SANBI, IWPA & SAFCOL Q1 & 2 2024/25 Performance (with Deputy Minister)

Meeting report

The start of the meeting was delayed by almost 20 minutes.

The Committee Secretary, Ms Tyhileka Madubela, then announced that the Chairperson could not attend the meeting and initiated the process of electing an acting Chairperson. The Committee resolved to elect Ms Ronalda Nalumango as acting Chairperson.

The acting Chairperson confirmed that the Chairperson had tendered her apology. She stated that it is the constitutional duty of Parliament to monitor the work and spending of the Executive. Reporting on both financial and non-financial performance is vital to evaluate the effectiveness of government institutions. While monitoring the implementation of audit action plans, expenditure and revenue play a key role in understanding the costs and efficiencies of programmes and activities, non-financial information is equally important to measure progress towards outcomes or impact in the environmental sector. Receiving quarterly reports from the Department and its entities is aligned with the corporate responsibilities of the Committee to determine if the Department achieved its planned outcomes and if citizens had been receiving the services needed. The Department should ensure effective governance, alleviate poverty and unemployment, reduce unemployment, promote inclusive economic development, and uphold the rights of citizens to a healthy environment free from pollution and ecological harm. The standard in this portfolio is to achieve a minimum of 80% at the end of the financial year. Only iSimangaliso had obtained an 80% average for the first six months under review. The Committee was confident that catchup plans were in place to compensate for missed targets. The Committee needed to understand the root causes of underperformance, assess the adequacy of human and financial management and ensure that appropriate measures are taken to safeguard the economic stability of the entities. At a glance, the financial position of some entities was concerning and needed a turnaround strategy. She welcomed the delegations of all entities present and invited Deputy Minister Singh to give his overview of the entities’ performance.

Deputy Minister’s Overview

Mr Narend Singh, Deputy Minister of Forestry, Fisheries and the Environment, appreciated the acting Chairperson’s introductory remarks about accountability and oversight responsibility on the Executive and the Department. The reports looked backwards on the performance over the past two quarters up to September 2024, but it was a good indicator of future performance. The Executive had received presentations from the entities which were thoroughly scrutinised. Some of the acting Chairperson’s observations were similar to those made by the Executive. Moving towards the third quarter, some of the targets not achieved, as indicated in red, will turn green and most will be achieved by the fourth quarter. He advised that the Board Chairpersons led the delegations. SANBI is an old entity established under the auspices of the National Environmental and Biodiversity Act to provide leadership and research in biodiversity and conservation policies. It is also responsible for generating scientific evidence and data to inform biodiversity planning and programmes of action. At a recent COP meeting, he noticed that many of the delegates from other countries were aware of the work of SANBI. iSimangaliso is well-known as a listed world heritage site. The Executive was proud of the audit results and service delivery performance of the entity despite some challenges. SAFCOL was relatively new to the environmental stable because it was previously under the Department of Public Enterprises, which no longer existed. Political responsibility for SAFCOL had been delegated to Deputy Minister Swarts, who, along with the Minister, had been hard at work dealing with the issues. The Minister was in the process of submitting a memo to Cabinet for the appointment of a new board. The financial statements were submitted late in the past due to various reasons. The Executive had been interacting with the old board and would continue to do so. He expressed his willingness to answer questions on behalf of the Executive.

SANBI Presentation

Mr Edward Nesamvuni, Board Chairperson, SANBI, led the SANBI delegation and provided a performance overview of the institute for the first two quarters of the 2024/25 financial year. SANBI achieved 80% (16 of the 20 targets) in the first quarter and 76% (16 of the 21 targets) in the second quarter. The SANBI Board continues to provide oversight to the management team according to the relevant legal prescripts, governing the role and conduct of the board. SANBI was working innovatively and collaboratively to deliver on its mandate. Despite the many achievements, a few areas presented challenges. The 2023/24 External Audit improvement plan was developed following the conclusion of the audit, to address all the findings emanating from the external audit process. The Audit and Risk Committee had been monitoring the plan on a quarterly basis to ensure all findings were resolved by 31 March 2025. At the end of December 2024, 71% of the findings were fully resolved. Management had prioritised the outstanding audit actions in the fourth quarter. SANBI was in good financial position, the institute is solvent with total assets exceeding total liabilities, and liquid with current assets exceeding current liabilities. Management continued implementing the 2023/24 to 2021/32 strategy which the Board had approved. The strategy sought to maximise the institute's income generation capacity by exploring identified opportunities and pursuing strategic partnerships and other innovations. Implementing the 2024/25 Annual Performance Plan (APP) with targets aims to achieve the strategy's outcome. One of the strategies launched was the new SANBI membership card introduced at the start of the 2024/25 financial year. A comprehensive marketing campaign is being implemented and monitored by the Board to return to previous revenue levels using diverse revenue sources.

