IntBRRR

1. Budgetary Review and Recommendation Report of the Portfolio Committee on International Relations and Cooperation, dated 18 October 2017

The Portfolio Committee on International Relations and Cooperation (the Committee), having considered the performance and submission to National Treasury for the medium term period of the Department of International Relations and Cooperation (the Department) on 4 and 11 October 2017, reports as follows:

1. Introduction

1. The mandate of the Committee

The Portfolio Committee on International Relations and Cooperation, is a committee of Parliament mandated by the sections 55 and 92 of the Constitution of South Africa,[1] to oversee and ensure accountability in the formulation and conduct of South African foreign policy. Consequently, the Committee conducts oversight on activities of the Department of International Relations and Cooperation, its policies, financial spending patterns, administrative issues, and it holds the Department accountable for its operations and functions. The Committee is thus mandated by the Constitution to legislate, conduct oversight over the Department and also facilitate public participation. The Committee may also investigate any matter of public interest that falls within the foreign policy area of responsibility. The Committee is thus an important mechanism for ensuring oversight over the conduct of South Africa’s international relations and cooperation policy.

1.2 Purpose of the Budgetary Review and Recommendation Report

In accordance with section 5 of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009), the National Assembly, through its committees, must assess service delivery performance of each national department and submit Budgetary Review and Recommendation Report (BRR Report) for each department, for tabling in the National Assembly. The process allows the National Assembly to evaluate the effective and efficient use and forward allocation of resources; and may make recommendations on forward use of resources. These reports will be considered by the Standing/Select Committees on Appropriations and Finance, respectively, when they make recommendations to the Houses of Parliament on the Medium Term Budget Policy Statement (MTBPS).

In compiling this report, the Committee as mandated by section 5 of the Money Bills Amendment Procedure and Related Matters Act, based the assessment of the Department on its service delivery plan as outlined in the 2016 State of the Nation Address. The Committee linked domestic priorities to the Department’s Medium Term Strategic Framework for the period 2014 – 2019 and aligned the information to priorities and measurable objectives as set out in the strategic plan.

The Committee examined the expenditure report as published by the National Treasury, commonly known as section 32 Reports of the Public Finance Management Act (PFMA) (Act 1 of 1999). Reference was also made to the Auditor-General’s report on the 2016/17, Budget Vote 6 and the Department’s Annual Report 2016/17. The Annual report contains the Department’s service delivery information, reflecting its performance in 2016/17 reporting period.

1.3 The core function and mandate of the Department

The overall mandate of the Department is to work for the realization of South Africa’s international relations policy objectives. In terms of the provisions of the Constitution, the President of the Republic of South Africa bears the overall responsibility for the country’s foreign policy and international relations. However, the Department is entrusted with the formulation, application and implementation of South Africa’s foreign policy which is derived from South Africa’s domestic priorities[2].

The Minister of International Relations and Cooperation (the Minister) assumes overall responsibility for all aspects of South Africa’s international relations, albeit in consultation with the President. The Minister also liaises and consults with members of the Cabinet on overlapping issues and on the priorities and programmes of other departments that bear an international relations element. In the same breath, other Cabinet ministers are required to consult the Minister on their international role.

1.4       Measurable Objectives of the Department

The Department had identified the following strategic objectives for implementation during the reporting year, aimed at responding to the domestic priorities as announced by government for the reporting year as follows:

• Efficient, effective, economical and fully capacitated Department;
• Enhanced the African Agenda and Sustainable Development;
• Provide strategic Public Diplomacy direction nationally and internationally;
• Strengthen political and economic integration of the Southern African Development Community (SADC);
• Strengthen of South-South Relations;
• Strengthen of Relations with strategic formations of the North;
• Strengthen Political and Economic Relations;
• Participate in the Global System of Governance;
• Provide effective Protocol Services;
• Strengthen Multilateralism through financial contributions

During the reporting period, the thrust of the work of the Department remained anchored on these overarching priorities as confirmed by the January 2016 Cabinet Lekgotla and the 2016 State of the Nation Address (SONA). In its work on these priorities, the Department is supported by the following activities:

• Organisational support;
• Rendering of professional services and
• Organisational strengthening.

2.         Policy focus areas

2.1       Analysis of the Department’s prevailing strategic and operational plan

The Annual report reflects the highlights of a number of diplomatic activities carried out by the Department including its Missions abroad. At the time of reporting, South Africa’s representative drive had grown from 34 in 1994 to 124 diplomatic missions in 2016/17, situated in 109 countries throughout the world.

During the reporting period, the Department remained focused towards implementing strategies and mechanisms to bolster regional and continental political and economic integration. These are the apex priorities of South Africa’s foreign policy[3]. The inherent foreign policy outlook guided the Department’s engagements in Africa, and with partners in the global South, developed nations of the North as well as in multilateral relations.

It ensured that South Africa’s foreign relations contributed to an environment that is conducive to sustainable economic growth and development; and serve as a basis for addressing government’s identified urgent priorities. The Department’s priority was to pursue African development and enhanced international cooperation. This was in support of government’s key targets, as outlined in the medium term strategic framework.

2.2       2016 State-of-the-Nation Address

In his 2016 State-of-the-Nation Address[4], President Jacob Zuma indicated that there would be continuity in South Africa’s foreign policy, and the consistent theme of foreign policy playing a role in the development of Africa and South Africa would remain. He further indicated that South Africa’s foreign policy activities would remain aligned to the National Development Plan. President Zuma stated that South Africa would continue to contribute to building a better Africa. He highlighted that South Africa continued to support peace and security in the continent. South Africa also supported regional economic integration through participation in the African Union and the Southern African Development Community (SADC) initiatives. President Zuma also noted that South Africa continued to assist sister countries in resolving their issues, for example in Lesotho and South Sudan.[5] 

The President further noted that the Agreement by the Brazil, Russia, India, China, South Africa (BRICS) nations on the New Development Bank or BRICS Bank, came into force. The BRICS bank was envisaged to approve its inaugural projects in April 2016. The President also noted that South Africa participated in the India-Africa Summit as well as in the Forum on China-Africa Cooperation (FOCAC) South Africa strengthened these important partnerships. China announced investments of fifty billion United States of America (USA) dollars (USD50 billion) of which South Africa would receive ten billion US dollars (USD10 billion) for infrastructure, industrialisation and skills development.[6] 

The President discussed the importance of South Africa’s North-South Dialogue. He noted that South Africa continued its engagements with the European Union (EU), as a bloc which is South Africa’s largest trading partner and foreign investor. Over 2000 EU companies operate within South Africa creating over three hundred and fifty thousand jobs. South Africa’s relations with the USA and Canada continue to strengthen, especially in the areas of economy, health, education, energy, water, safety and security, capacity building and the empowerment of women. The renewal and expansion of the African Growth and Opportunity Act (AGOA) provides a platform for the enhancement of industrialisation and regional integration. All outstanding issues around AGOA were being attended to.[7]

The President concluded by reflecting that in order for South Africa to achieve its goals of creating jobs, reducing inequality and pushing back the frontiers of poverty, it would need a faster growth. President Zuma emphasised that the tough global and domestic conditions should propel South Africa to redouble its efforts, working together as all sectors. He said in this regard, it would be important to act decisively to remove domestic constraints to growth.[8] 

2.3       Alignment to National Development Plan (NDP) and the 2016 MTBP Statement and the 2014-2019 Medium Term Strategic Framework

In Chapter 7 of the National Development Plan (NDP) entitled “Positioning South Africa in the world”, the National Planning Commission argued that government’s global and regional policy-making stance should be South Africa-centric. It should also improve South Africa’s integration in the region, on the continent, among developing countries, and in the world with measurable outcomes. The National Planning Commission also argues that policy-making should be guided by the following principles and objectives[9]:

• Focus on what is achievable without over-committing to possibilities of regional and continental integration.
• Foreign Policy should be evaluated on a regular basis to “ensure that national interests are maximised”.

• Remain an influential member of the international community;
• Deepen cooperation with Brazil, Russia, India and China as part of the BRICS group while promoting regional and continental integration;
• Stabilise the regional political economy through increased integration and cooperation; and

Achieve measurable outcomes related to food, energy, education, health, transport and communication infrastructure, national defence, adjustment to climate change and economic growth to benefit all South Africans[10].

2.4       Service delivery environment

In its examination of the Annual report of the Department, the Committee observed that the Department had aligned itself with the prescripts of Chapter 7 of the National Development Plan entitled “Positioning South Africa in the world”. (National Planning Commission (2011): One of the objectives of the national development plan is to enhance South Africa’s position in the region and the world, and to increase trade and investment.

The plan states that the country’s foreign policy should be shaped by the interplay between diplomatic, political, security, environmental, economic and regional dynamics that define international relations. The country should position itself as one of Africa’s powerhouses, leading development and growth on the continent. Integration with the Brazil-Russia-India-China-South Africa group of countries should be deepened[11]. In this regard the Department is doing its part in contributing to the realisation of the plan’s development goals. These are achieved through continuing to support regional and continental processes, responding to and resolving crises, strengthening regional integration, contributing to an enabling trade environment, increasing intra-African trade, and championing sustainable development and opportunities in Africa.

The Department recognises that the NDP proposed expansion of South Africa’s trade and global market share. To achieve this, a greater productive and export capacity and global competiveness across the region needs to be built. The Department’s strategic focus is thus to advance a developmental integration agenda in Southern Africa. This would be achieved by combining trade integration, infrastructure development and sector policy coordination.

