National Arts Council 2022/23 APP; DSAC & NAC Report back on Implementation of Public Protector Recommendations, Expired Projects Policy, Presidential Employment Stimulus Programme & suspended CEO; with Ministry

Sports, Arts and Culture

27 May 2022
Chairperson: Ms B Dlulane (ANC)
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Meeting Summary

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National Arts Council

The Committee met virtually to consider the 2022/23 Annual Performance Plan of the National Arts Council (NAC). The Committee was also briefed on other matters in the entity, including recommendations of the Basic Innovation Group (BIG) report, the agreement with the suspended CEO, and steps taken to address the leadership vacuum at the entity.

The Department of Sports, Arts and Culture presented an overview covering the NACs non-financial performance for 2021/22. It achieved 77% of its targets and its budget allocation was R154.8 million for that year. Its audit outcome was an unqualified outcome with findings.

The former CEO was suspended following a forensic report by Mazars on PESP disbursements. After deliberations, a settlement agreement was reached between the parties. The disciplinary hearing against the CFO was in process. The NAC's challenges were the appointment of a CEO, the distribution of the PESP and the increased number of council and committee meetings, governance matters, disciplinary matters,  and the Departments interventions.

The NAC said it was responsible for at least 75% of the funding of this sector and had disbursed 99.9% of the R285 million Presidential Employment Stimulus Programme funds to 1 331 beneficiaries. Total disbursements were R376.5 million, while the total number of beneficiaries was 7 496. 60% of the Annual Grant Funding would be allocated to the six underfunded provinces, while 40% would be allocated to marginalised groups across the nine provinces. The NAC spoke to outcomes aligned to transformation, nation-building, indigenous languages, and gender-based violence targets. Funding remained a challenge.

The NAC reported on the allegation of impropriety and abuse of the NACs Expired Projects Policy. The Public Protector found that the allegation was substantiated. The application by the CEO, on behalf of the South African Roadies Association (SARA), without informing them and obtaining their consent, was found to be improper. It also found that implementation of the Expired Projects Policy by the NAC was inconsistent with the Constitution and Treasury regulations and therefore was procedurally unfair. The Policy did not take into account the applicant's rights but afforded NAC employees, management or Council-wide powers to deal arbitrarily with applications for surplus funds in particular partnership funding without their knowledge and consent and therefore had the potential of abuse. The NAC said the Expired Projects and Surplus Policy” was abolished and replaced by the Utilisation of Funds from Unclaimed Projects".

The NAC said that before Mr Freddie Nyathela, on behalf of SARA, lodged a complaint to the Public Protector, he had lodged a complaint with the Department regarding the submission of his failed application for funding by the CEO, without his knowledge or consent. The Department appointed the BIG to investigate the complaint. The findings of the BIG investigation were that there was no evidence to suggest that the NAC staff members were involved in any irregularities involving the grant funding application submitted by SARA, the Hugh Masekela Foundation, the Legacy Hotels and Jazz for Juniors. The investigation also found management of the NAC was correct in not awarding SARA a grant as they failed to comply with the grant funding policies and procedures for their application.

The NAC spoke about the forensic investigations concerning the  Presidential Employment Stimulus Programme (PESP) and disciplinary action against the NAC leadership. When Council was appointed in January 2021, it discovered a very difficult situation where the PESP was oversubscribed. This led to the Council seeking external legal opinion, which was that all successful applicants had the right to be treated in a lawful, reasonable, and procedurally fair way.

Council then restructured the grant allocation figure to allow all approved beneficiaries to receive funding.

Members complained that the presentations differed from those they had been given to prepare and proposed that the presentations not be accepted. The differences in the presentations made the NAC appear misleading and “dodgy”. Other Members felt that the presentations were merely updates and thus should be heard. 

