Premier Soccer League on Commissions; Minister on Department Annual Report 2006/7

Sports, Arts and Culture

06 November 2007
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Meeting Summary

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Meeting report

SPORT AND RECREATION PORTFOLIO COMMITTEE
6 November 2007
PREMIER SOCCER LEAGUE ON COMMISSIONS; MINISTER ON DEPARTMENT ANNUAL REPORT 2006/7

Chairperson: Mr B Komphela (ANC)

Documents handed out:
Department of Sport and Recreation Annual Report 2007/2008 presentation
Sport and Recreation South Africa Annual Report 2007/2008 [available at www.srsa.gov.za]
ABSA/Premier Soccer League Transaction

Audio recording of meeting [Part 1][Part 2][Part 3][Part 4]

SUMMARY
The Premier Soccer League chairperson, Dr Irvin Khoza, explained in great detail the transaction between ABSA, Premier Soccer League and the National Soccer League. He insisted that no payments had been made to soccer administrators. Furthermore there were no additions in the contract regarding payments by ABSA to soccer administrators. At a biennial meeting with the Executive Committee in 2006 it was decided that parties negotiating sponsorship would be paid 10% commission.

The Minister of Sport and Recreation provided a detailed overview of the Department’s activities in 2006/07. He discussed the qualified audit report noting that the Office of the Auditor-General had changed its methodology and thus issues that were previously matters of emphasis now result in a qualified report, now however, those same issues were considered audit queries and had resulted in a qualified report. Most of the audit matters had been dealt with. The mass sport participation programmes were going well, however they were facing issues regarding funding. He clarified policy on the quota system, emphatically stating that the quota system had been eliminated since 2004. He stated that there was no evidence supporting the premise that the quota system was improving transformation of sport in South Africa. Instead a catch-up strategy had been devised to develop talent at ground level to begin transformation from the ground up. The Department noted the great strides made in filling its vacancies in the Department. Challenges included insufficient funding to support the transformation process as well as the lack of club development. The funds given to municipalities by the Department were often used elsewhere.

The Committee was concerned with the lack of compliance as reflected by the qualified audit. The mounting pressure for completion of the World Cup stadiums was also worrisome.

MINUTES
Premier Soccer League (PSL) briefing on ABSA / PSL
Transaction
Dr Irvin Khoza (Chairman: Premier Soccer League) gave a detailed presentation on the interactions between ABSA Bank and the Premier Soccer League (PSL) for the renewal of sponsorship rights. ABSA Bank had notified the PSL about their renewal rights as per their contract. An extension period was mutually agreed upon due the fact that the PSL was finalising its broadcasting agreements. The extension period was extended numerous times. A meeting was finally held on 22 August 2007 between ABSA Marketing and Dr Khoza and Peter Mancer from Diversity and Management in the PSL regarding the renewal of the contract. ABSA confirmed that it wanted to renew its contract and sought clarity on certain aspects of the sponsorship proposal presented by the PSL.

A legal opinion sought by the PSL suggested that the National Soccer League (NSL) did not have to offer the same benefits as offered in the current agreement. Various media publications then published a report that another financial institution had shown interest in purchasing the rights to the PSL. In response to these reports ABSA held an urgent meeting with the PSL and brought to the attention of the PSL the clause in their contract that stipulated no other organisation within the financial service sector would be allowed to sponsor any tournament in the NSL without the consent of ABSA. ABSA’s contract was only expiring on the 31 October 2007 and they were within their rights.

On 5 September 2007 ABSA sent a formal proposal to offer for the exclusive rights to sponsor the PSL. The proposal was presented to the joint Finance, Sponsorship and Marketing Committees on 24 September 2007 where it was ratified to proceed with the deal with ABSA. On 26 September 2007 ABSA and the PSL announced the ABSA sponsorship of the PSL to be called the ABSA Premiership. On 27 September 2007 the full Executive Committee met and ratified the transaction with ABSA.

On 30 September 2007 the Sunday Times and the City Press published stories regarding claims of soccer bribes by ABSA. A letter allegedly written by the Minster of Finance Trevor Manuel and sent to Dr Steve Booysen of ABSA was quoted in the Sunday Times. The letter said that Minster Manuel was ‘shocked’ by the announcement that ABSA would pay ‘R50 million into the private banking accounts of the administrators who had awarded the contract’. Dr Khoza, in response to this statement, said that there had been no negotiation with ABSA by the PSL regarding payment nor was there any mention in the agreement concluded between ABSA and the PSL of payments to soccer administrators. There were no auxiliary announcements by either party of payments to soccer administrators’ private banking accounts. There was no clause or stipulation in the agreement of any payment to any individuals with regard to the rights contract that ABSA had entered into with the PSL.

A letter written to Dr Khoza from Dr Booysen informed him that in a letter written to Minister Manuel, it was stated that no payments had been made to the NSL nor were any commissions or payments promised. Dr Khoza had written to the Minister of Sport and Recreation informing him of the matter and requesting a copy of the letter written by Minister Manuel and further intervention. The Minister Stofile responded that he had not seen the letter and that he was not aware of the sponsorship deal and added that until he had received a factual report he was unable to intervene in the matter.

Dr Khoza referred to the Board of Governors Biennial General Meeting that was held on 11 November 2006 where the issue of commission was decided, although the modalities thereof were not decided upon. In the meeting it was decided that commissions would be payable and that negotiations would be handled from within. The individuals in the media were the only people that had challenged the principles of the agreement. The amount unanimously agreed upon was 15% on the incremental value of the sponsorship. Full commission would only be paid on any new sponsorship obtained. The party or parties negotiating sponsorships would be paid 10% commission. Executive members would receive 2% and clubs 3% as commission.

Discussion
Mr Komphela clarified that, as Chairperson, he was flooded with questions regarding the capacity of the invitation to the PSL. Any South African citizen could be invited to parliament in order to improve social cohesion and the country in genera.

Mr D Lee (DA) commented that South Africa could only do well in the 2010 World Cup if the talent was nurtured in the country. There are more people playing soccer than rugby, and developing talent should be encouraged. If one looks at the commission paid to the PSL when there seemed to no funds available for young talented soccer players, it was cause for concern. He believed that government should not interfere with soccer. However, he was concerned by the way funds had been handled. He wanted to know how much money was being paid in commission.

