PCSciBRRR

3.    The Budgetary Review and Recommendation Report of the Portfolio Committee on Science and Technology on the performance of the Department of Science and Technology for the 2017/18 financial year, dated 24 October 2018

The Portfolio Committee on Science and Technology, having considered the performance of the Department of Science and Technology and its entities for the 2017/18 financial year, reports as follows:

  1. Introduction
  2. Mandate of the Portfolio Committee on Science and Technology

The Portfolio Committee on Science and Technology (the Committee) is mandated by the Constitution and the Rules of Parliament to oversee the activities and performance of the Department of Science and Technology (the Department or DST) and the entities that report to it. Hence, the Committee must consider, amend and/or initiate legislation; consider international agreements and provide a platform for the public to participate and present views on issues and/or legislation specific to the science, technology and innovation (STI) system. The entities that reported to the Department during the 2017/18 financial year are the:

  1. Academy of Science of South Africa (ASSAf)
  2. Council for Scientific and Industrial Research (CSIR)
  3. Human Sciences Research Council (HSRC)
  4. National Advisory Council on Innovation (NACI)
  5. National Research Foundation (NRF)
  6. South African Council for Natural Scientific Professions (SACNaSP)
  7. South African National Space Agency (SANSA)
  8. Technology Innovation Agency (TIA)

To enhance Parliament’s oversight role, the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009) was promulgated to provide Parliament with a procedure to make recommendations to the Minister of Finance to amend the budget of a national department. A key provision of this Act is that Portfolio Committees must annually compile Budgetary Review and Recommendation (BRR) Reports. These BRR Reports provide an assessment of service delivery performance given available resources; evaluates the effective and efficient use of resources; and may make recommendations on the forward use of resources. The BRR Reports are also source documents for the Committees on Appropriations when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS).

  1. Method to develop the 2018 Budgetary Review and Recommendation Report of the Portfolio Committee on Science and Technology

In preparation for the BRR Report, the Committee assessed the performance of the Department and the entities by:

  • Considering the prevailing Strategic Plans and the 2017/18 budget allocations and Annual Performance Plans;
  • Evaluating the 2017/18 quarterly performance and expenditure trends;
  • Conducting oversight by having briefings on specific initiatives and programmes, which included site visits;
  • Inviting the Auditor-General (AG) to explain the 2017/18 audit outcomes for the Department and the entities; and
  • Considering the 2017/18 Annual Reports.
  1. POLICY CONTEXT
  2. Relevant policy documents

Science, technology and innovation are considered crucial for the creation of wealth and improving the quality of life in modern society. In South Africa, the 1996 White Paper on Science and Technology introduced the concept of a National System of Innovation (NSI) as an enabling framework for the development and application of science and technology (S&T). The 2002 National Research and Development Strategy (NRDS) and the 2008 Ten-Year Innovation Plan (TYIP) are the key drivers of the NSI. The TYIP, particularly, aims to guide the country towards a knowledge-based economy through human capital development (HCD), knowledge generation and exploitation, knowledge infrastructure and enablers to convert knowledge into socio-economic outcomes. Hence; the TYIP seeks to enable multidisciplinary thinking and research that will result in the socio-economic changes envisaged in both the National Development Plan (NDP) and the New Growth Path (NGP).

The NDP identifies the need to increase the size, coherence and effectiveness of the NSI because STI is crucial for national development. Hence, the country must enhance its investment in infrastructure, improve the skills base and ensure that it better exploits the knowledge generated from its investments in research, development and innovation (RDI).

  1. Mandate of the Department of Science and Technology

To position STI within the framework of the NDP, the Department directs its efforts and resources toward the following five strategic outcome-orientated goals:

  • Goal 1: Responsive, co-ordinated and efficient NSI – build on previous gains to create a responsive, co-ordinated and efficient NSI.
  • Goal 2: Increased knowledge generation – maintain and increase the relative contribution of South African researchers to global scientific output.
  • Goal 3: Human capital development – increase the number of high-level graduates and improve their representivity.
  • Goal 4: Using knowledge for economic development – derive a greater share of economic growth from R&D-based opportunities and partnerships.
  • Goal 5: Knowledge utilisation for inclusive development – accelerate inclusive development through scientific knowledge, evidence and appropriate technology.