Members asked questions about the refusal to grant Mr Nyatelas funding application while later making an application in his name without his knowledge and consent. Members asked questions about the charges against the former CEO being withdrawn but not those against the former CFO. Members asked questions on why the disciplinary process against the CEO and CFO only took place months afterwards and if the suspension was with full salary and if so, why? Members asked what the Departments view was on the appointment of a Council member as an interim CEO in light of good governance? When would the DC hearing for the CFO conclude? How many candidates were interviewed for the vacant CEO and CFO posts? What was the level of consultation by the NAC with the Department regarding the appointment of an interim CEO? What was the status of the Hawks regarding the PESP and the NAC? Members asked what sectors were financial and operational risks to the NAC regarding the PESP disbursements. Members asked if the NAC had reviewed the utilisation of unclaimed funds to ensure PFMA and Treasury regulations compliance. At what stage were the recruitments for the CEO and CFO posts?

How did the entity plan to address the international trade of the cultural and creative sector to include provinces with a low percentage share? How was the entity working with the private sector and other funding institutions to increase funding for the cultural and creatives sector? Members questioned the increase in Board expenditure that rose from R869 000 in 2019 to R3.5 million in three financial years.

The Minister, Mr Nathi Mthethwa, said the criticisms directed at the NAC were justified. He said the forensic work of Mazars was important as it was thorough and factual and there was no legal challenge to the report since its release on 30 November.

Meeting report

The Chairperson addressed transformation in the country in terms of democracy and this should be protected given the racist incidents at Stellenbosch University. She called for the University management to resolve the matter through consequence management speedily. She added that there had been incidents of gender violence over the past few weeks where women were murdered in cold blood, or raped, or killed to take body parts, and she called for law enforcement to deal with the perpetrators speedily.

Mr T Mhlongo (DA) said he supported the Chairpersons views.

Department of Sport Arts and Culture Overview of the National Arts Council (NAC)
Mr Vusumuzi Mkhize, Director-General, DSAC, presented the overview covering the NACs non-financial performance for 2021/22. It achieved 77% of its targets and its budget allocation was R154.8m for that year. Its audit outcome was an unqualified outcome with findings. It had a board of 16 members. The former Chairperson, Ms Rosemary Mangope, was suspended following a forensic report by Mazars on the PESP disbursements. After deliberations, a settlement agreement was reached between the parties. The disciplinary hearing against the CFO was continuing. The challenges the Department faced were the appointment of the CEO, the distribution of the PESP and the increased number of Council and Committee meetings, governance matters, disciplinary matters, NAC challenges and the Departments interventions

National Arts Council (NAC) 2022/2023 Annual Performance Plan
Ms Celenhle Dlamini, chair of NAC, introduced the Council members present in the meeting.

Mr Mhlongo noted that only three members of Council had attended the meeting and questioned why the other members were not present.

Ms Dlamini apologised for their absence and said some would be joining later due to other commitments.

Mr Mhlongo questioned the presence of NACs legal counsel at the meeting.

Mr Jason OHara, Chief Financial Officer, NAC, then did the APP presentation for 2022/23. He said the NAC is responsible for at least 75% of the funding of this sector. The NAC had disbursed 99.9% of the R285 million Presidential Employment Stimulus Programme (PESP) funds to 1 331 beneficiaries. A total of 4 170 applications were received during the 2021 call for funding, valued at R1.2 billion, against a budgeted R27 million. This was a 41.9% increase from the 1 750 applications received in the previous years call for funding. It funded 284 beneficiaries in the industry and disbursed over R79 million to over 6 100 beneficiaries in COVID Relief Programmes in partnership with the Department. Total disbursements were R376 507 450.64, while the total number of beneficiaries was 7 496.

60% of the Annual Grant Funding would be allocated to the six underfunded provinces, while 40% would be allocated to marginalised groups across the nine provinces. The 2021/22 funding call saw a huge discrepancy between requests for funding and actual allocations, with requests totalling 4 071 applications to the value of R1.2 trillion, while actual allocations were 282 applications to the value of R23.6m.