Dr Khoza replied that it was important not confuse the PSL with South African Football Association (SAFA). PSL pays a fee every year for the development of sport. Any sponsorship for SAFA was only event related. At present SAFA was struggling to raise finances for its trip to Ghana. According to the agreement that SAFA has with sponsors, they would only pay if they were sure to receive a return on the investment. In 1997 the idea for the PSL was conceived and realising that funds were needed, shares were sold. They managed to raise R22million, even though R6 million was required and gave each club R1million. In reference to development, Dr Khoza’s team Orlando Pirates, sponsor’s 150 children from all over the country, in a boarding school in Johannesburg, that cost approximately R5 million each year. The PSL was not responsible for players going overseas, that was dealt with by SAFA. In order to promote development, the PSL held charity games at the beginning of each year.

Mr C Frolick (ANC) commented that there was a time that it was not popular to sponsor soccer. It would be time consuming to sit with each transaction that took place between all sports federations and the parties that they were engaged with. The Committee was aware that payment of commission was not unique to football and it was difficult to keep abreast of all the transactions that took place. He asked for elaboration on how the state of football had reached a stage of commissions running into millions of Rands. He questioned whether it was an issue of South Africa being shocked at the amount of money involved in sponsorship deals. He wanted Dr Khoza’s views on the immense challenges facing soccer in the country, regarding poverty and lack of development, the fact that there was no decent league for women’s soccer, the fact that two years ago PSL promised to create a women’s league, and then attempt to justify the huge amounts of money that sponsorship negotiators receive. He added that when the commission had been decided upon, times were different but he sought justification nonetheless.

Mr Khoza replied by referring to a meeting that happened in 2004. In this meeting issues of payments were discussed. When Dr Khoza took over as Chairperson he had made a commitment to increase the grants to the clubs. However, he was faced with the dilemma of whether they should use outside consultants for sponsorship negotiation or continue using internal negotiators. The commission was not the ultimate motivation behind the club. The executive does not benefit, their experience was used for the beneficial sponsorships. They had managed to reposition the PSL, being able to have incremental value in broadcast rights and event sponsorship. The achievements of the PSL finance committee should be applauded. It was not easy to obtain sponsorships.

Mr M Dikgacwi (ANC) asked about local development. He felt that the PSL was not selecting enough local players. Many players from other African countries were occupying space that should have been taken by South African players. The point had been made that each club received R1 million and that it was partly to guarantee the salaries of players, however, there had been an outcry that players were receiving R1000 per month while other were being paid R60 000, he asked for clarification. Was there a viable development plan to ensure that the 150 children Dr Khoza mentioned would be ready for 2010. He asked for the exact amount that was received as commission.

Mr Peter Mancer (PSL Diversity and Management) replied that the PSL was not an employer of the players, rather they were contracted directly by the clubs. In terms of the rules and regulations the signed contracts of the players were sealed and placed in the vault. The only time when the PSL has access to those contracts was when there was a dispute. They cannot state that all clubs were treating players equally. However in acknowledgment of the leadership the PSL, there had been an agreement in consultation with the players union to establish a bargaining chamber where all pertinent issues were addressed. Central to the bargaining chamber was the issue of basic minimum wage for the players. The PSL structure would need to be revisited in terms of registering the league as an employer organisation in order for the Department of Labour to recognise the institution as an employer organisation. Currently the primarily employer was the clubs and they had to first relinquish their role as primary employer to the PSL before the restructuring could happen. The union stated that unless the League considered registering as a primary employer, they would pull out of the negotiations.

Mr Komphela asked about the selection of foreign players and wanted to know if their employment as football players at the various clubs was in compliance with the labour laws.

Dr Khoza replied that the R1 million that was previously referred to, had changed as the benchmarks had changed for players. The grants to the clubs amounted to over R289 million. Each team received a minimum amount of R1 million per month. They signed an agreement with the union. A forum had been established that worked towards a bargaining chamber to help resolve the issue of salaries. They were working towards finding a mechanism for interacting with the players union to solve the challenges that were faced.

Mr T Louw (ANC) commented that certain protocols should be observed. According to the documents, the issue had not been finalised and if it had not been finalised, it would not be properly implemented. He also questioned the PSL’s leadership qualities.

Dr Khoza responded that the modalities had to be arranged before the contracts and other documentation could be finalised. In reference to leadership, the PSL had tried their best and would continue to ensure that they provide strong leadership.

Mr Komphela asked that Dr Khoza not respond to questions regarding Minister Manuel.

Dr Khoza stated protocol was important, as it was a mark of respect. It was also why he had informed the Minister of Sport and Recreation in reference to the letter that was published in the newspaper.

Ms W Makgate (ANC) wanted to know what programmes were in place to bring about development and how would learning institutions be brought on board by PSL. She asked how the public would be educated on the issue of commission. One of the biggest challenges was female soccer as it seemed as if it was not taken seriously and asked how would the PSL assist in this matter.

Dr Khoza replied that one of the outstanding issues of broadcasting rights was radio rights. It was to give the PSL a voice because if press conferences were called, it would depend on the approach of the media. A proposal was given to the SABC requesting two thirty-minute time slots, to address all issues. The SABC replied that they would come back to the PSL with an answer. They were currently in a partnership with Supersport and Wits Business School where they assisted administrators and players when available to attend the course. One of the challenges for football in South Africa was that it lacked scientific premises.

Ms M Ntuli (ANC) asked wanted to know if the 150 children that were sponsored were gender balanced. She asked what happened to the trainees after they had been trained. What had been done to encourage football in South Africa?

Mr R Bhoola (MF) wanted clarity on whether deviation from the contract that the PSL had entered into was possible. He thought that because of the sensitive nature of the commission, everything seemed to be in order. He asked if the League provided bursaries to youths living in disadvantaged communities.

Dr Khoza replied that the PSL had provided bursaries for quite some time; they also provide bursaries for journalists.

Mr E Lucas (IFP) referred to a comment made earlier by Dr Khoza on a breakdown of the relationship with a financial institution and asked for elaboration. He was concerned by the issue that the Board and the Finance Committee seemed to be intertwined. He also wanted to know if the commission was included in the sponsorship or if it was completely separate.

