ARC, OBP, NAMC PPCEB, OVG, ITB & SAVC Annual Report 2021/22; with Deputy Minister
Agriculture, Land Reform and Rural Development
12 October 2022
Chairperson: Nkosi ZM Mandela (ANC)
Agriculture Research Council (ARC)
Onderstepoort Biological Products (OBP)
Perishable Products Export Control Board (PPECB)
The Portfolio Committee on Agriculture, Land Reform and Rural Development met virtually with the Department of Agriculture, Land Reform and Rural Development and its entities for a briefing on their annual reports for 2021/2022.
The reports focused on both the organisational and financial performances for the 2021/22 financial year, and were presented by the following entities: Onderstepoort Biological Products (OBP); the Agricultural Research Council (ARC); the National Agricultural Marketing Council (NAMC); the Perishable Products Export Control Board (PPECB); the Office of the Valuer General (OVG); the Ingonyama Trust Board (ITB); and the South African Veterinary Council (SAVC).
The OBP discussions had dealt with its vaccine production capacity; the impact of an ongoing strike at the entity; measures to enhance animal health sector relations; its financial performance; the decrease in vaccine sales; its production plan and sales focus; and its investment in research and development and possible duplication of the ARC’s function. Other issues raised included the slow horse vaccine production rate; the vaccine manufacturing plant recapitalisation project; the prioritisation of staff training; consequence management; failure to establish and implement policies; farmer training; resolving client complaints; the current status of its apparatus and machinery; and its contribution to fighting unemployment, poverty and inequality.
The ARC discussions concerned its qualified audit opinion with material findings; non-compliance with legislation; training and support for emerging farmers; the retaining of skilled staff; its commercialisation strategy; new vaccines, and revenue generated from vaccines; its animal database and record keeping; and the student training and placement strategy. Members also sought more information on land reform beneficiaries; the ARC's mobile laboratories; programmes to improve emerging farmers’ livestock; its working relationship with the OBP; the foot and mouth disease (FMD) facility; and the measurement of their support for farmers.
The NAMC was questioned on its unqualified audit opinion with findings; project sponsorships and income received; fruitless and wasteful expenditure; consequence management; challenges faced by smallholder farmers in accessing markets; the statutory levy collection from industries, and the 20% levy contribution towards transformation; the war in Ukraine’s disruption to ports and the export of products; procurement from designated groups; its support for export promotion, and dealing with the citrus industry's export issues; and the NAMC’s research and development relationship with OBP and the ARC.
The PPECB was asked about factors causing delays in perishable goods reaching export destinations, such as the transport strikes at the ports, ships that were not suitable, and the effect of load-shedding. Members also want to know how the war in Ukraine was affecting produce exports, and how the collection of the levies was related to the sales performance of the sector
The OVG was commended for its unqualified/clean audit opinion with no findings. The main issues discussed included valuation issues in some provinces; the reasons for its low performance in some areas; the backlog in old order claims; the current capacity in terms of valuers, and the use of external valuers; and the cost of digitisation.
The ITB questions included the building of capacity of the traditional councils; its unqualified audit opinion, with findings; its high employee costs and justifying the size of the entity; the approved posts and designations, with the commensurate salaries; incidents at the iSimangaliso Wetland Park Authority, and the possible authority of the ITB; the repeating audit qualification of property, plant and equipment, and preventative measures to avoid a recurrence; the financial reporting of Ingonyama Holdings, and a possible conflict of interest.
The SAVC discussion included cooperation over the use of mobile clinics; the spread of veterinary personnel and the delivery of their services; the capacity of veterinarians and nurses on the ground to deal with the FMD outbreak; and the relationship between private and state vets.
Ms Albertina Kakaza, Committee Secretary, said an apology had been received from Ms Thoko Didiza, Minister of Agriculture, Land Reform and Rural Development, who, together with Mr Thulas Nxesi, Minister of Employment and Labour, was leading the negotiations with Transnet worker representatives.
The Chairperson asked if the Deputy Ministers were in attendance.
Ms Kakaza said that Ms Zoleka Capa, Deputy Minister of Agriculture, Land Reform and Rural Development, should be in attendance.
Chairperson's introductory remarks
The Chairperson welcomed everyone to the meeting. The Committee had been engaging with the annual reports of the Department of Agriculture, Land Reform and Rural Development (DALRRD) and the Commissioner the previous day. It would be proceeding with the other respective entities today. This was an important and critical role for Members as Parliamentarians, as it was an extension of the Committee’s policy oversight function and responsibility. In addition, annual reports served two primary purposes. Firstly, they helped generate ideas and take investment actions; secondly, they helped identify red flags and early signs of trouble when everything seemed to be going well. To summarise, annual reports acted like an anchor to investment decisions and shareholder interest. It was therefore critical for the Committee to have the confidence that the Department had thoroughly and accurately engaged with these annual reports and presentations from its entities, and to enhance the quality, input, and engagement.
On a previous occasion, he had spoken about the value of the Agricultural Research Council (ARC) and the valuable role of research in further growing and developing the agriculture sector. He also reflected on the world-class products and services that Onderstepoort Biological Products (OBP) was renowned for, and the importance of protecting the valuable resources for the country, the region, and the continent. He had wanted Members to briefly reflect on the importance of marketing the agricultural sector and its value in attaining the goals outlined in the National Development Plan, as well as by President Ramaphosa’s State of the Nation Address remarks on the immense potential of the agricultural sector and its role in stimulating rural development.
South Africa’s agricultural food and beverages exports for 2021 were at a record of US$ 12.4 billion. The top export products included wine, maize, citrus, nuts, berries, grapes, wool, fruit juice, apples, and pears. Food drove the world, apart from clean water. Access to adequate food was the primary concern for most people on the planet earth. This made agriculture one of the world's largest and most significant industries. Agricultural productivity was important not only for the country’s balance of trade, but for the security and health of its population as well. It therefore went without saying that much greater attention needed to be given to further enhancing South Africa’s agricultural marketing capacity to grow its agricultural output share. Members needed only to consider that agriculture employed over 60% of the African workforce and accounted for roughly a third of the continent’s gross domestic product (GDP). However, Africa was the most food insecure region in the world, with more than 232 million undernourished people -- or approximately one person in four. This told the Committee that there was a huge potential for expanding the agricultural sector and exporting valuable produce. He invited everyone today to listen to and engage with the annual reports before the Committee, with a special focus on the National Agricultural Marketing Council (NAMC) and the wonderful work they did to place the agricultural sector on the map.
OBP's Annual Report 2021/22
Ms Rene Kenosi, Chairperson, OBP, presented the summary for the 2021/22 financial year. The net revenue had moved from a total of R209 million in 2020/21 to R170 million in 2021/22. The overall rate for organisational performance was 48%, which was a decline of 2% from the 50% achieved in the previous year. Support to developing farmers had been over-achieved by 400%. AGSA had reported an unqualified audit opinion with no findings. OBP had achieved a 95% reduction in irregular expenditure, from R9 million to R400 000, with no fruitless and wasteful expenditure.
Regarding the summary of the Board-initiated investigations, outcomes and actions implemented, the 2021 investigation was finalised; irregular expenditure was identified; disciplinary action was finalised; recoveries were noted and would be initiated by human resources (HR) and the legal department; policies had been reviewed and updated in line with identified weakness; and management had been tasked to ensure the entire report recommendations were implemented within the financial year.
Mr Luvuyo Mabombo, Interim Chief Executive Officer (CEO), OBP, reported on the organisational performance. The financial sustainability programme achievements indicated that revenue had decreased by R3.2 million; two new products dossiers were submitted to regulatory authorities for registration; two product dossiers were submitted to new markets; earnings before interest, depreciation, tax and amortisation (EBITDA) had increased by 3%; and vaccine doses sold had declined by 25%.
The continuous improvement of business processes programme indicated improved production efficiency and improved output on its top 20 products, and the information communication technology (ICT) enterprise architecture plan approved. However, there has been non-achievement of the genetically modified products (GMP) roadmap and improved GMP facilities targets. There had also been a decline in customer satisfaction and customer complaints resolved. Three increased distribution channels achieved, and the target of training 176 farmers had been overachieved by 200. In the governance and leadership programme, the targets for developing and approving reviewed policies 14 reviewed policies had not been achieved. There was also inadequate training against the workplace skills plan (WSP) target.
Highlights of the financial performance were that net revenue had moved from R209 million in 2020/21 to R170 million in the 2021/22 financial year. This was mainly attributed to equipment breakdowns, which had impacted the production capacity of OBP, resulting in a restrained supply of products to the market. The OBP had managed to make a profit of R5 million.
See presentation for details.
Mr N Masipa (DA) said that in terms of schedule 38, according to the financial report, this organisation had obviously stated that food security and safety were met through the development, security and availability of critical vaccine reserves and the ability to manufacture, distribute and sell vaccines. The Committee had been at the OBP to do oversight. What was its capacity to produce vaccines, since the Committee had left? Have there been any significant or notable changes to the OBP? What had been the impact of the ongoing strike -- if it was still ongoing -- and what had been the impact?
Relations with the animal health sector remained strained, but measures had been put in place to enhance them. This was the statement that he had picked up in the report. The reality was that the Committee constantly received concerns about the vaccines. What measures were in place to ensure that the strained relationship was being taken care of? He really welcomed the fact that Ms Kenosi and Mr Mabombo had indicated that with the GMP facility, the Special Investigating Unit (SIU) had been asked to intervene to investigate all those matters. He wanted to say well done and that the Committee would wait for the report about it from the OBP.
He also had the opportunity to go through the structure of the OBP. He noted that it had a Chief Executive Officer, Chief Operations Officer, Head of Legal and Company Secretary, Business Development Officer (BDO), Corporate Services Executive, Chief Financial Officer, and Chief Scientific Officer. Where did human resources (HR) lie in this particular structure?
The next question related to the revenue. Net revenue had moved from R209 million (quarter 4-year to date) in 2020/21, to R170 million (quarter 4-year to date) in 2021/22. Mr Masipa asked for an explanation around these dates referring to "quarter 4-year to date." Were they not dealing with the 2021/22 year end? He wanted some clarity around this particular explanation as he was unsure what reporting was being talked about, because the reporting that the CEO had just done reflected a different picture than what was noted in the report. Was the institution on track to change the fall in its performance or the downward trajectory? Could the OBP share with the Committee what the trajectory was looking like at the moment in terms of the financial performance from the sales of vaccines?
A point was made that the OBP was looking at investing in research and development to develop new technologies for solving animal health challenges. He wanted to know whether the OBP was not going to be duplicating what the ARC was doing at the moment in terms of research and development. Could the OBP clarify as to how they were going to differentiate themselves from the ARC in terms of this particular approach that they were looking at? This included investing an amount of money, which was in the areas that the ARC was not doing, and which the OBP was looking at filling.
He welcomed the news that the OBP had managed to retain 9001:2015 accreditation. He had received a letter on 16 September from one of the horse farmers, raising concern regarding the ability of the OBP to produce vaccines. In the letter, it was stated that although the OBP was producing these vaccines, they were doing it at a slower rate, the vaccines were even more expensive, and the horse farmers had been informed by wholesalers that they would not be releasing any more vaccines. The end of October was the D-Date for all horse breeders to vaccinate their horses, and vaccinating after that would be very dangerous. He requested feedback from the OBP concerning this issue. How was it being addressed? Were there enough vaccines to address this matter?
In the 2013/14 period, National Treasury injected about R492 million during the Medium-Term Expenditure Framework (MTEF) towards the GMP facility. How much of the R492 million was spent? How much of this R492 million that was allocated could really be attributable to possible corruption and so forth? What was left of the R492 million that was allocated to the project? Had there been rollovers, or had there been money returned to Treasury? He noted that the entity had indicated that its financial position had improved over the past five years due to the cash injection by the shareholder for the plant’s recapitalisation. He wanted to know if the OBP was talking about the R492 million for the recapitalisation, or which other amount they were talking about. He welcomed the clean audit, but was not satisfied with their performance as they were not meeting their targets.
Ms B Tshwete (ANC) commended the OBP on obtaining an unqualified audit opinion. She The training of staff had been prioritised -- how was this affecting the institution in terms of competency? She was asking this because the Committee was aware that there was a strike. Perhaps it was ongoing or not, and she was wondering if it was affecting the entity. This was one of the matters that the workers were demanding.
Secondly, the management had appointed an independent quantity surveyor to validate the GMP project. What was the actual amount involved, the outstanding payments, and the estimated completion phase of the project? Could the entity give a detailed progress report on this matter?
Lastly, the former CEO was dismissed in December 2021, and the entity reported to the Committee that the matter was with the Commission for Conciliation, Mediation and Arbitration (CCMA). What were the delays? What were the issues, as the matter had been with the CCMA for a couple of months now? There was a tendency to delay the implementation of consequence management, costing the institutions and wasting taxpayers’ money.
Mr M Montwedi (EFF) thought that, first and foremost, it was important for the Committee to appreciate how the OBP managed to handle the entity's financial affairs. He hoped that the OBP would be a good example to other entities and the Department as well, because the DALRRD and other entities were failing dismally regarding that very important aspect.
The one issue that he wanted to raise had been raised by Ms Tshwete with regard to the CEO. The OBP remained the only manufacturer of animal vaccines in the country. This was a challenge now, with instability at the executive level, and the Committee should get a briefing as to how soon the matter could be finalised. Have there been any vaccine shortages in the country? How had the OBP managed to deal with that in the previous year? How did it plan to deal with any other vaccine shortages in future, and in the coming year?
