HSRC, CSIR & NRF 2022/23 Annual Reports

Meeting report

National Research Foundation (NRF) 2022/23 annual report

Prof Fulufhelo Nelwamondo, Chief Executive Officer (CEO), NRF), presented the entity's annual report.

Among the highlights for the year, he reported that on 10 February this year, NRF-Sasol had announced a R40 million, five-year expenditure project on clean energy research. The Joint Marine Laboratory Programme, a project of NRF- South African Institute for Aquatic Biodiversity (SAIAB), was constructing research labs at four historically disadvantaged institutions. This fresh infrastructure would empower these institutions to produce the next generation of marine scientists to counteract the prior exclusion of black people. The NRF also achieved a significant milestone in South Africa through the start of construction of the Square Kilometre Array (SKA) Mid-Frequency Telescope (SKA-MID 1), in the world’s largest telescope project. The Department of Science and Innovation (DSI) had assigned R1.26b from the National Treasury to successfully complete South Africa’s SKA hosting responsibilities.

Despite exceeding its performance targets in several areas, two were not achieved, under the national research infrastructure platforms. This included a R19 million shortfall on the planned target under the foreign income generated from activities. The number of patient doses generated from radioisotopes produced by NRF-iThemba LAB was 60 597, short of achieving the 225 000 planned target.

Prof Nelwamondo further reported that the organisation was in a healthy financial state, with clean audit outcomes maintained for the past three years. The Auditor-General (AG) had found that good internal controls were implemented by management, and noted the healthy going concern position and sound financial disciplines. In addition, no irregular, fruitless or wasteful expenditure was reported in the audit outcomes.

Prof Mosa Moshabela, Board Chairperson, NRF, expressed concern about the situation of financial austerity the entity found itself in, having just recovered from the COVID-19 period. He was encouraged, though, that the impact of the country’s science research was making a difference all over the world. Partnerships would be very important in the work of the NRF, and the research on energy security with the private sector was cited as exemplary.

(See presentation)

Human Sciences Research Council (HSRC) annual report 2022/23

Dr Cassius Lubisi, Board Chairperson, HSRC, said that when the board appeared before the Committee a year ago, they had expressed concern about the regression in audit outcomes of the organisation and committed to turning things around. He was pleased that their efforts had since yielded the desired results. 51 instances of irregular expenditure had been investigated, consequence management had been applied, and those instances had been submitted to the National Treasury for condonation. A response had been received from National Treasury, and would be discussed at upcoming board meetings in October/November.

The board had also considered the first draft of the consequence management policy, which was being refined before final approval and implementation. A voluntary disclosure agreement was signed between the HSRC and the South African Revenue Service (SARS) on 19 January 2023, where the capital debt of R6.5 million and the interest of R2.6 million were paid to SARS. The process to recover the capital amount had commenced in November 2022, and was ongoing.

An external service provider had been employed to conduct a forensic investigation into the events leading to the material irregularities. The report had made several recommendations, which the board would consider for management to implement. Finally, an external service provider had also been appointed to verify the correctness of all tax codes and payroll configurations. The HSRC reports regularly to the AG on progress. The board was confident there would be improvements going forward, starting with building on the recent unqualified audit outcome.

Prof Sarah Mosoetsa, CEO, HSRC, led the presentation to the Committee, and reported that the entity’s overall performance for the year stood at a percentage score of 76. The shortfall in performance targets was found under two programmes -- ‘Leadership in knowledge production’, and ‘Transformed research capabilities.' In the reporting period, the desired percentage of senior researchers who were black, female and those with PhDs was not achieved. The organisation was thus continuing to focus on the recruitment, advancement and retention of highly qualified and transformative research capacity.

Amongst the reported highlights for the year were the launch of the Election Indicators Report Series at the Independent Electoral Commission (IEC) provincial research seminars, the focus on women, youth and people with disabilities, and the inaugural National Disability Awareness Conference championed by the organisation. She also reported that the HSRC’s research output digital footprint had shown significant growth. The entity had also hosted the 17th Africa Young Graduates and Scholars (AYGS) Conference. It published a book, ‘BRICS In Africa’, which seeks to determine the potential of BRICS-Africa cooperation in promoting African development.

