Department of Environmental Affairs & Development Planning & CapeNature Audit Outcomes

Meeting report

[the session between the Committee and the Auditor-General was closed to the public]

Department of Environmental Affairs ad Development Planning & Cape Nature Annual Report 202/21

Ms N Nkondlo (ANC) wanted to understand the areas of poor spatial planning and land-use management, the unsustainable use of resources, illegal occupations, and work streams that are posing as emergent risks to the Department and asked if the Department has strategies in place and reports and studies to address these concerns before it gets too late. She said climate change risks accumulate slowly before they create trouble for communities and asked how these risks were affecting biodiversity in the Province and how the Department was engaging with affected communities. Also, she asked if the Department’s OHS unit is fully fledged and has capacity to address challenges; and wanted to know if there was an authorisation sought by the Department for its deviations on the BBBEE Act because an entity or Department has to seek authorisation for using a differentiated instrument from the Minister of Trade and Industry. She stated the Department has provided a lot of explanation on its way of implementing the requirements of the BBBEE Act. From CapeNature, she wanted to establish why Board members dealing with IT and finance attended less than ten meetings whereas the Board has a maximum of 20 meetings; and enquired how the entity’s CSI policy identifies projects seeing that its annual report states it has staged programmes for schools.

Mr Piet Van Zyl, Department HOD, informed the Committee that the Department has an active OHS which really worked hard during the hard lockdown of the pandemic. The OHS unit has a Covid-19 Compliance Officer and a formal OHS Committee, chaired by the Chief Director For Management Support and CFO who has a health inspection background. The Department’s EXCO is part of the Committee.  The Deputy Director provides support in Cape Town and there is a regional office in George.

Mr Anwaar Gaffoor, Director: Strategic & Operational Support, added that as the compliance Covid-19 officer, they had to make work arrangements for staff members before the hard lockdown started and procure sanitisers and PPE. The supply was limited and prices were challenging at that time and they had to review their business continuity plan which included Covid-19 as well. They utilised the services of a Senior Manager in the Department to play a key role in this structure and emergency personnel in terms of OHS to provide support during this period. As regulations changed, they had to amend their Health and Safety Policy and to do individual risk assessment for all staff members and work place, and develop a safe return-to-work plan for the staff. As a Compliance Officer, he was at the office full-time during this period. When the country moved to level 4, the Department had to develop other new ways of doing and handlings things in the office to ensure all Covid-19 regulations were observed like the issuing of staff with PPE, masks, sanitisers, and cleaning of work spaces. As the alert levels changed, they had to adjust accordingly. The OHS unit had a very little budget which was meant for the training of its representatives and procuring PPE for Environmental Inspectors required to perform normal work. The Department had to provide special PPE Covid-19 material. That was why the expenditure went up. The Department developed a rotational shift system in order to accommodate the numbers required in the building and that was monitored on a monthly basis. Various measures were introduced and this included taking additional roles.

Mr Gerhard Gerber, Chief Director: Development Planning, briefed the Committee on risks associated with poor spatial planning and land-use management in all three spheres of the government. The National Government is part of the diagnosis done to inform the NDP which has identified this risk for three spheres of the government. It was related to the challenge associated with land markets in terms of where the land is available and the price of the land. The pressure to develop housing opportunities is much greater and exceeds the capacity to proactively do the land assembly in terms of allocating the better land. At National Level, this was implemented across the country in partnership with all three spheres of the government and integrated urban development framework. These are the risk areas to be addressed by the three spheres of government. The effort of the Department as a role player is to advance spatial transformation and some issues relate to the process of budget and planning.

There has been a shift from budget-led planning to a planning-led budget. The initial budget was dominated by law reforms in the country, both at provincial and national level and across all the municipalities. This culminated into the SPLUMA Act. The efforts have shifted now to monitor the performance of the provincial governments and municipalities in order to ensure the enabling system is enabling, to share best practices, and to see if performance is happening in the required space.

