DFFE & DMRE Audit Outcomes

Meeting report

The Chairperson opened the meeting and cautioned Members not to ask the Office of the Auditor-General (AG) questions about accountability because AGSA was reporting only on what the Office had found. The briefing was to equip the Committee with the information so that Members would be better informed when performing its oversight over departments and their entities.

AGSA briefing on the audit outcomes of the DFFE

Ms Thabelo Musisinyani, Business Unit Leader, AGSA, took the Committee through a presentation on the audit outcomes of the Department of Forestry, Fisheries and the Environment (DFFE) and its entities.

The key targets in the medium-term strategic framework (MTSF) for the portfolio were outlined.

The South African Weather Service (SAWS) did not achieve indicators measuring the availability or operating effectiveness of its infrastructure and system information.

The AG’s observations were:

• It noted that there was a shared responsibility across the three spheres of government, and for the key targets to be achieved, there was a need for intentional and directed collaborate effort.
• It also noted that environmental responsibility at the provincial level was often clustered with other portfolios, such as tourism. Competing priorities within the cluster may threaten the achievement of the target. Therefore, balancing priorities to ensure all key targets were met was critical.

The poor quality of performance indicators and targets of the department and its entities was outlined. The monitoring of landfill sites, enforcement, and waste management was reported.

The overall audit outcomes in the portfolio had remained stagnant compared to the prior year. SAWS, Isimangaliso Wetland Park and the Marine Living Resources Fund (MLRF) had maintained unqualified audit opinions, with no findings, while the Department, South African National Parks (SANParks) and the South African National Biodiversity Institute (SANBI) had received unqualified opinions with findings, similar to the previous year.

However, the DFFE and SANBI had required the audit process to make material adjustments to avoid a qualified opinion. SANParks and SANBI had complied with legislation findings, while the DFFE's findings were on both compliance with legislation and performance information.

AGSA highlighted the importance of ensuring coordination across all three spheres of government on energy issues. It flagged a concern that the environmental portfolio was often coupled with other line departments in the provincial government sphere. For example, it questioned how to ensure prioritisation in Gauteng, where the environment portfolio was combined with the transport portfolio.

It also drew attention to the DFFE's capacity issues, and urged it to ensure that there were sufficient inspectors to monitor compliance at landfill sites.

Se the attached presentation for details.

Discussion

The Chairperson emphasised the importance of environmental sustainability in light of natural disasters such as earthquakes and floods. He highlighted the need for coordinated responsibility across government levels to protect the ecosystem for future generations.

In addition, he said that the Committee should lobby the President and Deputy President to ensure that the environmental responsibility was clearly located in an office in the provinces. He proposed that provincial finance departments should take on more environmental responsibility, suggesting that budget cuts be imposed on municipalities failing to meet environmental standards.

Mr N Pienaar (DA, Limpopo) noted that de-coupling within some of the provincial departments, as the AG had suggested, would lead to government expansion. His view was to make the government more efficient and streamlined, and he therefore advocated involving the private sector in environmental accountability to enhance coordination.

He expressed disappointment in the Free State’s complete lack of compliance, questioning the excuses provided by its officials to the AGSA. He labelled this non-compliance as embarrassing.

Ms S Boshoff (DA, Mpumalanga) emphasised the importance of monitoring the recovery process for financial losses and investigations.

She agreed with other Members about the widespread non-compliance of landfill sites across all nine provinces.

She pointed out discrepancies between AGSA’s report and the Department’s report, calling for an interrogation into the discrepancies.

Ms M Kennedy (EFF, Limpopo) raised concerns over the reduction in the number of environmental inspectors, which reduced monitoring effectiveness. She said that non-compliance often stemmed from a lack of capacity at local government levels. All activities in government should be monitored and measured. She stressed that sufficient inspectors were crucial for effective oversight of environmental standards. The reduction in their numbers posed a significant challenge to accountability and environmental protection.