He spoke to outcomes aligned to transformation, nation-building, indigenous languages, and gender-based violence targets. He said all senior positions within the entity were filled and the entity was no longer in ICU. He said funding remained a challenge and created huge frustration for arts practitioners who could not get funding because of the limited resources.

Report back on the Implementation of the Public Protectors Recommendations
Ms Marion Mbina-Mthembu, Interim Chief Executive Officer, NAC, gave a background to the Public Protectors investigation and the Public Protector's findings.

Mr Mhlongo said he had not received the presentation being flighted.

The Committee Secretary said it was part of a package of materials sent.

Ms Mbina-Mthembu spoke to submitting an application for partnership funding by the CEO on behalf of the South African Roadies Association (SARA) without their knowledge or consent. The Public Protector found that this was substantiated but that the application was not falsified or forged. The Public Protector found the action to be inconsistent with the provision of S33(1) of the Constitution and that the CEOs failure to inform the complainant before submitting the proposal to EXCO for partnership funding amounted to improper conduct as envisaged in S182(1)(c) of the Constitution and maladministration as envisaged in S4(a)(i) of the Public Protector Act.

Mr Mhlongo said the presentation being given was not the one that was sent to members and the presentation had been changed.

The Chairperson said he should wait until the presentation was complete before engaging on the issue.

Mr Mhlongo said it was wrong to accept a presentation that members just received and it should not be entertained.

The Chairperson said he should wait until the presentation was complete before engaging on the issue.

Ms Mbina-Mthembu continued her presentation and spoke to the allegation of impropriety and abuse of the NACs Expired Projects Policy. The Public Protector found that the allegation was substantiated. The application by the CEO on behalf of SARA without informing them and obtaining their consent was found improper. It also found that the NAC's implementation of the Expired Projects Policy was inconsistent with the Constitution and Treasury regulations. The Policy was found procedurally unfair as it did not take into account the applicant's rights but afforded NAC employees, management or Council-wide powers to deal arbitrarily with applications for surplus funds in particular partnership funding without their knowledge and consent and therefore had the potential of abuse.

The Minister noted the findings and ensured the remedial actions were implemented.

The Expired Projects and Surplus Policy” was abolished and replaced by the Utilisation of Funds from Unclaimed Projects".

Ms Mbina-Mthembu then spoke to the Basic Innovation Group (BIG) investigation and its recommendations.
She said that before Mr Freddie Nyathela, on behalf of SARA, lodged a complaint to the Public Protector, he had lodged a complaint with the Department regarding the submission of his failed application for funding by the CEO, without his knowledge or consent. The Department appointed the Basic Innovation Group to investigate the complaint.

The findings of the BIG investigation were that there was no evidence to suggest that the NAC staff members were involved in any irregularities involving the grant funding application submitted by SARA, the Hugh Masekela Foundation, the Legacy Hotels and Jazz for Juniors. The investigation also found management of the NAC was correct in not awarding SARA a grant as they failed to comply with the grant funding policies and procedures for their application.

The progress on implementation of the recommendations of the BIG investigation was that:
• The projects funded under the Expired Projects and Surplus Policy achieved the objectives of the NAC.
• Training and awareness workshops have been held with stakeholders.
• Concerning the Surplus Policy, section 51(3)(b) is the legal guide on dealing with policies and this review recommendation has been implemented.
• A new Policy called the Utilisation of Unclaimed Funds has replaced the Expired Projects and Surplus Policy.
• The Policy does provide broad guidance on the requirements for grant funding.
• The Policy includes a section on reasons for disqualification at the review stage.

Forensic Investigations concerning the PESP and disciplinary action taken against the NAC leadership
Dr Sipho Sithole, NAC Council member, spoke about the forensic investigations concerning the PESP and disciplinary action taken against the NAC leadership. When Council was appointed for its 4-year tenure in January 2021, it discovered a very difficult situation where the PESP was oversubscribed and about 829 applications. It had no plausible reasons for being declined. This led to the Council seeking external legal opinion. The legal opinion was that all successful applicants had the right to be treated in a lawful, reasonable, and procedurally fair way.

