In a virtual meeting, the Committee was briefed by the Department of Economic Development and Tourism on its 2020/21 Audit Outcomes. The Committee was very pleased to hear that the Department of Economic Development and Tourism recorded a clean audit outcome for the financial year under review.
Members asked for clarity on the R21 million for consultancy business and advisory services. They were concerned about Internal Control Deficiencies and the quality of reporting and Wesgro’s ability to account because it was stated that the Department does not have sufficient and adequate documented and signed Standard Operating Procedures. Members wanted to understand what the financial sustainability of the CTICC was in the context of a prolonged Covid-19 pandemic and enquired if the CTICC was a going concern given the impact that Covid-19 had on its operations.
The Committee wanted to establish why the Directors for Business Regulations and Regional Economy attended only one meeting out of the planned three; they enquired how the Department was planning to address key risks and asked for clarity on the anti-fraud and corruption strategy that created the impression that it was proactive but appeared to be reactive because there were cases that had occurred. Members wanted to find out why the Department had not developed and implemented a preferential Procurement Policy under the BBBEE.
[the beginning of the meeting was closed to the public as the Committee engaged with the office of the Auditor-General of SA]
Committee interaction with the Department of Economic Development and Tourism on its 2020/21 Audit Outcomes
Western Cape Minister, Mr David Maynier, in his introductory remarks, informed the Committee that the Department had achieved a clean audit outcome for the financial year under review. He introduced the incoming CEO of Wesgro, Ms Wrenelle Stander, to the Committee, and told the Committee the HOD, Mr Solly Fourie, would be retiring at the end of March 2022.
Ms A Bans (ANC) commented that Scopa resolutions have not been resolved in relation to the succession plan of the HOD, and asked for a response on the matter.
Mr Fourie (HOD) stated that Members should be aware that there are processes in place. The position has been advertised, and provision has been made for the proper handover to the new person. There is ample time for the handover.
Minister Maynier indicated that the Department has a strong leadership team. The current successor for the HOD position has been identified and the Department would put a detailed handover in place.
Ms Bans remarked that internal control deficiencies are raising serious concerns about the quality of reporting and Wesgro’s ability to account because it is stated that the Department does not have sufficient and adequate documented and signed Standard Operating Procedures. These are repeats of last year’s reports. The AG raised these concerns as well.
Ms Mymoena Abrahams, CFO, Western Cape Department of Economic Development and Tourism, explained that the details of the consultants and the R21 million are in the Annual Report. When the Department looks at the appointment of consultants, there are specific and strict criteria set up by National Treasury that are followed when they look at internal capacity and the need for consultants, and that is motivated in terms of technical skills. In terms of the Department’s strategic priorities, especially the resilience programme within the Department, the technical skills that are required to deliver in that area are not available. That is why the Department needs to go to the market to get these technical skills. She noted that it would be very expensive for the Department to have those skills on a permanent basis, given that it needs them for a short period. So, everything is motivated and it is only for the technical skills needed by the team, not services that are available to the Department.
Mr Ian Bartes, Wesgro’s Chairman of the Audit, IT & Risk Committee, responding to the matter of internal control deficiencies at Wesgro, made it clear that it has been a difficult year because the AG has been technical in their staff. This particular indicator has been used before. It is not the first time it is on the annual plans of the entity. It is the first time the AG is highlighting the usefulness of this indicator. The indicator relates to the efforts of Wesgro’s internal staff to support events. From that point of view, the risk this Internal Control Deficiency posed was not really that high.
Ms Kholeka Zama, Wesgro’s CFO, explained that within the DMO’s space of performance information, there are four target indicators articulated in the Annual Performance Plans. The first target indicates the output on initiatives supported where the issue was not sufficiently explained to enable the AG to audit that output. The activity is demand-led and in line with the industry requests. It is not easy to articulate it in the technical indicators, and because they had put it in the Performance Plans, they could not remove it in the Annual Report. Going forward, they have resolved to remove this target because it was demand-led and made it difficult to pre-empt a technical indicator for it. So, they would support the activities for the industry, but would no longer articulate the achievement in this area. They would incorporate the achievements in the narrative versus it being in auditable numbers. The activity of Wesgro would not be diminished by them in the future APPs.
Mr D America (DA) wanted to understand what the financial sustainability of the CTICC is in the context of a prolonged Covid-19 pandemic and enquired if the CTICC is a going concern given the impact Covid-19 had on its operations. He said there are increased impairment costs compared with the previous year and it is understandable because of the impact Covid-19 had on the CTICC.
Mr Fourie informed the Committee that the CTICC is managed by a board appointed by the shareholders and company. The City of Cape Town (COCT) is the majority shareholder and additional shareholding comes from the Department and Wesgro. The board has responded to the significant challenges the reduced revenue has brought about with immediate actions to reduce costs and re-imagine the purposes of the CTICC over the short-medium-long term. At the end of the financial year under review, the CTICC was a going concern. But upticks have been seen in the fortunes of the CTICC and the COCT has agreed to a support tranche as and when it is required up to a certain maximum in exchange for additional shares. This shows the commitment of the CTICC Board of Directors to ensure that future trends are monitored; the company is a going concern and had to respond to external shocks that had to be addressed. The CTICC is a going concern and there is a future sustainability plan endorsed by the Board of Directors. The business tourism sector is certain the CTICC would recover and, through its strategic sessions, it has adopted other forms of re-imagining the organisation so that it continued as a business entity.
Mr M Xego (EFF) wanted to understand why the Directors for Business Regulations and Regional Economy attended only one meeting out of the planned three; they asked how the Department was planning to address key risks; they asked for clarity on the anti-fraud and corruption strategy that created the impression that it was proactive but appeared to be reactive because there were cases that had occurred; and they enquired why the Department has not developed and implemented a preferential procurement policy under the BBBEE because it stated that the procurement policy was non-existent.
Mr Fourie made it clear the Governance Committee required a forum of 60% of the members. Apologies from both Directors were received and accepted, but that did not impede the work of the Governance Committee because there were sufficient members to make decisions. He stated that all risks are registered in the Risk Register and all risks have contributing factors and mitigations. Then they assign an inherent risk rating and apply remedial actions. When the risks are in at an intolerance level, an eye is kept on them and they do not require any kind of action other than those in the mitigation reports. Everything is clearly articulated in the Risk Register. Concerning the fraud and corruption approach, he explained that the strategy is aimed at being proactive. One of the major tools the Department uses is the ability to make use of the Provincial Forensic Investigation Unit for thorough investigations. Two cases have been opened while other two cases have been resolved during the year under review, and one case is still under investigation. This showed that fraud and corruption is responded to in an immediate way. About the Preferential Procurement Policy, the Department follows Supply Chain Management (SCM) regulations determined by the SCM and BBBEE Acts and the need to provide regular scoring that is applied effectively. In previous meetings with the Committee, the Department indicated that 58% of appointed consultants were at BBBEE levels 1 and 2. This showed a strong commitment from the Department to support BEE procurement.
Ms M Maseko (DA) thanked the HOD for his contribution to the Committee and for sharing information with Members on how the Department was operating. She stated that the HOD has left the Department flourishing with everything he planted on the ground.
Mr Fourie thanked the Committee for its oversight role, including the AG and audit committees of the Department as well as risk management teams from the Department of the premier to ensure that the Department delivered on the mandate given to it.
The meeting was adjourned.
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