Mr B Farmer (PA, Western Cape) supported the idea of prioritising environmental protection, even if it involved expanding government structures. He suggested establishing a dedicated Ministry of Environment to ensure focused oversight. It should be done sooner, rather than later.

He requested more information on the poor quality performance indicated on slide 7.

On slide 8, he sought advice on what the Select Committee could do -- whether it was to call those provinces to the Committee, or write them letters, to account for their poor compliance, given that the Free State and North West had zero percent compliance, the Northern Cape three percent,  with Limpopo at 17 percent and Gauteng the highest, sitting at only 52 percent.

Referring to slide 11, he wanted assurance that those municipalities understood the laws and regulations correctly now.

Ms S Sithole (ANC, North West) expressed her embarrassment over the non-compliance indicated on slide 8, and wanted to know the main reason for it. She emphasised the need for strict consequence management and enforcement, including clear timeframes, to enable better interrogation of departmental activities by Members.

Mr H van den Berg (FF+, Northern Cape) raised concerns about the lack of clarity regarding government structures and responsibilities for landfill site management, especially since provincial and national government involvement had emphasised the point so often, but he knew very little about it, coming from the local government sphere.

He noted some of the inputs in the AG’s report that stated “unable to obtain audit evidence,” which showed the lack of internal controls. He recommended a workshop to clarify what consequence management measures should be in place to address the issue, and how the Select Committee could enforce those measures. He enquired if re-investigations were possible where records were missing or were non-compliant.

He did not understand why the national government had to be involved in landfill sites while local governments, which were the implementers, received the grants and spent them on the landfill sites.

He highlighted a misalignment between provincial and national environmental goals.

He expressed frustration that 2 759 cases of material irregularities remained unaddressed. He questioned if inspectors were doing enough to address waste and other environmental issues, or if they were doing other work.

He noted that the government was unable to institute internal disciplinary processes against the five ex-officials who had incurred financial losses since they were no longer employees. Was there a system in South Africa, such as a register, to bring them to account and prevent them from being deployed to another government department or a different sphere of government?

Ms M Ndlangisa-Nodada (ANC, Eastern Cape) suggested using unemployed graduates to assist with landfill sites, given the country’s high unemployment rate. She wanted to know the reasons why municipalities were unsure of compliance on environmental standards. Her observation at many of the landfill sites was that they were “dirty and bad,” and thus stressed the need for sufficient inspectors to monitor the standards.

Mr P Mabilo (ANC, Northern Cape) said that building projects, such as houses, shops and factories, should be subjected to environmental review and positioned under state oversight to mitigate unintended environmental consequences.

Coming from a mining town, he mentioned issues with waste disposal from mining operations that should be strictly monitored. He requested a comprehensive report on the status of landfill sites nationwide. His particular concern was that some of those sites had exceeded their capacities.

He argued that air quality compliance was essential, and signing agreements such as the Paris Agreement without enforcement would mean little.

He emphasised that the Department must obtain a clean audit opinion.

He questioned whether municipalities had waste management structures in place, pointing out inconsistencies in the Department’s response on this issue.

AGSA's response

Ms Musisinyani clarified that the intention was not to expand government structures but rather to highlight the function of environmental affairs because of the inter-departmental working relationships. There needed to be a way that this function could work together with other portfolios by identifying all the role players involved.

Referring to the non-compliant provinces, she assured the Committee that its teams were on the ground and reporting back to the national office on the issues that required attention. The team was also busy unpacking and understanding the elements of the National Environmental Management Act (NEMA) to get a sense of the roles and responsibilities of different stakeholders. There was the overall responsibility of the national Department to issue regulations. The provincial level was also mandated to issue some regulations after consultation with the national government. Given the complexity of NEMA, the national Department may be playing the roles of both an implementor and a monitor in environmental affairs. Ideally, the national Department should not be directly involved in landfill sites, but in the event when a local government was not performing, the national government would have to intervene.