As such, the integration of the Southern African Development Community and regional neighbours is critical for the economic development of the region. It is also seen as critical for South Africa’s global competitiveness. South Africa would continue to use structured bilateral mechanisms and high level engagements to reinforce and expand cooperation in the political economic, and social and security spheres. This would be for the purposes of contributing to the achievement of national priorities[12].

The Committee in its analysis of the Annual report 2016/17, observed that the Department continued with its concerted efforts to execute South Africa’s international relations strategy to address the country’s domestic challenges. In this regard, the National Development Plan enjoins the Department to contribute towards addressing the identified triple challenges of poverty, inequality and underdevelopment. The NDP requires the Department to create a better life for all South African. This it should do while meeting the country’s international obligations in a dynamic and complex global terrain. In this vein, South Africa’s foreign policy objectives remained predicted on the country’s national interest and identity.

2.5       Global delivery environment

During the reporting period, the Department’s international relations programme continued to be implemented within a global environment that was characterised by insecurity, a rise in terrorism, growing political volatility and populism. This is compounded by the continued hardships felt by the populace due to slow economic growth and lack of sufficient opportunities. Consequently, the Department continued to tactically navigate this terrain guided by national interests in all its international engagements.

It operated in an ever-changing environment, but through a consistent and principled approach to the implementation of diplomacy. South Africa is now a respected member of the international community. It boasts a dynamic and independent foreign policy that speaks to domestic priorities. During this time, South African foreign policy and diplomacy had to respond to global drivers and trends, that influenced both the international system and the pursuit of South Africa’s domestic priorities.

The emergence and growth of new economic powers continued to shift the balance of the global distribution of power. This continued to challenge the established political order. It further placed pressure on international organisations to reflect new political and economic realities.

2.6       Major highlights in the work of the Department in 2016/17 financial year

During this reporting period, South Africa actively participated in collective regional peace and security efforts. The Department’s efforts were aimed at propelling initiatives aimed at regional integration. This was in full cognisance of the fact that the SADC is South Africa’s biggest trade partner within the continent.

As such, in the promotion of peace and stability in the region, South Africa has been honoured to be accorded a responsibility to mediate with a view to bring about lasting peace in Lesotho. It had to ensure that all stakeholders participate in the elections in a free and fair climate that would entrench democracy in that country.

South Africa also participated in three election observation missions (two in Zambia and one in Seychelles), in its effort to strengthen democratic principles in the region. Moreover, South Africa was nominated to the chairship of SADC for the period 2017/18.

It was observed that the objectives of regional integration within SADC were also intertwined with the objectives of the African Union (AU) and enhancing the African Agenda. The commencement of the negotiations of the Continental Free Trade Area was regarded a step in the right direction of enhancing regional integration. This would further bolster intra-Africa trade.

Regarding issues of continental security, South Africa was also part of the collective which contributed towards resolving the resurgent instability in the Eastern Democratic Republic of Congo, Burundi and South Sudan, among others. South Africa continued to play a role towards the broader continental security agenda through its membership of the African Union Peace and Security Council (AUPSC).

South Africa was reported aware of the inextricable link between regional stability and prosperity. It therefore participated in the signing of the SADC-East Africa Community (EAC), Common Market for Eastern and Southern Africa (COMESA) Tripartite Free Trade Area (TFTA) in June 2015 in Egypt. South Africa has since signed the declaration launching the Tripartite Area. The Tripartite Trade Area is a building bloc towards the conclusion of negotiations for the Continental Free Trade Area (CFTA) Agreement by 2017.

Pursuant to its commitment to the ideal of Pan-Africanism, it was reported that South Africa spared no energy in finding solutions to African challenges through collective and individual country efforts. The establishment of the AU Peace Fund was crucial and necessary. It would assist in support of African solutions to peace efforts of the AU Peace and Security Council, in pursuit of lasting peace on the continent.

In addition, the AU held ministerial retreats on the implementation of Agenda 2063, particularly focussing on the First Ten-Year Implementation Plan. Similarly, the decision of the Heads of States during the AU Summit in January 2017, on the AU Master Roadmap of Practical Steps for Silencing the Guns in Africa by the year 2020. This was seen as a significant step in actively addressing peace and security challenges on the continent, which continue to hamper development. Consequently, the Department’s focus is geared at fully implementing this decision, in support of government’s national imperatives.

The admission of the Kingdom of Morocco presented the AU with an opportunity to collaboratively work on the resolution of the challenges of the people of Western Sahara, from within the organisation of the AU. South Africa continued to support the AU Commission as well as its new leadership, who was elected in January 2017. This would assist to continue with the country’s continental journey towards the Africa we aspire for by 2063. It is imperative for South Africa that the AU continues with the legacy.

South Africa is greatly honoured to hold current membership of the African Union Peace and Security Council (AUPSC). The Department would utilise this membership as a conduit towards strengthening the AU, its agencies and member states alike. South Africa continued to attach great importance to ensuring the effective operationalisation of the pillars supporting peace and security in the continent.

The centrality of Africa also found expression in the Department’s engagements in formations of the South, such as BRICS. Within this grouping, milestones were achieved. This included the creating of alternative sustainable development and infrastructure financing mechanisms. It was achieved through the establishment of the BRICS New Development Bank (NDB) in 2015.

South Africa has leveraged opportunities derived from its membership of the BRICS mechanism. The Department reported that the New Development Bank of BRICS is up and running at its headquarters in Shanghai, China. The Africa Regional Centre is also up and running after being launched in in Johannesburg, South Africa in August 2017.

The Eighth BRICS Summit, held in Goa, India, in October 2016, took place at the back of a sluggish economic outlook. Despite some of the challenges facing member states, the summit concluded a number of memoranda of understanding (MoUs). The conclusion of these MoUs was critical for achieving the objectives set in the NDP, which remains South Africa’s blueprint for its developmental aspirations. The Department was said to be looking forward to the long-term benefits of these initiatives in addressing the critical needs of the country.

South Africa’s partnerships and formations within South-South relations continue to provide complementary mechanisms to furthering its economic imperatives. The BRICS countries continued to be the leading sources of foreign direct investment (FDI) among emerging investor countries. Trade flows from these five economies rose from US$7 billion in 2000 to US$145 billion in 2012, accounting for 10% of the world total.

Further outcomes emanating from the Goa Summit were the proposals for the creation of a BRICS Credit Rating Agency, a BRICS Railway Research Network, an Agriculture Research Platform and a BRICS Sports Council. With regard to the Indian Ocean Rim Association (IORA), South Africa is in line to take up the chairship in 2017. South Africa would continue with the implementation of the Jakarta Summit outcomes.

It was reported that globally, the nations of the world witnessed the expiry of the Millennium Development Goals (MDGs), and the subsequent adoption of the Sustainable Development Goals (SDGs). As part of its active participation of the global governance agenda, South Africa, through its leadership of the G77, was key in the finalisation of critical development agendas. These were the United Nations’ (UN) Sustainable Development Goals, the Paris Climate Change Pact and the Financing for Development. These agreements guide the socioeconomic global trajectory for all countries.

South Africa aspires for a United Nations which is responsive to the needs of the global South and the world’s poor majority. In this regard, the Department continued its advocacy for the reform of the United Nations, particularly its Security Council, with a view to entrench its relevance and increase representation.

Bilateral relations with countries of the North continued to grow and strengthen within the difficult economic climate. In this regard, there was a specific focus on Africa at the Group of Twenty forum (G20), to support industrialisation in Africa and least developed countries. The G20 also pledged support for the implementation of Agenda 2030, and the focused attention on antimicrobial resistance from a financing and research perspective.

It was reported that South Africa has strengthened relations with countries and formations of the South, without negating its important ties with strategic formations of the North. In this context, South Africa signed an Economic Partnership Agreement with the European Union (EU) in June 2016, with a view to leverage increased market access for its products into the region. This was done conscious of the challenges that could follow the United Kingdom’s exit from the EU, which will in future require South Africa to conduct more trade negotiations with that country at a bilateral level.

This, however, was regarded to bode well for South Africa’s bilateral relations strategy. The strategy mainly focuses on the promotion of Foreign Direct Investment (FDI), tourism and market access with a view to address the triple challenges of poverty, inequality and unemployment. Thus, economic diplomacy seeks to contribute towards the realisation of the NDP Vision and by extension the AU’s Agenda 2063 and the UN’s SDGs.

South Africa’s bilateral relations have served as a key driver of economic diplomacy, and yielding tangible dividends for the South African economy. The southern African region continued to be of great importance to South Africa, not only politically, but more so in the area of trade and economic development. In 2016, South Africa’s trade with the region was reported to have amounted to R336 billion, which was estimated to be more that 70% of the total trade with Africa.

Western Europe was reported to have accounted for about 25% of South Africa’s total global trade in 2016, and remained South Africa’s largest source of FDI. The USA and Canada continued to be important trade and investment partners for South Africa. It was highlighted that there were 863 companies from the region trading in South Africa, creating over 120 000 employment opportunities. South Africa was also seen as the USA and Canada’s most important commercial partner in Africa.