There is a strategy in place for monitoring in municipalities. Data is gathered on how municipalities do things, and there is a State of Development report that shows where the Department is at in terms of development and spatial planning and transformation. In the broader system, there are 300 indicators looking at levels of compliance and performance in order to be more responsive.

On illegal occupations of land, different work has been undertaken. The Department aims to get ahead of the curve in trying to accelerate the delivery in terms of integrated human settlement. A lot of work has been done with the Department of Human Settlements, municipalities and other partners on implementing the Living Cape Human Settlement Framework for the Western Cape. One of the key programmes the Informal Settlement Support Programme provides was support to human settlements delivery across the province and municipalities. Specific work is underway on the illegal occupation of land. There is work happening at national level that the Department partakes in and there are other role players that are involved. To date, there has been an operating manual that’s been developed to address the unlawful occupation of land. Its focus is on municipalities and government. There has also been an agreement that has been drafted to be used by municipalities to enter into agreements with other organs of state and a cross-boundaries effort with other municipalities. More recent work is focusing on the Municipal Model By-law to better respond to these issues. The Department has also released a circular on Municipal Land-Use Authority to guide municipalities and land owners. It sets out empowering provisions in terms of responsibilities and what is available to the environmental and planning legislation.

Ms Karen Shippey, Chief Director: Environmental Sustainability, spoke talked about why resource issues have been raised as risks. She indicated that the Department elevated these into the provincial sphere as enterprise level risks. Globally, she said we’re seeing recognition that environmental failures are causing huge economic damage and loss of life and livelihood. In the last ten years, we had the largest storms and heatwaves, and massive fires across Europe, Australia and South Africa. What we were seeing here is that our risks to our economy and well being are far and more environmental. We have been tracking environmental trends for years, and provinces are required to produce state of the environment reports. This report is a collection of information from a five-year period and indicates the actual state of themes like coastal waters, fresh water, mountainous areas, biodiversity, air quality, waste management etc. There is a declining trend in each of these. For a while, we have been flagging we are undermining our systems. We can replace them with human-made solutions, but they would need a lot of capital investment system and operational management. At the moment, the environment does this for free, keeping our riverways healthy, keeping our water quality at a high standard, making sure we can engage with wetlands, and fill our ground water aquifers. All of these are done as a matter of course. But we’re hardening the surfaces, removing natural vegetation, and clearing dune fields. So, we were doing a lot of damage across the province to the systems that support us and if we do not have natural pollinators like bees, then our agriculture would suffer. Very complex networks are happening and these are risks we’re facing moving forward and are undermining the development progress we have made to ensure people have a healthy environment to live in.

If people cannot access clean water and the municipality cannot clean it because it was too polluted, then all of these things would make our situation worse. The Department has the State of The Environment report. There is one produced in 2018 and the 2023 would be done in the next years. The Department also has the State of Biodiversity Report which was released online because of Covid-19.

She stated that we were seeing massive fallout from our species. Whether you are talking about dry land, sea water, fresh water, insects, and land mammals, there’s a massive strain on these populations across the board. They elevated this into corporate risk space and they need other departments to pay attention to how they do their business, how they are future-proofing themselves, how they are not doing more damage where they do not need to, and they need to do restoring where they need to. The Department is involved in the water security side of things and has multiple plans for its catchment areas which are focused on its mandate. It is all about trying to protect their resources like river systems to make sure when it rains, the rain gets into our dams and to ensure our aquifers recharge so that towns reliant on ground water can survive. On water security, there is a transversal process run by the provincial Department of the local government to develop an integrated drought and water security plan. The Department’s catchment management interventions have done work on Ecological Infrastructure Investment Framework (EIIF) to coordinate and point in the right direction in terms of as to where the next best rand was spent. The Department has a limited budget, so it needs to know how best to spend it to get the best results in terms of ecological restoration and provision of services they desperately need.