Dr Khoza replied that the breakdown resulted from a misrepresentation of information on that the potential sponsorship. After that they had met with ABSA. All the sponsorships had been covered.

Mr B Solo (ANC) commented that what sparked this meeting was the newspaper stories. The perception is that black people involved in business often resulted in corruption accusations. He asked if outsourcing for negotiating sponsorships had been thoroughly researched. He also asked who or what constituted SAFA. He thought the media unit of the PSL should have handled the media differently.

Dr Khoza replied that the issue of handling the media was difficult to answer as the PSL was constantly under attack by the media. The issue of outsourcing future sponsorship negotiations would be welcomed and encouraged, however companies that do the job sometimes did not have the same intentions. It was better to be open and transparent to address the issues. Everybody who was part of football in the country, the PSL were part of SAFA. SAFA was considered as the ‘mother body’.

Minister on Sport and Recreation SA Annual Report 2006/07
Minister Makhenkesi Stofile noted that all managers had to report to the Committee, when requested to do so. If they were not present, they were in violation of three laws, Section 18 and 19 of the Public Service Act and the Public Finance Management Act (PFMA). He took the opportunity to formally announce the new Director-General, Ms Xoliswa Sibeko. The recruitment process, in finding a director-general was prolonged because there had to be compliance with the law and adherence to all the relevant prescripts.

The Annual Report, in his opinion, should have been dealt with in April, so that performance could be assessed up until March and planning could begin for the subsequent year. However, the process dictated that the Department had to report on the previous financial year towards the end of the running year.

It was an important tool because it informed those that allocated funds on what was done with the funds. The comments from the Auditor-General were negative compared to the previous years’ Annual Reports. The Minister was present when the Auditor-General explained to Cabinet that he had introduced a new way of auditing departments. In summary the issues that would have been considered as matters of emphasis, would be raised as audit queries. It was a new methodology and the framework of this methodology needed to be understood. This begged the question why the issues that caused the Department to have a qualified report this year had not resulted in qualified reports in previous years.

The Minister emphasised that the qualified report did not imply that money was missing rather it illustrated a lack of compliance. The process for the integration of the Sports Commission and the filling of vacancies was extremely slow. The Department had then accelerated and completed the process. They had complied with Section 197 of Labour Relations Act that individuals could not be placed in a position lower than the one they currently held. In compliance with the Public Service Act each of them had to be evaluated to ensure that they were in a position that was deserved.

One of the weakest areas in the civil service was Human Resource Management. Transformation was extremely problematic. The Sports Commission and the Department had to be merged into one department and each of the parties had their own expectations. A number of individuals refused to apply for posts. The law stated that all posts higher than Level 13 had to be advertised nationally. The law did not allow the Department to promote those individuals to their expected positions. These individuals reported the Department to various complaints commissions and even to the Department of Public Services and Administration. Since the Department was well within its rights, it had won all cases against it.

All of the comments by the Auditor-General had been evaluated and dealt with. The cause of the issues that had been raised by the Auditor-General needed to be assessed. In two cases it was matter of misleading the Executing Authority by the managers in charge, this situation was being dealt with appropriately as it was a violation of Section 19 of the Public Service Act.

The parastatals the Department dealt with such as Boxing South Africa (BSA) and the Anti-doping Agency also provided some challenges. The Anti-doping agency only had one internal issue that the Chief Executive Officer (CEO) clashed with the Board and she was dismissed. BSA, however, continued to be a nuisance. The Minister thought that boxing was a business and that the sport component was in the amateur part of boxing. Those who continue to require funds were the professionals, and the Department had agreed with Treasury to release funds in order to affect a turnaround in BSA with the intention of allowing them to become a private business entity.

The core function of the Department was to ensure that South Africans lead a better healthier lifestyle. To do this the Department had attempted to reconstruct the ethos of the participation of sports in the country. In Upington a mass participation programme was launched in March 2004. Mass participation was a successful programme and because it was so successful it continued to be problematic. The Minister believed that more money was required and it was a question of sustaining the momentum without demoralising those who were participating.

Another that challenge that faced the Department was the problem of the Building for Sport Programme (BFSP) in conjunction with the Municipal Infrastructure Grant (MIG) and the Department had lost 300% of their initiative. Many municipalities saw the funds allocated to sport elevation as a soft target. Therefore the top managers and those from the Department of Finance had been instructed to prepare a Cabinet Memorandum to extract the Department’s money out of the MIG. In terms of facilities the Department believed the best course of action would be regional or district facilities. It was not possible to provide facilities for each community and school.

The 2010 World Cup opened a window of opportunity for mobilising communities around sport. Treasury had been helpful in availing the Department with the Mass Mobilisation Fund (MMF). The integration of this fund cannot only be for 2010 programmes, the MMF and social cohesion should lead the way for schools and the communities.

The 2010 progress report indicated that all operations were on track, however not all of them were on time. The stadium in Port Elizabeth would be finished on time. Mbombela on the other hand, was going though issues, however it was being dealt with. Polokwane was fine as well. The organising agreement stated that the International Federation of Association Football (FIFA) was the major party; SAFA was the host organisation and government was the sponsoring organisation. In South Africa, government meant all three spheres of government. There was a more comprehensive responsibility than just the building of the stadiums.

At the international level, South Africa was perceived as the leader in the development of sports policy. The International Olympic Committee (IOC) and FIFA had requested that South Africa provide inputs on how to regulate the relationship that should exist between the international federations and governments. There had been an agreement both on the African continent and globally that there could not be sport without the contribution of government. A subcommittee had been established and the Minister of Sport and Recreation had been asked to serve on that committee.

On anti-doping matters, a delegation would be going to Madrid to review polices of doping. The big issue was whether marijuana should remain on the list given that it was not considered a major threat to athletes. The World Anti-Doping Agency (WADA) was an agency arrangement between the IOC and the governments of the world. Out of the five continents, Africa would be at the election. The Minister of Denmark that had been chairing the committee would not be there. South Africa would be guiding that conference.

Minister Stofile noted the introduction of the quota system in September 1992 when he was the Chairperson of the Development Committee of the South African Rugby Football Union (SARFU) together with Trevor Jennings. The unification of four different rugby unions with disparities in terms of development, meant the implementation of the quota system was imperative in order to move rugby in the right direction. It was agreed that all competitions right up to provincial level, excluding international appearances, would have a five-five-five formula.