Prof Mosoetsa informed the meeting that the organisation had received an unqualified opinion from the AG, which was an improvement from last year’s audit. No material findings were identified in terms of the annual performance information. Material misstatements had been identified and corrected in the annual financial statements, as instructed by the auditors. Significant improvements were noted in procurement, contract management and consequence management. Management implemented controls to ensure compliance with applicable legislation was reviewed and monitored effectively. 

Going forward, the HSRC would look to work through an Africa-centric approach, where direct research, outputs, and stakeholder relations were geared towards Africa-focused endeavours. The advancement of transformation would also be prioritised, by concentrating on new appointments, promotions, and capacity development, including the expanded implementation of the internship programme. Strengthening stakeholder relations would see a focus on building and maintaining relationships, and the involvement of BRICS in Africa would also be a top priority.

(See presentation)

Council for Scientific and Industrial Research (CSIR) annual report 2022/23

Mr Vuyani Jarana, Board Chairperson, CSIR, said that the performance of the organisation remained strong, with 90% of targets achieved. The board was happy that the organisation had received a clean audit outcome from the AGSA. He commented that economic growth was still slow, which notably negatively affected the turnover, restraining the rise of private sector income and its repercussions. Energy security posed a threat to the CSIR’s operations and had increased the cost of doing business. Building on the strong culture of performance and governance, the new board had committed itself to supporting the organisation to make an even greater impact, particularly at the grassroots level and with small, medium and micro enterprises (SMMEs).

Dr Thulani Dlamini, CEO, CSIR, led the presentation, which focused on the CSIR's mandate and strategic focus, as well as its performance against set targets. Many of the set targets had been met and some were exceeded. The notable target that was not met was the number of licence agreements signed, which had been 44% short of the target.

The organisation was working to collaboratively improve the competitiveness of high-impact industries to support South Africa’s re-industrialisation. The highlights of this strategic objective included the CSIR partnership with Eskom to improve the durability of components used in power generation and implementing television white spaces to provide connectivity to rural areas. The CSIR continued to support youth employment through internships, and the Youth Employment Service and graduate-in-training programmes. The organisation also reported a significant transformation of the profile of its senior researchers, especially black and female individuals.

Dr Dlamini informed the meeting that one of the key performance indicators (KPIs) not met this year was the decline in total South African private sector income, which fell short by 3% of the planned target of a 12% increase for the year. The CSIR had received an unqualified audit opinion from the AGSA, as it had for the past couple of years. It still had challenges in contracting with government entities to fulfil its mandated role of providing national research and development (R&D) capabilities in enabling a capable state, due to the requirement that single-source procurement processes now required a thorough analysis of the market and a transparent and equitable pre-selection process be used to decide on one supplier among a few prospective bidders.

(See presentation)

Discussion

The Chairperson appreciated the work done by the Department and its entities. She observed that throughout the presentations, the entities had emphasised the direct impact on the livelihoods of the people, an objective that the Committee wanted to see achieved across all programmes. She noted that although there had been material findings with the HSRC, the Committee appreciated the work done by the board and the executive management to turn the tide at the institution and improve the accountability ecosystem. Concerns had been raised on energy sustainability, the impact of load-shedding and issues around funding challenges. Despite the funding challenges, she emphasised the need for entities to strive to meet their set targets. She noted that the AG had recommended the creation of mechanisms to track the completion of qualifications.

Ms N Khakhau (DA) hoped the meeting of targets as reported would be a consistent achievement across all entities, not a result of the bar being set low. She recalled from previous interactions with the NRF that there had been challenges with meeting the demands of applicants, with about 75% of those applicants not being funded. She also wanted to how far the entity was in closing the gap between key government challenges like the fourth industrial revolution (4IR) and high-demand jobs. She wanted to know from the HSRC and CSIR if any work had been done to include more students from technical and vocational education and training (TVET) colleges.

She asked the HSRC for details of the skills audit done on the state of the public service in the country.

She wanted to know from the CSIR what the reasons were for the constraints that had led to the deviations in the licence agreements signed. The mobile app to deal with potholes on Gauteng roads was a good idea, and the Council must consider rolling this out to other provinces at a later stage.