There is work done by the Department and Cape Nature on the biodiversity space, coastal space and estuary waters and catchment management. The state of diversity and state of environmental reports would be provided to the Committee. The draft strategy for drought response has been done and is in the public domain for comment. The Economic Opportunity study has been done and that is where the Department could leverage as many benefits to ensure it responds easily to climate change.

About unlawful occupation, she reported it came to the attention of the Department during the second quarter of 2020. This started at Mfuleni during the hard lockdown because many backyarders were evicted because they could not pay rent. Consequently, they started to find empty spaces to live in and there was a trickle of people who moved around the Driftsands Nature Reserve and settled in informal areas like Green Park, Los Angeles and Sikhumbule. The Cape Nature team ensured the influx stayed within those boundaries so that it did not impact on the reserve itself. After a couple of weeks, thousands of people moved into the property of Driftsands Reserve. Cape Nature tried to get court papers for the eviction. Unfortunately, conditions meant it would be impossible to house these people elsewhere. This pattern repeated itself in many different areas across Cape Town. Between September and December 2020, this number increased to 8 000 structures which started to encroach on a river and retention dam on site. Then Cape Nature appealed for assistance and MEC Bredell put together a task team in January 2021 to respond to the situation in a comprehensive way. The task team has been working for the last 10 months and the Department is coordinating things with the City of Cape Town. People have not been moved because covid-19 regulations are still in place. Before the end of the 2021 financial year, people need to be moved completely to a safer location. The dam is a massive risk in terms of how and where it is located. If a major storm could happen, lives would be lost. The dam belongs to the City. An irrepairable damage has been done to the biodiversity in the area and nature reserve, but the focus is on engaging with the leadership structure emerging there together with the Department of Human Settlement.

Dr Ernest Baard, Executive Director: Conservation and Operations, Cape Nature, confirmed that during the course of last year, Cape Nature had to make a decision about the future of Driftsands Nature Reserve as a conservation area for important biodiversity and provision of ecosystem services. The retention dam and associated wetlands on the reserve play an important role in protecting people from floods. Cape Nature is in the process of helping the task team and other relevant stakeholders to put the plan into action – to do the relocation of people. Cape Nature has not been isolated in terms of unlawful occupation of state land or provincial nature reserves. He said they have been to a number of nature reserves along the West Coast where incursions have occurred in the last 18 months. Cape Nature has developed and approved a strategy on how to deal with incursions on provincial nature reserves and state land. The implementation plan allows Cape Nature and its partners to respond rapidly to any incursion and increase its patrols in high spots areas that have been identified.

Mr Johannes Fritz, Director: Financial Management, explained the BBBEE policy of the Department to the Committee. He elaborated annually all the organs of the state and entities are required to report to the BEE Commissioner in terms of the BBBEE Act. In the Annual Report, there was compliance information. The compliance information and Annual Report are then submitted to the BEE Commissioner. About the Preferential Procurement Policy, it’s been indicated that the Department does not have a stand-alone Preferential Procurement Policy. As part of its business processes, the Department is implementing the Preferential Procurement Policy Framework Act and its regulations, in particular the 80/20 and 90/10 preference point system. Subsequent to the 27 Preferential Procurement Regulations, the Provincial Treasury did an assessment of the regulations and updated provincial treasury instructions were issued. The provincial treasury then produces a pro forma accounting system which becomes the policy that is utilised by the Department to implement the regulations. There is no stand-alone preferential procurement policy, but the Department has implemented its accounting officer system for SCM and asset management. This forms the policy environment for the Department.

Ms Razeena Omar, Cape Nature CEO, informed the Committee that the entity has five board committees which include: Audit and Finance, Risk and ICT, Conservation, Eco-tourism and Access, and HR and Remuneration. The last listed four have four scheduled meetings per annum, but audit and finance has six scheduled meetings per year because the additional two meetings are linked to the approval of annual financial statements and deliberations around the external auditors. The board has seven non-executive members, and for the past financial year it had three independent external members who sit exclusively on the Audit and Finance Committee.