Ms Musisinyani said that the status of landfill sites report would be provided to the Committee in due course, since the team was still on the ground making observations. The preliminary impression was that some landfill sites were almost full, which would require building new landfill sites. There were specific things that needed to be addressed to build better landfill sites. For instance, tyre waste should be separated and stored in a specific condition, otherwise some of the landfill sites would reach their full capacity prematurely. She encouraged the bigger picture of how to separate waste from every household, starting with every citizen in the country.

Under normal circumstances, the DFFE responded to the findings that the AGSA flags. Timeframes were inserted into actions by the management in their responses. The follow-up did happen and AGSA did monitor the progress of implementing action plans.

AGSA referred to the total number of all inspectors at both the national and provincial levels, and said the largest contributor of inspectors were rangers. However, the gathered data indicated that there was an insufficient number of inspectors, and she encouraged the Committee to seek more information from the Department.

In response to the question on MLRF, the Office was simply pointed out the findings and then MLRF had to rectify those errors. The indicators on slide 7 referred to the findings which all the auditees had findings on and later on rectified.

The AGSA was clear that all fruitless, wasteful and irregular expenditure needed to be investigated, and recommendations were provided to address the situation. For instance, AGSA had flagged the procurement processes at SANParks as a concern, so that was the status of its audit finding at the moment. Regarding resources not being utilised effectively, the AGSA had identified the departmental officials responsible for the misconduct. The DFFE had transferred the matter to the Office of the State Attorneys, who would now assist the department in the financial recovery process.

Mr Van den Berg sought clarity on the names of those implicated officials, and reiterated his questions on the possibility of having to revisit some of the "dodgy" investigations.

The Chairperson instructed the response be submitted in writing.

AGSA briefing on DMRE's audit outcomes

The Committee was taken through the audit outcomes of the Department of Mineral Resources and Energy (DMRE).

An overview of the portfolio was given:

• From a performance perspective, five of the 12 auditees in the portfolio had achieved more than 90% of the performance targets in their annual performance plans. However, the DMRE had achieved less than 80% of its targets in the 2023/24 financial year. Furthermore, key performance indicators relating to DMRE's and the National Energy Regulator of South Africa's (NERSA's) mandate and core functions were not tracked and reported on.
• Generally, the portfolio upheld the culture of transparency, with eight of the 12 (75%) auditees submitting credible financial statements with no material errors. Included in the eight auditees was the DMRE, signifying a tone that was set for the portfolio.
• The remaining four were able to obtain a credible set of financial statements after the audit process, resulting in the entities receiving an unqualified opinion.
• The prevalent instances of non-compliance were in the areas of material misstatements identified in the financial statements submitted for auditing, consequence management, and revenue management. Some of the matters were recurring. In the last year of administration, AGSA had seen a general improvement in compliance, with fewer auditees having material non-compliance with regard to consequence management. This indicated improved accountability and a strong message for non-tolerance of wrongdoing within the portfolio.
• A significant portion of the irregular, fruitless and wasteful expenditure were historic transactions that continued to have an impact.
• Controls were being implemented to stop the incurring of fruitless and wasteful expenditure through the material irregularity (MI) process.
• Challenges in the current audit cycle included non-compliance with the National Energy Act and Electricity Regulation Act, which were the key enabling legislations within the portfolio. Although there was a general improvement within the portfolio concerning the achievement of indicators, some key targets in relation to key energy security indicators had not been achieved.

Ms Musisinyani concluded that the discussion on energy should be expanded to include those entities involved in energy security, as well as all three spheres of government, in addition to the Department. She stressed the need for an integrated plan from various stakeholders to ensure energy security. The Department of Mineral Resources and Energy (DMRE) was identified as responsible for issuing policy directives that ensure coordinated planning across government levels. The South African National Energy Development Institute (SANEDI) should play a critical role by providing research and data to inform the DMRE's plans. However, to be able to do that, adequate funding is required to fulfil its mandate. Infrastructure management involved multiple stakeholders, including Eskom and the municipalities, with a focus on minimising energy loss, maintaining distribution efficiency, and enforcing licensing standards. NERSA's role in monitoring and enforcing these standards was crucial for optimising distribution. One could not have a situation where 80% of the electricity was lost during the distribution process due to ageing infrastructure.