Ms C King (DA) asked the CSIR about the lifespan of its infrastructure, and the strategies they had put in place to improve the lifespan of infrastructure. She enquired from the HSRC about the reported financial deficit experienced and the measures that would be put in place to avoid its recurrence in the future. She spoke of the need to narrow the critical skills gap, and wanted to find out from the entities on progress made. She had noted the challenges with commercialisation – especially the patenting aspect from the CSIR -- and the mitigating strategies in place to deal with them.

Ms J Mananiso (ANC) asked the NRF about the delays in transferring funds from the Department of Higher Education and Training (the National Skills Fund), and how they had affected its work. The Committee would need to ensure it engaged the Department to ensure this was dealt with and would not be allowed to recur in future. She also asked all entities about their strategies to keep staff morale high and the skills retention approaches they employed within the organisations. She also asked if the entities had plans to produce their own personal protective equipment (PPE) in future, as challenges had been reported in the past. She asked the CSIR to share further details on its plans to increase its local public income. Finally, she wanted to know if the CSIR was a member of the Information Communication Technology (ICT) Forum in South Africa.

Ms D Sibiya (ANC) asked the NRF for an update on the amount allocated to the six post-doctoral fellowships, and the scale of work produced by the fellowships. She asked the HSRC for an update on the recovery of funds, and if there were any significant organisational changes currently underway. What were the reasons for its underperformance against its budget, and how would this be addressed?

Mr M Shikwambana (EFF) noted that the NRF had touched on the issues of energy and their collaboration with the private sector, given the current challenges of the country. He wanted to know the extent of the research conducted on energy challenges, and how they could be resolved. What guarantee could science and research give to the people of South Africa that load-shedding would come to an end? He wished to know from the HSRC about consequence management for the 51 financial regularities – whether people had been held responsible and the potential for recovering losses. He was disappointed to hear of the funding challenges of the entities. There had been submissions by all entities that there were good plans of action, but not enough funding to achieve their mandates. He noted that the people who should be in the meeting to take this forward were not at the meeting – in particular, the Minister, was accompanying the President to do his work elsewhere and was neglecting his duties.

Dr W Boshoff (FF+) asked about the suspension of senior managers at the NRF, and if this would hurt the entity’s work. He asked the CSIR about the state of the National Laser Centre, which the Committee had visited in 2020. A forensic report had previously exposed serious mismanagement at the centre. He had asked the Minister what was happening at the centre, and he felt the response he received was unclear.

The Chairperson acknowledged that the leadership in the sector was receiving support from the Department. She did not want a picture painted that the sector was not supported, and the Committee had pushed for this. She believed that finalising the Decadal Plan would alleviate some of the funding challenges in the country’s science and innovation sector through better budget coordination, amongst others. The leadership was stable and there was a collective responsibility to ensure an improved accountability ecosystem in the sector.

Responses

NRF

Prof Moshabela said that they recognised the importance of not setting a low bar for performance, and had set it within the means that the entity had, as the performance was closely linked to this. An example was the reduction in postgraduate funding because of funds – only 35% of applicants were funded, translating to a 65% gap. This included a gap in funding for emerging researchers as well. The priority of the board had been to lessen that gap and to achieve the sectoral impact required, and the contributions by the NRF to the NDP.

Priority sectors for skills gaps were identified with the support of experts in the sector. The NRF had approached the Minister and DSI, and it was suggested that the entity could look at the National Skills Fund to address this challenge. In principle, support had been received, but there remained significant work to be done in this area.

On the retention of skills within the NRF, the new board found that the entity had a low attrition rate and did not lose skills easily. Work continued to be done to create an environment that was attractive to highly skilled people to work.

Research funding went mostly to the top six research-intensive universities, with the recent entrance of the University of Johannesburg. The Foundation was looking at institutional skills development, to support historically disadvantaged institutions and those that ranked low, so they were lifted. What should be done with the additional funding was to lift those institutions that were lagging, whilst not draining resources from those doing well, so the sector did not collapse. The budget needed amounted to R10 billion but was currently at R5 billion. There had been talks with the DSI to leverage a budget coordination mechanism across the sector – a mechanism not yet devised -- but a strategy was in place for consideration. Further discussions were being held on how the Decadal Plan could be used to create this budget coordination mechanism.