In May 2004, the Minister had decided not pursue the route of quotas any longer. This was because from 1992 until 2004 there was no evidence to support the premise that the quota system had supported transformation in sport in South Africa. The evidence supported the view that the quota system had only been used a window dressing for national consumption. It was common knowledge that black players were bought in from the Eastern and Western Cape. There was no money placed into developing talent from underprivileged communities.

The Minister reiterated that the quota system was no longer in effect. The catch-up strategy was the way forward. This strategy pushed more resources in the development of new talent. The Department was in the final stages of completing the catch-up strategy. He suggested that science supported systems should be established to assist in physically developing new talent. There were no coaching, referee or science expertise structures in the country. Capacities should be identified to establish academies. The Minister had informed the President that it would require a budget of R200 million a year.

The idea of black people not being able to play certain sporting codes should be eradicated. The National Sport and Recreation Amendment Bill that the Committee had passed had not been signed as yet. The President received a letter from an organisation called AfriForum stating that the President should refrain from signing the Bill, as their views were not taken seriously by Parliament. He added that without the Bill there could be no progress in sports development. South African society would like to move towards a non-racial society and the Bill was one of the tools that if used, could accomplish that goal.

Department presentation on its Annual Report 2006/7
Ms Xoliswa Sibeko (Director-General: Department of Sport and Recreation) introduced the presentation, saying that each manager would give an accounting of their programme in the Department. She noted the merger of the South African Sport Commission (SASC) and Sport and Recreation South Africa (SRSA). Placements and secondments were employed in order to alleviate the vacancy rate. The systems had to be aligned to allow for consistency and three new directors-general had been appointed. The Department had relocated to new offices, new staff members had been employed and allowance had to be made for this period of consolidation.

Ms Lulu Sizani (Chief Director: Corporate Services: SRSA) presented details regarding corporate services. The vacancy rate in the Department was highlighted and it was mentioned that great strides had been made in this area. Ms Noma Kotelo (Director: Sport Support Service: SRSA) informed the Committee that client services included the financial support given to the National Federations (NFs) and SASCOC. Further clarification was provided on the financial support provided specifically to Boxing South Africa (BSA) and SAIDS. A graphic was provided that gave a breakdown of the funds spent the programmes of administration, client support, mass participation, liaison and information and facilities coordination.

Mr Makoto Matlala (Chief Financial Officer: SRSA) continued the presentation by clarifying the financial aspects of the Department. The reasons were given for the under spending of the Department for the year 2006/7. These reason included the fact that vacancies were only filled after the year-end review and the number of vacancies not filled as planned. The audit opinion stated that even though the Department had received a qualified audit, the cash flow and the financial performance of the Department was in accordance with the PFMA.

Mr Matlala continued by explained the basis for the qualified audit the Department had received. Action had to be taken with regard to capital assets, intangible assets, leases, receivable for Departmental revenue and receivables, accruals, commitments, goods and services and special services. Irregular expenditure had been recorded in reference to employee compensation, specifically performance bonuses and transitional allowances and acting allowances. This matter was handed to Legal Services Unit in order to proceed with recovery.

The audit also discovered that internal controls in the area of control environment lacked a formal risk assessment, approved delegations and appropriate training programmes for employees. The control activities lacked asset management and performance assessments. Transactions were not always authorised and performed in terms of legislation and there was a lack of human resource strategy. Other matters in the finance sector were that there was insufficient control of gifts and documentation, material non-compliance with applicable legislation. In summary there were 243 audit queries and 198 of those queries had been addressed.

Mr Joe Phaahla (Director-General: 2010 Government Unit: SRSA) made general remarks around the construction of the 2010 stadia. The 2010 World Cup Unit had requested the National Treasury to bring forward R1.905 billion. The request was granted and both the World Cup Unit and the National Treasury were monitoring cost escalations. A number of host cities were faced with cost overruns and had to redesign some aspects in order to remain within the budget. The audit queries surrounding the 2010 World Cup were that monthly reports were not submitted to National Treasury, approved plans for host cities were not submitted. There was no evidence that coordinating committee were established by host cities. The quarterly report did not cover specific outputs as identified in Government Gazette no.29470. Other queries was also raised and dealt with accordingly.
The Zone VI Youth Games 2008 and the host province would be the North West Province.

The White Paper and the Sports Plan was outlined and details of the programmes for both the Minister and the Deputy Minister were specified. Policies were also totalled and gaps within the policies were identified and a database was developed.

Ms Sibelao concluded the presentation by clarifying the challenges that faced the Department such as insufficient funding to assist in transformation, club development was lacking capacity, sports service providers needed to be accredited, international liaison lacked the ability to move government to government agreements and facilities were not seen as funding priorities.

Discussion
Mr Komphela clarified that, as Chairperson, he was flooded with questions regarding the capacity of the invitation to the PSL. Any South African citizen could be invited to parliament in order to improve social cohesion and the country in genera.

Mr D Lee (DA) commented that South Africa could only do well in the 2010 World Cup if the talent was nurtured in the country. There are more people playing soccer than rugby, and developing talent should be encouraged. If one looks at the commission paid to the PSL when there seemed to no funds available for young talented soccer players, it was cause for concern. He believed that government should not interfere with soccer. However, he was concerned by the way funds had been handled. He wanted to know how much money was being paid in commission.

Dr Khoza replied that it was important not confuse the PSL with South African Football Association (SAFA). PSL pays a fee every year for the development of sport. Any sponsorship for SAFA was only event related. At present SAFA was struggling to raise finances for its trip to Ghana. According to the agreement that SAFA has with sponsors, they would only pay if they were sure to receive a return on the investment. In 1997 the idea for the PSL was conceived and realising that funds were needed, shares were sold. They managed to raise R22million, even though R6 million was required and gave each club R1million. In reference to development, Dr Khoza’s team Orlando Pirates, sponsor’s 150 children from all over the country, in a boarding school in Johannesburg, that cost approximately R5 million each year. The PSL was not responsible for players going overseas, that was dealt with by SAFA. In order to promote development, the PSL held charity games at the beginning of each year.