His last issue concerned the modernisation of the vaccine manufacturing plant. After almost ten years since a once-off allocation for the modernisation of the vaccine manufacturing plant, there had been very little work carried out, except for some of the expensive equipment that was lying around and not functioning, yet the industry continued to suffer from shortages of vaccines at a time they were urgently needed. He needed the OBP to deal with this issue, and to say by what time the GMP facility would be completed. The OBP said some of the other machines were ordered from overseas and some were not in good working condition. When could the Committee complete the modernisation of the vaccine manufacturing plant?
Ms N Mahlo (ANC) wanted to follow what other Members had said in commending the entity for obtaining a clean audit. However, one would also like to add that it was also good that the OBP had obtained accreditation. Her questions dealt with the issue of under-spending. Why had the OBP under-spent in some areas? How was it going to be possible for the OBP to carry on without some policies that were supposed to be established, but had not yet been established? The OBP would not be able to enhance good governance if it did not have all its policies in place. It had to tell the Committee why the policies were not being reviewed or implemented, as this was one of the targets they had put in place for themselves.
The OBP also talked about training. Could the entity show the Committee the list of those trained so that they would know where to go when they did their oversight?
Lastly, her opinion was that if an institution did not have good policies in place in some areas, one would find that they had failed to implement certain things or would fail to exhaust the budget. Those things could damage the accreditation and good governance that the OBP was coming up with.
Ms T Breedt (FF+) wanted to get back to what Mr Montwedi had mentioned, which was the roles of the OBP, the ARC and the NAMC in certain research and policy developments. She was very happy to hear that at last, these entities were speaking to one another and having coordination. However, how could the Committee ensure that the OBP was not the whole time redesigning the wheel? How were they ensuring that the OBP was not doing research that the ARC had already done, or that the NAMC had already experienced or done some work on? How did they ensure that and was there a working relationship? How did the entities decide who did what type of research? She feared that the Committee would have a bunch of entities that were all so focused on their own doing or silo-working that they were not getting the greater picture, and that they could actually achieve so much more.
The OBP was saying that they were overachieving in farmers' training. How were they measuring this? Was the OBP having them write a test, or were they just dumping information on them and saying, “Golden star – we have achieved that”? She feared that if there was no way to measure how much the farmers trained, the Committee would not be able to see what they needed to improve.
She wanted to find out the nature of the customer complaints, how the OBP resolved them and, regarding the one they had achieved, whether the customer had been satisfied after that. Mr Masipa also mentioned that the Committee was seeing entity at a stage where one almost could not say the word “OBP” to a farmer without him getting upset because of their dissatisfaction with the OBP.
She thought it was great that the OBP had referred to the GMP roadmap. It needed to be done, and more entities needed to be seen doing that. The Committee had noted that the OBP was underachieving in vaccines sold and vaccine production. She knew that when the Committee was there in April of this year, the OBP said they were in the middle of disciplinary actions being taken against staff members. There had been a breakdown of how many males and females they had, but she wanted to find out specifically about filling vacancies. What was the vacancy rate at this stage? Where were critical positions vacant? Did the staff impact the fact that the organisation was underachieving in terms of vaccines?
She was very worried that the revenue was decreasing, and the number of vaccines sold had decreased. Mr Montwedi had said it -- there was a "white elephant" standing there. The OBP had brought in state-of-the-art machinery. She quickly referred to it, giving the Committee feedback on the fridges that were not working correctly -- some of them were cracked, and one was in the process of getting fixed but could do only certain vaccines. She asked if the OBP could currently speak to the status quo of their apparatus and machinery. For example, she listed the dishwasher valve and asked whether it was up and running again. Were the fridges working again? The OBP mentioned a shortage or unavailability of African Horse Sickness (AHS), Brucella S19, and blood vaccines. If the Chairperson would allow, she asked that the Committee receive in writing the current status of all the vaccines that the OBP produced. Did they have them in stock? Where were the vaccines in stock? When were they going into a new production cycle? Lastly, what was the reason for the decrease in vaccines sold? Was it just because of production, or was it because people were finding other alternatives and companies that actually had them?
Mr N Capa (ANC) appreciated the financial performance of the OBP. He asked that they never regress from this, and that, instead, they should try their best to improve even further. He recommended that the OBP always highlight areas where they worked with the ARC, or where they worked differently from the ARC, so that the Committee should not have to seek those clarities. He knew that there were areas where they could work together and areas where they could work separately. There was nothing wrong with that to him, but it helped to get that clarity.
Regarding farmer training, it would assist if they always had the evidence so that there would be no question of asking who those farmers were that had been trained, where they were, and what they were doing. Even if that information was just an annexure, it would assist in strengthening the understanding of the OBP’s performance. Were there any other institutions that the OBP worked or cooperated with in this field of research? There were definitely universities or institutions that were always part of research, so it would assist if there were other institutions in that performance.
Lastly, he asked the entity to do themselves and the Department a favour by highlighting areas where they definitely saw that they were contributing to fighting unemployment, poverty and inequality. He was sure it was possible to identify such areas, because if the OBP did not do that, it would seem as though nothing was being done to fight those three evils.
Ms Breedt commented that the OBP, under their action step to increase revenue, had said that they would adhere to the 2022 sales forecast and production plan, and asked for the plan to be provided to the Committee.
Mr Masipa said that in the report of the ARC, they had indicated that they had produced 49 890 blood vaccines for the OBP. Was the ARC now producing vaccines for the OBP? If so, how much of the OBP’s vaccines had been produced in this financial year – particularly the blood vaccines?
Ms Kenosi responded that the OBP board had approved the procurement of the vector-proof facility and the additional freeze dryer, which was now with the awarded service providers. As the OBP had indicated previously, the timing between the placement of orders and the commissioning of their equipment was approximately 24 months. In the meantime, the OBP had also been in discussion with an alternate service provider to assist in producing some of the OBP’s vaccines – which management could talk to.
Regarding the strike, some legal matters had taken place. As far as she knew, the strike was over. The employees were back in their positions. However, she thought, on average, it was probably about ten employees, who were members of a particular union, involved. The CCMA matter involving the CEO took a long time, but she thought there had been challenges regarding the other party. Even the Commissioner at the CCCMA had tried to expedite the process, because it was just dragging on for too long.
Stakeholder engagements had improved, and she knew that the OBP team was constantly in discussion with various parties and stakeholders within the sector. These were ongoing, not without challenges, of course, but there was regular interaction, especially around the shortages of vaccines and the expectations out there. The CFO would respond to the under-spending in detail, because the OBP did not receive funding from the fiscus -- it was self-sufficient -- so where it saved money and did not spend on certain aspects, it would ultimately reflect in the net profit of the organisation. However, if the Committee looked at an area like ‘employee training’ as an example, where very little training had been achieved in the past financial year, it was also because of the benchmarking, matching and placement exercise that was underway. In this financial year, probably in the last two quarters, the OBP would see a rise in the training expenditure, because people would have been matched and placed in their positions by then.
There was a question about where HR sat in the organisation in the old structure, HR reported to the CEO. In the newly approved structure, the OBP had defined the corporate services element, where HR would be a part of that division. On the policies and procedures and the areas around how the OBP wanted to enhance good governance when its policies were outstanding, she specifically referred to the HR policies, where a service provider had been appointed and was busy with the HR policies for now. In the other divisions, the policies on those environments were being reviewed on an ongoing basis. She thought it had even been prioritised which policies were done first and could be served at the sub-committees and ultimately receive approval from the OBP board.
Regarding filling vacancies and the impact on the organisation, the OBP had filled only critical vacancies recently due to the matching and placement exercise. Of course, the rest depended on where and how the OBP matched and placed individuals, and they would look at the vacancy gap thereafter.
Mr Mabombo referred to governance and the policy targets that the OBP had said they had not achieved, and said the policies did exist but they were dated. The OBP had taken it upon themselves to ensure that the policies were updated and relevant regarding the Labour Relations Act 66 of 1995. This referred to specifically HR policies. From a skills development point of view, the OBP was reporting that their capacity at HR historically had been very small. This resulted in some of the skills and skills development work they did, not being fulfilled to the fullest capacity. As he spoke right now, the training programme for the OBP staff was at a peak, from information and communications technology (ICT) training to general management training. As the OBP would reflect when they reported on the third quarter performance, their training was at full speed.
Having said that, the OBP’s capacity from a technical point of view to produce vaccines could not be matched to any skills gap. They had the technical capacity to produce any vaccines in their 52 or so list of vaccines, so they were not running a shortage because of a skills gap. The OBP’s technical skills were at the level which was required by such an entity.
The OBP facility was sitting on a very interesting erf. On the right of their gate, they had the university that produced students that had done veterinary sciences. On their left, they had the ARC which did research on animal health. In the middle, the OBP produced the vaccines. As he spoke, the OBP had an MOU and a steering committee that ran the programmes through that MOU between themselves and the ARC. The chairpersons of the two entities met half-yearly to make sure that there was progress. In this instance, there were certain programmes that the OBP ran together with the ARC – the Onderstepoort Veterinary Research Institute (OVRI). One of the projects that were at the conception stage, was to what extent the OBP could share any renewable energy programmes that assisted both entities. Energy sustainability for both entities was crucial. The OBP had submitted a request to the Department, and it had responded to them favourably. The OBP was now in the process of putting together a comprehensive energy sustainability programme for the two campuses. There was thus no duplication in research.
The OBP also had an MOU with the University of Pretoria veterinary campus, where they worked together on certain projects where there were candidate students for veterinary science. When the students did their research, they could share what they had picked up in the field so that the OBP could produce relevant vaccines for the future.
He said that Ms Kenosi had already talked about the strike, but to put it mildly, a group of 16 employees had tried to hold the organisation to ransom. The OBP had taken the matter to the labour court and had won the case. That strike had been declared unlawful, as it did not meet the rules of the picketing process, and the labour court had awarded costs against the union that was involved, together with those members of staff that had been involved, so the OBP was in the process of recouping all the legal costs that related to the strike.
Regarding where HR currently resides concerning the structure, HR belongs to a division called Corporate Services. Their function included ICT, HR and security management.
Lastly, the OBP had developed a mitigating strategy around their freeze-drying process, because this was where their production had failed. It had been because the OBP was dealing with dated and very old equipment. They had currently placed an order for a freeze dryer, and were working with the Spanish and the French for their support on their current freeze dryer. The OBP was now on the verge of getting into a contract with a company of the OBP’s stature that would be able to freeze-dry the product for them, because the OBP’s technology was very important. All the company was going to do in this contract was freeze-drying for them. However, the rest of the manufacturing process would be the function of the OBP.
Ms Elspeth Govender, CFO, OBP, responded to the financial questions that Members had posed. The first was to provide clarity on the numbers that were provided. In the presentation, the OBP had given the net revenue. If Members looked at the annual report, note 16 explained what that was composed of. They had a gross revenue for the year of R186 million. They had then granted a discount of R16 million, giving them the figure of R170 million they had spoken to. The presentation thus spoke to only the OBP’s net revenue.
The second item that was spoken about was the cash flow. The OBP had stated that they were given R492 million in capital expenditure assistance from the Department. However, cash flow had improved operationally. The OBP’s operating cash flow in the prior year had been R6 million. In the financial year that they were reporting on, they had increased their operational cash flow to R41 million, meaning that although they had reduced the revenue that they had made, they had, in turn, put in cost management strategies that had reduced expenditure. So the OBP had spent in line with what they had come up with, being additional cash of R41 million, which they were going to utilise to invest in purchasing the new freeze dryer.
Regarding under-spending, the OBP’s business model was slightly different. The OBP did not get an operational grant, so they had to spend what they made. In noting that, the OBP had moved from revenue of R209 million and had also then had to reduce their expenditure accordingly. In the previous year, the OBP had moved from R214 million and a profit of R1.4 million. In this financial year, it had a revenue of R173 million. They had had to reduce their cost of sales by R28 million and their operating expenditure by R25 million, and in turn, they had actually then had a comprehensive income or profit of R5.3 million, so this was an increase in income through its cost management strategy. It was a slightly different model in that the OBP chased its budget, but they had to align with what it made. In terms of employment, she would speak to direct and indirect initiatives. In terms of direct initiatives, the OBP had paid internships, amongst others.
However, the OBP also had a supply chain management (SCM) department where they had initiatives that they could invest in. They were looking at enterprise development programmes, focusing on their immediate community and empowering the black community, the disabled, and women, therefore bringing employment in those indirect initiatives through the SCM.
To increase revenue, there was a concern about what initiatives the OBP had in place. According to the OBP’s amended budget, they had to increase revenue but also be sensitive to pricing, so they were going to increase their revenue to R205 million for the current financial year, and then to R213 million. The increases were significant from where they were now, so they had taken cognisance that they still needed to increase their revenue. It would obviously be in line with the initiatives they had put in place for the purchase of the freeze dyer that worked with viral vaccines, as well as the plant maintenance programme they were putting in place.
Dr Jacob Modumo, Business Development Officer: Marketing and Sales, OBP, responded to the question on the farmer’s days -- where they were being held, and whether they were quantifiable. He said the OBP was in the livestock industry sector, and it was obvious that they had a targeted approach on their farmers’ days. Their main target was livestock farmers, which included cattle and sheep. The OBP also had an association with some of the horse owners, where it engaged with them concerning the data related to that sector. Farmers’ days were being held across the country, but the OBP’s main focus, based on the number of certain species, would be more on Northern Cape and Eastern Cape, because that was where one would find quite a lot of sheep farmers. The OBP also had activities in KwaZulu-Natal, Limpopo, Mpumalanga and North West. Wherever there was a high concentration of livestock farmers, they were there. The OBP also had joint activities with the provincial Departments of Agriculture, at which they promoted the use of vaccines as part and parcel of educating farmers concerning their farm security.
