DIRCO audit action plan; SADPA; Pan African Parliament; consequence management: with Minister

Meeting report

Minister’s opening remarks
Dr Naledi Pandor, Minister of International Relations and Cooperation, said that there had been irregular contracts and poor management of contracts but assured the Committee that the necessary measures had been put in place which would save the Department some costs. The Department’s new organisational structure had been approved which was a good fit for the work that it had to do. The Department was inadequately funded. She announced that Zane Dangor had been appointed as the new Director-General.

Department of International Relations and Cooperation presentation
Ms Nonceba Losi, DIRCO Acting Director-General, said the acting CFO would be leading the presentation, sharing information on the audit action plan and how it was being implemented; she was also going to talk about expired contracts, the BT Communications contract, give an update on PAP and on separating the property management portfolio from the financial branch.

Ms Dineo Mathlako, Acting CFO, DIRCO, said the emphasis of the audit action plan had been on addressing recurring audit findings and it had prioritised strategies to address the following matters:

1) Non-compliance with applicable laws and regulations, wherein the implemented corrective measure had been to terminate all such contracts, with the exception of one, for networking (ICT). The Department was in the process of finalising the procurement process for acquiring new ICT services.

2) The Department not being able to provide sufficient supporting documentation for an amount of R76 million. A dedicated director had worked on the account, to ensure that the disallowance was cleared, resulting in a reduction to R73 million. As of 10 February 2022, the account was further reduced to R14 million, based on the analysis of foreign losses and gains dating back to 2013/14. The Department had since written off an amount of R14 million in line with Treasury Regulations.

3) Material misstatements in the AFS: DIRCO is looking for a chartered accountant to fill the CFO position. Also, the two vacant posts in the Finance Division of a Deputy Director and the Director will be filled. In their absence, the Department was in the process of appointing a service provider that could prepare the AFS on its behalf.

On the continuing expired contracts, she said the contracts/services of Mustek, Datacentrix, NeoThando JV, Magic Travel, Wings Travel and AGS Frazer-Lazer Transport Group had since been terminated. The approval for the procurement processes for the replacement of BT Communications had been almost complete, until National Treasury advised that the bid be put on hold until further notice. As a corrective measure, a Contract Management Unit had been established to monitor both the performance of service providers and the monitoring of contract expiry dates.

The Department was currently not in a position to cancel the BT Communications contract for the network services as that would mean that the ICT network would be shut down and DIRCO officials at head office and missions would not be able to operate. National Treasury had been formally made aware of that reality. The process of investigating this irregular expenditure was being pursued by the Department for continuing to utilise the contract after expiry and it had requested assistance from National Treasury Special Audit Unit. The Department had recorded all contract expenditure according to the Irregular Expenditure Framework and had instituted a disciplinary process for the awarding of the contract.

Speaking on the migration from the ARF to SADPA, the creation of a development agency would contribute directly to government’s seventh priority of “A Better Africa and World”. South Africa aspired to create a development agency that would enable it to partner with other development agencies for greater impact on the African continent. The Minister had requested a meeting with the Minister of Finance to finalise the matter and DIRCO intended to take the draft bill to Cabinet in the first quarter of 2022/23.

Speaking on separating the Property Management portfolio from the Finance Branch, the Department had repositioned its property management functional area as part of the organisational structure review, which was underpinned by the organisation-wide renewal process. The organisational structure review was at an advanced stage in consultation with the Minister of Public Service and Administration. It proposed that the Property Management Portfolio reside with the Office of the Chief Operations Officer and renamed “Real Estate Management Portfolio” in line with international best practice.

On a permanent headquarters for the Pan African Parliament, the PAP was established through the Host Agreement on the Seat of the PAP, signed between South Africa and the African Union on 16 September 2004 and entered into force on 4 April 2017 after an exchange of notes between South Africa and the AU as required by the Host Country Agreement. The Agreement spelled out South Africa’s obligations. Currently, the PAP is temporarily hosted at Gallagher Estate, Midrand. It had been envisaged that, by now, the PAP would have been in a permanent precinct. However, legal challenges have arisen that have delayed the completion of the project. It is hoped that the relevant Departments will proceed towards finalising the outstanding issues. DPWI is responsible for the site, National Treasury is responsible for financing the project and DIRCO is responsible for guiding the process. Once the current case that has delayed the project has been finalised, the process will be back on track.

Ms Losi, giving an update on consequence management, said of the 12 disciplinary cases, seven were finalised, two were still pending, one was recalled and two were closed due to the officials’ contract of employment coming to an end. All disciplinary cases including suspensions were handled in terms of the Disciplinary Code and Procedures read with the Senior Management Handbook on discipline.

Minister [1:09:00 inaudible from chamber]

Discussion
Chairperson [1:12:20 inaudible from chamber]

Mr D Bergman (DA) [1:13:00 inaudible from chamber]

Mr M Chetty (DA) apologised that he might repeat some comments that were already made, which he did not hear because of apparent connectivity issues. He was disappointed that the Minister had not attended the debate the previous day, as he had hoped to hear the views of the Minister on the topic.

The Chairperson requested Mr Chetty deal with his background noise before continuing his questions.