Mr C Frolick (ANC) commented that there was a time that it was not popular to sponsor soccer. It would be time consuming to sit with each transaction that took place between all sports federations and the parties that they were engaged with. The Committee was aware that payment of commission was not unique to football and it was difficult to keep abreast of all the transactions that took place. He asked for elaboration on how the state of football had reached a stage of commissions running into millions of Rands. He questioned whether it was an issue of South Africa being shocked at the amount of money involved in sponsorship deals. He wanted Dr Khoza’s views on the immense challenges facing soccer in the country, regarding poverty and lack of development, the fact that there was no decent league for women’s soccer, the fact that two years ago PSL promised to create a women’s league, and then attempt to justify the huge amounts of money that sponsorship negotiators receive. He added that when the commission had been decided upon, times were different but he sought justification nonetheless.

Mr Khoza replied by referring to a meeting that happened in 2004. In this meeting issues of payments were discussed. When Dr Khoza took over as Chairperson he had made a commitment to increase the grants to the clubs. However, he was faced with the dilemma of whether they should use outside consultants for sponsorship negotiation or continue using internal negotiators. The commission was not the ultimate motivation behind the club. The executive does not benefit, their experience was used for the beneficial sponsorships. They had managed to reposition the PSL, being able to have incremental value in broadcast rights and event sponsorship. The achievements of the PSL finance committee should be applauded. It was not easy to obtain sponsorships.

Mr Komphela referred to the fact that any other elected leader soliciting sponsorship would receive a 10% commission. He questioned the credibility of an elected person as the spectrum for an elected official was wide.

Mr M Dikgacwi (ANC) asked about local development. He felt that the PSL was not selecting enough local players. Many players from other African countries were occupying space that should have been taken by South African players. The point had been made that each club received R1 million and that it was partly to guarantee the salaries of players, however, there had been an outcry that players were receiving R1000 per month while other were being paid R60 000, he asked for clarification. Was there a viable development plan to ensure that the 150 children Dr Khoza mentioned would be ready for 2010. He asked for the exact amount that was received as commission.

Mr Peter Mancer (PSL Diversity and Management) replied that the PSL was not an employer of the players, rather they were contracted directly by the clubs. In terms of the rules and regulations the signed contracts of the players were sealed and placed in the vault. The only time when the PSL has access to those contracts was when there was a dispute. They cannot state that all clubs were treating players equally. However in acknowledgment of the leadership the PSL, there had been an agreement in consultation with the players union to establish a bargaining chamber where all pertinent issues were addressed. Central to the bargaining chamber was the issue of basic minimum wage for the players. The PSL structure would need to be revisited in terms of registering the league as an employer organisation in order for the Department of Labour to recognise the institution as an employer organisation. Currently the primarily employer was the clubs and they had to first relinquish their role as primary employer to the PSL before the restructuring could happen. The union stated that unless the League considered registering as a primary employer, they would pull out of the negotiations.

Mr Komphela asked about the selection of foreign players and wanted to know if their employment as football players at the various clubs was in compliance with the labour laws.

Dr Khoza replied that the R1 million that was previously referred to, had changed as the benchmarks had changed for players. The grants to the clubs amounted to over R289 million. Each team received a minimum amount of R1 million per month. They signed an agreement with the union. A forum had been established that worked towards a bargaining chamber to help resolve the issue of salaries. They were working towards finding a mechanism for interacting with the players union to solve the challenges that were faced.

Mr T Louw (ANC) commented that certain protocols should be observed. According to the documents, the issue had not been finalised and if it had not been finalised, it would not be properly implemented. He also questioned the PSL’s leadership qualities.

Dr Khoza responded that the modalities had to be arranged before the contracts and other documentation could be finalised. In reference to leadership, the PSL had tried their best and would continue to ensure that they provide strong leadership.

Mr Komphela asked that Dr Khoza not respond to questions regarding Minister Manuel.

Dr Khoza stated protocol was important, as it was a mark of respect. It was also why he had informed the Minister of Sport and Recreation in reference to the letter that was published in the newspaper.

Ms W Makgate (ANC) wanted to know what programmes were in place to bring about development and how would learning institutions be brought on board by PSL. She asked how the public would be educated on the issue of commission. One of the biggest challenges was female soccer as it seemed as if it was not taken seriously and asked how would the PSL assist in this matter.

Dr Khoza replied that one of the outstanding issues of broadcasting rights was radio rights. It was to give the PSL a voice because if press conferences were called, it would depend on the approach of the media. A proposal was given to the SABC requesting two thirty-minute time slots, to address all issues. The SABC replied that they would come back to the PSL with an answer. They were currently in a partnership with Supersport and Wits Business School where they assisted administrators and players when available to attend the course. One of the challenges for football in South Africa was that it lacked scientific premises.

Ms M Ntuli (ANC) asked wanted to know if the 150 children that were sponsored were gender balanced. She asked what happened to the trainees after they had been trained. What had been done to encourage football in South Africa?

Mr R Bhoola (MF) wanted clarity on whether deviation from the contract that the PSL had entered into was possible. He thought that because of the sensitive nature of the commission, everything seemed to be in order. He asked if the League provided bursaries to youths living in disadvantaged communities.

Dr Khoza replied that the PSL had provided bursaries for quite some time; they also provide bursaries for journalists.

Mr E Lucas (IFP) referred to a comment made earlier by Dr Khoza on a breakdown of the relationship with a financial institution and asked for elaboration. He was concerned by the issue that the Board and the Finance Committee seemed to be intertwined. He also wanted to know if the commission was included in the sponsorship or if it was completely separate.

Dr Khoza replied that the breakdown resulted from a misrepresentation of information on that the potential sponsorship. After that they had met with ABSA. All the sponsorships had been covered.

Mr B Solo (ANC) commented that what sparked this meeting was the newspaper stories. The perception is that black people involved in business often resulted in corruption accusations. He asked if outsourcing for negotiating sponsorships had been thoroughly researched. He also asked who or what constituted SAFA. He thought the media unit of the PSL should have handled the media differently.

Dr Khoza replied that the issue of handling the media was difficult to answer as the PSL was constantly under attack by the media. The issue of outsourcing future sponsorship negotiations would be welcomed and encouraged, however companies that do the job sometimes did not have the same intentions. It was better to be open and transparent to address the issues. Everybody who was part of football in the country, the PSL were part of SAFA. SAFA was considered as the ‘mother body’.