The OBP also had joint activities with associations such as the Red Meat Producers Organisation (RMPO) and had several roadshows with organisations as part and parcel of their training. The OBP did work very closely with the ARC. In fact, in some of the ARC’s Kaonafatso Ya Dikgomo (KYD) projects, the OBP had been involved on several occasions – they were a team and had jointly been on the roadshow with them. The OBP could not do it alone, and had to engage with all other stakeholders. The question was whether the training was verifiable. He said all of the information presented to the Committee, including the number of farmer’s days, had been audited. It was verifiable, and the OBP had the contact details of all the participating farmers, including their names and regions where they stayed.
Concerning African Horse Sickness (AHS), there had been some doubts about whether the OBP was producing AHS vaccines. He assured the Committee that it produced AHS vaccines, even though they had some challenges. The AHS control zone was the most sensitive area of interest not only to the OBP, but also to the equine industry. It had had engagements with the equine industry. It made some assurances, as they needed to supply more than 40 000 doses to ensure that the export industry was not being affected by the unavailability of AHS vaccines. In the previous two weeks, approximately 40 000 doses of the vaccine had been dispatched. Even before that, the OBP had supplied a lot of doses to that region, and had started now supplying some of the AHS vaccines to big regions such as Gauteng, where there was quite a high concentration of horse owners, as well as KwaZulu-Natal.
Concerning the number of doses and why they were dropping, in the opening statement of Ms Kenosi, she outlined that the OBP had some equipment breakdowns, which was unfortunate. It had had an impact on the OBP’s production output capacity. However, that had not been the only challenge. The one thing that needed to be acknowledged was the impact of electricity outages, which were part and parcel of production. Just like any other manufacturing sector, the availability of energy would have an impact on the OBP. They had indicated a year prior how much the OBP had actually lost with regard to the product that they had to dump because of the electricity outages. They also had some challenges concerning the equipment that impacted their production output. Despite the current challenges, the OBP’s first quarter financial performance had been very impressive, as they had gone far beyond their sales revenue target and doses sold. The OBP exceeded approximately 20% of their target in quarter 1. The OBP had serious challenges in quarter 2, as they had not reached their targets.
On the plan ahead, the OBP had reviewed what they could do concerning what was available to them. They had plans to look at alternatives within the next six months, as had already been explained by Mr Mabombo, involving certain products of high value. They believed that they would be able to break even by the end of the financial year, so the future was not as bleak as it may seem. Plans were already available for the OBP to ensure they achieved their targets.
Acting Chairperson Capa said that the OBP had run out of time, but said all the remaining questions could be answered in writing by Friday. He appreciated that there was a lot of information to be given.
Ms Mahlo said she would not be asking a question that needed to be answered now. To deal with its electricity challenges, were there any other plans to look at other avenues like solar usage or a backup system that would not make the OBP wait while the electricity was not there?
Mr Masipa asked if the Committee could have a whole day with the entities, because he was worried that the Committee was just going to cut down on questions and not get the answers. It had really been a problem in the past where the Committee asked for written answers and never received them at all. If the Committee prevented the entities from sharing with them, would they really be doing oversight if they were not getting the full answers? He asked that the Committee indulge the Department, because it definitely needed to do a follow-up as well.
The Acting Chairperson said the fact remained that the Committee had this session and the afternoon session with all of the entities. At the moment, the Committee had heard only one entity and still had two more before lunch. In the afternoon, there were another four entities. He worried about the Committee spending all of its time on one entity. It did not seem as if the Committee had the opportunity or chance to leave the meeting uncontrolled. Going forward, the best that could be done was that the time allocated should be used as it was.
Ms Tshwete said that the Acting Chairperson was very clear.
Mr Masipa said the Acting Chairperson had answered him, but he thought that perhaps the Committee should allow the entities to answer the questions as fast as possible, but also remind them of the time before they started answering them so that they could allocate each other enough time to speak. His concern was that Members were not being answered on questions of much importance.
Ms Tshwete asked to assist in terms of procedure. Perhaps the Committee should remind the entities that the allocated time was 20 minutes now for everyone about to present. The allocated time was 20 minutes for the presentation, and then 20 minutes for clarity-seeking questions and answers moving forward.
The Acting Chairperson said that if Members then agreed that the remaining questions would be answered in this way, it was not going to be a tradition. The presentations that were coming now must be done within the allocated time so that it did not disadvantage Members on their oversight responsibility. He appealed to Members, because it so happened that the OBP apparently had a lot of information to give to the Committee, and he was not sure if they had been aware that they had only 20 minutes. Now, all entities know the time allocation.
Ms T Mbabama (DA) added that perhaps the Committee needed the Secretariat to keep track of the questions so that Members knew which questions had been answered and which were not, and not just leave it up to the entity.
The Acting Chairperson said that was in order, and he hoped that the Secretariat understood it.
ARC's Annual Performance Report 2021/22
Dr Monodowafa Mashaba, Deputy Chairperson, Agricultural Research Council (ARC), introduced the presentation, and said the ARC again received a qualified audit due to property, plant, and equipment challenges.
Dr Litha Magingxa, President and CEO, ARC, said that for the 2021/22 financial year, the ARC had 83 reportable performance information output indicators, and 64% of the overall performance targets were either met or exceeded. 78% of the research and development performance targets were met or exceeded. There had been 479 scientific publications – the highest the organisation had ever achieved. Some stimulating discoveries and contributions were also made over the same period. The ARC expenditure for the year under review remained within budget. The performance trend has been steadily improving over the years. Internal solutions have been developed to meet challenges and investment in technology areas for more efficiency.
Mr Abdul Carim, CFO, said the parliamentary grant had increased from R980 million to over R1 billion, but the entity had lagged behind with external revenue of R360 million. Employee costs and other operating expenses remained the same. There was a net surplus of R198 million. The financial position overview indicated total assets of R3 billion, liabilities of R700 million, and net assets of R2.2 billion. Foot and Mouth Disease (FMD) funds of R 480 million continued to be invested at the Reserve Bank Corporation for Public Deposits. The ARC had received a qualified audit opinion from the AGSA for a sixth year. Management had developed an audit improvement plan to work towards a clean audit for the 2022/23 financial year.
See presentation for details.
Ms Mbabama said her concern was around the qualified report with material findings, especially non-compliance with legislation. She wanted the entity to give the Committee more information on why there was non-compliance with legislation, as that seemed to be a matter of negligence, rather than anything else. Regarding the qualification areas that had increased from one to four, she was satisfied with the answer that the ARC had given the Committee. It looked forward to the end of the current year, when hopefully all of these challenges would have been rectified.
Mr Masipa wanted to emphasise that the Committee needed enough time to indulge and engage the Department. The Committee could not afford to run the meeting like they were running a funeral programme -- they definitely needed time. The Department and the entities obviously wanted to elaborate a little bit on what they were doing.
He noted that the CEO was new, the previous CEO’s contract ended in July, and the CFO resigned on 28 February. The Committee had heard that the General Executive (GE) had resigned in January, and there had been people in acting positions in HR, Marketing and Legal Services. Dr Hilton Vergotine had been acting everywhere. He did not think that with this particular executive management team, the Committee had been given a picture of the current situation regarding the senior management team, and whether permanent employees fully occupied all the positions. He asked that the ARC update the Committee in that regard.
The other point that the ARC raised was that its biggest risk was the inability to meet its external revenue budget due to its failure to generate sufficient money from its research and development professional services. What had caused this inability to create sufficient demand? What was the ARC doing to address this particular problem?
The ARC had also indicated that they had a commercialisation strategy. Could it share with the Committee this strategy and explain which elements would assist them in becoming more viable? As was known, the fiscus was not really going to sustain the ARC much longer. The Committee welcomed the progress that had been made with regard to the FMD facility, and was hoping that they would see some good traction happening. The ARC had referred to concluding about 77% of their research and development projects, which constituted 479 scientific research publications. He was personally interested in the development of the post-harvest/pre-treatment strategies for managing stone fruit. He requested that the ARC share this with him, as the Western Cape, had a 70% deciduous fruit industry.
During the presentation of the OBP, he posed a question regarding the 49 890 vaccines produced for them by the ARC, which were blood vaccines. The OBP had not answered this question. The question that he had asked was whether the ARC was able to produce 49 890 blood vaccines, but what was the quantity of blood vaccines that the OBP was able to produce. If the OBP was still on the platform, he reiterated that if the freeze dryer did not affect the blood vaccines, the freeze dryer challenge affected the bacteria vaccines. However, the issues that were being found, or the concerns that the farmers raised, were really more related to the blood vaccines. He had not heard of any issues that had been raised concerning the bacteria vaccines. What revenue was being generated from the sale of these vaccines between the ARC and the OBP? He knew that they probably had to pay royalties, but was revenue being made out of these vaccines? Could the amount that was being made out of these vaccines be shared?
The audit opinion had obviously been repeated over a number of years, and the Committee had been talking about it. He could directly link this audit opinion with the ARC's staffing at the senior management level. While he was linking this to the senior management level, the accounting and other staff that the ARC did not have in the senior management positions, he thought it was very important that the ARC share with the Committee the report that they had produced and handed over to the Council that pertained to the land that the ARC owned. He was asking this question, and had asked it to the Auditor-General the previous day, as they had said that they had done a sample of properties in terms of valuations because there was a problem concerning the land that the ARC owned in terms of the valuation record keeping. Obviously, there were invasions and vandalism taking place on this particular property. He thought this was an area the ARC needed to look at.
The ARC had indicated that there was a moratorium on vacancies. Could it clarify the potential impact of this moratorium? The ARC had highlighted that they were really focusing on ensuring that they were hitting high-level areas in terms of hiring scientists and so on. What vacancies were the ARC talking about? What was the impact, and how was it going to address these particular impacts? The ARC managed the recording of animal data, which was very important concerning what the Committee was doing. One of the things that were being struggled with was the database and census of cattle, sheep and so forth owned by the rural communities. It was reckoned in the report that the ARC managed the national animal recordings and improvement schemes, and the National Animal Database on behalf of the DALRRD. Could the ARC assist the Committee by giving Members the exact numbers of livestock in the hands of the rural community or black farmers and the statistics on the commercial farmers?
One of the ARC’s target areas was producing new vaccines. Could the ARC advise how many vaccines they had introduced in previous years?
His biggest question was related to the issue of the audit finding, because if he looked at the land valuation according to the ARC’s report, the land valuation for the previous year had been R651 million. For the current year, it was still R651 million. He thought this was probably an area the ARC needed to zoom in on and address as urgently as possible.
Mr S Matiase (EFF) said he had been struggling to get on to the platform and had missed the greater part of the presentation. He would hold back, listen to other Members' inputs, and then at some point, he would come and make some contribution.
Ms Tshwete said she was concerned about the audit opinion of non-compliance with legislation. In the same breath, she found comfort in the ARC’s remedial plan that the CFO had presented, that they would attend to this. The Committee would monitor that the ARC complied with the legislation and take them into account on the plan they had presented to the Committee.
The ARC had been training students. Did it have a placement strategy for them?
Could the Committee get an update on the current status of the FMD facility?
Mr Montwedi said that from the presentation of the ARC that he had managed to read, they had been speaking of a skills audit for land reform beneficiaries. He wanted to ask the ARC what the importance of the skills audit for land reform beneficiaries was. Why was the ARC not doing the skills audit prior to the allocation of farms so that they were able to advise the Department about allocating them? The ARC had mentioned mobile laboratories -- how many did it have? How had those mobile laboratories assisted farmers? Was there a breakdown that the ARC could provide to the Committee to indicate the work that the mobile laboratories did?
The ARC used to implement a programme called the Livestock Production and Development Programme, where it would sell cows with very good genetics to emerging farmers to improve their livestock. Why was the ARC no longer doing this? That programme used to be very beneficial to farmers in communal spaces, as they received very good genetics from the ARC at a very good price. Was there a possibility of the ARC bringing back that programme? What would the ARC need for that programme to be resuscitated? He was raising this, looking at what had been said by the Auditor-General in the ARC's qualified opinion on property, plant, and equipment. He asked whether the ARC also had a record of their stock in their different facilities. Did the ARC know how many cows, bulls and livestock they had, or if they had goats or sheep that they were using for their own research, in all of their stations? Was the ARC selling some of them? What revenue had that generated for the ARC?
The other issue he wanted to raise with the ARC concerned outcome five of enhanced resilience in agriculture, where they spoke of climate resilient solutions. He wanted to raise this in light of the current climatic conditions, where especially livestock farmers were seriously affected by veld fires that continued to destroy grazing land. Had the ARC not done some form of research on what could be done for farmers to mitigate against these wildfires that continued to destroy grazing land? Was there any advice that the ARC was able to offer?
On the KYD programme, where the ARC had said that they had assisted 7 096 smallholder farmers, he wanted to know what programmes those farmers were taken through. His interest was that, as part of the KYD animal improvement programme, how the ARC had contributed to assisting people in improving their stock's genetics.
The Committee had conducted an oversight visit at the ARC in Pretoria, where they had good facilities, could harvest semen themselves, and store semen in semen straws. Had the ARC not thought of getting some of those good genetics? The ARC harvested the bulls, and they had semen banks in their centres where farmers could access them at a very reasonable price. One saw white farmers going to an auction to buy a bull for R1 million, and they would go and harvest that bull, where one kick of a bull would make up to 70 straws of semen. Why was the ARC not looking into programmes like that, where through artificial insemination on small stock and livestock, they could contribute towards improving the genetics of the livestock of farmers? The last question, he was not sure if it was the ARC or NAMC. There was a pilot programme on the planting of potato. How far was the ARC with this project? If this was not an ARC project, they could indicate that the question would go to the NAMC because he was unsure where it was located.
