprehensive study on the potential job gains vs losses regarding a just-transition towards a renewable and clean future. He urged the DPME to look at the existing research -- especially the PWC report -- to find areas that needed to be prioritised, and to stop being frightened to move away from "dirty energy."

Mr Nkuna said he noted Mr Bryant's comments. He would meet with DGs from affected departments to discuss a way to ensure that whatever came from the government was consistent, and to manage the job sector regarding the just transition.

The Chairperson asked Mr Nkuna to attach a timeline to the report back.

Mr Nkuna said that he would convene meetings with the concerned DGs as early as next week. They could come back to report to the Portfolio Committee only early next year, because they had to follow Cabinet processes.

The Chairperson noted this commitment from Mr Nkuna.

She asked when they would get the DFFE performance reports from 2014-2019, including the associated recommendations from the DPME.

Mr Nkuna said he would have to consult the team before he could commit to a submission deadline.

The Chairperson asked if the report was there or not?

 Mr Nkuna said that the report was there.

Ms Tshatsinde said that reports were posted on the DPME website. The report the Chairperson was looking for was not on the website because it was before their tenure. She would source it and the Committee would get it in two weeks’ time.

Closing Remarks

The Chairperson said the DPME was a crucial Department because they would be assisting the Portfolio Committee with oversight. She appreciated the information provided, and promised to engage further with it.

The meeting was adjourned.

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