He indicated that the NRF would be happy to do a separate presentation on the just energy transition at a later stage.

Prof Moshabela responded to the question about the two deputy CEOs who had been put on leave. This had caused distress to the board, but it was important to indicate that the decisions made by the board did not reflect a situation of crisis, and there were no concerns about the Foundation’s activities. They were actions that were taken to ensure good governance and accountability. Acting appointments had been made internally, and they had been running things smoothly -- in fact, improvements had been witnessed in those areas. The board had allowed space for the investigation to be concluded, and was eager to bring matters to finality.

The CEO said that the energy challenges affected both the public and the private sectors. He was of the view that enough research had been, and continued to be, conducted, but indications were that there were leadership challenges around the issue.

Dr Gugu Moche, Acting Deputy CEO, NRF, reported that the NRF had also engaged the private sector to assist with funding to increase the number of funded students. The partnership with Sasol was an example, and had contributed positively in this regard. Where the number of funded students declined, the value of the funding increased, ensuring that students were able to focus on their studies and finish within the required periods. With the National Skills Fund, there were internal initiatives to mitigate risks to students. Reduced amounts had been coming in, and support was needed to release the funds earlier to reduce the negative impact on students' well-being.

Dr Mary-Jane Bopape, Managing Director (MD), NRF- South African Environmental Observation Network (SAEON), reported that the NRF was making progress with the national facilities. Observations of an environmental nature were being dispersed on the ground, like automated weather stations. Platforms were also made available to students for research, working with universities. She said the NRF had been recognised for opening up the data in what was usually a closed data sector. It was working with partners like the BRICS countries on the training of students on software programmes like Python, to analyse data. Training was also provided at the high school level on geographic information systems, which was accredited by the South African Council of Educators. The skills needed were not yet there and a lot more had to be done.

She concluded by informing the Committee of the recent BioSCape project that had been making news. BioSCape was an international collaboration between the US National Aeronautics and Space Administration (NASA) and several South African organisations to study biodiversity in South Africa’s Greater Cape Floristic Region (GCFR). The programme explores the region's structure, composition, function, and threats to biodiversity across terrestrial and aquatic systems. The NRF funded the scientists in South Africa. The data sets collected over the project's next six weeks would be made available to all South African universities for access by research students.

Dr Mamoeletsi Mosia, MD, NRF- South African Agency for Science and Technology Advancement (SAASTA), responded that the Foundation sought to build the skills needed for 4IR skills around creativity, problem-solving and others at the school level. Maths Olympiads and the Eskom Science Fair were cases in point. A partnership had been established with the Department of Basic Education (DBE) to provide workshops for educators. Science centres were being capacitated across the country to develop learner skills for future work.

Dr Angus Paterson, Acting Deputy CEO, NRF, said that the country had done very well on the big build projects, like the Meerkat and the SKA, the launch of the isotopes facility, as well as the environmental observation points spoken of earlier. The infrastructure had an excellent year and would continue in that direction.

HSRC

Dr Lubisi agreed with the Committee Chairperson on the importance of its impact on the work of modern organisations. The HSRC realised this in its Institutional Review of 2018, and had built it into the 2018-25 strategic plan. This has gone as far as creating an impact centre at the HSRC. There had been no feedback at the board level on issues raised by the AG and the DSI – including the tracking of timely addressing of qualifications, where they would take a cue from management on why this was happening. He clarified that the 51 cases investigated were not for the current financial year, but for previous years. As reported earlier, about 60% of losses had been recovered, except from deceased former employees whose estates had been closed, and these had been written off. The Council would continue to provide progress on this matter to the AGSA.

Dr Lubisi said that when the board arrived, the staff morale at the organisation was at its lowest. This was largely due to remuneration issues, such as executives not receiving salary adjustments in four years. The Minister of Higher Education and the National Treasury had been engaged in this, and this intervention had been crucial. The board had consistently dealt with these issues in the past year, and thought that the intervention achieved what had been intended, despite organisational dynamics that had to be monitored. HSRC remuneration levels were lower than some universities, although the trend was beginning to be reversed.