South Africa’s presence in the Asia and the Middle East consisted of six missions in 1994. In 2014, South Africa had diplomatic relations with all 57 countries in the region, with 32 missions. Consequently, in 1994, South Africa’s total trade in the region stood at approximately R5 billion for the Middle East and R40 billon for Asia. In 2014, this figure grew rapidly and substantially to R760 billion for Asia and R116 billion for the Middle East.

The Public Diplomacy branch was able to hold events and engaged the public in communicating tenets of South Africa’s foreign policy. This was to ensure a better understanding by both national and international audiences. The Department steadily worked hard to improve the comprehension of South Africa’s international engagements by international and domestic audiences.

The Foreign Service Bill was tabled in Parliament. The Bill is being processed by the Portfolio Committee as required. The Committee publicised the Bill in newspapers in South Africa as required. There was a low rate of responses or interest from the members of the public. As a result of this inadequate public participation, the Committee held a stakeholders’ seminar in Pretoria towards the end of November 2016. This seminar brought about interested stakeholders ranging from the general public, students, academia, civil society, labour, and all not listed here but relevant.

Then the Committee planned and undertook a Study Tour on the Bill to Canada, from 9-16 September 2017. The aim was to learn best practices on the management of foreign missions. It also gave an opportunity to compare with existing legislation in Canada, areas of complementarity and differences. This also included an oversight visit to the South African High Commission in Ottawa. This was to assess the implementation of the mandate of South Africa’s Foreign Policy in the area of accreditation.

3.         Overview and assessment of the financial and non-financial performance of programmes of the Department and its entity for the 2016/17 financial year

3.1       Financial expenditure trends of the Department and its entity

Departmental budget and expenditure summary

Table 1: Total expenditure for the 2016/17 financial year[13]

Source: Annual Report of the Department of International Relations and Cooperation 2016/17

The Department continued to operate in an uncertain international environment and budget constraints. It received an appropriated allocation of R6 838 651 billion for the 2016/17 financial year after the adjustment estimates. The actual expenditure for 2016/17 was 100, 1% amounting to R6 844 930 billion of the final appropriation. This constituted a net overspending of R6 279 million. The Department has requested no additional funds for its operations.

3.2       Analysis of financial performance of the Department and its entity for the 2016/17 financial year

Spending trends per programme aligned to service delivery of the Department and its entity

Programme 1: Administration

The Department reported that during the period under review, the Programme continued to provide support with regard to the development of the overall policy and management of the Department. This was achieved through efficient, effective and economical utilisation of scarce resources.

The expenditure for Programme 1 was at R1, 5 billion, which represented an increase of 12% compared to R1, 4 billion of the 2015/16 financial years. The increase in expenditure was due to the acquisition of land for the development and construction of the office and residential accommodation for South Africa’s Permanent Mission to the UN and the Consulate General.[14]

Programme 2: International Relations

The Department reported that expenditure increased from R3, 6 billion in 2015/16 to R3, 7 billion in 2016/17 at a nominal growth rate of 3%. This was mainly attributed to the depreciation of the Rand against other major foreign currencies. The depreciation of the Rand resulted in high exchange rates. In turn, thus increasing operational costs incurred at missions abroad. These include salaries and wages as well lease payments for office and residential accommodation.

Programme 3: International Cooperation

Under this Programme the expenditure decreased by 8% from R523, 0 million in 2015/16 to R481, 9 million in 2016/17. The decrease was mainly due to the cost containment measures that were implemented.

Programme 4: Public Diplomacy and Protocol Services

Expenditure for Programme 4 decreased from R333, 2 million in 2015/16 to R272, 9 million in 2016/17, which represented a decrease of 18%. The decrease was due to the expenditure relating to the AU Summit and Forum on China-Africa Cooperation (FOCAC) Summit that were hosted in the 2015/16 financial year.

Programme 5: International Transfers

The Programme recorded expenditure of R822, 4 million against the final appropriation of R788, 4 million. This represented an overspending of R33, 9 million during the 2016/17 financial year. The overspending was due to the adoption of a new African Union (AU) scale of assessment[15]. This occurred during the 25th AU Assembly of Heads of State or Government hosted in Sandton, South Africa, in June 2015. Thus, the resolution on self-financing/ reliance rendered the South African assessed contribution amounting to R75 million, was in arrears for the 2015/16 financial year. The Department had planned to defray such expenditure through a virement of funds from savings realised from the implementation of cost-containment measures.

Virements and roll-overs

Virements of funds amounting to R113 669 million were processed from Programme 2 and Programme 3 to defray over expenditure in Programme 1 and Programme 4. The higher expenditure was mainly in relation to information and communications technology expenditure; as well as storage and insurance costs for officials transferred abroad. The savings were mainly due to the cost-containment measures that the Department implemented for missions and head office in the areas of travel budget and operating leases at missions.

Roll-over

The Department did not request a roll-over of funds during the 2016/17 financial year.

Unauthorised, fruitless and wasteful expenditure

The Department incurred unauthorised expenditure of R33, 9 million during the 2016/17 financial year[16]. The overspending was as a result of arrears payment for AU membership of the 2015/16 financial year. It was also caused by the foreign exchange losses due to depreciation of the Rand against other major foreign currencies.

Future plans of the Department – Foreign Service Bill 2015

The Department has tabled the Foreign Service Bill for processing by the Parliament during the 2015/16 financial year. This Bill is aimed at, among others, the establishment of a single foreign service for the Republic of South Africa; for the administration and functioning of the Foreign Service; and for the establishment of mechanisms that enhance the execution of international relations. The Foreign Service Bill, 2015 has been tabled in Parliament and referred to the Portfolio Committee on International Relations. The Bill is aimed at, among others, the establishment of a single foreign service for the Republic of South Africa; for the administration and functioning of the Foreign Service; and for the establishment of mechanisms that enhance the execution of international relations.

Public-Private Partnership Agreements

The Department continued to service the existing Public-Private Partnership Agreement (PPPAs) with Main Street 717 (Pty) Ltd, concluded in 2009. This is done through quarterly meetings of senior managers as well as monthly operational meetings for operational managers. In addition, the meetings also deal with other governance and operational issues. The term of the PPPA is 25 years, ending in 2034. The total cost incurred in relation to the agreement for the financial year 2016/17 is as follows: R188 745 million for 2015/16, and R220 075 million for 2016/17.

New or proposed activities – South African Development Agency

In addition, the Department is continuing with plans to activate the South African Development Partnership Agency (SADPA) and finalise the Partnership Fund for Development Bill. The process is aimed at repealing the African Renaissance and International Cooperation Fund Act (Act 51 of 2000), in order to support South Africa’s outgoing development cooperation policy by providing funding and technical support for the development initiatives. Finalisation of the Partnership Fund for Development Bill, aimed at repealing the African Renaissance and International Cooperation Fund Act is in progress.

Other agency services

It was reported that the Department renders agency services on behalf of other departments, public entities and provinces that have staff members stationed abroad. The services also occur when various departmental delegations travel abroad for official purposes, including institutions. In addition, the Department also renders agency services on behalf of the Department of Home Affairs in relation to immigration and civic services.

It was reported that the Department has entered into agreements through signed MoUs with the relevant departments. These MoUs set out the administrative arrangements concerning cooperation between the Department and the relevant departments represented at South African missions. The arrangement also included the payment of advance payments by partner departments.

The African Renaissance and International Cooperation Fund

The African Renaissance and International Cooperation Fund (ARF) is administered by the Department. In strengthening the governance issues of the ARF, the Department has developed an operational framework; appointed a full-time ARF secretariat; shared internal audit and appointed an audit committee; as well as developed a risk management plan.

Performance information

During the reporting year, the core of the Department’s work of conducting South Africa’s foreign policy remained predisposed towards Africa and South-South cooperation. The objectives described in its Annual Performance Plan (APP) 2016/17, are based on South Africa’s National Development Plan (NDP).

3.3       Analysis of non-financial service delivery performance of the Department and its entity for the 2016/17 financial year

The Minister of International Relations and Cooperation gave a political overview of the global environment within which the Department had to discharge its mandate. She referred to the increasing global trends of terrorism, poverty and underdevelopment. She pointed out that through the diplomacy of Ubuntu, South Africa was able to navigate through the turbulent global order. The country was still able to maintain its image as a leader in global affairs, and the Department has conducted South Africa’s Foreign Policy to achieve the aspirations of the NDP. The Minister undertook that her department would accept and implement the recommendations to be made by the Committee. She expressed her commitment to work with the Committee at all times. The Minister even answered some of the questions posed by the Committee in relation to the Department’s Annual report 2016/17.

The Committee considered and analysed the Annual Report of the Department of International Relations and Cooperation for the 2016/17 financial year. In its analysis of the report, the Committee also enlisted input from the, Department of Performance, Monitoring and Evaluation and the Office of the Auditor-General.

The focus of the assessment was on the performance of the key programmes of the Department comprising of Administration, International Relations, International Cooperation, Public Diplomacy and Protocol Services and International Transfers. The Department’s performance was measured against its own set targets as identified in the Strategic Plan of 2015-2020. It was also measured against Government’s key priorities identified in the President’s State-of-the-Nation Address (SONA) of February 2016 and the Government’s Medium Term Strategic Framework 2014-2019. Other key measures comprise of the moral values and principles that underpin the country’s foreign policy. The source documents for this analysis include the 2016 Estimates of National Expenditure (ENE); the 2016 State-of-the-Nation Address; the Delivery Agreement for Outcome 11 (2014-2019) as well as the Department’s Strategic Plan 2015-2020.