Ms Mahlo said the country was talking about transforming the education and training landscape. The ARC had talked about training young people in their company. Was it developing quality learning and training programmes in collaboration with the Agricultural Sector Education and Training Authority (AgriSETA)? Was there an analysis of who the learners were and the implications of the learning programmes? Was there any plan to ensure the ARC supported those learners post-training? Was the ARC's training accredited with AgriSETA to allow those students who were being given the training to seek greener pastures in other companies, to receive certificates from the entity? Was the ARC considering the issue of recognition of prior learning (RPL) for those getting training? Were there any special qualification requirements for learners who were adults?
Ms Breedt said that notwithstanding the instability at the executive management level, the qualified audit opinion on the same issues over the past five years was a matter of concern and really needed attention. The ARC should explain what they were going to do about the irregular expenditure of R323 million, for which there had been no consequence management. It should also provide details about the irrecoverable debt of R19 million, which was a lot. In cases where transgressions were caused by people who had since left the entity, was there a possibility that the ARC could still apply consequence management? Could it recoup the monies where relevant in such cases?
In terms of the apps the ARC had developed, she thought that was very interesting work and wanted to know how they would be included in the biodiversity hub. The ARC had briefly alluded that they would be working with that, but she thought that the Committee needed concrete information on how they would work with the apps and how they had marketed them. As she was an iPhone user, it had come up continuously, and she wanted to find out if the ARC’s apps were compliant with all cell phone manufacturers, or if it was just those that had android systems.
She hated sounding like a broken record, but it seemed to her as if the OBP and the ARC were doing exactly the same research, and the only problem was that they were working in silos and not seeing it. She needed to get clarity as to what the working conditions were. Was the ARC working with the OBP? Was there a connection in terms of the sharing of information? One of the Members mentioned farmers' support. Again, the Committee was saying, as with the OBP, that farmers had been supported, yet it did not know how they have supported and the details of the support. How were the farmers supported? How was the ARC measuring this? She really wanted to know and did not think that she had got an answer from the OBP. She would thus like to find out from the OBP and the ARC how they were measuring their support for farmers, and what the programmes for assisting them were.
It was the Deputy Chairperson, in his introductory remarks, who had said that the private sector was encroaching in the ARC’s space. She almost wanted to say that that was exactly what was happening, because it felt to her as if they had this disjointedness, in that the private sector was not communicating with the ARC. They were not having this communication, as the Deputy Chairperson had also indicated. She feared that the Committee was forcing the Department to work with the ARC, saying that this was the research arm and should be perfect. However, it did not help that the Committee said this and tried to ensure that farmers and clients used the ARC, but the ARC was behind in terms of development, research, and technology, as opposed to the private sector. How was the ARC going to address that? How was the ARC going to address the private sector encroaching on this space? How was the ARC going to ensure that it remained a state-of-the-art council, and was not just lagging behind all of a sudden?
Linked to this, when the Committee was on oversight at the ARC, there was mention that they had many retiring researchers. If she remembered correctly, about five more senior researchers were retiring within the next 12 months, which was a matter of great concern. They would not assist this encroachment by the private sector on the ARC and the ARC’s terrain. How was the ARC ensuring a skills transfer? How were they ensuring that institutional knowledge was not going to be lost? She remembered seeing a lot of interns, but as was known, interns were temporary. How was the ARC ensuring that they were retaining youth, that they were getting youth in, retaining knowledge, and ensuring that when these scientists actually retired at the end of the year, or within the next two years, they did not sit with a knowledge gap?
Dr Mashaba responded that Members had raised the issue of non-compliance with legislation. That was one of the findings of the Auditor-General. In short, the three areas that led to the qualification in overall were grouped together, and then the AG made a pronouncement that the qualification was because of non-compliance with legislation. There was no other specific issue, except those that led to the qualification, which he thought was important. The second issue was the number of people acting in management positions, to which the CEO would respond. When the previous CEO left the organisation, the ARC initiated the process of appointing a new CEO, which they had done. The new CEO had started, and he had then also appointed the CFO, so the process that he was engaging in now was to look at the organisation and decide what type of structure he would be able to work with to do his job. The Council had given him the space to decide on the team and the type of structure, and to appoint a team that would work with him to execute these functions. That matter was still with the CEO. He thought Council had done their job.
The commercialisation strategy that Members had raised would be shared with the Committee, but the most important thing that the ARC was looking at was to try and commercialise their intellectual property (IP) by creating an agency that would be responsible for actually ensuring that they could bring in venture capital and ensure that their research could be operationalised, and the ARC could then be paid for the IP. It was a process that the ARC was currently engaging with. Firstly, they would want to give the executive authority regarding creating the agency. If not, Treasury had to give the go-ahead to the ARC, so they were busy with that.
On the issue of the FMD facility, the ARC had appointed the professional services and all the consultants that were supposed to assist them. It had about three months to finalise their contracts, because the ARC was trying to avoid some of the pitfalls. The OBP had already explained that they had engaged in cancelling the contracts.
The ARC tried to ensure that the contracts that they would be signing with their service providers – the particular service providers, the engineers, the electrical engineers, the architects, and the process engineers -- being about five or six companies that had been appointed, were watertight and would ensure that they did what they were supposed to do.
Concerning the issue of the private sector encroaching on the ARC’s space, for many years, the stakeholders, growers, farmers and associations had naturally been moving away from the ARC due to the issue of the working relationship between themselves and the ARC. This Council was working very hard to manage the stakeholder relations to ensure that they again put the ARC in front of the stakeholders as a collaborative institution -- an institution that was still able to provide the services that their growers, farmers and associations were looking for. In essence, there was a lot of work that had been done. The issue of investment in new technologies was something that the ARC was looking at, to ensure that they also attracted the best skills that were available in the industry.
Dr Andrew Magadlela, Group Executive: Animal Services, ARC, responded on how many blood vaccines were supplied to the OBP. Normally the ARC supplied in the region of about 65 000 doses to the OBP. How do they arrive at that figure? Normally, the ARC sat down with their OBP colleagues, and they then told the ARC what their needs were in terms of the blood vaccines that they used for controlling Heartwater, Redwater and gallsickness. They would agree on a figure, and then supply those vaccines to their OBP colleagues. Certainly, their OBP colleagues and themselves did sit down to talk about all sorts of things together. They talked about FMD issues, how they could assist each other in terms of research backstops or research support, and all of that. There was usually no overlap of duties. The ARC produced the blood vaccines and handed them over to the OBP, and then the OBP processed them further, and bottled them, so there was no overlap of responsibilities in that regard. As he had said, the ARC had produced in the region of about 65 000 doses in the previous year, and had collected nearly R4 million from the OBP for them. Mr Masipa had asked how many blood vaccine doses had been handed over to the OBP so far this year. The ARC had handed over 21 840 doses of blood vaccines, which had happened mostly in the first quarter.
Then there was the issue of the ARC having stopped providing genetic material to farmers. That had not stopped. The ARC still provided genetic material to smallholder farmers. However, what happened was that it depended on the funding that they received. Members would appreciate that these things did cost money. The ARC provided what it could provide. Even very good technologies, embryo transfers, and all of those things were provided by the ARC – not just artificial insemination. However, it depended on the amount of money that they had. In collaboration with the provincial departments, the ARC would work out a programme and had to agree on the breed that was going to be supplied to the smallholder farmer to improve the genetic makeup of the livestock in the villages. Once again, this was also something the ARC did not always agree on. Some farmers would swear by a particular breed, and another group would swear by another. Usually, when farmers came to the ARC and told them their needs, the ARC assisted in whatever manner they could.
There was a question of what the KYD programme did for the farmers. Each and every farmer that the ARC reached out to, or that claimed to be a member of the KYD scheme, was contactable. Obviously, the ARC had some limitations regarding what they could provide publicly through their identity details. Certainly, each and every one of them and all of these things were audited not only by their internal audit people, but also by the external audit, so there was no thumb-sucking here at all. He could guarantee to Members that each and every one of these farmers that the ARC claimed to have reached out to, they had reached out to. As to what the ARC did for the farmers under the auspices of the KYD programme, it did not really have what was called a one-size-fits-all service offering arrangement. Each and every farmer had their own needs. Normally, the ARC went in and discussed and engaged with the farmer to know exactly what they wanted. The ARC then tried to provide the services that would address their needs.
For instance, the ARC would get to a particular household and find out that they were keeping more oxen than what they called productive animals. The ARC would talk about what the composition of the herd should be for the animals to build up. They would also help the farmers to know what to feed the animals, what to vaccinate with, and when to vaccinate, and all of those things, and would also help the farmers to know when it was that they were supposed to allow the bulls to get to the cows or the other way around. The ARC would talk about all such things. They assisted the farmers in how they could improve the chances of getting their cattle marketed and the cattle attracting the highest prices. Usually, some farmers wanted to know how to castrate animals, while others wanted to know how to brand them. It normally differed from farmer to farmer, but the ARC pretty much had a whole suite of services that they could provide to them fs. Usually, it was not an arrangement where they went there just once. The ARC formed a relationship with the farmers and then went back to them every now and then to make sure that things were still going accordingly.
When a problem came up, it was not always reported, but the ARC received calls from farmers about all sorts of problems they had. The ARC would then send somebody out to assist. They did not have to follow their strict programme, but their doors were wide open, and their telephone lines were always operational. Farmers could also go to the ARC website. He received calls from farmers every day of the week, any time of the night, and sometimes from people who wanted to take dogs overseas whose rabies certificates had not come through. Normally, the ARC did not work from 08h00 to 17h00 -- they took queries and requests from farmers 24/7, and not just him, but all of the ARC officials.
The ARC had been asked if they knew their livestock and where it was located. They knew their livestock and where, as they had a pretty good record system. They also sold livestock at auctions. Their livestock had brands that were registered. They also had to make sure that if an animal was born or died, it was recorded, so their livestock record keeping was usually pretty good.
Another Member had asked about what could be done to stop veld fires. It was not a very easy question to answer. Usually, what happened with veld fires was something they did as well, in that they made what was called ‘fire breaks’. Without fail, at the end of winter, about July/August, they needed to make sure that there were fire breaks. This way made causing a tremendous amount of damage to the land was reduced. Sometimes fires did jump fire breaks, and it was very difficult to stop people from throwing cigarette butts out of their windows, although this danger could be reduced by trying to keep the grass down next to the roads and next to the farms. In animal sciences, they were not conducting any research that tried to stop these incidents of wildfires. What the ARC did was to make sure that they had fire breaks so that the chances of fires reaching the grazing spaces were reduced.
Mr Masipa had asked how many cattle there were in the country. South Africa had in the region of 14 million cattle, the bulk of which -- probably about 12 million -- would be beef cattle, with the rest being dairy cattle. The distribution between smallholder farmers and commercial farmers would be very close to 50:50, although it might be a 55:45 situation in favour of the commercial sector. The ARC was looking at somewhere around 7.5 million in the hands of the commercial sector and close to about seven million in the smallholder sector. The idea of having dipping tanks and regular dipping was no longer practised religiously, but the numbers were sitting around 14 million or somewhere around there.
Mr Carim responded to the initial question about the noncompliance with legislation, on which the AG had based his qualification. It was basically to do with the Public Finance Management Act's requirement of having to keep complete records, so it was not specifically linked to any one of the findings, but it was just an overall statement made by the AG.
Concerning the particular question asked about why there was no movement in the land portion in the disclosure of the ARC’s property, plant and equipment, the ARC normally recorded land at historical cost. That was why the amount of R615 million in the 2021 financial year had not shifted, as there was no acquisition or disposal of land parcels during the year under review. As to what the external service providers were doing, they were doing a verification process. They had not been asked to do a valuation – that was done a couple of years back. However, if the ARC wanted to have completeness in the fixed assets register, they could always assign a value to it, but since the Council would not be disposing of land, they did not want to incur costs in valuing that land unless they wanted to talk about either renting it out at its commercial value or disposing of the land because the land valuation was a bit of a costly exercise.
There were other questions around consequence management for the irregular expenditure and the quantum of the irregular expenditure that had been raised. Regarding the R320 million, Members should just bear in mind that that was an accumulation of all irregular expenditure not condoned from the 2016 financial year onwards, so it was not as though all that irregular expenditure was the result of transactions that had occurred in the 2021/22 financial year only. Until the point when irregular expenditure was condoned, it was regarded as irregular expenditure. That was why the quantum looked like such a big amount, because it was accumulated over the last six financial years.
Concerning consequence management, finance worked closely with an internal audit when an instance of irregular expenditure was detected. An assessment was then made to see whether that resulted in a financial loss or not. In many instances, officials did not get three quotations, but they would get two and then go for the cheapest one, so the Council got value for money. They did that assessment first to see whether value for money was received. If that were the case, then obviously the consequence management would mean that the official would have to go through a disciplinary process for a reprimand and the like.
In instances where officials had already resigned and criminal activity was suspected, the ARC obviously did not take it further because there was a criminal element to it. They had to report it to law enforcement agencies and continue with consequence management after the exit of the person from the organisation. However, in instances where there was value for money, there was basically no further consequence management if someone had left the organisation. Members had to bear in mind that the R350 million had been built up over many years.
A large portion of the old outstanding debt was with the shareholder department, and a bit of that had been resolved. At the ARC’s latest meeting with the Director-General of the Department some three weeks ago, he and the CFO had resolved that they would endeavour to find an amicable solution, because there were instances where the Department was saying that they could not prove delivery had taken place. The bulk of the R20 million that was sitting in old outstanding debt was in two or three different accounts with either the national Department or provincial departments. Some of that data had been collected subsequent to the year end. R90 million was obviously a material number, and they wanted to resolve the issue as soon as possible.