Mr Nesamvuni remarked that the National Botanical Gardens continues to fulfill its roles in conservation, research, recreation, ecotourism, and education. The gardens exist in all provinces, except the North-West province, where processes have advanced toward establishing a garden in line with the expansion strategy and the medium-term development plan. This would be complemented by fully operationalising the two new botanical gardens in Limpopo and the Eastern Cape. The implementation of the expansion strategy is extended to other gardens where opportunities have been identified. Management is continuing to implement the improved repositioning strategy of the National Zoological Garden (NZG) in line with the 2024/25 Implementation Plan to enhance the role of the NZG in conservation, research, recreation, ecotourism and education. This strategy resulted in infrastructure improvement during the reporting period. The public-private partnership (PPP) project would provide significant shifts in the outlook of the NZG's future. SANBI plays a leadership role in human capital development (HCD) and transformation strategy. The Groen Sebenza Programme has over a thousand interns active in the graduate skills development programme. The institute is encouraged by the exits into further studies and is fulfilling its primary support mandate by providing scientific and policy advice on several critical areas. SANBI continues to assist in department processes to review policies, legislation, and practices in biodiversity and conservation to foster sustainable development while considering social and economic imperatives. The institute supports the Department by providing scientific and technical input and has been playing leading roles in several multilateral environmental agreements to address key global crises of biodiversity loss, climate change and degradation.

Mr Shonisani Munzhedzi, CEO, SANBI, focused on the targets not achieved during Quarter 1 and Quarter 2 and assured the Committee that the team was working hard to ensure that the Quarter 3 and Quarter 4 performance outcomes would present a different picture.

Ms Maphefo Sedite, CFO, SANBI, reported that the company's solvency and liquidity ratios were solid. The assets of R961 million exceeded liabilities of R259 million with a margin of R702 million. The current assets of R311 million exceeded current liabilities of R202 million with a margin of R109 million. Maintaining the company's solvency and liquidity is a priority.

(See Presentation)

 Discussion

The Chairperson opened the meeting for questions and comments.

Mr N Paulsen (EFF) wanted to know what was being done to expose learners from poor communities to the SANBI environment. He asked if the number of visitors included paying visitors and non-paying learners from schools. He wanted to know if the income included gate takings and rentals, and what other revenue options were being explored. He requested a breakdown of the R54 million operating expenses. 

Mr W Peach (DA) sought clarity about the R26 million spent on investing activities, i.e. if it included monetary or infrastructure projects.

Dr L Managa (EFF) noted that SANBI struggled in the beginning of the financial year with the target of training 600 interns in the Groen Sebenza Programme but managed to exceed the target by the end of the year. She asked if more could be done to double the number of trainees. She wanted to know which factors contributed to the lower-than-expected visitor numbers and if a plan was in place to manage the factors that could be controlled.

Ms N Makasi (ANC) noted that the entity had missed the 49% target for the appointment of female staff in senior and top management positions. The issue of the appointment of women and people living with disabilities has been a concern of the Committee since the start of the Seventh Administration. She encouraged the entity to achieve more than 50% employment in this category in compliance with the Department's target.

 Mr Munzhedzi, stated that the design of all botanical gardens includes an environmental education centre for conservation, research, recreation, and ecotourism. Kirstenbosch has been operating a bus service, funded by external sources, to support educational programmes. Educators and learners are accounted for differently from visitors who come for other activities. The business is supported by products and services on offer. Own income represents 30% of total income while the fiscus provides 70%. More investment is needed for infrastructure development and maintenance. More than 600 Groen Sebenza interns have been trained at year-end. The measure is to offer recognised training models. Mentors are assigned to the 1 200 trainees across the board. They do demonstrations daily, showing trainees how to operate in different areas. He replied to Member Makasi that the entity was on the right path regarding appointing females and people living with disabilities. The rate in this category fluctuates between 46% and 49% but the entity is committed to achieving the target. The budget cuts across all government departments present challenges which need to be mitigated. The constrained fiscus is impacting on infrastructure and other developments.