Prof Mosoetsa said that the board would consider the report on consequence management, and a lot had been achieved. Warning letters had been issued. No money was lost on the tax matter. A lack of resources would not be the only factor involved in a lack of performance, and should not be used as an excuse for non-performance. The HSRC was working closely with the DSI on the NSF for funding. This had reached the due diligence stage, and they were awaiting their response. The internship programme was looking to attract the right skills, and the TVET colleges' comments would be looked into. The DSI had indicated that there would be no budget cuts for the HSRC. National Treasury had condoned the use of the entity’s surplus, and this was expected to continue.

Prof Leickness Simbayi, Deputy CEO:Research, HSRC, asked the Committee to note that the targets set had been high. The Council aimed to have racially diverse senior researchers, with Africans, coloureds and Indians at 51 per cent, and the target had fallen short by 3%. A target of 39% had been set for female researchers, and this had also fallen short by 3%. It was doing its level best to make up for some of the shortcomings. The percentage of researchers who held PhDs stood at 70% of the 77% target set.

Ms Jacomien Rousseau, CFO, HSRC, responded to the question of the accounting deficit, and reported they had a cash surplus calculated according to Instruction Note 12 of 20/21, and the previous surplus had been accounted for. Audit findings would be cleared out before the end of the year. The HSRC had a cash surplus of R84.9 million for the year.

CSIR

Mr Jarana confirmed the CSIR’s commitment to driving impact in its work.

Dr Dlamini assured the Committee that the organisation undertook rigorous planning when setting targets, which included interacting robustly with the board. He suggested, however, that there needed to be a certain level of realism with regard to expectations when this was done, as investment was currently low due to a shortage of funds.

On the technology licensing agreements signed and targets not met, the issues needed to be dealt with within the National System of Innovation. The commercialisation of intellectual property was a very expensive endeavour. For example, the Council was now in the third year of commercialising one piece of intellectual property (IP) which had found an application in defence with a partner from Germany which had operations in South Africa. R300 million had been invested between themselves and the partner just to get the IP ready for the partner to invest. The funding model for the commercialisation of IP as a system needed to be relooked at. He argued that the budget of the Technology Innovation Agency should be ten times more than what it was if the country was to achieve its targets. He hoped that the special purpose vehicle being created by the CSIR would go a long way in addressing these systemic issues.

On the AeroSwift question, the machine that the Members saw in 2020 during the visit to the Laser Centre had been a prototype. There had been challenges, including losing a commercial partner and finding a new one, who had now been identified. Commercialisation would be done at a smaller scale at the beginning, to reduce costs.

Mr Andile Mabindisa, Group Executive: Human Capital and Strategic Communications, responded to the questions on the TVET colleges. The CSIR had partnered with several institutions to influence the national curriculum, including the DHET. They also worked on lecturer development, particularly with the University of KwaZulu-Natal. He added that the people strategy underpinned the retention policy at the organisation and looked at how the leadership engaged with employees. The organisation continued to improve its work culture and issues of social cohesion programmes and employee participation.

Adv Esme Kennedy, Group Executive: Legal Compliance and Business Enablement, CSIR, reported that the ageing infrastructure of the CSIR required significant investment. A building condition assessment was currently underway and would inform the long-term infrastructure investment plan. This was the case with the electrical infrastructure, which included a possible replacement in the main sub-station. Some progress had been made, but this would depend highly on continued investment through funding.

On its readiness to take up the DHET as a tenant, she said the CSIR had suffered significant delays, awaiting the Department to commit to a lease. They looked forward to this being resolved, as this impacted the organisation’s ability to invest in its infrastructure.

Dr Sandile Malinga, Divisional Group Executive: Smart Society, said that the CSIR was not a member of the ICT Forum. They were, however, involved in several other platforms where they contributed. These included the International Communication Union, the 5G Forum driven by the Independent Communications Authority of South Africa (ICASA), the SA Centre for Digital Language Resources, the National Advisory Council on Innovation, and others. Underpinning all of this was a programme funded by the DSI under the CSIR, the Foundation for Digital Capabilities Research Programme, which drives national initiatives with regard to ICT.

Chairperson's closing remarks

The Chairperson thanked the Department and the entities for their presentations and commitment. She noted that there were responses that needed to be unpacked later by the Portfolio Committee. She requested that those who had committed to send written responses should do so within the next seven days.

The meeting was adjourned.