Dr Magingxa acknowledged the concerns raised by the Members around the negative audit outcomes. Indeed, in terms of the audit improvement plan in place, the ARC was looking at giving it sufficient attention to turn it around so that it could have an improved audit outcome at the end of the current period. He could share with the Members that that was also being taken quite seriously by the Council, where they had been asked to go beyond the monthly reporting, which was accompanied by assurances from internal audit, and have an interim report every second week that demonstrated how they were progressing in terms of implementing the audit improvement plan. The other thing he wanted to share with Members arose from the concerns around what seemed to be instability at the management level. The Deputy Chairperson had touched on this to say the CEO was now expected to develop a structure that showed how the organisation should function to achieve its plan.
He also wanted to share that they had just completed a very important exercise for the ARC- the institutional review process- which was conducted once every five years. It was a legislative process, and it looked at a number of things, such as what they had just done, if they had considered the mandate of the ARC, the science part of the ARC, whether it was delivering on that, and of course, the governance issues. The ARC had developed a set of recommendations, including how they could structure the organisation to be more efficient and effective in delivering its mandate. They were taking some of those recommendations and working on them to develop a structure that was going to assist them in delivering on their objectives.
Ms Mahlo and Ms Mbabama had asked about capacity development and farmer training. One of the questions was whether the ARC worked with any of the accreditation bodies. Indeed, they worked closely with the AgriSETA, and some of their training programmes were accredited by them. What he could also share was that they had two levels of recognising training or certificates, where they provided certificates of attendance, but they also had a competency-related kind of certification where participants would have had to demonstrate that they had sufficient competency in terms of the material that was being shared with them.
Mr Montwedi had made a good point about conducting a skills audit before allocating land to farmers. The ARC believed that was where this initiative was going. At this stage, they had been brought in and were collaborating with their colleagues at NAMC to conduct this work, but they expected that was going to feed into a process that allowed a prior exercise to be undertaken before the allocation. This was also one of the key recommendations from the exercise that was done by the Presidential Land Reform Advisory Panel.
Ms Breedt had raised a concern about retiring senior professionals, and that was indeed a very valid concern. That was why the ARC thought there was a strong case for strengthening their succession planning at the end of somebody's long career that had been built up over many decades, with networks at a professional level and everything that came with it. It was known, for instance, that in other countries, people would actually own laboratories, and even grants and funding would actually follow an individual. It was very important that this was something that was thought about long before getting to the retirement age. Therefore, the ARC officials had to build a very clear plan for succession into every one of their critical roles. They could not say, 12 months before somebody retired, that they were going to bring in young people to work with them, because it was too late at that stage, as they would never get to that level – not that it was expected that somebody would get to the level of a senior world-renowned scientist within a period of even four or five years, because that was something that took time. They had to begin to create that environment so that they could build momentum during that period.
Ms Breedt also talked about the ARC’s involvement in the biosecurity hub. This was very much a coordination exercise, as Members could imagine. For him, it was where the concept of "One Health" had become very appropriate. In other words, there should be recognition that plant, animal and human health and their environment was something that should be considered together, rather than separately. Biosecurity was indeed a collaborative effort. That was why the ARC thought they were really uniquely positioned to contribute through their national Public Goods Assets Programme, with all their national connections, which put them in a unique position to contribute to the biosecurity hub. It allowed them to provide all the information collected over many years to understand the threats of pests and diseases and assist others who did not have the information or access to the information that the ARC had. The ARC thought that this was going to be an excellent opportunity to use some of the funding that was being made available by both the DALRRD and the Department of Science and Innovation in order to support these kinds of initiatives.
To conclude, said that the ARC had noted the request by Mr Masipa for a copy of the study on stone fruit and the Committee's request to have a view of some of the ARC's property portfolio.
NAMC's Annual Performance Report 2021/22
Mr Angelo Petersen, Chairperson, NAMC, said the new Board had many legacy issues that they had to deal with, but had settled in well.
Dr Simphiwe Ngqangweni, CEO, NAMC, said the Council had received an unqualified audit on its financials with findings, and on the performance information with no findings (clean audit). Programme 1 (Business Excellence) achieved 63% of the targets, Programme 2, (Enabling Agricultural Marketing Policy and Statutory Environment) achieved 88%, and Programme 3 (Agricultural Sector) achieved 100%.
Ms Irene Mathatho, CFO, NAMC, provided details of the entity's income and expenditure against its approved budget. Grant income had decreased by R100 000 to R47.3 million. Interest earned had decreased to R2.2 million, and other income had decreased to R4.9 million. Expenditure had fallen to R54.4 million. There was a surplus of R24 000, meaning the budget had been spent during the year. Fruitless, wasteful, and irregular expenditure had decreased by R14 million to R6 million.
See presentation for details.
Ms Mbabama said that she would like to commend the NAMC, as compared to other entities, it was really a pleasure to listen to them. The NAMC seemed to have gotten on quite well with the work they were supposed to do. She saw they had received an unqualified opinion with findings, which were basically the same as the previous year. She was satisfied with the explanations that had been given.
She would like to query two things, and she thought it was more ignorance on her side than anything else. Under programme 2, sponsorship received and other income, the CFO had shown the Committee that there had been a drastic decrease from an income of R27 million in the previous year to R4.9 million. The CFO had said it was projects and management fees from those projects. Apparently, the NAMC had had a lot of new projects in the previous year. She asked the CFO to explain a bit more about that. She did not quite understand why the NAMC would have had a lot of projects in the previous year and not in the current year. In terms of fruitless and wasteful expenditure and irregular expenditure, she must have missed any explanation that the CEO had given the Committee.
Mr Masipa commended the annual report. It was really nice to read and was well put together. He also complimented them for achieving an unqualified audit. The NAMC obviously had the agricultural sector's trust and also fulfilled a statutory role in terms of really ensuring that the sector complied with the marketing of agricultural products. He did not know if the Agricultural Produce Agents Council (APAC) was going to present, but APAC played that role and the NAMC obviously oversaw APAC. The concern that he was having was the situation concerning the Gqeberha and Pretoria markets. Some of the issues that were being raised by smallholder farmers involved access to those markets and some of the red tape they were encountering. Was the NAMC doing something about these issues? It appeared that some unscrupulous activities might happen at the markets, and there were issues that needed to be taken care of.
His second point was on the funds being collected. The NAMC had increased its funding by 9% by collecting the levy. If he looked at the annual report, citrus and other farmers significantly contributed to these levies. What was the anticipation in terms of this year, with so much disruption to exports due to the war in Ukraine, and the Transnet strike at the ports that had also affected the export of products? What were the estimates of the collection of levies in the coming year? The NAMC also indicated that the agricultural trust’s values were about R2.4 billion. What were these assets? Were they biological assets or buildings?
He also wanted some clarity on the statutory Levy. The NAMC had talked about the R147 million collected for the levy, in which 20% had to be towards transformation. The key question was around this 20%. The NAMC had talked about a statutory measures survey, where approximately 21% was spent on transformation. Did the NAMC survey, or did they have a contractual obligation with the commodity group regarding the spending? Was that supposed to be surveyed to ensure that it had really been spent, or was it obligatory that the commodity group needed to ensure that the 20% was spent on transformation? Why did they need to do the survey? Did it involve just choosing a few samples and then checking to see if they had done exactly what was needed?
The Minister had contracted the NAMC or requested it to conduct a master plan for the agriculture sector. The question was about the NAMC’s indication that they would be putting an implementation plan in place. What progress has been made concerning this implementation plan or master plan? In the last engagement with the Committee, the NAMC had indicated that a budget prioritisation was going to support this implementation plan. The Committee had not really seen that budget reprioritisation. What progress has been made with the budget prioritisation?
Regarding the levy expenditure, he noted that the NAMC had spent 38% on research , 21% on transformation, and only 8.7% on export promotion. Was it not high time that the NAMC really looked at this? The NAMC knew that the citrus harvest was expected to increase by more than 30%, and South Africa did not have capacity as a country to consume all of it. He suggested the Council needed to provide assistance by increasing the budget to support the export promotion, especially for the citrus. As was known, Europe was making it very difficult for South Africa, and the black spot problem also worsened matters.
Lastly, concerning fruitless and wasteful expenditure, there had been concern over some of these things in the previous year. Could the NAMC update the Committee on the irregular expenditures that National Treasury did not condone? He thought it amounted to about R80 million, and wanted to know if it was part of the R155 million in fruitless and wasteful expenditure.
Ms Tlhape joined her colleagues in commending and appreciating the entity's improvement, especially the reduced irregular expenditure from R32 million to R6 million. The entity could not achieve the target for Programme 2, and had indicated that it was difficult to predict in advance the number of applications to be received on an annual basis. The NAMC had targeted 30 and received only 25, and later they were not evenly spread across the quarters. What was the entity going to do with this target in future, based on the challenge they had indicated here? Was it a realistic kind of target? The other issue was their shortcoming in procurement from designated groups of youth, women and people living with disabilities. She thought that this was a cross-cutting kind of target. What was making it difficult for the NAMC to procure from designated groups?
Ms Mahlo said the NAMC’s own mandate was to make sure that they reported to the Minister. When they reported to the Minister, had they ever informed the Minister about the smallholder farmers that were from rural areas which were not being recognised at the market level due to the quality of their products? Was any assistance given to them by the NAMC? Most smallholder farmers, like cooperatives and small, medium and micro enterprises (SMMEs), struggled to enter the market due to quality management systems. They did not have the correct policies to follow when they did their work. They could not even manage to get the South African Bureau of Standards (SABS) qualification because they did not have the assistance that the Committee thought they should get. If they were assisted, the economy of the country would improve, they provide a lot of employment in the rural areas. How could the NAMC assist them, as they advise the Minister on this issue?
Lastly, she asked for a list of the 141 farmers which the NAMC had assisted with leases so that the Committee could do oversight and see for themselves the good work the NAMC had done.
Ms Breedt asked how the NAMC was involved in exporting and marketing citrus. How did they see their involvement going forward? Was it a one-time occurrence, or did they provide long-term assistance with market access?
The NAMC had mentioned that they wrote reports for the Department to advise on policy matters, and had referred to COVID-19 and the floods in KwaZulu-Natal. Did they take the work of other departments into account? Was their focus specifically on agriculture, or was there a broader policy framework which also specifically took into account the work of other departments? For example, the Department of Trade and Industry was doing a lot on the economy, and the Department of Environmental Affairs had done a lot on climate change.
Lastly, the NAMC had referred to their research and development, so she wanted to know their relationship with the OBP and ARC in terms of support. Did they work together?
Dr Ngqangweni responded on the issue of trusts and statutory measures, and the fact that the NAMC played a regulatory role on behalf of the Minister. He said Mr Masipa had raised the point that APAC was the body involved in the fresh produce market space, which was indeed true. It was the main body that played in that space as regulated by the APAC Act. NAMC’s specific role was that they had had some engagements with APAC, as well as some of the leadership of the markets, given the challenges that these markets were going through concerning the deterioration of infrastructure, for example. However, the NAMC did not really have a direct mandate in that space -- their role had been purely advisory. They had conducted a study that they had undertaken internally to look at the status of these markets, issues of management control, issues of transformation, and the participation especially of black agents, as well as access for smallholder farmers. That report had been discussed with the leadership of specifically the Johannesburg market, the biggest market in the country. The NAMC had also engaged with APAC in terms of making sure that as they regulated the affairs of the agents, as space had been created for black agents to also participate, which was one of the findings of the study. There was very little participation from black agents which, if sorted out, could also open an opportunity for emerging farmers to participate and have access to those markets. In a nutshell, the NAMC had a very limited role because it was not directly within its mandate.
In terms of the anticipated increase in revenue collection, the fact that there had been challenges this year meant that they did not have specific figures, but they did anticipate that the revenues or the collection may be put under pressure due to global factors and the economic situation, which affected the cost of production for farmers. The collection was based on the revenue at the point of sale, and if the revenue was under pressure, it meant the levies collected would also be under pressure. The NAMC anticipated that there may be challenges, but did now know to what extent.
Responding on what the trusts were, he said there were various categories of assets that these trusts held. There was property, but most of the assets were in the form of investments in the financial markets. A lot of the other trusts also had buildings and warehouses from the previous control boards, but most of the value was from investments in the financial markets.
He said the 20% spent on transformation was it obligatory, in the sense that they had agreed with the bodies that collected levies that they would put guidelines in place for them to make sure that the expenditure went into certain categories, one of which was that 20% needed to go to transformation. It had been accepted widely by these bodies that it was an obligation, and they committed to spend 20% of whatever they collected on transformation upfront. That was basically how the NAMC handled that obligation with them.
The NAMC was now making very big strides in the implementation of the master plan and also the issue of budgetary reprioritisation following a series of engagements with the Director-General’s office. They had now been given a very clear direction and had come up with a roadmap that would see them presenting a plan to the executive committee (EXCO) of directors in the next few weeks. The NAMC anticipated that by the time the next financial year started, there would be a comprehensive implementation plan and a budget. The NAMC agreed there was an opportunity to look at increasing the budget for export promotion because of the challenges in gaining global market access. However, he thought the budget might be quite limited because of the levy income -- in terms of their guidelines, a certain percentage had to go towards that. However, when the industries applied, they also put upfront what they would contribute toward export promotion.