The 2014-2019 Medium-Term Strategic Framework (MTSF) represents the first phase of implementation of the NDP and commits Government to 14 key Outcomes. The Programmes and initiatives of the Department contribute to Outcomes 2 (long and healthy life), 4 (inclusive economic growth), 5 (skilled and capable workforce), 6 (efficient, competitive and responsive economic infrastructure network), 7 (sustainable rural communities) and 10 (environment and natural resources); as well as the Nine-Point Plan. The Nine-Point Plan seeks to stimulate and diversify South Africa’s economy. Specific areas where the Department contributes to the Nine-Point Plan include:

  • Revitalisation of agriculture and agro-processing.
  • Increasing the impact of the Industrial Policy Action Plan (IPAP).
  • Beneficiation of mineral wealth.
  • Unlocking the potential of small business and rural and township enterprises.
  • Growing the oceans economy through Operation Phakisa.
  • Resolving the energy challenge by advancing alternative energy sources.
  • Scaling-up private sector participation in R&D.
  1. RESPONSE TO previous financial recommendations of THE PORTFOLIO Committee ON SCIENCE AND TECHNOLOGY

The Minister of Finance responded to the Committee’s 2017 Budgetary Review and Recommendation Report’s request for additional funds for STI, as follows:

“...allocation grows at an annual average rate of 4.8 per cent. Over the medium term, the department transfers over 90 per cent of its total budget to its entities to fund research and development that drives science, technology and innovation. Historical spending trends suggest that the department’s six entities are adequately funded to deliver on their mandate given the yearly applications to the National Treasury to retain surplus funds. The DST must intensify its efforts to realise co-investment opportunities with the private sector.”

Furthermore, in his response to Parliament, the Minister of Finance, stated that a range of parliamentary committees recommended that additional budget allocations be made available to establish new entities, implement new policies and enhance existing programmes. However, the scope to provide additional funding is limited given the constrained fiscal outlook. Departments, public entities and constitutional institutions have to reprioritise funds within their existing baselines to fund new priorities. Should the fiscal outlook improve, recommendations for additional funding may be considered in future budgets.

The Committee noted the response from the Minister of Finance and being cognisant of the fiscal constraints, responded in its 2018 Budget Report as follows:

The Annual Performance Plans of the Department and its entities state that their performance delivery has been structured around the budgets that have been allocated to them, and not according to all the responsibilities that they are mandated to fulfil. This has meant that the STI mandate cannot be fully implemented at the current levels of funding. The key cost drivers for STI include: attracting and retaining the necessary skills, funding for skills development and transformation, funding for STI entities to fulfil mandates, funding for infrastructure acquisition and maintenance, funding for full-scale implementation of initiatives over the lifetime of these initiatives, and funding for new responsibilities.

Science related inflation is higher than standard inflation. Hence, allocations that grow in line with standard inflation only marginally assist the STI objectives. Allocation increases below standard inflation further exacerbate the sub-optimal funding environment that prevails. Furthermore, relying on external funding to fulfil government-specific mandates poses the risk that R&D focus may shift to the needs of the funder and away from Government’s priorities.

  1. 2017/18 financial performance OF THE DEPARTMENT OF SCIENCE AND TECHNOLOGY

The Department was allocated R7.56 billion, which represented a real decrease (inflation-adjusted) of 4.3% from the R7.4 billion allocated in 2016/17. In terms of economic classification, the apportionment of the Department’s budget allocation of R7.56 billion remained the same as in previous years and comprised Current payments of R575.8 million (7.6% of total allocation), Transfers and subsidies of R6.96 billion (92% of total allocation) and Payments for capital assets of R21 million (0.3% of total allocation). The Department’s budget funds five Programmes. The budget allocation to each Programme comprised:

  • Programme 1– Administration – allocated R383.7 million
  • Programme 2– Technology Innovation – allocated R1.1 billion
  • Programme 3– International Cooperation and Resources – allocated R128.7 million
  • Programme 4– Research, Development and Support – allocated R4.3 billion
  • Programme 5– Socio-Economic Innovation Partnerships – allocated R1.6 billion

The budget allocation was aligned to the priorities of strengthening and expanding STI human capital development and ensuring that innovation and knowledge underpin the Government’s growth strategy. Hence, Programmes 2, 4 and 5, as in previous financial years, received 93.3% of the Department’s total budget allocation. Programmes 1 and 2 received marginal real increases in their allocations. The allocation to Programme 5, responsible for implementing STI-based interventions to enhance the growth and development priority areas of government, decreased by 14.4% in real (inflation-adjusted) terms. Programme 3’s allocation decreased in real terms by 2.8% and Programme 4’s allocation decreased in real terms by 1.9%.

The Department also received donor funds totalling R25.8 million that comprised R4.2 million from the European Union, R20 million from Finland, R216 000 from Portugal, and R1.35 million from the United States Agency for International Development (USAID). The Department spent approximately R25.5 million of the donor funds.