The performance of the entity, the African Renaissance and International Co-operation Fund (the ARF) for 2016/17 is also assessed in this report.

3.4.      Non-financial performance per Programme

3.4.1    Programme 1: Administration

Main objective: The purpose of the programme is to develop overall policy and manage the Department with the intention of ensuring an efficient, effective, economical and fully capacitated department.

During the reporting period, the filling of posts was affected by the ceiling placed on the compensation of employees’ budget by National Treasury. Therefore, only specific posts were targeted for filling, resulting in a deliberate reduction in the filling of vacancies. Despite this, the department still managed to reduce its vacancy rate to 9, 09%, which is within the national minimum average rate of 10%.

During the reporting period, the Performance Management and Development System (PMDS) policy was revised through consultation with organised labour. The policy was disseminated among managers and employees. This led to improved level of compliance for filing of signed performance agreements; and steps were taken on those who failed to file within time.

Policy, Research and Analysis Unit (PRAU) continued to do research in support of South Africa’s foreign policy. Research papers and policy recommendations emanated from the unit included topics such: Water Diplomacy: Cross-Frontier Water Management in SADC; Cultural Diplomacy as an Instrument of Foreign Policy; Science Diplomacy; and The Role of Four Central European Countries that Form the Visegrad Group of Countries (Poland, the Czech Republic, Hungary and Slovakia) in the Geopolitical Dynamics between Western Europe and Russia.

During the reporting period, the Department facilitated and provided consular assistance to all cases reported about South African nationals in distress abroad. This included attending to 110 cases of South African nationals in distress abroad, 376 civil processes, 95 new prisoner cases, 168 mortal remains cases, 48 cases of the whereabouts of South African citizens, two adoptions, 10 abductions and 38 extradition requests.

The Mediation Support Unit (MSU) and the International School of the Department Diplomatic Academy hosted three capacity-building programmes on Conflict Resolution, Negotiations and Mediation. During Youth Month (June 2016), a programme was hosted for 37 Student Representative Council members from 18 South African institutes of higher learning to assist them with knowledge and capacity when negotiating. During Women’s Month in August 2016, a programme was hosted for 60 South African women from civil society.

Supply chain and asset management

The Department embarked on the revision of the financial delegation of authority as well as training of senior management members serving in three bid committees, namely: specification, evaluation and adjudication. It also worked on its invoice-tracking system to improve and monitor the turnaround time in adherence to 30-day payment period.

Asset management remained a key focus area and the Department implemented additional measures in an effort termed “asset clean-up”, consequent to the negative audit outcome in 2015/16. These measures included introducing a web based asset management system. Missions and assets controllers were given additional tools, through the implementation of the web-based asset management system, which conferred the accountability to the cost centre level (mission). In addition, the Department has appointed an expert for the identification of heritage assets within its collection of works of art. This has been a challenging exercise, especially that it requires specialised knowledge and skills, which the department does not have and more so, a rare skill within the country. This project has remained work in progress, with consultations taking place with National Treasury and the Department of Arts and Culture.

3.4.2    Programme 2: International Relations

Main objective: The purpose of this programme is to promote policies, strategies and programmes to advance South Africa’s national priorities through strengthened political, economic and social relations with targeted countries.[17]

The National Development Plan’s narrative is that South Africa should engage political and economic relations as important vehicles for promoting South Africa’s national priorities. Engagements with the individual countries of the South and the North should contribute to the five national priorities, including, prioritising increased exports of South African goods and services; increasing Foreign Direct Investment (FDI) with technology transfers into value-added industries and mineral beneficiation; as well as increased inbound tourism and skills enhancement.

In response to the aspirations of the NDP, the Department has adopted an Economic Diplomacy policy as a driver towards its contribution to addressing domestic challenges. The Department conducted a range of bilateral engagements through Africa; Asia and the Middle East; Americas and the Caribbean; and Europe.

In terms of the Africa sub-Programme there were engagements in each region. The Southern Africa region remained one of the significant regions of Africa. Its importance to South Africa could be attributed to long-standing historic bonds, regional affiliation to Southern African Development Community (SADC) and its geographic positioning. The region has remained relatively stable, though harshly affected by drought and slow economic growth.

With regard to Southern Africa, the NDP advocates that South Africa should implement a focused regional integration strategy. In response to that, in 2016 South Africa remained engaged in the six Bi-national Commissions (BNCs), at head of state level. In Namibia, South Africa embarked on a project aimed at revitalising agriculture and the agro processing value chain. In the DRC, work is ongoing on the Great Inga Project aimed at resolving the energy challenge. In Mozambique, the engagements were also in the area of resolving the energy challenge, particularly in gas.

With mining in gold and diamonds in Zimbabwe and copper in Zambia, among others, the focus was on advocacy in the area of advancing beneficiation or adding value to the wealth. Water and sanitation continued to be broadly addressed through the Lesotho Highlands Water Project (LHWP). During the state visits undertaken in 2016, business delegations and government entities were taken on board, encouraging private-sector investments and boosting the role of state-owned companies.

The Department regards the region to be of great importance to South Africa, not only politically, but more so in the area of trade and economic development. In 2016, South Africa’s trade with the region amounted to R336 billion, which is estimated to be more that 70% of the total trade with Africa[18]. These high-level interactions in the form of state visits and BNCs were primarily aimed at economic diplomacy with particular emphasis on areas specified in the NDP, national priorities and the Nine-Point Plan.

With regard to East Africa region, there have been regular interactions between President Jacob Zuma and the respective presidents of the countries in the East African region.

South African total trade with the East African region amounted to R25,5 billion in 2016, up from R23,6 billion during 2015 (7,92%)[19]. The composition of trade between South Africa and the region remained the same since 1994, with South African exports being mainly semi to manufactured products while imports from the region remained primary products. This has led to a lopsided trade balance in favour of South Africa and the basis for regional complaints that trading has not been mutually beneficial.

South Africa’s economic footprint in the Central Africa region has improved significantly during the period under review. South Africa and Cameroon held a bilateral meeting in September 2016. This auspicious occasion was used to reaffirm the strategic importance of the Republic of Cameroon for South Africa. South Africa reassured Cameroon of her commitment to strengthen the relationship to benefit both countries and the African continent.

The Department was involved in a series of engagements in North Africa. President Zuma hosted His Excellency, President Brahim Ghali, and President of the Saharawi Arab Democratic Republic, on a Working Visit to South Africa in January 2017. The visit was aimed at deepening and strengthening the already existing good political relations between the two countries. The relations have been fortified by the strong historical ties dating back from the years of the struggle against colonialism and apartheid.

President Zuma reiterated South Africa’s support for the efforts of the AU’s continued appeal for enhanced and coordinated international action towards the organisation of a referendum for self-determination. This would be in compliance with the Organisation of African Unity/AU decisions and UN resolutions and to bring the project of decolonisation to its final conclusion. President Zuma expressed the hope that the admission of Morocco to the AU would serve as a catalyst to resolve the Western Sahara issue. The President affirmed that South Africa would continue to offer concrete support and solidarity for the programmes of the Polisario Front.

Deputy Minister Luwellyn Landers hosted a public dialogue on the struggle for independence of Western Sahara from Morocco in March 2017 in Parliament, Cape Town. Various stakeholders were involved, including the Parliamentary Portfolio Committee on International Relations which engaged on the issues of mobilising support for the Saharawi cause.

In the East Asia and Oceania region, 2016 Deputy President Ramaphosa hosted his Chinese counterpart, Li Yuanchao, in November 2016 in Cape Town, for the BNC. During the BNC, the Chinese Government made a commitment to increase short-term skills development programmes, so as to reduce the skills gap in South Africa. China also reaffirmed that it would provide 2 000 training opportunities for South Africa from 2015 to 2020.

South Africa and China agreed on the identified six job drivers to collaborate on: infrastructure development, agriculture, mining and beneficiation, manufacturing, green economy and tourism. Over 700 South Africans were reported to have benefited from training opportunities from China between 2015 and 2016.

Deputy Minister Mfeketo met with Vice Minister Wang Li on 14 September 2016, in Beijing, China, for the Eighth South Africa-China Strategic Dialogue[20]. The two sides reviewed bilateral relations and agreed that the South Africa-China Comprehensive Strategic Partnership had significantly strengthened bilateral relations. The dialogue discussed the establishment of the South Africa- China High Level People-to-People Exchange Mechanism (PPEM).

Japan was mentioned as a major investor in the South African economy (reported as over R90 billion as at the end of 2015). Japan’s current presence in South Africa was through approximately 140 Japanese companies, sustaining over 150 000 local job opportunities to the benefit of many South Africans, in terms of both income and skills transfer. Total bilateral trade between the two countries in 2016 was R88, 3 billion (in South Africa’s favour by R13, 3 billion), with exports to Japan of R50, 7 billion and imports from Japan of R37, 5 billion[21]. Since 2010, an average of approximately 28 750 Japanese tourists have visited South Africa annually.

With regard to the Middle East region, South Africa’s relations with the Gulf States are managed through structured bilateral mechanisms such as Joint Commissions, partnership forums and bilateral consultations. The region continues to hold key strategic value in providing energy security for South Africa. This is done through supply of hydrocarbons as well as an investment partner in the renewable energy sector. The region has also increasingly become an export destination for South Africa’s products and services. It has contributed to the creation of decent work in the tourism value chain through investment in South Africa’s growing tourism infrastructure.