Ms Sedite explained that the restaurants and kiosks within the gardens and zoos help generate income by selling items to the public. Consultancies were assigned to assist with the revenue generation strategy. SANBI is working closely with the SAPS to confiscate plants and other illegally acquired objects, contributing to revenue generation. She replied to Mr Paulse that operating expenditure referred to expenses on operations within the gardens. Personnel expenditure is separately accounted for. The over expenditure was due to stabilising the ICT environment. Expenditure is managed tightly. She explained that investment income is placed with the Reserve Bank because SANBI cannot invest in other areas. One of the initiatives for own income generation is the Open Week that is held to promote public visits. No gate income is generated this week, but restaurant revenue contributes to overall income. Other marketing avenues are being considered to increase revenue.

The Chairperson thanked the SANBI team and allowed them to exit the meeting. She invited the iSimangaliso team to proceed with their presentation.

IWPA Presentation

Mr Inkosi Mabhudu Tembe, Board Chairperson, IWPA, apologised for the absence of the CEO and indicated that the CFO would be leading the presentation on behalf of the entity. He stated that the IWPA was committed to deliver all targets by the end of the financial year. He was proud to report on the significant strides that were made in the first two quarters. The entity achieved 83%, or 19 of the 23 planned output indicators in the first quarter and 83%, or 20 of the 24 planned output indicators in the second quarter.

Ms Qhamkile Mntambo, CFO, IWPA, reported that the IWPA made significant strides in fulfilling its mandate of conservation, sustainable tourism, socioeconomic upliftment, and community empowerment. The key achievement included the expansion of protected areas and the implementation of community-based projects such as the Expanded Public Works Programme (EPWP). An increase in ecotourism activities at the Charters Creek Resort contributed to achieving the 83% target. The tourism offering was enhanced by the introduction of the Charters Creek Resort through private public partnership (PPP) as part of the commercialisation project. The resort has been attracting both international and domestic visitors through strategic infrastructure investments. The iSimangaliso advertisement board is being showcased at the OR Tambo International Airport as part of the marketing strategy. The entity is committed to ensure that local communities benefit from the various development programmes, job creation, and support for small businesses. Facilities and roads are being upgraded to ensure unique experiences for visitors while maintaining ecological integrity.

Ms Mntambo attributed the targets that were not met to the delay by National Treasury to approve the Appropriations Bill. The entity reported low liquidity ratios in the first quarter, e.g. the cash ratio of 0.2:1, indicated that the current assets were inadequate to cover the current liabilities. Financial liquidity remained a challenge in the second quarter. The current liabilities exceeded the current assets in a ratio of 0.5:1. Management is hopeful that improving strategic decision-making would improve liquidity.

(See Presentation)

 Discussion

Mr Paulsen asked if any expenses, not budgeted for, were incurred to clear the estuaries.

Dr Managa wanted to know if revenue avenues other than gate collection fees, such as the accommodation offered at Kruger National Park, were being considered. She appreciated the visitors from other provinces but asked how many visitors from areas around the Park had been visiting.

Ms Makasi inquired about provisions being made for emergencies resulting from natural disasters and asked which alternative revenue streams are being considered in such situations. She noted that the entity achieved 83% of its targets in both quarters and asked if plans were in place to increase performance.

Ms J Khumalo (ANC) wanted to know the effect of the non-implementation of the Cloud Backup system and how this could be prevented in the future.

Mr S Mkhize (MK) noted that the IWP target was to attract 215 000 paying visitors but only reported 34 000 in the first quarter and 76 000 in the second quarter. Given the importance of tourism for financial sustainability, he asked what measures were being taken to meet the annual target and address the revenue shortfall. The delay in the Appropriation Bill led to the non-implementation of the key EPWP project and the employment of Groen Sebenza interns. He asked if discussions were held with National Treasury to expedite disbursements and if alternative funding had been considered to prevent a similar situation in future.

Mr Tembe, remarked that the COVID-19 pandemic was still impacting global tourist numbers, but the numbers were improving, both in terms of local and international visitors. To increase revenue, the IWPA embarked on an exchange programme with other parks, particularly the Kruger National Park.

Ms Mntambo replied to Member Paulsen that no expenses were incurred to clear the estuary. The process had started but was incomplete because the basic assessment needed approval.  The entity had developed a financial sustainability plan and a commercialisation strategy to increase revenue. By the end of this financial year, all five target projects, including Charters Creek, will be operational. The project aims to generate R52 million over the next five years. Existing contracts were expected to generate about R500 000 by the end of March 2025. The marketing strategy included the advertising board at OR Tambo International Airport and other campaigns on social media platforms such as the Betaway advertisements at televised soccer matches. She explained that the 83% achieved in both quarters was a coincidence because the number of targets per quarter was different. She replied to Member Khumalo that the Cloud Backup system is in addition to the existing external hard drive. The initiative is for business continuity because systems are being hacked. She explained that the election impacted the approval of the Appropriation Bill which resulted in the non-implementation of the EPWP until 31 July 2024. Grants were subsequently received from the National Treasury, and the targets were met.