Minister on Sport and Recreation SA Annual Report 2006/07
Minister Stofile noted that all managers had to report to the Committee, when requested to do so. If they were not present, they were in violation of three laws, Section 18 and 19 of the Public Service Act and the Public Finance Management Act (PFMA). He took the opportunity to formally announce the new Director-General, Ms Xoliswa Sibeko. The recruitment process, in finding a director-general was prolonged because there had to be compliance with the law and adherence to all the relevant prescripts.

The Annual Report, in his opinion, should have been dealt with in April, so that performance could be assessed up until March and planning could begin for the subsequent year. However, the process dictated that the Department had to report on the previous financial year towards the end of the running year.

It was an important tool because it informed those that allocated funds on what was done with the funds. The comments from the Auditor-General were negative compared to the previous years’ Annual Reports. The Minister was present when the Auditor-General explained to Cabinet that he had introduced a new way of auditing departments. In summary the issues that would have been considered as matters of emphasis, would be raised as audit queries. It was a new methodology and the framework of this methodology needed to be understood. This begged the question why the issues that caused the Department to have a qualified report this year had not resulted in qualified reports in previous years.

The Minister emphasised that the qualified report did not imply that money was missing rather it illustrated a lack of compliance. The process for the integration of the Sports Commission and the filling of vacancies was extremely slow. The Department had then accelerated and completed the process. They had complied with Section 197 of Labour Relations Act that individuals could not be placed in a position lower than the one they currently held. In compliance with the Public Service Act each of them had to be evaluated to ensure that they were in a position that was deserved.

One of the weakest areas in the civil service was Human Resource Management. Transformation was extremely problematic. The Sports Commission and the Department had to be merged into one department and each of the parties had their own expectations. A number of individuals refused to apply for posts. The law stated that all posts higher than Level 13 had to be advertised nationally. The law did not allow the Department to promote those individuals to their expected positions. These individuals reported the Department to various complaints commissions and even to the Department of Public Services and Administration. Since the Department was well within its rights, it had won all cases against it.

All of the comments by the Auditor-General had been evaluated and dealt with. The cause of the issues that had been raised by the Auditor-General needed to be assessed. In two cases it was matter of misleading the Executing Authority by the managers in charge, this situation was being dealt with appropriately as it was a violation of Section 19 of the Public Service Act.

The parastatals the Department dealt with such as Boxing South Africa (BSA) and the Anti-doping Agency also provided some challenges. The Anti-doping agency only had one internal issue that the Chief Executive Officer (CEO) clashed with the Board and she was dismissed. BSA, however, continued to be a nuisance. The Minister thought that boxing was a business and that the sport component was in the amateur part of boxing. Those who continue to require funds were the professionals, and the Department had agreed with Treasury to release funds in order to affect a turnaround in BSA with the intention of allowing them to become a private business entity.

The core function of the Department was to ensure that South Africans lead a better healthier lifestyle. To do this the Department had attempted to reconstruct the ethos of the participation of sports in the country. In Upington a mass participation programme was launched in March 2004. Mass participation was a successful programme and because it was so successful it continued to be problematic. The Minister believed that more money was required and it was a question of sustaining the momentum without demoralising those who were participating.

Another that challenge that faced the Department was the problem of the Building for Sport Programme (BFSP) in conjunction with the Municipal Infrastructure Grant (MIG) and the Department had lost 300% of their initiative. Many municipalities saw the funds allocated to sport elevation as a soft target. Therefore the top managers and those from the Department of Finance had been instructed to prepare a Cabinet Memorandum to extract the Department’s money out of the MIG. In terms of facilities the Department believed the best course of action would be regional or district facilities. It was not possible to provide facilities for each community and school.

The 2010 World Cup opened a window of opportunity for mobilising communities around sport. Treasury had been helpful in availing the Department with the Mass Mobilisation Fund (MMF). The integration of this fund cannot only be for 2010 programmes, the MMF and social cohesion should lead the way for schools and the communities.

The 2010 progress report indicated that all operations were on track, however not all of them were on time. The stadium in Port Elizabeth would be finished on time. Mbombela on the other hand, was going though issues, however it was being dealt with. Polokwane was fine as well. The organising agreement stated that the International Federation of Association Football (FIFA) was the major party; SAFA was the host organisation and government was the sponsoring organisation. In South Africa, government meant all three spheres of government. There was a more comprehensive responsibility than just the building of the stadiums.

At the international level, South Africa was perceived as the leader in the development of sports policy. The International Olympic Committee (IOC) and FIFA had requested that South Africa provide inputs on how to regulate the relationship that should exist between the international federations and governments. There had been an agreement both on the African continent and globally that there could not be sport without the contribution of government. A subcommittee had been established and the Minister of Sport and Recreation had been asked to serve on that committee.

On anti-doping matters, a delegation would be going to Madrid to review polices of doping. The big issue was whether marijuana should remain on the list given that it was not considered a major threat to athletes. The World Anti-Doping Agency (WADA) was an agency arrangement between the IOC and the governments of the world. Out of the five continents, Africa would be at the election. The Minister of Denmark that had been chairing the committee would not be there. South Africa would be guiding that conference.

Minister Stofile noted the introduction of the quota system in September 1992 when he was the Chairperson of the Development Committee of the South African Rugby Football Union (SARFU) together with Trevor Jennings. The unification of four different rugby unions with disparities in terms of development, meant the implementation of the quota system was imperative in order to move rugby in the right direction. It was agreed that all competitions right up to provincial level, excluding international appearances, would have a five-five-five formula.

In May 2004, the Minister had decided not pursue the route of quotas any longer. This was because from 1992 until 2004 there was no evidence to support the premise that the quota system had supported transformation in sport in South Africa. The evidence supported the view that the quota system had only been used a window dressing for national consumption. It was common knowledge that black players were bought in from the Eastern and Western Cape. There was no money placed into developing talent from underprivileged communities.

The Minister reiterated that the quota system was no longer in effect. The catch-up strategy was the way forward. This strategy pushed more resources in the development of new talent. The Department was in the final stages of completing the catch-up strategy. He suggested that science supported systems should be established to assist in physically developing new talent. There were no coaching, referee or science expertise structures in the country. Capacities should be identified to establish academies. The Minister had informed the President that it would require a budget of R200 million a year.