In the Americas and the Caribbean, South Africa’s bilateral relations with North America remained cordial and continued to strengthen. The USA and Canada continue to be important trade and investment partners to South Africa. There were about 863 companies from the region trading in South Africa, creating over 120 000 employment opportunities. South Africa was reported as also the USA and Canada’s most important commercial partner in Africa.

Latin America and the Caribbean remain South Africa’s strategic partners in the region. This is done through structured bilateral mechanisms and high-level engagements in pursuit of South Africa’s national priorities, with particular focus on expanding economic ties with the region. Countries of Latin America and the Caribbean view South Africa as a priority partner and gateway to the continent. The region is rich in natural resources and is also home to a large component of the African Diaspora, making it a strategic partner to South Africa and the AU in pursuing the African Agenda.

South Africa continued to build on the existing solid relations with Cuba to explore further opportunities for development, particularly in cooperation in education, defence, science and technology, agriculture, health services, infrastructure development, housing and water and sanitation. The flagship cooperation programme between South Africa and Cuba has been in the field of health, with approximately 3 000 South African students currently receiving medical training in Cuba, and 520 South African graduates providing primary healthcare services to their local communities. The Cuban Vice President, Salvador Valdes Mesa, paid an Official Visit in February 2017, which included a courtesy call on President Zuma.

In strengthening bilateral relations with Western Europe during the 2016/17 financial year, South Africa continued to utilise its engagement with countries in the region to advance South Africa’s foreign policy objectives. Western Europe remained a key strategic region for South Africa and dialogue partner from the global North. It accounted for about 25% of South Africa’s total global trade in 2016 and remained South Africa’s largest source of FDI. Total trade with the Western Europe region showed positive signs as it increased by 9% year on year in 2016, while bilateral FDI into South Africa has grown fivefold and created over 350 000 direct jobs since 2004[22]. Latest figures from the South African Reserve Bank for the end of 2015 show that Western European countries accounted for 76,5% of the total global FDI stock in South Africa at R1 507 billion, and that South African FDI into these countries constituted 30,1% of total global stock at R723 billion.

Western Europe continued to be a key market for inbound tourism, with the figures showing a significant 16% increase in 2016. The United Kingdom (UK) and Germany are in the top 10 leading countries for overseas tourist arrivals and the Western Europe region contributed nearly 1, 4 million tourists in 2016.

President Zuma undertook a State Visit to France in July 2016, which coincided with the Delville Wood Centenary Commemoration, as well as the SS Mendi Centenary Commemoration in the UK in February 2017.

Central and Eastern Europe, Nordic and Baltic countries

The Department also reported on a series of bilateral meetings held with Russia, Turkey, Hungary, Poland and Sweden. Many countries of this region regard South Africa as a strategic partner on the African continent and a springboard for doing business with the rest of Africa. As a result of this approach, a number of Trilateral Development Cooperation comes through South Africa to reach deserving beneficiaries in Africa.

3.4.3    Programme 3: International Cooperation

The purpose of this programme is to facilitate participation in international organisations and institutions in line with South Africa’s national values and foreign policy objectives[23].

The NDP has provided that South Africa’s national interest and the country’s obligations to the global community should be articulated in relation to sustainable environment; global economy; international flow of migrants, human freedom and international cooperation. Furthermore, South Africa should be positioned to be efficient and effective in regional regimes and institutions, in the country’s multiple international affiliations, especially in BRICS, and the global South, in multilateral relations and in institutions of global governance. South Africa should also strive to remain an influential member of the international community and stay at the forefront of political and economic developments.

In its response to the NDP narrative, the Department remained committed to garner support for its domestic priorities, promote the interests of the African continent, advance democracy and human rights, uphold justice and international law in relations between nations, seek the peaceful resolution of conflicts and promote economic development through regional and international cooperation in an interdependent world.

The Department has divided this programme in the following sub-programmes and strategic objectives:

3.4.3.1 Sub-programme: Global System of Governance

In its multilateral activities, President Zuma and Honourable Minister Maite Nkoane-Mashabane represented South Africa at the General Debate of the United Nations General Assembly (UNGA) in September 2016. The focus of the general debate for UNGA71 was on the means of implementation of agreements reached during UNGA70, particularly the 2030 Agenda for Sustainable Development and the Paris Agreement on Climate Change.

3.4.3.2 Sub-programme: Continental Cooperation

Strategic Objectives: Enhance the African Agenda and Sustainable Development; and Strengthen political and economic integration of SADC.

With regard to continental cooperation, the NDP advocates that South Africa’s foreign policy should be driven by a clear understanding of our national, regional and continental priorities in a multipolar world, where the geostrategic politics of the continent is central to global, political and economic competition for natural resources and market share.

In the spirit of Pan-Africanism and solidarity, South Africa remains committed, as host of the Pan-African Parliament (PAP). It is committed to work with other AU member states to ensure that the PAP operates effectively as one of the most important organs of the AU.

South Africa continued to support ongoing efforts aimed at finding a peaceful and lasting resolution to conflicts in Africa, with the South African Government involved in various mediation and peacekeeping missions in the region and on the continent.

3.4.3.3 Sub-programme: Regional Integration: Southern African Development Community (SADC)

The NDP provides that South Africa should implement a focused regional integration strategy. In response to this narrative, the Department continued to support the consolidation of democracy, peace and security in the region. Deputy President Ramaphosa would continue his responsibilities as SADC’s Facilitator to the Kingdom of Lesotho.

South Africa was elected as Incoming Chair of SADC from August 2017 to August 2018. As Incoming Chair, South Africa would be afforded the opportunity to give guidance on policy direction in terms of the SADC Integration Agenda.

During this past year, efforts have also focused on accelerating progress in terms of the SADC-Common Market for Eastern and Southern Africa-East African Community Free Trade Area. This would enhance intra-Africa trade and build towards the achievement of the Continental Free Trade.

3.4.3.4 Sub-programme: South-South Cooperation

The NDP enjoins South Africa to improve collaboration and cooperation, through deeper integration and increased trade with its regional partners in Africa and the global South, in general. Particular emphasis should be placed on the role that South Africa can play in mediating the role and influence of the BRICS group.

In its response to the NDP, President Jacob Zuma attended the Eighth BRICS Summit in Goa, India, in October 2016. The BRICS leaders discussed intra- BRICS cooperation; global issues such as international conflict and the fight against terrorism; and reform of the global system of governance, notably the democratisation of the United Nations (UN) and the Bretton Woods Institutions.

The first-ever BRICS Trade Fair was also held in New Delhi and the South African pavilion attracted many visitors. The good pace of implementation and expansion of the BRICS cooperation agenda was noted and the leaders exchanged views on further strengthening intra-BRICS trade, business, and commercial, tourism and travel ties.

The BRICS leaders recognised progress in the functioning of the New Development Bank (NDB) and expressed their satisfaction with the approval of the first set of loans to member countries in renewable and green energy sectors, as well as the successful issuance of the bank’s first bond, a green bond denominated in RMB. The NDB’s potential in bridging the gap in financing infrastructure projects was also highlighted.

The Indian Ocean Rim Association (IORA) South Africa continued to serve as Vice Chair of the IORA and prepare for its chairship from 2017 to 2019. South Africa also formally announced its intended candidature for the position of Secretary-General of IORA.

India, Brazil, South Africa (IBSA) dialogue partnership

South Africa and the IBSA countries continued to focus on reducing poverty in least developed countries though the IBSA Fund for Poverty Alleviation. To date, the IBSA Fund has approved the disbursement of almost US$30 million to developing countries in the Global South.

North-South cooperation

The EU is South Africa’s largest trading partner and foreign investor, as a block of 28 member states. South Africa enjoys strong economic ties with the EU developed under the TDCA since 2000, and total trade increased from R150 billion in 2000 to R588 billion in 2016; and a growth of 292%[24].

3.4.3.5 Programme 4: Public Diplomacy and State Protocol

The NDP provides that Public Diplomacy is fundamental to South Africa’s projection of soft power. In its implementation of this advocacy, the Department continued to enhance public understanding of South Africa’s foreign policy engagements by both local and international audiences.

Protocol Services

The Department continued to provide advisory services to government departments in the hosting of international conferences and summits. The Department also collaborated with the Southern African Development Community countries by providing guidance and support on protocol-related issues.

3.4.3.6 Programme 5: International Transfers

The purpose of this programme is to honour South Africa’s financial obligations and voluntary contributions to international organisations.[25] Under this programme, the Department reported that South Africa diligently honoured its dues and on time. However, the activities of the programme were impacted upon by foreign exchange fluctuations.