Mr B Nkosi (ANC) said he had noted an inconsistency between what was written in the audit action plan and the narrative presented. The narrative had been recently updated as opposed to the document; he requested the Department to look into that. He assumed that all the actions that had been labelled as incomplete, were to be interpreted as ongoing and would soon reach finality. He asked for clarity on its interpretation of the term ‘incomplete’. What specific actions were to be taken against the officials who had not complied with the Department of Home Affairs? What actions were being taken against officials who had been responsible for irregular expenditure? Who were the DDGs responsible for the missions who allowed irregular expenditure? On contract management and supply chain management (SCM) generally, the audit action plan had gone into much detail and showed a lot of improvement.

For the Pan African Parliament, where was its operational expenditure reflected in the Department’s budget and annual report. A lot of work has been done on the PAP project and it was important for the public to know the details of the project.

The progress on the termination of the contracts was welcomed. DIRCO had been responsive to the concerns raised. There was a need, however, for the Committee to monitor the Department to ensure that its practices were in line with the guidelines from National Treasury.

Mr Chetty recalled that two weeks before COVID hit in 2020, the Department had promised the Committee that there would be ‘soil turning’ for PAP in two weeks' time. The Deputy Minister had made it clear that, that was a dream and a farfetched reality. At the same meeting, the Committee had asked if it had been the right thing to do for South Africa to take on the Host Country role of the PAP. After numerous cost analyses, it was clear that the project carried an expense that the Department could not carry.

The Minister had previously confirmed to the Committee that action would be taken against those implicated so that they pay back the monies due to the Department. However the Committee was now being told about arbitration cases involving the dismissed officials. It was well know that in arbitration cases no one would be obliged to pay anything.

Could the Minister speak to the Acting DG's remarks on Facebook? Could the Minister take the Committee into confidence about the statement made by DIRCO as opposed to the Presidential and South Africa’s current status.
 
The Chairperson said the last matter raised by Mr Chetty was not part of the report under discussion.

Rev K Meshoe (ACDP) said he needed clarity about the BT Communications contract. The Auditor-General had concluded that it was awarded irregularly. After the contract expired, it was extended on a month-to-month basis until 10 March 2021. Why had an irregular contract been extended even on a month-to-month basis? National Treasury had not been in support of the contract extension. DIRCO said it was not in a position to cancel the contract. The reasoning from DIRCO was that if the contract was cancelled, then its ICT services would be shut down and it would not be able to operate. Why had the Department not advertised for a new service provider as soon as it found out that the BT Communications contract had been awarded irregularly? Did that not show a lack of urgency by the Department to eradicate unacceptable practices? Had there been no Plan B?

Mr T Mpanza (ANC) said the employers and employees had rights and there were platforms that they could use. It would be proper for the Committee to await the CCMA process to be concluded. The employer had done what was supposed to be done. If, hypothetically, the CCMA ended up ruling in favour of the former Director-General and CFO, while the Minister had already introduced the new DG, how would that be handled? The lease for the PAP had expired at the end of February 2015 and the Department of Public Works was required to request an extension from the landlord. Given the advent of the Foreign Service Act, would Public Works or DIRCO be continuing the engagements with the landlord? How far was DIRCO with the implementation of the Foreign Service Act and when could the Committee expect to see the Regulations.

Mr W Faber (DA) [1:50:40 inaudible from the chamber]

The Chairperson inquired about the part of the report that referenced an investigation of a BT Communications director, of which the report stated that the matter was then closed. Could the Department give the Committee some details on that matter?

Minister's response
Minister [1:55:00-1:58:00 inaudible from the chamber]

The Minister said DIRCO had lost several officials and it had been a particularly difficult period. It was distressing when families could not connect due to one family member being in the UAE or the UK, and due to ‘the document’ not being legalised, the wife and the children could not reach the person. The Department intervened where it could do so, by placing more people to provide assistance, but it had to be careful in doing so since it was dealing with a legal matter.

On the former officials, DIRCO could not follow up on them once they had left the Department, except in the case where criminal charges had been laid.

Answering Mr Bergman’s question on the New York matter, she said there was no lease, property or land, the monies were paid out for nothing. The payments were the responsibility of the accounting officer and not the Minister. The action of signing off the monies had been the core of the charges. The actions the Department took resulted in wasteful expenditure in the amount of more than R117 million.

The Department could make the reports requested by Committee Members available, including the one on allegations of sexual harassment. However it was worth noting that there was little substance in the reports as people tended to make allegations and not follow through on their own cases.

The Minister said she did not clearly understand the comment from Mr Chetty about the debate and she had stuck strictly to the letter that she was sent by the Committee, when preparing for this meeting.

On the ‘soil turning’ for PAP, the Minister replied that it had quickly become clear to the Department that it was not at a point where that could be done.

Answering on arbitration, the Minister replied that there were procedures to be followed. Arbitration did not mean that there would be an award from one party to the other. It was important to let the process conclude and only then, deal with the outcome.