Dr Managa noted that SANBI appeared not to have been impacted by the delay in the approval of the Appropriation Bill because the entity was able to exceed the Groen Sebenza target. She asked what SANBI had done differently despite the budget delay and why IWPA had failed.

The CFO, Ms Mntambo, replied that she would discuss the matter with SANBI and provide a comprehensive written response.

The Chairperson thanked the IWPA team and allowed them to exit the meeting. She was aware that the SAFCOL Board was not present and invited the SAFCOL representatives to proceed with their presentation.

 SAFCOL Presentation

Mr Sibalo Dlamini, Acting CEO, SAFCOL, presented an overview of the performance for the first two quarters. SAFCOL is an integrated forest company, operating in South Africa and Mozambique. The task is to manage state forests according to acceptable commercial management practices. SAFCOL had a dual mandate, i.e. commercial viability and socioeconomic development. The main operating entity is the Komatiland Forests Company in South Africa. In Mozambique, SAFCOL owns 80% of the IFLOMA Forest Industries. Plantations in South Africa starts in Limpopo through to KZN, with the main plantation in Mpumalanga. Operations in Mozambique are mainly in the district of Manica and the Sofala province. Revenue in South Africa is derived from the sale of logs. The 27-year certification achieved by SAFCOL is a symbol of running a sustainable forest. Timber processing is done at one sawmill, Timbadola, located in Limpopo. Ecotourism is another source of revenue. The old infrastructure is a challenge but is being managed to the best of the team’s ability. Strategy-29 is in place to diversify revenue streams.

Mr Dlamini reported on the performance outcomes of the first and second quarters. Reports for the first quarter were submitted to the Department of Public Enterprises while the second quarter reports were submitted to the Department of Forestry, Fisheries and Environment. In the first quarter, 82%, or 18 of the 22 KPIs, were achieved. The performance in quarter two was based on 28 KPIs of which 22 were measured. A complete financial report was unavailable due to the ongoing implementation of the ERP project as part of the automation process. An updated report would be provided once the ERP can generate financial reports.

Mr D’Shorne Human, CFO, SAFCOL, was proud to announce that SAFCOL has been performing well and had not received bailouts or government guarantees. The entity is generating its own income and creating value to the government as a shareholder. Quarter one ended with a profit of R9.1 million, almost three times more than the budget for the comparative period. All expenses for the quarter were within budget except for Administration Costs, which were incurred for software expenses to implement a new ERP system after system integrity issues were identified in the old system. The new ERP system became operational in July 2024 but experienced difficulties generating detailed financial reporting in the second quarter. All financial performance ends up in cash; therefore, cash is tracked on a daily basis. A R36 million drop in cash was reported in quarter one. This related to a payment for aerial support to extinguish the massive fire due to weather changes. The self-insurance reserve was used to service the costs of the fire but will be replenished to prepare for the next fire. The entity was not expecting to make any losses and was actively managing the cash flows.

(See Presentation)

 Discussion

Mr Paulsen was concerned about the absence of the Board and sought an explanation for their non-attendance. He noted that BEE targets were not met and asked if this meant that business is given to white-owned companies. He questioned the location of the lumber processing plant in Limpopo while the major forests were in Mpumalanga. He asked if an environmental impact assessment was conducted given the transition to lower carbon emissions. Considering that SAP was fined for state capture, he wanted to know if ERP is an SAP system. He questioned the R30 million spent to combat a fire and the reliance on third parties to extinguish fires. He asked if it would not be feasible for SAFCOL to set up its own fire-fighting department to despatch teams in case of a fire outbreak readily. He encouraged SAFCOL to invest in technology that could easily detect the risk of fires, thereby saving money, jobs, and lives.

Ms Khumalo asked which production challenges led to the low production output in timber processing and what caused the underperformance in spending on BEE-compliant companies.

Ms Makasi wanted to know how much was invested in the Timbadola and INFLOMA projects and if measures were in place to mitigate the risk involved. She also asked what led to the delay in implementing the Forensic Report recommendations within the three-month time frame.