In the process of crafting the master plan, it was suggested that there needed to be a more deliberate effort to match the government funding to support activities such as export promotion with private sector funding, some of which came from the levy collection. The approach in implementing the master plan was that there would be closer collaboration and coordination of the funding between the private sector and government. That also included issues of transformation, where there should be better collaboration rather than just increasing the size of the pie.
The Cirrus Abattoir was a very old project, and the balance that was being reflected was just the balance from the work they had done for the Department, which had been very specific at the time.
Dr Ngqangweni responded on the Programme 2 target not having been achieved, and what the way forward was concerning statutory measures. The NAMC had found that they could never really control the number of applications received from the industry, even though they had average figures from the past few years. Therefore, they decided that rather than tracking the number of applications, they would refocus that target by looking at whether all the applications received had been processed successfully, ending up in the promulgation of a levy or a statutory measure. That was why they had changed that target slightly to ensure it was achievable and they were in full control of it.
The issue of smallholders not accessing markets due to quality issues was a very big challenge. The budget was too limited to cover the whole spectrum and make significant inroads into this challenge. That was why their approach was to work in partnership with stakeholders to ensure that those who were able to be assisted could access sustainable markets, they were in a position to meet the requirements, and that the contracts that they signed with the buyers were long term contracts. That was the approach that the NAMC was taking, but they were not the only ones responsible for the mandate of linking smallholder farmers to markets. The provincial departments were working in this area, and when the NAMC found opportunities to collaborate, they did so.
They would indeed be able to provide the list of farmers they had supported this year regarding market access, and would send the report as requested. It had all the details.
Regarding the challenges the citrus industry was going through, he had had intensive engagements with the Citrus Growers Association (CGA) CEO, especially during the heat of the issue and the dispute with Spain. In that regard, the CEO of the CGA had said they were dealing with it under the World Trade Organisation (WTO) rules. He believed some progress had been made on that. However, the NAMC was not really directly involved. In terms of their advisory responsibility to the shareholder, they took note of those issues, and raised them with the Minister whenever there was an issue she had to take note of. However, he thought there were structures in place to deal with these kinds of challenges. The CGA, for example, followed those processes.
The end goal of the research projects was to take the technical reports, distil them and take out key policy messages. These were shared with the Minister monthly. For example, one of the reports that the NAMC produced monthly was the supply and demand estimates within the grain industry. The objective was to ensure that they still had enough supplies and enough stock of the various grains monthly.
Regarding the NAMC's relationship with the ARC and OBP, the entities had different specific mandates. There were areas of overlap in some cases. For example, in the case of the ARC and OBP, the NAMC was in the process of finalising a service level agreement with the Department which was going to culminate in a joint project in the livestock sector. This was basically an amalgamation of the National Red Meat Project that they had been managing in the past, together with the KYD that the ARC was doing. The OBP would come in on the issues of vaccines to support this programme. Again, this was what the master plan advocated -- collaboration between the various entities on projects to ensure that resources were used in a coordinated manner and that there was a much better outcome and impact.
Ms Mathatho said the project funds declined mainly because in the previous financial year, the NAMC had received about R20 million for it to manage the Master Plan project. That was a once-off fee they had received, covering the project for its duration. The NAMC did not receive those funds in the financial year they were reporting, so there was a huge decline in their sponsorship projects. The NAMC did have other smaller projects for which they got funds almost each and every year, like from AgriSETA for the Cassava project. Those they received as and when there were requests as per contracts with those organisations. That was mainly the reason for the decline.
Regarding irregular expenditure and consequence management, she said Treasury had not approved the NAMC’s request to condone it and had requested them to work on consequence management. Because of the volume, she had already reported that currently, the irregular and fruitless expenditure had been combined, and was sitting at R151 million. The NAMC had a service provider who was currently assisting them in getting through to the consequence management stage, as they had to do the determination test and identify whether there was no value for money, and all the other requirements as per the irregular expenditure framework. The NAMC believed that before the end of the current financial year, they would have solved this matter, and would also have written to Treasury where they needed condonement. They were trying to ensure that they followed the framework and that people were identified, but it was also a legacy issue. Most of the personnel had left the organisation. However, for now, they would wait for the outcome of the report that the service provider was assisting them with. Once that was done, where there was a need for the organisation to take other steps, that would be done.
Concerning the decline in procurement from other designated groups, this mainly involved their operational budget, and it was very small, so their procurement was also small. For the procurement that the NAMC undertook during the year, they did not really get a lot of suppliers or service providers from those particular groups. This was mainly because some of the services they needed to procure during the year were not available from these groups, but as the CEO had mentioned, they had really tried to procure from the local suppliers.
Mr Petersen said that the NAMC was steadily making progress. They had already worked the audit findings into their audit plan for this year to make sure that the issues they needed to address were addressed in a way that would not recur.
On export promotion, the NAMC worked with industry bodies funded through the levy system. Bodies were also responsible to a large extent for driving export promotion and market access for their particular commodities with the Department. He thought the NAMC needed to look at better collaboration with the Department of Trade and Industry and industry bodies to secure better funding of pavilions for growers to go to, particularly black emerging growers in terms of Fruit Logistica fresh produce trade show.
PPECB's Annual Performance Report 2021/22
Mr Anton Kruger, Chairperson, Perishable Products Export Control Board (PPECB), introduced the delegation.
Mr Cyril Julius, Chief Operations Officer (COO), PPECB, said the entity had 14 indicators for the year, and one was not achieved. 89% of broad-based black economic empowerment (B-BBEE) expenditure was achieved against a target of 80%. 48 Agri-Export Technologist Programme (AETP) students had graduated, and 302 smallholder farmers had been trained, both of which had exceeded the board's targets. The extent of customer satisfaction and the number of smallholder farmers certified as export-ready were both above the set targets. There had been 2 623 beneficiaries from corporate social initiatives. The PPECB’s challenges included logistical challenges, the pandemic, data security and the working environment. The road ahead envisioned the economic recovery plan, Titan 2.0 electronic export certification, data provision, improved efficiencies, market access, the PPEC Bill, and the PPECB Board.
Mr Johan Schwiebus, CFO, PPECB, presented the financial performance results. Income of R562.5 million exceeded the budget by 11%, and the previous year by 15%. Expenditure of R527 million was 1% below budget, and 14% higher than the previous year. Of the expenditure, 71% was for cost of employees (R374.5 million) and 29% was operational (R152.5 million). The net result was a profit of R35.4 million. The PPECB had received an unqualified audit opinion and a good overall assessment on financial viability. Fruitless and wasteful expenditure and irregular expenditure were being taken seriously. There were no findings by the AGSA.
See presentation for details.
OVG's Annual Performance Report 2021/22
Ms Motlatso Maloka, Acting Valuer General (VG), Office of the Valuer General (OVG), introduced the presentation.
Mr Thapelo Motsoeneng, Acting COO, OVG, said that in 2021/22, the OVG had issued 403 final valuation certificates to clients. 493 portions of land had been valued, and 100% of client valuation referrals were completed. Land use for valued properties was 73% agricultural, 17% non-agricultural, and 10% mixed-use properties. Valuations for land claims accounted for the highest value determined by the OVG. Values determined for land acquisition accounted for the second highest value.
Insofar as organisational performance was concerned, 80% of targets were achieved. The OVG had planned to achieve ten targets during the year, but only eight were achieved. In Programme Valuations, all four targets were achieved. 34 days were taken to issue valuation certificates, against a target of 50 days. The backlog of valuations was cleared. Corruption and fraud prevention mechanisms had been implemented. 64 of the 67 funded posts were filled in line with the approved interim structure. The entity had received an unqualified audit opinion from the AGSA.
During the year, the OVG had incurred irregular expenditure of R16 000, and processes were underway to investigate the two transactions that had led to this. Fruitless and wasteful expenditure involving a single transaction of R132 had been successfully recovered from the responsible official, and there was no unauthorised expenditure.
Mr Tumelo Mokale, Senior Manager: Financial Management Services, OVG, presented the financial performance. The Department grant allocated was R131.8 million, which, together with other income, gave a total revenue of R132 million. Total operating expenditure amounted to R68.4 million. The expenditure reflected a 34% increase from the R44.9 million in the 2020/21 financial year. The total surplus amounted to R63.6 million.
See presentation for details.
Ms Mbabama started with the PPECB, and said it was her pleasure to commend them on a very satisfactory report. She had no questions whatsoever for the PPECB.
She congratulated the OVG on their unqualified audit report with no findings, and on achieving their core function, which was 100% of the evaluations done. She also congratulated them on their 34-day turnaround time against a target of 50 days, the eradication of the backlog, and no unauthorised expenditure. She really had no questions for these two organisations except to say she wished the other entities could take a leaf out of their book.
Mr Masipa said the PPECB had mentioned that they had to stop the export of some fruit due to challenges with the ships. He had heard there were delays because a ship was not properly fitted to export fruit, and the PPECB had to ask them to address this issue. Was this attributable to the load-shedding? What had caused this ship to be non-compliant? He knew of one of the farmers who exported to the United States, and when citrus to the value of R700 000 had arrived there, they had had to destroy it because it was rotten. Before the ship left South Africa, there were problems because the PPECB had made findings and had asked them to attend to those findings. This meant that they had been delayed a bit before they could take the produce out of the country, and when it arrived, the receiver had to dump it because the citrus was rotten.
He asked how the Russia-Ukraine conflict affected the export tonnage and the number of inspections the PPECB had to do. What were the values? The NAMC had said their levies were collected at the point of sale, so where would the point of sale be? Was it when the goods arrived overseas, or was it here -- when they left here, was a certain value attached to the sale that had taken place? This was to get an understanding in terms of the collection of the levy concerning the performance of the sector, such as the rand values and tonnages being exported.
Ms Mahlo said OVG was one of the organisations the Committee was proud of. She understood that there was limited knowledge of the evaluation process in some provinces, and provinces like the Free State, the North West, Northern Cape and Gauteng felt that it was not satisfactory. How could the OVG help the Committee and the Department to ensure these provinces were taken on board? The Committee had been in the Free State on a site visit and could see that there was a need to evaluate some of the farms for farm dwellers who had been kicked out of some places. The Committee and the Department needed to help one another to ensure they addressed these issues in those provinces.
Ms Breedt said the Committee saw an improvement at the OVG. Had the old order claims backlog been addressed, and would they stay up to date now with valuations? What was the current capacity of the OVG in terms of valuers, as it had been quite a challenge? How many external valuers was it still using? She remembered that in the Committee’s last BRRR session, the OVG had said that they had approval to go ahead and appoint valuers. How was that process going? Were they looking at employing more valuers? What was the timeframe for being completely self-reliant and not being reliant on external valuers? Lastly, what was the cost of digitisation? Had that been taken into account within the budget?
Acting Chairperson Tlhape said her colleagues had represented her by commending the two entities. She asked how the OVG had addressed issues of capacity within the entity and what the reasons were for the low performance in the Western Cape, Free State and Northern Cape
Mr Julius responded to the shipping question. The PPECB approved vessels that were carrying fruit directly in their holds. That was also the case when the fruit was shipped to the United States of America (USA). It happened from time to time that they did have to reject these vessels. It was mostly technical in nature, where the cooling units of the vessel were not functioning correctly and the temperature in the holds at which the product was being carried had to be recorded daily, even hourly. These recordings must be shown when they docked in the USA, and sometimes the printers malfunctioned, which was also one reason why the PPECB had to reject vessels. At other times, these vessels had perhaps carried motor vehicles and breakages of headlights and glass would be found. In those cases, where they were dirty and unsuitable, the PPECB also had to reject them.
In terms of the consignment that arrived rotten, these things sometimes happened, where the cold chain was broken on the other side, but the PPECB was unfortunately not informed about this. In this case, the exporter had not made contact with the PPECB. From the PPECB’s side, they definitely made sure that these vessels were fit for purpose, and that they could carry the product. The same went for the containers carrying products as well.
The second question was about the situation in Ukraine and how it affected inspections. As the PPECB could see from the figures, the inspections of the shipping had actually increased year on year. Despite the war in Ukraine, the Russian importer surprisingly still took the fruit. In the previous year, exports to Russia had been around 7%; this year, for this citrus season, they were still at 7%, so the war did not have much influence on their export volumes to Russia.
Then there was a question about the point of sale. There were different scenarios as to how exporters negotiated with the producers. The main point was what was being given back to the farmer on the farm, which was also determined by what happened in the supply chain. If the supply chain was made longer by delays on this side, or on the side of the import markets -- like in Europe in the previous year where there was some inefficiency in the ports and containers stood around for a long time and the quality suffered -- then the price got lowered and the farmer got a reduced income. At the end of the day, the farmer paid everyone in the supply chain, including the PPECB.
Mr Motsoeneng said the performance of the OVG in terms of numbers was really determined on the supply side, which came from the clients. The OVG had no control over which properties clients would ask them to value, but some of the insights they could draw from these numbers were what was on the books of the Commission and the Department itself. The Committee would see much higher demand for the OVG’s services in provinces where there was still a higher number of old order claims that were still outstanding, for instance. A province that still had to dispose of a number of land claims would have a higher requirement for valuation services from the OVG. When looking at a province like the Free State, where there was a lower number of outstanding claims, if any, the Committee would also find that there would be a very low demand for valuation services.
The other variable was the choices that the Department was making in terms of its own land acquisition strategy, where they were acquiring more land from the Land Redistribution and Tenure Reform branch. Where the Department was acquiring more land, they would require more valuations from the OVG’s side. That was really how the split would work. The split was not dependent on anything that the OVG did, but on what the clients had to do in terms of their land acquisition strategy and the remaining claims.