Concerning CSI, she indicated that the Cape Nature has various structures for liaising with committees around its nature reserve and other partners. The entity also partakes in stakeholder liaison forums. On structures they liaise with, the entity is guided by its Sponsorship Operational Guideline document for decisions taken to support programmes linked to its mandate: biodiversity conservation. Some of the initiatives sometimes get to be supported for over a year. For instance, the Cape Nature Free Access Week gives the public access to its nature reserves for a week to familiarise itself with what Cape Nature is all about. Other initiatives like the Matric Wildlife, where there has been partnership with some NGOs, afford matriculants a few nights in nature. Some initiatives are once-off.

Mr Sheraaz Ismael, Executive Director: Eco-Tourism and Access, Cape Nature, indicated that sometimes they found themselves to have to waver their fees and provide discounts to their customers. Over the years, they have relooked at how they were engaging because for a long time they were inundated by schools wanting discounts when visiting the reserves and doing excursions. They have redesigned how they engage schools and NGOs. This has become part of the daily work they do, and no longer seeing it as part of CSI. In working with the Department of education, they decided quintile 1, 2 and 3 schools would have free access to their facilities. Quintile 4 schools pay a small fee, while quintile 5 schools are given a different fee structure.  Cape Nature has never refused access to any school or NGO involved in social programmes, especially when it sees value-add because nature reserves provide a time to think and heal and provide access to these pristine areas. This model has been in operation for two years and is working very well.

Mr D America (DA) congratulated the Department and its entity on the clean audit outcomes recorded, saying this was proof of hard work and dedication of the officials and oversight structures put in place. He asked the Department to provide clarity on the decrease in irregular expenditure that amounted to R84 000 for the year under review compared to the R100 000 of the previous financial year. He asked further for details on the status of the condonation application of R100 000 submitted to the provincial treasury, and asked if there have been disciplinary steps taken; and asked for clarity on the SIU investigation. To Cape Nature, he wanted to know how fair value is determined for services rendered in kind and on intangible assets for the R2 million. Also, on employee benefits obligation, he wanted to know what the entity means by saying it is under no obligation to pay for unfunded benefits and asked if this is only in relation to staff members belonging to the defined contribution; and asked for clarity on the post-employment obligation of R100 million.

Mr Thapelo Mosome, CFO & Chief Director: Management Support, reported that investigations on irregular expenditure have been completed. Reprimand letters have been issued. The main issue is there is timing in difference between when the documents are prepared and when an official order is generated. At the time the order was generated, the service providers were non-compliant. As a result, they have now introduced new controls to ensure this does not re-occur. The CSD report and tax compliant pin are such that when the order is issued, they also print it to double check to ensure service providers are compliant. The internal audit is assisting with the post audit on a monthly basis to check all the transactions are compliant.

About the SIU investigation, Mr Fritz reported that the SIU contacted him a year before last on the procurement of thermometers. The SIU investigated the issue of PPEs during the pandemic as part of its mandate. It received a tip-off and contacted him and he provided it with all the requested documents. In its letter of request for information, it indicated the thermometers were to the value of R8.9 million. When he showed the SIU the documentation, he indicated that the actual value of the thermometers was R8910. The parties had a discussion around the matter and eventually, a few months later, the SIU indicated it could not find anything non-compliant in terms of the procurement. As part of the investigation, the SIU incurred costs amounting to R42 000 which were expected to be paid by the Department. The Department of Environmental Affairs was not the only Department to be investigated by the SIU. Then engagements started with the deeds office and SIU, and during June/July 2021 the Department met the representatives of the SIU to discuss this amount. Since then, there has been no communication about the R42 000.