The Acting Chairperson noted that SAFCOL needed R34 million per month for salaries. With forecasts showing insufficient month-end balances, she asked what specific scenarios were being considered to address the potential shortfall. She enquired about the contingency plans if the early settlement discounts do not generate sufficient cash flow. She asked which KPIs were being used to monitor the financial health of SAFCOL and how frequently the KPIs were reviewed. She wanted to know to what extent irregularities and unethical behaviour were impacting SAFCOL operations that necessitated the creation of a dedicated forensic investigator position. She enquired about the core forensic report recommendations for implementation within three months. Reporting on several targets appeared to be impacted by the ongoing ERP implementation. She asked when the implementation started and when it was supposed to be completed. The R36 million cash decrease in Q2 was mainly attributed to fire-related expenses. She requested a breakdown of these expenses and asked what measures were in place to prevent such significant cash balance drops due to unforeseen events.

Mr Dlamini noted the concerns about the Board’s absence and undertook to provide a written response to the Committee. He explained that the BEE evaluation criteria consider black-owned suppliers and women- and youth-owned businesses, and most of the companies appointed were BEE-compliant. The target was not achieved due to key issues addressing the cash reserves. He replied to Member Paulsen that the dedicated plantation in Limpopo is within reach of the sawmill. More funding is required for another facility in Mpumalanga with a market for logs. Revenue is derived from the sale of logs to customers. The big players include SAPPI and other black-owned entities. An environmental impact study was in the preparatory phase, considering climate change initiatives. SAFCOL has not operated in the Western Cape because most plantations were privatised. The entity is employing a detailed scientific process to reduce fuel load. It is more economical to share resources and expertise during a fire. SAFCOL has detection technology to detect fires but the combatting process is normally coordinated with the Fire Protection Associations (FPAs). The Timbadola boilers were over 60 years old and needed replacing. A scheduled maintenance plan is being followed because of the frequent breakdowns. The BEE underperformance was due to cost containment reasons and to manage strategic project risks. A strategic partner is needed in Mozambique, and a lengthy approval process is required from the government. He replied to the acting Chairperson that timber theft was a big challenge, hence the appointment of a dedicated forensic investigator. Cases are followed up through whistle blower information with the involvement of law enforcement agencies.

Mr Human explained that the quarter one BEE target was missed because the suppliers of the technologically advanced machinery to mechanise harvest activities were all offshore and their representatives in the country were not at a high BEE level. He advised that ERP is not an SAP system. The entity moved from ORACLE to SAGE, which offered the best price, and the system is fit for purpose. Because SAFCOL forms part of the FPAs, it would not make financial sense to spend on helicopters while the FPAs had the resources. The fire trucks were replaced recently through financing from a commercial bank. The entry-level response teams have been trained to combat fires. The business case for the Timbadola investment of about R300 million would be phased in over a number of years. The entity hoped to hear about the IDC funding application versus commercial bank funding shortly. The strategic partner is funding part of the project. He replied to the acting Chairperson that the early settlement option offered to suppliers was to prevent a possible crisis with salary payments. However, the offer proved not to be necessary because of the cash intervention that was implemented. Other tracking measures included the efficiency rate and the debtors recovery rate, which is below the target of 60 days. The current ratio is used as a measure to manage liquidity. The ERP implementation started in April 2024 at the beginning of the new financial year and was scheduled to be completed by the end of March 2025 when there would be access to the full financial reporting information. The fire expenses were the biggest in the last five years, but the risk was becoming more pronounced due to climate change. Because it is expensive to insure all biological assets, the entity is making provision for self-insurance. The reserve is forecasted to be fully replenished by the next fire season. More creative risk products are being explored, and a tender was opened to provide a complete overview of risk mitigating factors to cover operational risks.

Deputy Minister’s closing remarks

Deputy Minister Singh thanked the Committee for the relevant questions to ensure that the entities use the allocated monies efficiently and take corrective actions where targets were not achieved. Adequate funding was going to be a big challenge in the future. To this end, the entities and the Ministry were in the process of sourcing private funding. For example, the Global Environment Facility at SANBI was keen to fund some projects. The Minister recently had meetings with private sector partners for assistance with infrastructure development at iSimangaliso. The Deputy Minister remarked that at a COP-16.2 meeting in Rome the previous week, he took time to engage the Italian Police Force, which has a dedicated environmental unit. He would be forwarding the information to SAFCOL to learn about detection enforcement. The Italian Police Force expressed willingness to train our enforcement agencies. This formed part of the initiatives that the Executive was engaged in to enhance our capabilities.

The Chairperson thanked the SAFCOL team for responding to all the questions and noting the concerns raised by Members. She also thanked everyone who participated in the meeting and expressed gratitude to the Secretariat for arranging the successful online meeting.

The meeting was adjourned.