Mr Mhlongo interjected and said he did not have the presentation.

Ms D Sibiya (ANC) said Mr Mhlongo should raise issues after the report was presented.

Mr B Mamabolo (ANC) said the Chairperson had ruled on the matter and the presentation should continue.

The Chairperson said she saw no problem with the NAC giving their report as it was an update and was important for the interest of the Committee.

Mr Mhlongo said the rule was that entities should supply their presentation beforehand and the NAC should not be getting special treatment.

Mr D Joseph (DA) said that in future, when the agenda was approved, the meeting must ensure that presentations were in line with the agenda or indicate that there was new information. In principle, Mr Mhlongo was correct.

Ms V Van Dyk (DA) concurred with her colleagues as Members needed time to go through presentations.

Mr A Zondi (ANC) concurred with Mr Josephs that the additions were in the agenda that was adopted and one could not chase them away when they were at the end of the presentations and that the Committee must stick to the Committees procedure.

Ms V Malomane (ANC) said Mr Mhlongo was correct that the NAC could not present a new presentation. She said the question was whether the NAC was working with the Department. She said the NAC should send the presentation and the Committee could send written questions to them.

Ms D Sibiya (ANC) said that if the agenda was agreed and there were new items, one could not stop people from presenting. This was incorrect, and points of order should be made at the end.

Ms R Adams (ANC) said the NAC presentation was long overdue but it was bad to follow a presentation which was not sent timeously. She supported Ms Malomanes proposal to send written questions.

Deputy Minister of Sports, Arts and Culture, Ms Nocawe Mafu, acknowledged Members' input and apologised from the Departments side on the NACs updated presentations. She said the mistake was that the updated presentation was not given to the Committee beforehand. She called for them to be allowed to finish the presentation even if it meant leaving out the updated information.

The Chairperson said the presentation should continue and questions could be asked on the relevant presentation.

Mr Mhlongo concurred that what had to be presented was on the agenda.

Ms Adams agreed.

Dr Sithole continued with the presentation on findings of the forensic investigations and spoke to the principles agreed to by Council as a way forward on the PESP. Council then restructured the R300 million guiding figure ranging from R16 600 up to R25 000 per job to R10 895 per job. This then allowed all 1 374 beneficiaries approved to receive funding. These four principles guided Council to reach an equitable solution that ensured that all successful beneficiaries received the PESP Grant.

Discussion:
Mr Mhlongo did not welcome the presentation as the presentation did not align with what was handed out as a written preparation for the meeting and therefore made the NAC appear misleading and dodgy.

In addition, the council members were not present at the meeting except for two or three, which showed that they did not want to account to the Committee. They claim the media were misleading. Why did they have to wait for the media to give information before giving the Committee information? This was not good governance or transparency. What was the six-month payment given as no information around this was provided to the Committee? The presentation was dodgy and not honest; clarity was needed on whether an expired project mentioned in the presentation was abolished or amended.

He asked if the NAC funded infrastructural projects, as they had refused to grant Mr Nyatela funding for lighting and stage equipment to do its work. Why was there a deal for the CEO only but not for others? Why were charges withdrawn against the former CEO? What was Mazars legal view on the charges being withdrawn? What other agreements were the Committee not aware of with the CFO? Why did NAC not provide SARA with the letter dated 31 July 2021? Did the NAC respond to Mr Nyatela or not? What was the status of the Hawks regarding the PESP and the NAC?

Ms Van Dyk said it was frustrating when one prepared for a meeting based on certain documents and then a presentation was made based on different documents.

On the charges against the former CEO being withdrawn, she said she found it weird that there were findings from the Public Protector which found her guilty but for someone else with lesser charges, the charges were not withdrawn. Who was acting as CEO while the former CEO was suspended?

On the surplus policy and spending of funds from unclaimed projects, she asked whether it was a new policy or an old policy that was amended and why was there a need for such a policy and why were there unclaimed funds. What happened in other entities when money was not spent?