The Department’s 2017/18 total allocation remained unchanged with the October 2017 budget adjustment process; however, virements and shifts were effected within economic classifications and Programmes. With regard to economic classification; R5 million was taken from Current payments, with R4 million allocated to Transfers and subsidies and R1 million allocated to Payments for capital assets. In relation to the Programmes, R7.8 million was taken from Programme 1 and dispersed more or less equally between Programmes 2, 4 and 5, with Programme 3 receiving the largest share at R3.7 million. Programme 2 had its R1.5 million allocated to its Space Science sub-programme for the payment of salaries. Programme 3 allocated its R3.7 million to salaries and goods and services. Programme 4 allocated its R1.3 million to its Human Capital and Science Promotion sub-programme and Programme 5 allocated its R1.3 million to its Sector Innovation and Green Economy sub-programme, both for the payment of salaries. The Department also effected virements of R94.5 million (equalling 1.3% of the adjusted budget) after the budget adjustment process. The virements under Transfers and subsidies were redirected towards the Intellectual Property Fund to capacitate Offices of Technology Transfer (OTTs), for the operations and infrastructure of the International Centre for Genetic Engineering and Biotechnology (as in 2016/17), and for human capital development at historically disadvantaged institutions.

The Department spent 99.1% (99.4% in 2016/17) of its 2017/18 budget, underspending by R67.7 million. Table 1 shows the expenditure by Programme and Economic classification. The material variances in expenditure occurring in Programmes 2 and 3 (and accounting for the underspending under Transfers and subsidies) are due to, respectively, non-payment (R15 million) for HIV research to the South African National Aids Council (SANAC) due to the entity’s capacity constraints, and delays in finalising contracts between the Department and the implementation agency for the Research and Innovation Exchange Platform (RIEP). The objective of the RIEP is to promote historically disadvantaged institutions' access to collaboration opportunities through participation of their staff in exchange programmes with international partners. The compilation of these contracts requires lengthy legal processes. The main reason for the variance in expenditure in Programme 4 is primarily as a result of cash surpluses realised on the Square Kilometre Array project.

Table 1:          Overview of the Department’s 2017/18 allocation and expenditure

Programme

Final appropriation

R’million

Actual expenditure

R’million

Variance

R’million

Programme 1 – Administration

340 873

338 197

2 676

Programme 2 – Technology Innovation

1 133 783

1 116 181

17 602

Programme 3 – International Cooperation and Resources

168 211

130 598

37 613

Programme 4 – Research Development and Support

4 300 795

4 291 924

8 871

Programme 5 – Socio-Economic Innovation Partnerships

1 613 567

1 612 645

922

TOTAL

7 557 229

7 489 545

67 685

Economic classification

Final appropriation

R’million

Actual expenditure

R’million

Variance

R’million

Current payments

520 480

514 153

6 327

Transfers and subsidies

7 014 513

6 954 524

59 989

Payments for capital assets

22 018

20 649

1 369

Payments for financial assets (virement)

218

219

(1)

TOTAL

7 557 229

7 489 545

67 685

 

The Department incurred R14.5 million (R35.1 million in 2016/17) in irregular expenditure due to non-compliance with supply chain management processes, the details of which have been referred to the National Treasury. Irregular expenditure awaiting condonation amounts to R49.6 million. The detail related to the irregular expenditure that was referred to the National Treasury is:

  • The National Treasury ruled that the matter that was referred to them for guidance in the 2016/17 financial year was irregular expenditure. The matter pertains to a mobile communication contract that was advertised for a shorter period after approval was obtained from the Accounting Officer in the 2014/15 financial year. The irregular expenditure was disclosed accordingly in the financial statements and will be handled in terms of the guidelines for the management of irregular expenditure.
  • The prior year’s irregular expenditure amounting to R35.1 million was referred to the National Treasury for condonement in the 2015/16 and 2016/17 financial years. No feedback had been received by the time the Annual Report was finalised.

The Department did not incur any fruitless and wasteful, or unauthorised expenditure in the 2017/18 financial year.

  1. Auditor-General’s report on the financial statements of the Department of Science and Technology

The Auditor-General (AG) awarded the Department an unqualified audit opinion with no findings; hence, a clean audit. The AG further states that no material findings on compliance with key legislation and that no significant deficiencies in internal control were identified. This is an improvement on last year where the AG awarded the Department an unqualified audit opinion with findings related to the systems and processes for collating and verifying performance information.

  1. 2017/18 performance OF THE DEPARTMENT OF SCIENCE AND TECHNOLOGY

The Department’s Programmes, with their concomitant achievement against the performance targets for the 2017/18 financial year, are shown in Table 2. Overall performance for the previous financial years is shown at the bottom of Table 2.

Table 2: Programme performance for the 2017/18 financial year.