AGSA encouraged the Select Committee to review the Act, determine its priorities for oversight, and then to devise a monitoring and evaluation plan to support that oversight.

For full details of the presentation, please refer to the slides attached.

Discussion

The Chairperson suggested postponing Members’ questions until the next meeting due to a scheduling conflict with a 2 p.m. plenary session, which several Members needed to prepare for. He observed that Members currently lacked the necessary background knowledge for effective oversight of the Department. As a solution, he proposed organising a workshop with the AGSA, focusing specifically on electricity-related issues, such as electricity loss across the value chain.

All Select Committee Members unanimously supported the Chairperson’s suggestion that a workshop with AGSA was necessary and should be arranged.

Ms M Dhlamini (ANC, Free State) supported the Chairperson’s proposal for a workshop, expressed her disappointment over the report on the NERSA, and emphasised the need for a dedicated platform to ask questions for clarification.

Ms Ndlangisa-Nodada raised a concern regarding the memorandum of agreement (MoA) on Slide 21, and flagged that the issue needed to be looked at.

Ms Sithole raised a question on Slide 25 regarding completed investigations from 2021; specifically, she wanted to know who those officials were, and the mechanism to prevent them from applying for another position at a different municipality.

Ms Kennedy commented that a new term for load shedding had been created now -- power outages and blackouts.

Ms Boshoff requested an update on meter boxes, and asked if it was within AGSA’s mandate. She said the meter box would expire at the end of the month. She suggested the response be provided in writing.

Mr Pienaar referred to NERSA as “one of the elephants in the room,” and agreed on the importance of a workshop. He questioned the Department’s capability, and proposed exploring ways to streamline its functions and getting rid of some of them.

The Chairperson agreed with the Members’ suggestions, and reiterated the need for a dedicated workshop. He emphasised the importance of familiarising Members with sector-specific terminology to enhance their understanding and oversight capabilities.

Response

Ms Musisinyani said the energy portfolio was acknowledged as inherently complex and requires significant time for effective management. The AGSA was committed to supporting the Select Committee by participating in a workshop aimed at addressing energy portfolio challenges and enhancing collaboration. The AGSA’s involvement was expected to bring more clarity and accountability to the discussions on energy policy and its implementation.

Load shedding had been highlighted as a critical issue often attributed to Eskom. AGSA’s research indicated that while Eskom was a key player, other departments and entities also played important roles in the energy value chain. Effective coordination and clear mandates were essential to ensure each institution was accountable for its responsibilities.

The NERSA operated under the National Electricity Act, which defined its legal obligations. It was stressed that there was a need for clarity on NERSA’s core mandate and enforcement of its legal duties to contribute effectively to the national energy strategy.

The independent power producer (IPP) office, responsible for generating additional capacity, lacked institutionalisation and legal status, which complicated oversight and accountability. Without an official oversight body, there was limited supervision of its activities, raising concerns about how the IPP’s contributions to the energy supply were managed and evaluated.

Ms Musisinginya said the Department of Public Service and Administration (DPSA) was developing a register to help track those perpetrators who incurred financial losses across departments, though this system was not yet automated. She emphasised the critical need for modernising information communication technology (ICT) within government, as this would allow for more efficient tracking and flagging of such individuals.

The AGSA welcomed the opportunity to build a stronger relationship with the Select Committee and emphasised the value of the workshop in facilitating knowledge-sharing and improving coordination among all stakeholders in the energy portfolio.

The Chairperson adjourned the meeting.