Mr Mohamed Bhayat, Cape Nature CFO, explained what the matter of services in kind has got to do with the offices they occupy in Athlone and George. In the past, the entity used the services of an independent valuer to do the work and look at the type of accommodation in terms of space, size; grades and maintenance to compare with the other types of rentals charged in that area for that space and compare that with other areas. And based on that, the valuer would come with a fair value. Because the buildings belong to the Department of Public Works and Transport, this Department would determine a fair value and Cape Nature would use a combination of these details/information to determine a fair value. When it comes to employee benefits, he made it clear when the entity stopped being part of the Department, the employees that were transferred to the entity moved with the benefits they were getting from the Department. On the other hand, the employees that were appointed by Cape Nature, after breaking away from the Department, were not awarded some of those benefits offered by the Department, but were only paid on total-cost-to-company perspective. The employees who came over were entitled to defined contribution benefits because when they retire, Cape Nature would be liable for the benefits they enjoyed in the Department, particularly around medical aid. Then eight years ago, the entity engaged with various service providers and went into the Defined Contribution Plan with Old Mutual pension fund. That was why they said that the entity is under no obligation to pay for the benefits but only Old Mutual. Regarding the R5 million, an actuary came to do the valuation for members who retired and those who still have to retire, and a determination is made on the value of the liability. Cape Nature would have to pay towards those benefits over the life cycle of the fund.

Ms Nkondlo, concerning irregular expenditure, wanted to establish if the individual transactions amounting to R184 000 were awarded to tax non-compliant suppliers and asked if it has been corrected to avoid its re-occurrence. She asked for clarity on the public service employee who had a directorship position while still employed by the state and asked if this was not stated as conflict of interest in the governance report; wanted to understand the expenditure decrease on environmental empowerment services between the last financial year and current year under review; wanted an explanation on funding from private enterprises and what its purpose is; and asked for an update on litigation where the HOD is said to be the accused.

Mr Van Zyl explained that the investigation of four cases relating to the irregular expenditure amounting to R184 000 has been completed. The findings and corrections were done. The file has been submitted to the provincial treasury for condonation. Assessments are being finalised, of which two would be completed before the end of the current financial year. Pertaining to the litigation and labour court case, he confirmed the ruling by the labour court has been in favour of the Department. The contingent liability of R517 000 would be reversed in the books of the Department. The matter was taken on a review to the labour court. The court then found in favour of the Department’s employee and it has been settled without any adverse consequences for the Department, financially and otherwise.

Mr Fritz, on disciplinary cases, stated that it was more than one employee. As part of the request to the provincial treasury for condonation, the Department had to demonstrate consequence management and corrective steps were implemented. The file has been already submitted to the provincial treasury. The R9 million story is an old matter. The Department had an intervention in the Drakenstein area – Langrug informal settlement – where there were certain construction activities in that area. During the audit, the AG felt that the project contained elements of construction which related to the municipal sewerage construction system and two roads that were paved. After a long discussion with the AG, it was concluded that the expenditure was irregular as there was no compliance to CIDB regulations. As part of consequence management, the Department indicated to the bid committee members and other officials that the construction matters were not the forte of the Department and that it had to work through either the Department of Public Works and Transport and the local CIDB office. The Department then had interactions with the local CIDB office for further training regarding the requirements of the CIDB Act and its regulations.

Concerning environmental empowerment, he made it clear during the past financial year that the Department hosted the cleanest town competition. R500 000 was the prize. This amount was incurred during that financial year. The same event has not been held during the year under review. Pertaining to the plea sentencing agreement, he indicated that there were four cases which amounted to R1.5 million. There were agreements between the particular companies, and the court order was that these companies would pay the Department this amount of money for a particular purpose.

Mr Van Zyl said, in respect of the irregular expenditure both matters are historic, including the four cases in the current year. Those were expensive investigations for the internal audit control unit. These four cases and that of the SIU were classified as irregular because the Department did not suffer a loss, but instead got value for money. There was no reason to suspect activities of fraud and corruption.

The meeting was adjourned.