Regarding Ms Breedt's question, the old order claims backlog was not a matter that the OVG could deal with. What they were dealing with regarding backlogs involved concluding valuations that the client had already requested. As the OVG started in 2016, they received an overwhelming number of requests from clients. As Members would remember, the OVG had kept on missing timelines and turnaround times. In the process, they had been building up a backlog that they had eventually ring-fenced, and had implemented a differentiated strategy to deal with that particular backlog. The backlog they were referring to was only regarding valuations that they had not been able to finish on time.
The OVG was still using quite a number of external valuers. There was an existing external panel with valuers who were based in all of the nine different provinces. The OVG had a hybrid model where they also sent out their own valuers and valuers that they used from the private sector. That hybrid model was going to continue in the foreseeable future, because the OVG did not have the capacity to handle everything that had to be valued on its own. The number of internal OVG valuers was about 25. They had lost about four recently and were trying to recruit more to fill those posts.
Members may recall that in 2019, the Minister had allowed them to recruit about 20 valuers to add to their capacity at that time. The OVG had done the recruitment process and was able to fill those posts. Over and above that, the Minister had given them an opportunity to fill roles on an ad hoc or contract basis, so where they wanted to tweak their capacity, they were doing so using contract appointments of about three years until the matters around the future of the OVG in terms of doing actual valuations and playing a role in the private sector was resolved.
The OVG was striving every day to stay up to date with no backlogs, which was why the Committee did not see an indicator that talked to backlogs in the 2022/23 APP.
Regarding the cost of digitalisation, so far, they have been spending close to R10 million on the enterprise research planning (ERP) that he had spoken about during the presentation. There were other smaller projects that they were doing. There was one on the enterprise architecture, where they were at the procurement stage. They foresaw that it was a project that was going to give them a far better outlook on what their digital landscape was going to look like. The OVG would probably use the outcome of that process to paint a much clearer picture of their digital journey.
Mr Masipa asked the PPECB about the effect of the Transnet strike on their work at the ports.
Mr Julius said that, unfortunately, it was now the end of the citrus season, and the grape season was starting at the end of the month, so the impact at the moment was not so big. It was now the tail end of the season, and the stone fruit and table grape season was starting towards the end of October. The terminals were open at the ports, but it was very slow going at the moment. The impact was not that big at the moment, and the OVG hoped that the impasse between the unions and Transnet would be broken soon.
Ingonyama Trust Board (ITB’s) Annual Performance Report 2021/22
Dr Zethu Qunta, Deputy Chairperson, Ingonyama Trust Board (ITB), introduced the presentation.
Mr Vela Mngwengwe, CEO, ITB, described the organisational performance information. In Programme 1, all ten relationship agreements had been signed by the traditional councils, government departments, entities, municipalities, the private sector and the Board. 11 traditional councils had been capacitated, and the ITB had achieved and unqualified audit opinion. In Programme 2 , however, only 390 of the targeted 1 000 land tenure rights had been approved by the Board, and no human settlement plans had been achieved at the five targeted traditional councils.
Mr Siyamdumisa Vilakazi, CFO, ITB, presented the financial performance of the organisation. The AGSA had maintained an unqualified opinion, with findings relating to irregular expenditure, classification issues, etc. The financial position of the ITB was a net loss of R1.684 million. Total revenue amounted to R39.3 million, and total expenditure to R41 million.
On the Ingonyama Trust, the AGSA had maintained a qualified opinion. The financial position of the Trust was a net loss of R4.668 million. Total revenue amounted to R55.5 million, and the total expenditure to R60.2 million. The AGSA had raised issues relating to the investment and loans provided to the subsidiary of the Trust, Ingonyama Holdings.
See presentation for details.
South African Veterinary Council (SAVC’s) Annual Performance Report 2021/22
Dr Nandipha Ndudane, President, South African Veterinary Council (SAVC), said the Council had continued to successfully implement its strategic goals. There had been further improved communication with stakeholders, with webinars being presented, COVID-19 protocols put in place, international liaison, guidelines for authorisation had been reviewed and developed, and the new para-veterinary profession of veterinary physiotherapists had been promulgated. 6 629 veterinary and para-veterinary professionals were registered, and 832 persons were authorised to perform veterinary or veterinary para-professional services.
The Council's financial performance showed that total income was R19.9 million. 95% of registries paid their annual maintenance and registration, of which 97% was used on the strategic goals. The AGSA had awarded it a clean audit opinion.
See presentation for details.
Mr Capa referred to the ITB, and said he was concerned about the relation between the building of capacity of the traditional councils, which seemed to have been done well, compared to the capacity challenges referred to as the cause of their shortcomings. He was also concerned that the reason that was given for non-achievement indicated somehow that it would never be achieved.
For the SAVC, he asked about its relationship with the ARC as researchers. The ARC had told them and shown them mobile clinics. How did the SAVC and their personnel interact with these clinics? Did the SAVC also have any involvement in the training and the design of the training? Lastly, what was the spread of the SAVC personnel? Did they have one technician or nurse in every district, local municipality, or ward? He just wanted to ensure an effective spread or delivery of the services to the people they were meant for. It was also important that the SAVC was structured, as their services to the people were important.
Ms Mbabama said she thought she had heard the initial presenter on ITB saying that the Board’s staff complement should be nine, but they had only seven. What was the problem there -- had they resigned, and were they going to be replaced? The CFO had said that the Ingonyama Trust -- and she was unsure whether he was referring to the Board, the Trust, or both -- had received a qualified audit. However, she had in her notes that the ITB got an unqualified audit opinion with findings on compliance, the same as the previous year, on misstatements in the financials, and also in terms of a lack of appropriate steps to prevent irregular expenditure. Perhaps she was the one who was mistaken, but she would like the ITB to clarify that.
The employee costs were actually quite high in Ingonyama Trust – they had always been -- and she was wondering if the R28 million in employee costs justified the entity. Did the number of staff who were there, who actually generated the R28 million in terms of salaries, justify the size of the entity? The CFO needed to tell her what the approved posts were. What was the staff complement at the moment, and what was the variance? She was interested in the organisation's hierarchy, because R28 million was quite a large sum. Maybe the organisation was top-heavy with executives. She asked if the Committee could have the approved posts, the staff complement at the moment, and the variance. She would like to see the designations with commensurate salaries. She also asked the CFO to explain an impairment resulting in receivables from exchange transactions of R25 million, and to provide a breakdown of the general expenses of R17 324 000.
What she wanted to know from the SAVC was related to the problem of foot and mouth disease (FMD). She wanted to understand the services the SAVC provided. What was the ratio of SAVC services against the animals on the ground? Surely they should have an idea, even if it was not exact, of the number of animals on the ground. How many doctors and nurses did the SAVC have? Was this enough to take care of the FMD problem?
Mr Matiase questioned the ITB on the land over which it had control or ownership in KwaZulu-Natal. He said the iSimangaliso Wetland Park Authority operated on land that the Ingonyama Trust owned, and the iSimangaliso board harassed people and removed them from their ancestral villages. People who lived around the river had been subjected similarly to harassment and closure of their water supply by iSimangaliso. Does the ITB have authority over the areas that he mentioned? If so, was the iSimangaliso Wetland Park Authority acting with the consent or permission of the ITB?
The AG had reported that the ITB had not followed supply chain prescripts, where some services had been procured without three written quotations. In some instances, quotations were accepted from suppliers who had not declared or disclosed whether they were employed by the state or not. In some cases, contracted service providers were approved without delegated authority by the ITB. If all of this were true, as reported in the AG's report, was this not a recipe for corruption? What corrective measures did the ITB intend to take?
The qualification of property, plant and equipment was reported as a recurring and repeated qualification. Should the Committee expect this trend to continue in the following year unabatedly? What measures were in place to ensure that did not happen?
There was a subsidiary investment called Ingonyama Holdings, which was formed in 2019. There were no financial statements for it, and it was accounted for only on a cost basis in the financial statement of the ITB. Was that in keeping with the prescripts of the PFMA? If not, what corrective measures were going to be taken?
Lastly, it was reported that the ITB exceeded its budget and overspent on employees, HR costs, and other general expenses by about R17 million. This was a serious indictment on the ITB, threatening its status as a going concern. What corrective measures had been planned to correct this pattern and trend going forward?
Ms Mahlo sought clarity on the high court judgment in June 2022, which had prohibited the conclusion of residential and agricultural leases on trust land. This has resulted in such types of lease applications being put on hold. What was the ITB’s mediation plan? What were their targets, because they had been reduced?
Ms Breedt asked if the Committee could get details from the ITB as to why the AG was unhappy with the transactions of Ingonyama Holdings. Where had Ingonyama Holdings actually invested the R31 million that they had reported on? She also asked the ITB to clarify the role of Mr SJ Ngwenya at Ingonyama Holdings. Was it not a conflict of interest to be both the Board Chairperson and the Chairperson of an investment organ? That just did not sound right to her. If the ITB could clarify that, it would be appreciated.
She asked if the SAVC had played a role during the recent FMD outbreak. Had they assisted the community or the veterinarians that assisted the community? What was the relationship between private vets and state vets, specifically concerning FMD? Did the SAVC foresee itself having a more active role than currently in dealing with FMD? As had been seen, the vets were completely understaffed and did not have the correct information. There was a lot of frustration, not only from the farmers, but from the vets. She thought the Council should have been instrumental in providing that clarity.
Acting Chairperson Tlhape also wanted to find out why Ingonyama Holdings was not integrated into the ITB's financial statements. Did they agree with the AG that this holding needed to be integrated into their financial statements?
Mr Mngwengwe responded on the issue of capacity. He said the way the organisation had developed was that, generally, people came in at the lower levels and then grew within the organisation. At the time that they were recruited, the organisation had not been looking for the type of competencies that were required for it to be efficient, or to be effective. As a result, the technical capacity needed was not necessarily in the places where they had the people. As a consequence, they ended up with a lack of performance. The concern that had been raised was that the ITB did not seem to be suggesting a solution for this problem. At present, they sit in a position where only the Department could help them. The ITB had approached the Department because it had the necessary capacity. The Department had made available some officials on an interim basis just to facilitate policy development, and then walked out. The ITB was dealing with the Department, and the last time they had engaged, which was quite recently, there had been some meeting of the minds that the Department would make the capacity available.
The reason the Board had seven members instead of nine, was that when its term of office expired in August 2020, the Minister had appointed an interim board, but at the time, the Act required the Minister to consult with the ITB, the Premier, the Chairperson of the National House and the Provincial House of Traditional Leaders. He understood that certain consultations had taken place, resulting in the ninth member not being appointed. So when the Minister appointed the interim board, instead of appointing eight to add to ITB, only seven were appointed and were not. In July last year, he joined the ITB and was part of the newly appointed interim members of the Board, and when he became the Head of the Secretariat, he resigned from the Board and there was a vacancy of seven. Then there was a situation in the royal family with the passing of Ingonyama, therefore affecting the consultation process for the appointment of the Board. There was a process in place right now that the Minister had undertaken. She was still trying to get the Board properly appointed in the sense that the ITB still had what was called an interim board.
The audit qualification had been because of the listing of ITB as an entity and the non-listing of the Ingonyama Trust, so what was required was for ITB to produce an APP and also submit the annual financial statements of Ingonyama Trust. What they had was a situation where the ITB was not qualified, but the Ingonyama Trust's financials were qualified. That was what was confusing Ms Mbabama.
There was concern that the employee costs were quite high. What was causing that was the separation of the Ingonyama Trust from the ITB, which resulted in the ITB's financials reflecting only in the main what it received from the government as a grant. Because of that separation, the activities of the ITB that resulted in it generating revenue for the Trust, were not reflected in the statements of the ITB. What was therefore worrying Members was that what was seen in the ITB was the expenses, but because those expenses were not directly related to revenue, they could not tell that there was actually value -- all they saw was the expenditure. Because of that separation, the Board had also taken the view that too much was spent on employee costs. As a consequence, of the 60 employees that were seen in the annual report, the ITB was currently sitting with 45, because ten contracts had been terminated, and three employees had taken voluntary severance packages. The Board was reducing capacity to deal with the apparent huge expenditure in employee costs.
He disagreed that organisation was top-heavy. It had about four senior managers, and the rest were lower-level staff. It had developed with so much low-level capacity that they now had a huge gap between the lower level and the high level. The ITB found a situation where a level 14 manager managed levels 7 and 8, but there was nothing in between.
Regarding the iSimangaliso Wetland Park Authority, in a meeting that the ITB had the previous day, the Chairperson of the Board had raised the issue of the Park Authority evicting, or seeking to evict people that were residing on Ingonyama Trust land, because that land somehow was included in the area under the jurisdiction of the iSimangaliso Wetland Park Authority. It was an issue that he understood the Board Chairperson was dealing with. He knew that when he was in the Department, there were some task teams that existed of a number of departments, together with communities in this area, to deal with issues related to iSimangaliso. Some of them were related to those evictions, and others were related to animals getting out of iSimangaliso and terrorising communities surrounding the park. At the present moment, he could not provide a direct answer regarding what was happening. The truth was that the ITB would have authority for as long as the land belonged to them - of course, with restrictions if it had been proclaimed as part of iSimangaliso. He believed that it was a matter that could be resolved between the ITB and the iSimangaliso Wetland Park Authority.
Regarding the high court judgment and what the mitigation plan was, the reality was that the ITB was basically in transition right now. It was reducing its capacity and redesigning its organisational structure. Depending on what came out of that process, it was going to have an impact in terms of how it dealt with issues of performance and how it structured itself so that it was able to deliver on what it set out to achieve. That mitigation plan was going to come in the context of the processes that were going on right now within the organisation. As a result, he would not want to offer a very clear answer as to what was going to happen, because it was a period of uncertainty where they were exploring a variety of things.