The idea of black people not being able to play certain sporting codes should be eradicated. The National Sport and Recreation Amendment Bill that the Committee had passed had not been signed as yet. The President received a letter from an organisation called AfriForum stating that the President should refrain from signing the Bill, as their views were not taken seriously by Parliament. He added that without the Bill there could be no progress in sports development. South African society would like to move towards a non-racial society and the Bill was one of the tools that if used, could accomplish that goal.

Department presentation on its Annual Report 2006/7
Ms Xoliswa Sibeko (Director-General: Department of Sport and Recreation) introduced the presentation, saying that each manager would give an accounting of their programme in the Department. She noted the merger of the South African Sport Commission (SASC) and Sport and Recreation South Africa (SRSA). Placements and secondments were employed in order to alleviate the vacancy rate. The systems had to be aligned to allow for consistency. The Department had relocated to new offices, new staff members had been employed and allowance had to be made for this period of consolidation.

Ms Lulu Sizani (Chief Director: Corporate Services: SRSA) presented on corporate services. The vacancy rate in the Department was highlighted and it was mentioned that great strides had been made in this area.

Ms Noma Kotelo (Director: Sport Support Servicse: SRSA) said that client services included the financial support given to the National Federations (NFs) and SASCOC. Further clarification was provided on the financial support provided specifically to Boxing South Africa (BSA) and SAIDS. A graphic was provided that gave a breakdown of the funds spent on the programmes of administration, client support, mass participation, liaison and information and facilities coordination.

Mr Makoto Matlala (Chief Financial Officer: SRSA) presented the financial report. Reasons were given for the under spending of the Department in 2006/7. These reason included the fact that vacancies were only filled after the year-end review and a number of vacancies were not filled as planned. The audit opinion stated that even though the Department had received a qualified audit, the cash flow and the financial performance of the Department was in accordance with the PFMA.

Mr Matlala explained the basis for the qualified audit. Action had to be taken with regard to capital assets, intangible assets, leases, receivables, accruals, commitments, goods and services and special services. Irregular expenditure had been recorded with reference to employee compensation, specifically performance bonuses and transitional allowances and acting allowances. This matter was handed to Legal Services Unit in order to proceed with recovery. In summary there were 243 audit queries and 198 of those queries had been addressed.

Mr Joe Phaahla (Director-General: 2010 Government Unit: SRSA) made general remarks around the construction of the 2010 stadia. The 2010 World Cup Unit had requested the National Treasury to bring forward R1.905 billion. The request was granted and both the World Cup Unit and the National Treasury were monitoring cost escalations. A number of host cities were faced with cost overruns and had to redesign some aspects in order to remain within budget. The audit queries surrounding the 2010 World Cup were that monthly reports were not submitted to National Treasury and approved plans for host cities were not submitted. There was no evidence that coordinating committee had been established by host cities. The quarterly report did not cover specific outputs as identified in Government Gazette No 29470. Other queries was also raised and dealt with accordingly. The Zone VI Youth Games 2008 and the host province would be the North West Province.

The White Paper and the Sports Plan was outlined and details of the programmes for both the Minister and the Deputy Minister were specified.

Ms Sibeko concluded the presentation by clarifying the challenges that faced the Department such as insufficient funding to assist in transformation, club development was lacking capacity, sports service providers needed to be accredited, international liaison lacked the ability to move government to government agreements and facilities were not seen as funding priorities.

Discussion
Mr Lee remarked that there were many leaders and it was good to see so many vacancies filled, however, he wanted to know when the lower level staff employers would be filled.

Mr Dikgacwi wanted to know why vacancies were not filled given the rate of unemployment in the South Africa

Ms Sizani responded that the filling of vacancies was a continuous process. Several situations could arise that could create another vacant post such as retirement or promotion. There had been an added structure and this had required staff which had increased the vacancy rate. People moved from their posts to the newly created posts created vacancies. She noted that the Sports and Recreation Department had been filling their vacancies more quickly than any other department.

Mr Lee pointed out that the Department had received a qualified report and asked if the current vacancies had contributed to the qualified report.

Ms Ntuli asked for the percentage of people that had left the Department.

Ms Sizani replied that the vacancies would have contributed to the qualified report although this audit report was a report for the previous year. Most of the current vacancies emanated from the expanded version of the Department. Since the beginning of the financial year there had only been two resignations.

Mr Komphela asked how many employees had resigned in total since 31 March 2006.

Ms Sizani replied that certain resignations should not be treated as resignations but were treated as such. In the public service any movement from one department to another department was treated as transfers and not as resignations.

Mr Komphela responded to the issue of transfers and resignations, saying that it should be looked at as it impacted negatively on the performance of the Department.

Ms Sibeko agreed that the exact numbers of people who had resigned, retired, died and so forth was not in the report. She did not think that the classification of the type of departure of the Department affected performance the Department.

Mr Komphela raised the issue of the amalgamation of the Department and the Sports Commission. The Sports Commission was never handled properly and therefore had affected morale in the Department. The employees from the Sports Commission working at the Department were very disgruntled. He felt that many of the problems being experienced at the Department was as a result of unhappy employees who preferred not to come to work. He asked if the Sports Commission move was complete.

Ms Sibeko replied that there six staff members who were disgruntled because of the medical aid and the housing allowance. This was the reason why the bargaining chamber had to sit and resolve these issues.

Mr Komphela asked that when the Sports Commission merged with the Department, were the functions and rules aligned with that of the Department or were the rules practised at the Sports Commission completely abandoned.

Deputy Minister of Sport and Recreation Gerhardus Oosthuizen replied that the process took longer than originally envisaged and he felt that it was because of the labour union. He understood it as a merger between the Department and the Sports Commission. The Sports Commission was a directorate and therefore the levels and remuneration differed between the Department and the Sports Commission.

Ms Ntuli was concerned with the small number of employed people with disabilities within the Department. She asked about the Department’s progress on the issue of HIV/AIDS.

Mr Lee wanted to know the actual figures for the 2010 World Cup.

Ms Sizani replied that they had a new structure for the World Cup.