3.5.      Public Entity: Overview of the Annual Report 2016/17 of the African Renaissance and International Cooperation Fund

The Department, in consultation with the National Treasury, is responsible for the administration of the African Renaissance Fund, which was established in terms of Act 51 of 2000. This fund is under the control of the Director-General of the Department who must account for all payments into and out of the fund. An Advisory Committee was appointed to make recommendations to the Ministers of International Relations and Cooperation and Finance on the disbursement of funds, as provided for in the African Renaissance and International Cooperation Fund Act, 2000.[26]

The objectives of the ARF are to promote economic cooperation between the Republic of South Africa and other countries by granting loans and/or rendering other financial assistance in respect of development projects in such countries. Therefore, the ARF enables the South African Government to identify and fund, in a proactive way:

• cooperation between the Republic of South Africa and other countries, in particular African countries
• promotion of democracy and good governance
• prevention and resolution of conflict
• socio-economic development and integration
• humanitarian assistance
• Human resource development.[27]

The Fund is managed by the Department and payments are made on behalf of the Fund by the Department once concurrence is received from the Minister of Finance. This has resulted in the opening of control accounts (Payables and Receivables) in the accounting records of the Department and these accounts are reconciled to the records of the Fund. The financial statements of the Fund are prepared separately from the Department as the Fund is registered as a Schedule 3A Public Entity in terms of the Public Finance Management Act (PFMA) (Act 1 of 1999). All transactions and information arising from the work of the Fund are audited by the Auditor-General South Africa on an annual basis.[28]

The ARF has remained an important tool for the enhancement of South Africa’s development cooperation on the continent and with other identified partners.

During the reporting year, the ARF functioned in support of skills development and capacity building. The ARF continued to provide support to the African Ombudsman Research Centre (AORC) through the office of the Public Protector of South Africa. An amount of R7 000 000 was disbursed to the Centre during the reporting year.

The ARF processed payments totalling R1 389 843, 41, with respect to South African deployment of Election Observer Missions for elections in Zambia, Seychelles and Mauritius.

The ARF financial report 2016/17

The appropriated funds for the 2016/17 financial year was R31 thousand, and it had an accumulated surplus of R1 561 906 as at 31 March 2016. As at the 31 March 2017, the ARF had an amount of R500 000 million in its account.

In an effort to support socio-economic development and integration, the entity processed payments of R78 047 130, 43 for the Cuban Economic Assistance Package. It also processed payments of R5 086 955,68 for the Rice and Vegetable Production project in Guinea Conakry, and the project has been finalised and handed over to the Government of Guinea Conakry. In terms of humanitarian assistance, an amount of R439 341, 19 million was disbursed for Namibia drought relief project. In the same vein, an amount of R199 258, 00 million was disbursed for transportation of humanitarian assistance to Madagascar.

The Committee found that the overall performance of the ARF is good, in line with the aspirations of the NDP in pursuing a peaceful and prosperous Africa. The Committee urged the Department to publicise the good work done through this foreign policy instrument.

4.         Report of the Auditor-General of South Africa, the Financial and Fiscal Commission 2016/17 on the Department of International Relations and Cooperation and its entity

The findings of the Auditor-General on the overall financial performance of the Department of International Relations and Cooperation has remained good, in terms of its financial statements, in all material respects reflecting an alignment of expenditure to the pre-determined objectives. There have been, however, issues of concern persistently highlighted by the Auditor-General which seemingly gradually affected the findings over a period of seven years.

There has been a noted improvement from a qualified audit opinion in 2015/16, to ‘unqualified audit opinion with material findings on pre-determined objectives and/or compliance with laws and regulations’ in 2016/17 financial year.

4.1       The Department

Regarding the financial statements of the Department as at 31 March 2017, the Auditor-General expressed an unqualified audit opinion with material findings. In terms of financial statements, the Auditor-General reported that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 40(1)(a) and (b) of the PFMA. Material misstatements of disclosure items identified by the auditors in the submitted financial statements were subsequently corrected and the supporting records were provided, resulting in the financial statements receiving an unqualified audit opinion with material findings.

The Auditor-General has raised concerns which rendered the Department the material findings, and has advised should be addressed. These were as follows:

Budgets

Effective steps were not taken to prevent unauthorised expenditure amounting to R33 977 000 million, as disclosed in note 11 to the annual financial statements, in contravention of section 38(1)(c)(ii) of the PFMA and treasury regulation 9.1.1.

Procurement and contract management

Goods and services with a transaction value below R500 000 million were procured without obtaining the required price quotations, as required by treasury regulation 16A6.1. Contracts and quotations were awarded to bidders based on preferential points that were not allocated and calculated in accordance with the requirements of the Preferential Procurement.

Policy Framework Act and its regulations

Contracts were extended or modified without the approval of a properly delegated official, as required by treasury regulation 8.1 and 8.2 and section 44 of the PFMA.

Consequence management

Disciplinary steps were not taken against officials who had incurred and/or permitted irregular expenditure amounting to R436 710 055 million as required by section 38(1)(h)(iii) of the PFMA. Disciplinary hearings were not held for confirmed cases of financial misconduct committed by officials, as required by treasury regulation 4.1.1.

Expenditure management

Effective steps were not taken to prevent irregular expenditure amounting to R366 745 million as disclosed in note 31 to the annual financial statements, in contravention of section38(1)(c)(ii) of the PFMA and treasury regulation 9.1.1. The Auditor-General reported that at the time of an Audit being conducted, their offices had not received the Annual Report.

The Auditor-General noted that while the Director-General had made some progress in addressing the significant deficiencies in his oversight of financial and performance reporting, compliance and related internal controls. However, a number of material misstatements were identified in the annual financial statements, annual performance report and material non-compliance matters reported, with most misstatements relating to repeat findings.

The Department did not hold performance management and reporting staff accountable for findings raised during the internal and external audit processes. The accounting officer has not ensured that consequence management is executed for those responsible for repeat findings even though investigations that had been concluded, identified the people responsible for such.

Senior management involved in the asset and compliance management process did not accept accountability for addressing previously reported deficiencies as repeat findings were raised in this regard. The financial statements and annual performance report were not properly reviewed as material misstatements were noted in the disclosure items in the financial statements, indicators and targets respectively. The material misstatements on the financial statements were subsequently corrected.

However, only some material misstatements were corrected on the annual performance report. Records were not kept to support the achievement of indicators as there was no regard for systems used to collect the data. This led to a regression in the predetermined objective outcomes.

4.2       The findings of the Auditor-General on the African Renaissance and International Cooperation Fund

The activities under this entity are governed by the African Renaissance and International Cooperation Fund Act, 2000 (Act 51 of 2000) (ARF Act). The Auditor-General rendered an unqualified audit opinion with findings. Overall, the performance of the entity has improved significantly since it has a permanent secretariat. The Auditor-General found the following issue:

“Any money in the Fund which is not required for immediate use must be invested by the Director-General, and may be withdrawn when required”. This in line with section 7(1) of the ARF Act, 2000.

The amount of R204 million related to projects from prior years. These were ARF disbursed funds to the Department as an implementing agent as per the approved concurrence letter. The projects were not subsequently funded and the monies are still with the Department. The Department reported there are ongoing negotiations between the Department and ARF to resolve the matter.

This issue of money from old projects not required for immediate use not being invested, as required by section 7(1) of the ARF Act, was also a finding in 2015/16, and it has not been addressed.

5.         Findings by the Committee

After due deliberations on the contents of the Annual Report of the Department and its entity, the Committee made the following findings:

1. The overall service delivery performance of the Department was commendable. This was despite the fact that the Department has to carry out its mandate within an unpredictable, at times turbulent, external environment to advance South Africa’s national priorities. Its budget is continuously under pressure and exposed to Rand fluctuations despite the fact that its mandate continued to grow.

1. The Department has received an unqualified audit opinion with material findings in 2016/17. The Department was commended for the efforts that assisted it to graduate to the latest audit status. The overall performance of the Department in achieving its pre-determined objectives was regarded as good/healthy.

1. The Auditor-General has recommended steps to be taken to rectify the situation in areas reported as problematic. These are those such as asset management contracts; the increasing irregular expenditure patterns; ICT issues; internal controls; addressing apparent incompetence by officials; especially in the Governance branch; lack of consequence management on those who caused irregular, wasteful and fruitless expenditure; leadership inability to address repeat findings; and non-compliance with laws and regulations of supply chain management.

1. The African Renaissance Fund has received an unqualified audit opinion with findings for the 2016/17 financial year.

5.The Auditor-General had noted irregular expenditure under programme 2, amounting to R17 398 518 million, these amounts were incurred in the missions abroad.

1. The Department incurred an unauthorised expenditure of R34 million, and had an overspending on the overall budget to the amount of R6 279 million. The recurring challenge is that the Department does not exercise the option to deviate as provided for in the Treasury Regulations, from the relevant authorities.  This then results in accumulated unauthorised expenditure over time. The Department incurred fruitless and wasteful expenditure of around R2 272 643 million.

1. An update was requested on progress on the implementation process thus far, regarding the commitments made by China during the Forum on China-Africa Cooperation (FOCAC) summit held in Johannesburg in 2015.

1. There was non-compliance with supply chain management (SCM) prescripts, when awarding contracts to Neo Thando Elliot Mobility and the resultant court action by the   Laser Group. These companies are handling storage and shipping of personal effects of Foreign Service officials. The Auditor-General had also discovered that Laser Group Company was still being paid despite the expiry of its contract with the Department.

1. Not, all planned National Pavilions aimed at promoting trade and tourism took place due to budgetary constraints in the 2016/17 financial year. As a result, there would be a shortfall as less than anticipated number of exhibitions identified for the Medium Term Strategic Framework (MTSF) would take place.

1. It was reported that a joint Cabinet Memorandum was being finalised between National Treasury and the Department on the review of the African Renaissance Fund (the ARF), to address challenges of the low disbursement rate.