The Minister replied that the remarks on Facebook had been discussed in previous Committee meetings. It was not clear what Mr Chetty meant by ‘taking the Committee into confidence’ – if that referred to the Ukraine-Russia matter, the Government had a very consistent approach on the matter. There were no disagreements on the matter. DIRCO believed that there should be negotiations and advocacy for peace. The United Nations Security Council should play more of a leadership role in seeking a peaceful outcome. That was the position of the President, the Government and DIRCO.

She assured Rev Meshoe that DIRCO was trying, really, to stress the importance of ethical conduct and attention to the important role of public service. There was no lack of urgency; it just took long to get things under way in all departments. The Department was going to act against those who had done wrong.

She said Mr Mpanza was right in saying that the Department and the Committee should allow the legal processes in the labour sector to conclude, allowing all employees to exercise the rights they had. There was no indication of what would happen should the ruling go one way or the other. The process had to be first concluded.

DIRCO was finalising the draft Regulations on the Foreign Service Act and would bring them to the Committee in due time, so as to make them public. On its role in the Foreign Service Act, DIRCO would always use the expertise from the Department of Public Works and Infrastructure when in need of advice about property and real estate.

The Minister explained the term ‘incomplete’, saying it meant that the process was under way and the full result had not yet been reached. The matter of the Department of Home Affairs and appropriate management of funds, had been part of the suspense and disallowance account in DIRCO. The matter was being resolved and the Acting CFO would speak more about it.

Answering on DIRCO’s commitment to the Pan African Parliament, she had assured the leaders of the African continent that South Africa was fully committed to hosting the African Parliament. Following the incident that occurred in the Pan African Parliament in 2021, AU Commission chairperson had designated an investigative committee to investigate South Africa, to look into the events that had been made public all over the continent and provide a report. The report was done and presented to the African Union executive. Given all the obligations of being a host, it had been clear that South Africa was the only country that was geared and fully committed to being the host. There had to be a convening of the PAP for the election of its office bearers. The AU Commission chairperson and the AU chairperson would have to be at that plenary session.

Chairperson [2:20:00 inaudible from the chamber]

Department response
Ms Losi, answering Mr Chettty’s concerns, said she had apologised to the Committee earlier in the year as she had been taken by emotions but had later realised the Department was bigger than her emotions. She had also apologised to the Minister, sincerely so.

She confirmed that the Department was prioritising staffing the legalisation team and had two experienced officials who had just came from the missions. Interns were being taken to the legalisation section to help with the backlog.

On actions taken against officials who had not paid the Department of Home Affairs, Ms Losi replied that that had been part of the forensic investigation that was taking place at National Treasury. The forensic company had promised DIRCO that the first draft report would be available before the end of March 2022.

Ms Mathlako, Acting CFO, elaborating on the deceased officials, said one of them was the head of Supply Chain Management and had died of cancer, the other official was the Head of ICT who died of complications relating to his medical condition.

She acknowledged the presentation details on the audit action plan had to be updated since there had been a lot of progress after it was drafted and sent to the Committee. She confirmed that ‘incomplete’ meant there was ongoing work awaiting finalisation.

The PAP expenditure fell under DIRCO’s Programme 3: Global Governance – Africa Multilateral.

Ms Mathlako explained that the BT Communications contract had expired in December 2020 and during October 2020 the Department had started with the process for acquiring a new service provider, the tender advert was due to close on 8 December 2020. From the bids received, all of them were found to be non-responsive to the specifications, forcing the Department to re-advertise the tender and that was done. National Treasury had provided advice to the Department and the process was under way.

On DPWI, Ms Mathlako replied that DIRCO already had its Foreign Service Act which gave the responsibility to the Minister for properties outside the Republic. When it came to properties inside the Republic, DPWI had full responsibility. DIRCO had to go through Public Works for acquiring / developing / constructing property for the PAP.

Answering Mr Faber on the Disallowance account, Ms Mathlako replied there were transactions that could not be identified when the 2019/20 audit was done and these transactions had amounted to R186 million. DIRCO was requested to do an investigation, which was outsourced to a forensic auditor, who found out that the transactions had emanated from the missions. DIRCO had a non-integrated financial system with the missions. It had written to National Treasury requesting the implementation of an integrated financial management system that would allow for minimal human error. The amount of the transaction had since been reduced from R176 million to R14 million. After consultations with all the relevant stakeholders, it was decided that the amount should be written off.

Minister [2:38:00-2:43:52 inaudible from chamber].

Mr Bergman said the apology from Ms Losi had been sincere; COVID had given people a frustration that most people did not understand; sometimes people did not empathise with each other. The Committee accepted the apology and sent its well wishes to the Acting DG.

The Chairperson said the rest of the Committee agreed with Mr Bergman unconditionally. He advised Ms Losi to look for help in the form of private coaching on that issue. He advised the Acting CFO that DIRCO had always to pre-empt National Treasury and ensure that all Treasury responses were in form of writing. It was important for Treasury always to respond to the Department’s queries in the form of writing.

The Committee was happy that DIRCO was engaging with National Treasury on the development of the Integrated Financial Management System (IFMS) and hoped one day it would be used by all government departments. He was happy that all of DIRCO’s graphs were beginning to point in the right direction.

Meeting adjourned.