Ms Makgate asked if the Department had a retention strategy.

Ms Sizani replied that there was a policy based on skills retention, although this report had no indication of the skills retention strategy.

Ms Makgate asked for the target of the Department for employing people with disabilities.

Deputy Minister Oosthuizen replied that target in the Annual Report was a reflection of the position of the Department at 31 March and since then, things had changed. With reference to disability their target was 2% and it had been exceeded, but it was not reflected in the Annual Report. It was extremely challenging to people with disabilities to manage employment within the Department. They were also in competition with the corporate sector that were also under pressure to comply with targets and were able to offer better salaries.

Ms Sizani replied that they had exceeded their target for employment equity.

Mr Lee asked if the fourteen vacant posts in Programme Four were linked to posts required for 2010 World Cup.

Deputy Minister Oosthuizen replied that when the World Cup was awarded, a special unit had been created. He added that there was a difference between the Local Organising Committee (LOC) and the 2010 World Cup Unit.

Mr Komphela noted that the Annual Report that was sent to them differed slightly from the presentation. Furthermore the improvements seemed dramatic.

Ms Sibeko replied that there was a team of people that came across to the department, as there was an integration of the staff from the Sports Commission, all of this improved the vacancy rate. Regarding the posts that are presently vacant, the Department was going through the necessary processes to have those positions filled. However there would always be a healthy balance of approximately 10% vacant posts because of retirement, resignations and other such factors.

Mr Lee wanted to know who was responsible for the performance information, as it seemed as if there was no comprehensive system in place.

Ms Sizani responded that the Human Resources Department monitored it and that there was a performance management system in place. She added that there was a system of evaluating performance in place but it was not used in the Department.

Ms Sibeko responded that even though there was a performance system in place within government, the Department did not use it because of the types of measures used. Performance agreements were not negotiated with the unions and therefore the bargaining chamber went outside of its mandate to negotiate performance. The unions agreed with the then Director-General to give an 8% performance bonus. This automatically meant that along with the 8% bonus there would be a 1% increment on the salary. This had resulted in departmental debt and an audit query. Those funds had to be recovered and had placed the Department in a difficult position. There were two options left to recover those funds, either the funds had to be recovered from the staff that had benefited from the performance bonuses or recover the funds from the advisers that had advised the Director-General to sign off on that performance agreement.

Ms Noma added that the challenge was that the placement process was not complete. There had never been a common ground that offered an average percentage for employees with regard to performance bonuses, as the Department had used a different system to that of the government.

Mr Komphela reiterated that there was never any common ground and therefore the merger of the Department and Sports Commission was not handled properly.

Mr Dikgacwi wanted to know which twelve National Federations were given funds to assist in transformation.

Ms Noma replied that she did not have the actual list. The Department discusses and agrees on the level of transformation for the National Federations. It was not only about race but it included gender equity and development in under developed communities.

Mr Dikgacwi commented that the Committee had to know which National Federations were receiving funds so that the activities those funds were being used for, could be monitored. He asked which National Federations did the South African Sports Confederation and Olympic Committee (SASCOC) fund.

Ms Komphela replied that the R9 million that SASCOC had been given was not for National Federations but for events and for when the national teams were sent outside the country by SASCOC.

Mr Lee commented that often skilled players could not play in events that happened outside the country because of lack of funds.

Ms Noma responded that before money was issued to the National Federations, the National Federations had to issue a business plan that would stipulate for which programmes and projects the money would be used. The Department would then be obligated to monitor and evaluate those programmes. A close relationship had to be maintained between the Department and the National Federations to avoid double dipping and to ensure that the National Lottery Board fund teams who would require funding. Unfortunately the commitments that the National Federations had would sometimes be over and above the available funds. The Sports Trust could provide assistance, however the players had to belong to viable organisations.

Mr Komphela asked who would decide the criteria for funds to be awarded to the National Federations.

Ms Noma replied that there was a task team that comprised of representatives of SASCOC, the Department and the then Sports Commission that developed criteria that would be used to determine whether funds would be awarded. This would have to be revised.

Ms Ntuli wanted to know how much money was given to women in sport and to the rural areas of the money allocated to sports.

Ms Noma replied that the money was solely to assist the Nation Women’s Rugby Team. In this year, clubs in the rural Transkei and Limpopo had been allocated funds.

Mr Dikgacwi asked how much did LoveLife receive from the Department.

Mr Komphela responded that the Department not answer the previous question, as he would like to remove LoveLife from the beneficiary list.

Mr Dikgacwi raised the issue of under spending with regard to mass participation and asked how was that possible. He asked if the Department was aware of the stipend given to participants.

Mr Lee noted that the Department seemed certain that particular deadlines were not in accordance with prescribed legislation.

Mr Thembinkosi Biyela (Chief Director: SRSA) responded that provinces had under spent. The issues were discussed with provinces on the matter of mass participation. The Department would prefer to standardise the appointment of coordinators within the provinces. The social cluster surrounding stipends were extensively discussed.

Mr Dikgawci asked where was the problem with regard to compliance within systems.

Mr Matlala responded that there was no proper financial reporting system in place.

Mr Komphela noted that there was no assertion made in the Annual Report 2005/6 by the Audit Committee. He asked what made the Department not adhere to the National Treasury regulations in the 2006/7 Audit Report.

Dr Phaala responded that funds for mass participation had increased. The information received from the provinces was not forthcoming and they had to meet on numerous occasions to discuss these issues. Without the report from the provinces, the national report would not have been compiled in time.

Ms Ntuli asked why intangible assets were not captured in the asset registers of the Department. She added that further assistance was required in the area of risk management and training of staff to improve capacity.

Mr Solo commented that the lack of compliance was worrisome and that the Department had to seriously consider ways to improve capacity in order to avoid poor performance.

Mr Komphela noted that there was no asset register for the Sports Commission. There were assets of R1.7 million that were not properly registered. He asked what the Department had done about the situation.

Mr Matlala confirmed that all the assets of the Sports Commission had been loaded on to the LOGIS system and that all assets had been recovered.

Mr Komphela concluded that the Committee was pleased with Department for the thorough analysis of its performance. He raised his concern with regard to facilities and the pressure that was mounting in completing 2010 World Cup Stadiums.

The Chairperson adjourned the meeting.

 

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