1. The Department was not investing the unused ARF funds to the amount of R204 million, into the ARF account with the Reserve Bank, as required by the ARF Act of 2000 This practice was rendering the ARF unable to receive a clean audit opinion, and was also losing accrual interest in the process.

1. The Committee has noted the Second Report of the Standing Committee on Public Accounts (SCOPA) on the irregular, fruitless and wasteful expenditure of the Department of International Relations and Cooperation, dated 16 August 2017.

1. The predetermined compensation of employees ceiling remained a challenge to the Department. This is due to the volatility of the nature of the benefits accorded to the transferred staff stationed abroad, as well as payment of salaries and wages to the Locally Recruited Personnel (LRPs).

14.A number of officials at high skilled level were noted to have taken a high number of days of sick (6485) and disability (919) leave during January and December 2016.

15.  It has been a recurring challenge that the financial statements of the Department are submitted to the Auditor-General with mistakes, and misstatements. Both the Audit Committee and Auditor-General’s office had recommended that that the Department should conduct a skills audit in the unit, to be able to identify root causes of repeat findings. However, the recommendations from these bodies have not been implemented since 2013 by the Department.

16.An explanation was sought as to why the responsible officer for finance was not taking due diligence to ensure that these statements are properly edited before submission. It was not clear why such an officer was not held accountable for this practice and appropriate action taken.

17.The investigation against the alleged misconduct by the Chief Financial Officer had not commenced. A report on the findings is with the Department, and it is yet to be studied.

18.Supply chain management findings reported in the Auditor-General’s report warranted investigations by the Department. The ARF investigated 10 of its own cases; whereas the Department only investigated 2 out of 239 cases reported.

19.There are repeat findings in terms of non-compliance with the prescripts of supply chain management. It was noted that proper procedures were not followed; tenders awarded people without tax certificates; with employee failing to disclose interest in the supplier, and without 3 quotes system being followed.

20.It was noted that there was still a challenge with finalising misconduct and disciplinary hearings within the DPSA requirement of 90 days’ period. Some cases were reported to have taken more than 200 days to be addressed.

21.In 2014, the Committee identified that most of the recurring challenges with operational issues were causing serial qualified audit opinions for the Department. The Committee thus recommended the consideration of a post of a Chief Operations Officer (COO). The COO has since been appointed, however, the problems with some operational issues still continue.

22.The existence and completeness of the Asset register has been a thorny recurring issue with the Department. For a short while, a Net Trace system was put in place to reconcile entries in the missions and headquarters on-line. There has been some improvement in that heritage assets were identified and valuated. However, the contract with Net Trace has since expired in July 2017.

23.ICT deficiencies in the Department have been a recurring matter since 2010. The previous annual plans of the Department have provided for turnaround strategies to address this issue, but to no avail. This is regarded as a serious matter in terms of security of information between missions and the headquarters, and between the missions themselves. There are recommendations made by the Audit and Risk committees on these issues.

24.Some suppliers were still not paid within 30 days. This practice tends to hurt the small to medium businesses and it hampers growth.

25.The Risk and Audit committees have reported that a number of dilapidated buildings stand unoccupied in Namibia, Brasilia and Angola. The Department is still paying a high cost of rentals in those places where some properties stand unoccupied.

26.

1. The structured bilateral mechanisms aim to promote national priorities, the African Agenda, and the Agenda of the South. It was a concern that under Programme 2, only 22 out of the planned 34 structured bilateral mechanisms were held; and out of planned 46 high level visits, only 26 were held.

1. There is a need for an assessment process and report on the impact of currency fluctuations on the mandate of the Department.

1.  It was noted with concern that the Deputy Directors-General (DDGs) of the Department do not attend meetings called by the Risk and Audit committees. Such meetings would be meant to highlight areas where risks of getting negative repeat audit findings lie.

1. The Department did not have proper recordkeeping with regard to the requests for Consular services and should provide information on the nature and form of Consular services requests received by the Department.

1. The Department was greatly honoured to be ranked number one in Africa in Digital Diplomacy. The issue was whether both domestic and international audiences could easily access the mentioned open digital diplomacy assets (websites, mobile apps, social networks).

1. An update was sought on the way forward regarding South Africa’s membership to the International Criminal Court (ICC).

1. It has been noted with concern that there were fewer Trade Attachés in missions abroad.

34.  The Audit Committee and Risk management committees ought to be the first line of defence and also act as early warning systems to assist the Department to rid itself of the repeated negative audit outcomes. Both the Audit Committee and AG’s Office had recommended that that the office of the Chief Financial Officer should conduct a skills audit in the unit, to be able to identify root causes of repeat findings. However, the recommendations from these bodies have not been implemented since 2013 by the Department.

35.  South Africa has signed the Agreement launching the SADC-COMESA-EAC Tripartite Free Trade Area. The purpose of the tripartite free trade area is to advance regional economic integration (SADC-COMESA-EAC)

1. In order to track progress and or challenges with regard to the performance of the Department to address some of the challenges raised quarterly meetings between the Committee and the Audit and Risk Management committees would be of importance.

1. The Department’s ICT infrastructure remained outdated, exposing foreign policy related information to related risks including cyber-crime.

1. Consequence management was not effectively applied. Wrongdoers were not immediately subjected to requisite disciplinary measures. Leadership of the Department has been slow or reluctant to take recommended remedial action.

1. The operationalisation of the South African Development Partnership Agency (SADPA) would be effected in 2017/18. There are unresolved issues of governance between National Treasury and the Department; and the negotiations on the issues had to start afresh with the new Minister of Finance.

1. South Africa’s contribution to peace, security and stability on the continent continued to grow considerably. The country has been supporting the African Union, United Nations and SADC efforts aimed at promoting peace and security. South Africa has been re-elected to the African Union Peace and Security Council (AUPSC).

1. South Africa has assumed the chairship of SADC from August 2017 to August 2018. South Africa will assume the presidency of BRICS and IORA in 2017.

1. The Minister apologised to the Committee for having not been able to attend Committee meetings on previous occasions. She further elaborated on her reasons for having not been able to attend. She then undertook to honour her obligation, and have more time and increase her frequency of engagements with the Committee in the future. The Minister said she believed that her work and that of the Committee should be complementary, and both organs should speak to the outside world in one voice, in support of South Africa’s Foreign Policy.

6.         Responses by the Department

The Department responded to the Committee’s discussions as follows:

1. The trend analysis and temporary incapacity leave records, indicate that most of sick leave was largely due to: non communicable disease e.g. hypertension and Cancer; respiratory tract infections (pneumonia and flu); adjustment problems for transferred officials, and mental health (depression). We have established a Disease Management Programme through our On-site Occupational Health Clinic to monitor and assist employees with chronic illnesses like hypertension, diabetes, HIV etc.

1. At times the nature of work is such that some of the DDGs would have travelled abroad, and not able to honour invitations to meetings of the Audit committee and the Risk Committee, however Chief Directors that act as DDGs will always attend on their behalf and give feedback to the Branch Management Meetings.  The Department would ensure that available DDGs attend all future meetings in this regard.

1. The Department has vast visibility on various digital platforms. These platforms include its website, Ubuntu Radio, its accounts on twitter, Facebook, Instagram, Flickr and on YouTube. These platforms ensure that the Department has presence globally. The Department also conducts Public Participation Programmes (PPPs), where the Minister gets to address ordinary South Africans throughout the 9 provinces. The PPPs are meant to address the notion that Foreign Policy is elitist.

1. The Laser Group contract was extended for 6 months whilst the procurement process was in progress. The contract was then awarded to Neo Thando Elliot Mobility; however, the Laser group challenged the awarding of the tender, citing irregularities of an SCM nature.  This case is on appeal and still sub judice. Based on the finding of the AG, the Department will embark on an investigation on the process followed to ascertain circumstances if any, that suggest that due procurement procedures were not followed in order to take appropriate action.

5.   The finding by the AG regarding the R204 million owed by the Department to the ARF, relates to outstanding balance for projects that were concurred before 2013/14 financial year and it was before the new governance systems was introduced. The practice has been that when concurrence was received, all money was transferred to the Department as an implementing agent before any due disbursement was done with the recipient country. For the period under review, an amount of R303 million was transferred back to ARF for investment after due consultation was performed after the projects were rescinded. Accordingly, the R204 million is recorded in both the financial statements of the ARF and the Department books as receivable and payable respectively. An amount of R92 million of the R204 million is in the process of being paid to the ARF as consultation have been done with the relevant implementing agencies and the recipient country.

6.   There is currently work-study underway for the officials that are assigned with review of daily transactions. In addition, there is also continued engagement with National Treasury to be part of the pilot on integrated financial management system; the Department is still waiting for a response. In addition, the Department has developed and implemented a checklist for the bid committees, to ensure that due supply chain processes are followed. This would also apply to procurement done through requests for price quotations that are below R500 000.

7.   The matters raised in the SCOPA report are currently under investigation. The outcome of the investigation would be made available when due process has been concluded.

8.   The Department undertook an investigation into the allegations levelled against the CFO.  The CFO was on special leave pending investigations into the allegations of misconduct. A report on the matter was being studied and appropriate action would be taken where necessary.

9.   The locally recruited personnel are appointed in terms of the provisions of the local law. In their working life in many countries, they do not participate in the pension fund schemes like in South Africa where all public servants contribute to the Government Employees Pension Fund. In the current cases of LRPs in missions abroad, the local law in those countries prescribed that termination benefits must be paid in full, such as severance package and leave gratuity.