On the public protector recommendations, she asked whether all the recommendations regarding SARA were implemented.

Mr Zondi welcomed the presentation.

On the suspension of Ms Rosemary Mangope in February, he asked why the disciplinary process only took place months afterwards and was the suspension with full salary. If so, why?

On Mr M Arendse and Ms Mugabe, who withdrew themselves from the disciplinary enquiry proceedings, did they not have to send their resignation letters before the disciplinary hearing enquiry?

On the Department’s presentation on the NAC, he asked what the progress was regarding the disciplinary hearing Case against the CFO? What was the Department's view on the appointment of a Council member as an interim CEO in light of good governance?

On the Department’s presentation on the NAC, Ms Malomane asked what sectors were financial and operational risks to the NAC regarding the PESP disbursements.

On the BIG investigations, she asked if the NAC had reviewed the utilisation of unclaimed funds to ensure PFMA and Treasury regulations compliance? What aspect constitutes the key challenge?

On the NACs Public Protector presentation and concerning the declaration of interests register for all NAC employees relating to projects initiated since 2015 to manage conflicts of interest, she asked how many employees were in conflict and what action needed to be taken?

On the estimate of national expenditure, which remained unchanged in 2021/22, was this allocation adjusted for inflation or was there a real decrease? What was the impact of this on staff morale? NAC indicated that all senior positions in the entity were filled, yet two posts (the CEO and CFO posts) were filled in an acting capacity. At what stage were the recruitments for these posts? When would it be filled? When would the DC hearing for the CFO conclude? How did the entity plan to address the international trade of the cultural and creative sector to include provinces with a low percentage share?

Ms Adams asked why the Department allowed NAC to lower the subsidy for grant funding from 75% to 70%. This funding amount was inadequate as it received more applications than what the budget allowed. What was the revenue generation strategy for the future? What was the total value of the 18 international bursaries awarded to art students to study abroad? Four NAC executives were suspended in February 2021 but the hearing process only started in December 2021. Why did the Council take ten months before it proceeded with the disciplinary hearing process while the alleged accused was being paid to do nothing? What was the level of consultation by the NAC with the Department regarding the appointment of an interim CEO? What was the NAC policy on settlements and what merits did the NAC use to settle? What was causing the entity to be in ICU regarding the leadership vacuum?

Ms Sibiya asked why Council member Arendse did not withdraw from the disciplinary hearing proceedings in the first place? How many candidates were interviewed for the vacant CEO and CFO posts? How was the entity working with the private sector and other funding institutions to increase funding for the cultural and creatives sector?

Mr Joseph said that expenditure on the Board rose from R869 000 in 2019 to R3.5 million in three financial years. An increase of R2.7 million in three years was a real concern as the increases to management were too high given that one was seeking money for the programs. Was the suspension of the CEO with full pay and did they get an increase also? Was the acting CEO also being paid?

The Chairperson asked why the entity appointed a council member as interim CEO as this undermined governance? What was the level of consultation of the entity and the Department regarding the appointment of the interim CEO? How did the entity plan to address the international trade of the cultural and creatives sector to include provinces with a low percentage share?

On the appointment of a council member as the acting CEO, Ms Dlamini said it sought someone familiar with the PESP because the CEO went on medical leave suddenly right in the middle of the time the entity was administering PESP. It had approached the Department if they could second someone familiar with the PESP and the PFMA while the CEO had gone on medical leave. There was no one that the Department could second, so the NAC preferred to take a council member with appropriate experience for the six weeks the CEO would be on medical leave. The acting CEOs medical leave eventually was extended three times, so an interim CEO was appointed. The disciplinary hearing hearings were now complete on the CEO and CFO and were now formalising the CEO and CFO posts by next week. 

On whether the suspension was with pay, she affirmed that it was.