In response to Ms Breedt, he said the CFO was going to deal with issues relating to Ingonyama Holdings. However, it was true that Ingonyama Holdings had two directors, one of them being the Chairperson of the Board, and the other being the former CEO of the ITB. Their appointment to Ingonyama Holdings as directors was something that the Board had approved at the time.
Mr Vilakazi started by responding to Ms Mbabama’s question, providing an explanation for the situation with receivables as reflected on note 11. What he was trying to get across was the fact that total receivables, as reflected in the statement of financial position, was R25.7 million, but that was the net amount -- it was net of an impairment that had been made for collectibility. This impairment was reviewed on an annual basis. Obviously, it would increase or decrease depending on the ITB’s assessment of whether they were likely to be able to recover those monies or not. He gave a detailed explanation for the ITB's approach to providing for impairment.
Concerning general expenses, he had given a high-level breakdown which essentially indicated that of the R17.3 million, about R7.9 million was disbursements to beneficiaries for whatever reason. Some traditional councils would opt for bursaries for a few children. Some traditional councils would opt for events that were heritage events, etc. The total disbursement that would have been made out of those general expenses to beneficiaries had been R7.9 million. Other items included agricultural project expenses of R1.1 million, audit remuneration of R1.7 million, consulting professional and legal fees of R2.7 million, and land tenure management of R2.2 million. The rest of the expenses were all below the R1 million mark.
Concerning Mr Matiase’s questions, the issue would have been that the Trust struggled to recognise and disclose property, plant, and equipment, which was mainly land, as it was a material component, in line with Generally Recognised Accounting Practice (GRAP) 17. This would have required valuations and identification of the complete extent of all the available properties that were within the organisation's control. When the ITB arrived, because this had been such a contentious issue for a long time, they had decided to discuss with the Accountant-General and eventually arrived at the correct accounting treatment, which was already effected in the previous year.
What continued to occur as a finding, and which was why today they were not sitting in an unqualified with finding position, was the expenditure relating to rates. The ITB had initiated a discussion with the Department of Cooperative Governance and Traditional Affairs (COGTA) to at least agree on the technical side of recognising these expenses. COGTA and the ITB were on the same path and had brought in the top three municipalities -- eThekwini, Mandini and Newcastle -- to discuss. However, without Board approval on these processes, they could go only so far as the Secretariat. It started requiring the Board's involvement and a clear intention to actually resolve this issue, as it affected and had an impact on many stakeholders. The ITB had identified that municipalities had been rating it incorrectly, and their ratings were inconsistent with the definitions of a property and an owner in the Municipal Property Rates Act 6 of 2004.
Regarding the ITB having exceeded its budget on employee costs, Mr Matiase had said it was a serious indictment and affected its status as a going concern. This was an issue that probably would continue until the restructuring of the organisation, which was what the CEO had been talking about. Because of how the organisation had developed over a period of time, there was a need to go back to the drawing board to understand and document the organisational objectives that stemmed from the legal mandate. Anything else that would be done if the starting point was not the legal mandate would ultimately show a disjuncture or misalignment between the employment of resources and achieving organisational objectives. Until those issues were discussed and finalised, there would not really be a change in how the financials looked.
Non-compliance with SCM prescripts relating to procurement always indicated failures in internal controls to the extent that they could even indicate fraud and corruption. The issue was the ability to address issues emanating from capacity challenges. For example, within finance, it was himself on the top as the CFO, but there was no actual SCM manager, and the next would be a senior SCM administrator. There was obviously a capacity issue that needed to be dealt with systematically, which basically saw the understanding of the mandate translating into organisational objectives and resource needs, and then seeing those resources being employed for the achievement of those objectives.
The question on governance issues at Ingonyama Holdings was difficult for him to answer. He thought it might be better for Board members, specifically Dr Qunta, to respond. The reason why he said that was that he and the Board had very material differences when it came to certain issues of governance within the entity, specifically relating to Ingonyama Holdings.
The questions that Mr Capa and Ms Breedt had asked also delved into why there was no consolidation, and the ITB had requested financials because the year-end was September for Ingonyama Holdings, so there would have been financial statements for consolidation that would have been required in accordance with the financial reporting framework that the Trust had employed. However, what had happened at Ingonyama Holdings -- and he was trying not to say something contrary to what the Board would say -- was that the information had not come through, which they had told the Board about, and the AG had actually reported on it. The ITB agreed with the AG that there was a requirement for consolidation, in accordance with GRAP 32 or 31. However, that information was simply unavailable, so they could not manufacture it to create consolidated financial statements, so they were recognised at cost.
To clarify the role of the ITB Chairperson, which the CEO had spoken about, Dr Qunta was in a better position, as they would not have been there at the time of the approvals to create this entity. Regarding where the monies for Ingonyama Holdings had been invested initially, the first investment of R10 million would have been paid to attorneys, because Ingonyama Holdings would not have had any bank account. However, that was before their time. The ITB would have found that information when compiling the financial statements. The subsequent payments of R31 million would have been dispersed as loans, which the Auditor-General complained about because there were no terms to those loans. This spoke to issues of governance within the entity.
Dr Qunta responded to the CFO's statement that perhaps the Board needed to respond about the directorship of Ingonyama Holdings. He said Ingonyama Holdings was a subsidiary of the ITB, and there was really nothing if the directors of the ITB were becoming representatives as a shareholder in that subsidiary. It was something that one would find happens in governance. This decision had been made by the previous Board, which was before she joined it in 2020. However, in terms of that structure in itself, it was not a problem. Perhaps something that could be looked at was whether it should have been a chairman of the Board, or if perhaps it could have been any other member of the Board. She thought that was the issue as to whether there was a conflict or not. It being a subsidiary was not a conflict, because it was there to look after the interests of the shareholders in that company. At that level, she did not see a conflict.
Mr Matiase said that the more the representative of the ITB spoke, the more the Committee got confused. The CEO had just said that the material differences that he possessed were different from the accounting materials that were perhaps in possession of Ingonyama Holdings. He guessed that Ingonyama Holdings was a subsidiary of the Ingonyama Trust. The Board should be seized with whatever was happening there. The principles of accounting must be the same. He asked that the Committee politely request the ITB to go back and look into these conflicting accounting statements and similar accounting principles.
The second point was that the CFO had said he was unaware of any repeat transgressions concerning property, plant and equipment. It was the Auditor-General’s report where this had been indicated, and just as he had proposed that the Committee deal with the previous question he had raised, this must also be dealt with similarly. The Auditor-General had said, “I was unable to obtain sufficient appropriate evidence that management had properly accounted for land to the value of R1.8 billion due to the supporting information not being submitted. The Trust did not properly account for property, plant and equipment in accordance with GRAP 17 on property, plant, and equipment. This was due to survey diagrams not being submitted and inadequate controls in place to correctly value the properties. Consequently, I was not able to determine the full extent of the property, plant and equipment of about R28.21 billion, as shown in note 21 to the financial statements, and it was impracticable to do so.”
It was in that context that he had said that this was a serious indictment. The Committee would call upon the ITB and Ingonyama Holdings to deal with these serious irregularities and breaches, which really undermined the spirit and the letter of the prescripts and the legislation that governed public institutions, more so when taxpayers' money was involved. Could the Committee in the future, in written form, get proper answers as to what had happened here? Why were they getting conflicting reports concerning what the AG had reported, and what the CFO and the management of the ITB and Ingonyama Trust were either aware of, or not aware of? They could not go on like this, and were doing this restrained in how they addressed these matters out of the respect the Committee had for Ingonyama, not only the King of the Zulus, but the King of South Africans. The Committee implored those who dealt with the day-to-day business of the Ingonyama Trust to pay particular attention to these issues so that the Committee did not find themselves in the situation of having to ask these kinds of questions, painful as they may be. Some of the questions may be seen to be a direct sign of disrespect. The Committee was therefore appealing to their colleagues to pay attention to their work and ensure that the books and everything about the Ingonyama Trust were in order.
Acting Chairperson Tlhape said that as and when the ITB responded, she would also highlight and remind the team that on their programme, there was a meeting scheduled for 18 October with the Minister, to also deal with issues of the ITB, as per the resolution of this Committee. She thought the Committee would get that clarity, and agreed with Mr Matiase that the more the ITB explained, the more confusing it got. She would also say that the Committee should follow up on these matters at that meeting on the 18th. The Minister would probably be present with the ITB and the Committee would be dedicating that time to deal with all these matters.
Mr Mongezi Menye, CEO/Registrar, SAVC, responded to the Council's cooperation with the ARC in the mobile clinics. As a regulator, the SAVC did not provide the service of the mobile clinics directly. However, they did register and approve the registries that had mobile clinics. Also, as a regulator, they did not provide training directly to the registries or to members of public, but they participated in some awareness campaigns, working with other relevant stakeholders. Insofar as the training was concerned, the SAVC used a number of institutions that were providing training to veterinarians and the para-veterinary professions they were regulating. For instance, they worked with the University of Pretoria, the University of South Africa, the Tsolo Agriculture and Rural Development Institute, the University of North West, Tshwane University of Technology, and the Equine-Librium College, which were the ones that were offering training interventions. These were the tertiary institutions that the SAVC worked with, and as the Council they regulated them and set the standards of training and education.
Concerning the spread of the services, the information at the SAVC’s disposal reflected that there was a high concentration of veterinarians within the urban areas and a shortage in the rural areas. They had been working with a number of stakeholders to try to rectify the situation. For instance, the Council had approved the rules that would allow para-veterinary professionals, like animal health technicians, to run their own practices now and not operate under the veterinarians. Those rules were with the Minister for approval. As soon as the rules were approved, the animal health technicians would be able to operate in rural areas, on the farms, and run their own practices, with a limited scope linked to their qualifications and expertise. That was a ground-breaking change introduced by the Council to ensure an even distribution of services so that the people in the rural areas could also benefit.
With regard to the question that Ms Mbabama posed regarding the prescribed ratio, the international norm was that there must be between 200 and 400 veterinarians per million of the country's population. However, the picture in South Africa was totally different, as there were about 60 to 70 veterinarians per million. This was a clear indication that they had a serious challenge when it came to veterinarians, as well as the other para-veterinary professions they were regulating.
There were also some interventions that the SAVC had been making as Council. For instance, there was a programme that they were doing hand in glove with the Health and Welfare Sector Education and Training Authority (HWSETA), wherein the HWSETA would be funding students that were going to be studying veterinary science and other qualifications pertaining to the industries or the professions that they were regulating.
Responding to Ms Breedt on the relationship between state and private vets, she said there was a relationship. The SAVC was working with the Department although they were also regulating it, especially the veterinary services of the Department, and they engaged with the Chief Veterinary Officer on a regular basis when it came to matters that were linked to the professions that they were regulating, and issues involving the facilities that they owned as government.
So far, the SAVC has been involved directly in all the stakeholder engagements, like the Animal Health Forum, the Department and other stakeholders involved in the outbreak of FMD. These engagements were to ensure that especially the people on the farms and in the rural areas, were conscientised about this outbreak.
Dr Ndudane said that the one area that Mr Menye had not mentioned was the collaboration with the Food and Agriculture Organisation around rescaling animal health technicians, to ensure that unemployed graduates were able to work for own gain. That initiative was being done with the SAVC and the training institutions offering the animal health qualification.
On issues of disease control, the Council was involved in the awareness campaigns. They had been involved with rabies control in the previous year, and this September, they were also involved with FMD. However, there was room for improvement in how they engaged with provinces and also engaged with the Department. The SAVC had indicated at their first exco meeting on 5 October that they needed to approach the Director-General and meet with the Chief Veterinary Officer's team at the national level. They needed to arrange a meeting with the provincial Chief Veterinary Programme so that they could sit down as SAVC, as the regulating body, with the provinces to chart whether the veterinary strategy that was the national document was being applied. They also needed to look at the numbers of personnel within the state veterinary services -- the veterinarians and the para-veterinarians -- to see what the SAVC could do and involve the institutions offering these qualifications, to check their output. Clearly, the skills needed were scarce, as they were not meeting the international standards for the number of veterinarians per million population. The SAVC did not directly have an active role, because they were constrained, as they were the regulator. However, they were working and willing to engage with all the stakeholders and working with the associations to achieve the issue of a well-maintained animal health industry in South Africa.
Ms Adele Howard, Senior Manager, AGSA, said she was responsible for the ITB and Ingonyama Trust audit. She clarified that it had been stated that property, plant and equipment was a qualification in that briefing document. The AGSA had included previous qualifications of previous years. The one improvement at Ingonyama Trust this year was that they were not qualified on property, plant and equipment. That briefing document included explanatory notes and dealt with previous years. For the current year, the only qualifications were on the municipal property rates, the contingent liabilities, and the non-consolidation of Ingonyama Holdings. She hoped that clarified that all the issues on the land, in terms of being accounted for correctly in the financial statements, had been addressed.
Mr Mooketsa Ramasodi, Director-General, DALRRD, said he had noted the requests and engagements.
The Chairperson would like the Minister to appear together with the ITB on many of the issues that have been raised. He also noted the requests from the Committee on some work that the Department had to do in respect of the ARC, the NAMC and the OBP. The Department would also get closer to the processes, as aligned.
He thanked the Committee for the time taken and guidance over the previous two days.
The meeting was adjourned.
Capa, Mr N
Mandela, Nkosi ZM
Tlhape, Ms ME
Breedt, Ms T
Capa, Ms RN
Mahlo, Ms NP
Masipa, Mr NP
Matiase, Mr NS
Mbabama, Ms TM
Montwedi, Mr Mk
Tshwete, Ms B
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