10. The Department received allocation from National Treasury in Rand. However, more than 70% of the Department’s expenditure is incurred in foreign currency, mainly in US Dollars and EUROs. The inherent risk is the currency fluctuation. As a consequence of this, the Department would not have a mitigating strategy, as it is a policy of government not to utilise available financial instruments in the market, such as forward cover and hedging.

These issues have a significant implication in the implementation of the Department’s approved annual performance plans. As a result, the Department would be faced with continuing unauthorised expenditure as a result of negative performance of the Rand. This phenomenon also contributed to the non-achievement of the set targets of pre-determined objectives.

It was proposed that the policy on foreign exchange be reviewed. This would create a window for the possibility of incorporating the opening of the Pay Master General account in foreign currency denominated option. This would mitigate the fluctuation of the Rand, and assist to remove the volatility in servicing the missions as well as recording the expenditure.

11. Requests of a consular nature received by the Department come mainly from South African nationals that are in some or other form of distress abroad. Requests are received in person, in writing or telephonically either in South Africa or at our Missions abroad.

12. Consular services are also rendered to foreign missions in South Africa whose citizens are in distress in South Africa, and the foreign mission needs advice or assistance.

13. Consular requests from the South African public mainly cover the following areas of assistance: general distress such as a lost passport, registration of births and marriages, illness, whereabouts of South African citizens; repatriation of mortal remains; inter-country adoptions; abductions; prisoners; service of legal process; extraditions and assistance to victims of natural- or man-made disasters and other large scale emergencies.

7.         Conclusions

Overall performance by the Department in the reporting year has been commendable. The Committee is encouraged by the efforts undertaken to contribute towards a better life for all in South Africa; striving for a stable and secure continent; and creating a better world for all.

The Committee unanimously expressed satisfaction that the Department has utilized its budget in accordance with its plans for 2016/17. The Department was regarded as having demonstrated full accountability to Parliament and the people of South Africa on resources spent, both human and financial, and how it contributed in the achievement of South Africa’s national priorities. The Department was applauded commended for continuing to position South Africa as a respected member of the international community, with a dynamic and independent foreign policy that speaks to the country’s domestic priorities.

The Committee noted serial weaknesses highlighted by the Auditor-General. It further welcomed the acknowledgement and commitment by the Department, to improve in the scores of the Department for good management practices measured against the standards set in the Management Performance Assessment Tool Framework, issued by the Department of Performance Monitoring and Evaluation in the Presidency.

The Department also expressed determination and undivided attention to pursue best practices in the areas of human resources, financial, supply chain, asset management and information and communications technology, as raised by the office of the Auditor-General. The Committee noted that there is room for improvement with necessary adjustments in service delivery.

8.         Recommendations

The Committee is of the opinion that overall the Department has performed according to the goals it had set itself for the 2016/17 reporting period. The 2016/17 budgetary allocations of the Department were generally aligned to the national strategic priorities outlined in the 2016 State-of-the-Nation Address, as well as its strategic direction in terms of its Medium Term Expenditure Framework. The unqualified audit report with material findings, if rectified, would take the Department to a clean audit. That would demonstrate a positive indication of commitment of purpose by the Department to diligently execute its mandate.

The unpredictable foreign exchange portfolios, have been negatively affecting the operations of the Department, especially in the Missions, where the bulk of its activities take place. The Department has accordingly operated within a tight budget despite its growing responsibilities.

In order to further assist the Department to enhance its performance, the Committee recommends that the Minister ensures that the Department implements the following and report to the Committee within three months of the adoption of this report by the National Assembly:

1. Identify and hold dedicated training programmes for the officers responsible for financial statements, procurement, supply chain management and asset management, to ensure that serial challenges in these areas are addressed.
2. Conduct a skills audit in the Finance unit to determine whether there is appropriate capacity to address the root causes of recurring qualified audit opinions for the past four years.
3. Deal with serial issues raised in the Auditor-General’s report especially on supply chain, ICT, asset management and consequence management, compliance with rules and legislation.
4. Upgrade ICT infrastructure of the Department and missions abroad to avoid exposing foreign policy related information to related risks.
5. Conduct a comparative study on best practices from other countries on the management of Locally Recruited Personnel; alleviation of the impact of foreign exchange fluctuations; and asset management; and report on turnaround strategies to be taken to effect lessons learned.
6. Conduct a comparative study on best practices from other countries on the management of Locally Recruited Personnel; alleviation of the impact of foreign exchange fluctuations; and asset management; and report on turnaround strategies to be taken to effect lessons learned.
7. Liaise with the South African Reserve Bank, National Treasury, Department of Public Service and the Office of the Auditor-General on mitigation options to address the challenges brought onto the budget of the Department by foreign exchange fluctuations.
8. Ensure that the Chief Operations Officer (COO) and available Deputy Directors-General (DDGs) attend all the meetings requested by the Risk management and Audit committees.
9. Conduct an assessment on the cost-effectiveness of long term acquiring or leasing of state-owned properties abroad, in order to address challenges of office and residential accommodation for Missions abroad.
10. The office of the Accounting Officer should have the necessary mandate and capacity to deal with and oversee the implementation of turnaround strategies aimed at addressing the root causes of recurring audit findings.
11. Immediately pay back the ARF monies amounting to R204 million and any other outstanding amount without delay, in line with the prescripts of the ARF Act.
12. Conduct a study on the causes of low disbursement rate to needy causes by the ARF.
13. Compile a dossier on the unoccupied premises in the Missions abroad, and a plan on the way forward in order to address the cost of hiring properties, while others remain unoccupied.
14. Compile a progress report on the circumstances impacting on the conclusion of inter-departmental negotiations relating to the establishment of the South African Development Agency (SADPA).
15. Compile a progress report on the circumstances delaying inter-departmental negotiations on payment by South Africa of the new African Union assessed contribution.
16. Compile a progress report on the processes relating to the provision of permanent headquarters for the Pan African Parliament.
17. Conduct investigations on the awarding of contracts to Neo Thando Elliiot Mobility and the case against the Department by the Laser Group companies, and take necessary action to recover monies being paid to Laser Group after the expiry of the contracts with the Department.
18. Conclude investigations and report on the outcomes into the allegations against the Chief Financial Officer (CFO).
19. Establish a contract management unit in the office of the Director-General to guarantee compliance with SCM requirements.
20. Strengthen internal control systems in order to take reasonable care to prevent and detect irregular, fruitless and wasteful and unauthorized expenditure.
21. Report on actions taken on all instances of irregular, fruitless and wasteful expenditure, as required by section 38(1)(h) of the PFMA.
22. Conduct investigation into the conduct of the Bid Adjudication Committee (BAC) in relation to non-compliance with SCM requirements.
23. Ensure that effective, efficient and transparent process of financial and risk management, as provided for in treasury regulation 9.1.1 is implemented.
24. Where criminality has been established, refer such cases to the law enforcement agencies.
25. Report on measures being put in place in order to have a credible asset register in place to avoid a regression on the audit outcome.
26. Table a detailed plan on ways to reduce expenditure on the compensation of the Locally recruited Personnel (LRPs) over the MTEF.
27. Improve recordkeeping with regard to the requests for Consular services and provide information on the nature and form of Consular services requests received.

To Parliament:

Parliament should consider the importance of the oversight requirement for the Committee which is currently not favoured by the prevailing oversight model. There is a need for the Committee to conduct oversight, at least once a year, on South African Missions abroad. This would allow the Committee to monitor causes of irregular expenditure and non-compliance with supply chain management issues. These mentioned areas are recurring and impact on the service delivery path of the Department.

Report to be considered.

Sources

• Annual Report 2016- 2017 Department of International Relations and Cooperation.
• Strategic Plan, 2015- 2020, Department of International Relations and Cooperation.
• National Treasury, Vote 5: International Relations and Cooperation, Estimates of National Expenditure 2016.
• Zuma, J.G. 2016, State of the Nation Address at the Joint Sitting of Parliament. Cape Town.
• The African Renaissance and International Cooperation Fund Act, 2000
• Standing Committee on Appropriations: 4th Quarter Expenditure Report 2016/17 financial year.
• Presentations by other departments.

[1] Constitution of the Republic of South Africa 1996

[2] Department of International Relations and Cooperation Annual Report 2016-2017

[3] Annual Report of the Department of International Relations and Cooperation 2016/17

[4] Zuma J State of the Nation Address 2016

[5] Ibid

[6] Ibid

[7] Presidency, (2016)

[8] Ibid

[9] National Planning Commission, 2011

[10] The National Development Plan, Chapter 7: Positioning South Africa in the World)

[11] Ibid

[12] Ibid

[13] Annual Report of the Department of International Relations and Cooperation 2016/17

[14] Annual Report of the Department of International Relations and Cooperation 2016/17

[15] Ibid

[16] Annual Report of the Department of International Relations and Cooperation 2016/17

[17] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[18] South African Revenue Service, 2016

[19] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[20] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[21] Ibid

[22] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[23] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[24] Department of International Relations and Cooperation Annual Performance Plan 2016-2017

[25] Department of International Relations and Cooperation Annual Performance Plan 2016-2017.

[26] Annual Report 2016/17 of the Department of International Relations and Cooperation.

[27] Annual Report 2016/17 of the African Renaissance and International Cooperation Fund

[28] Ibid