On the increase in Board fees paid, she said panel members increased from 18 to 40 members. They had assisted in the adjudication of applications while managing the PESP, as the leadership of the NAC was under suspension, and disciplinary hearing hearings, which led to an increased number of meetings.

Ms Mbina-Mthembu said that the amendment of the expired project's Policy was undertaken subsequent to the Public Protector Report and remedial actions. The new Policy was amended to remove inconsistencies and ensure that there was a process using the surplus funds similar to a normal call for funds. Council approved this. However, two issues could have been inconsistent with the PFMA. The first was that the funds could have been earmarked for specific grants to specific artists or artist organisations. This happened when artists did not complete their projects, which did occur. The second was what occurred if the end of the financial year came and the question then was what was regarded as surplus funds. So, a policy called the utilisation of unclaimed funds policy” was then drafted. Before using surplus funds, one had to get Treasury's approval.

On the remuneration of Council, Ms Dlamini said the jump from R800 000 to R2.5 million occurred during the time of the former Council.

On international cultural trade, Dr Sithole said the NAC was committed to the increased exposure to international markets and a budget of R2 million per annum was set aside for this.

On the distribution of funding amongst the provinces, he said 60% went to Gauteng, KZN, and the Western Cape, while the other provinces shared 40%.

On why the forensic investigation took so long to start, he said that immediately after a press conference on the issues was held, the NAC and the Department had started the procurement process for a forensic firm. The first procurement process report was a disaster as service providers did not even know the scope of the investigations, so the process was restarted from scratch. Mazars was appointed and did a number of interviews and the process was very long before the charges were drawn up. The NAC then had to do another process to secure firms to do the prosecution and to be the presiding officers. 

On why the CEO and CFO were different processes, he said the proceedings were happening simultaneously but with two different presiding officers. The CEO and CFO had different strategies for defending themselves. This was why there were different outcomes.

In response to a question by Ms Adams, he said that the NAC was very thin on the ground with only three managers. The acting CEO was the arts and culture manager and her removal from her original post left a big vacuum. The number of people applying in the annual call for funding increased drastically because a lot of barriers to entry was removed. Successful applications had increased from 302 to 1 700.

On the issue of funding vulnerable groups and marginalised arts was one of the things the new NAC strategy emphasised.

On the reduction in grant allocation of five percent, Ms Mbina-Mthembu said that there was a challenge in the entity that needed additional funds to meet the PESP requirements. The Department was informed for approval. This impacted operations because it used more than it intended to use.

On poor staff morale, she said it was difficult to say that it was because of poor staff funding. Staff contracting Covid last year and even this year was a contributing factor as some staff were lost to Covid. Some support was given by HR.

On why former councillors Mugabe and Arendse resigned on the day of the hearings, Dr Sithole said he did not have an answer to that question.

On the forensic investigation, Mr Mkhize said the labelling of the investigations as a “deal investigation” was casting aspersions on the quality of the work done by the forensic company and it was incorrect to attack the companys integrity. The implementation of their recommendations could not be put at their doorstep.

On whether the NAC responded to Mr Nyatela, he said a letter of apology was sent to SARA and Mr Nyatela by the Council. There had been a decision to fully implement the recommendations of the Public Protector on the revision of the expired projects policy.

On the Departments view on the appointment of a council member as interim CEO, he said the Department was on record in discouraging such a culture.

The Minister of Sports, Arts and Culture, Mr Nathi Mthethwa, said the criticisms directed at the NAC were justified. The NAC had to go back to the drawing board and look at issues raised as the expectation was that they be a well-run organisation. He said one important organisational element was stability, so having proper senior management was important.

He said the forensic work of Mazars was important as it was thorough and factual and there was no legal challenge to the report since its release on 30 November. Therefore, it was important to follow the recommended steps so that in future, the organisation did not find itself in the same situation.

Mr Mhlongo proposed that follow up questions be forwarded to the Committee Secretary.

The minutes for the meetings of 10 and 17 May 2022 were adopted.

The meeting was adjourned.

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