Programme

Number of targets

Achieved

Not achieved

Programme expenditure (%)

Programme 1 – Administration

6

5

1

99.2

Programme 2 – Technology Innovation

10

8

2

98.4

Programme 3 – International Cooperation and Resources

10

9

1

77.6

Programme 4 – Research Development and Support

11

9

2

99.8

Programme 5 – Socio-Economic Innovation Partnerships

12

10

2

99.9

TOTAL

49

41 (84%)

8 (16%)

99.1

2016/17 performance

89%

 

2015/16 performance

84%

 

2014/15 performance

85%

 

2013/14 performance

77%

 

 

For 2017/18, the Department achieved an overall performance of 84%, regressing from its 89% performance achievement in the previous financial year.

Notable performance in relation to the Department’s five strategic outcome-oriented goals, includes:

  • Goal 1: Responsive, co-ordinated and efficient NSI – build on previous gains to create a responsive, co-ordinated and efficient NSI.
    • Finalising the development of the new draft STI White Paper;
    • Initiating the reviews of the Intellectual Property Rights from Publicly Financed Research and Development Act (Act 51 of 2008) and the National Intellectual Property Management Office (NIPMO); and
    • The Ministerial panel appointed to review the STI Institutional Landscape (STIIL) submitting its report to the Minister.
  • Goal 2: Increased knowledge generation – maintain and increase the relative contribution of South African researchers to global scientific output.
    • Establishing a National e-Science Postgraduate Teaching and Training Platform, with a master’s degree in e-Science and led by the University of the Witwatersrand, to promote e-skills and e-research capacity development, and to build cyberinfrastructure capability at universities; and
    • Completing the 64-dish MeerKAT radio telescope within budget and beyond specification.
  • Goal 3: Human capital development – increase the number of high-level graduates and improve their representivity.
    • Awarding bursaries to 3 621 doctoral and 10 601 pipeline postgraduate students; and
    • Supporting 823 graduates and students in Department-funded work preparation programmes in science, engineering, technology and innovation institutions.
  • Goal 4: Using knowledge for economic development – derive a greater share of economic growth from R&D-based opportunities and partnerships.
    • Launching the Biomanufacturing Industry Development Centre (BIDC), a hub for innovation in the biomanufacturing sector aimed at supporting small and medium enterprises involved in biomanufacturing;
    • Launching the Biorefinery Industrial Development Facility (BIDF), which is aimed at innovation-led industry development and competitiveness, encouraging increased private sector investment in RDI activities and promoting job creation; and
    • Supporting projects focused on developing drought-tolerant, heat-tolerant and pest-resistant varieties for smallholders. Some of these programmes are for managing the early detection of diseases, while others are technology dissemination for farmers.
  • Goal 5: Knowledge utilisation for inclusive development – accelerate inclusive development through scientific knowledge, evidence and appropriate technology.
    • Continuing the development and evaluating the clinical significance and benefit of routine screening with the Umbiflow device, a portable umbilical artery Doppler device developed by the South African Medical Research Council and the CSIR for use in low-resource primary health care settings;
    • Hosting, in partnership with the African Union (AU) and the New Partnership for Africa's Development (NEPAD) Business Foundation, the 9th AU Private Sector Forum and assisting with the successful conclusion and adoption of the African Space Agency statutes, which contributed to the final decision for South Africa to host the Pan African University Institute for Space Sciences; and
    • Hosting a policy dialogue to advance the discourse on the role of science, technology and innovation in local economic development (LED).

The performance targets that were not achieved are:

Programme 1:

  • Due to the containment measures instituted on the public service wage bill, the vacancy rate for the Department was capped at 11%. The performance target was set at 10%.

Programme 2:

  • 41 less new disclosures (239 reported disclosures compared to a performance target of 280) were reported by publicly-funded institutions. This target was also not achieved in the 2016/17 financial year, where there was a shortfall of 24 disclosures against the target of 275. The Department attributes the non-achievement to increased capacity at the OTTs, which allowed them to better evaluate whether a disclosure would be actionable or not, as well as disclosures being dependant on researchers disclosing their new intellectual property (IP) to the OTTs.
  • 89 less postgraduate students funded (266 students funded compared to a performance target of 355) in the designated areas of space science, energy, bioinnovation, nanotechnology, robotics, photonics, synthetic biology, structural biology and functional genomics, IP management, technology transfer and technology commercialisation. The Department stated that the contract with the National Research Foundation was terminated owing to the poor quality of data and reporting.

Programme 3: during the preceding five financial years, this Programme achieved all its performance targets.

  • 109 less postgraduate students participated (241 students compared to a performance target of 350) in international training programmes. The Department states that in some instances, the confidentiality policies of international partners prevented the provision of evidence required for performance reporting.

Programme 4:

  • 199 less pipeline (i.e., honours, BTech and masters) students were awarded bursaries (10 601 students awarded bursaries compared to a performance target of 10 800). The Department states that since pipeline and doctoral students are funded from the same budget, the overachievement in the number of doctoral students supported contributed to the underachievement in the number of pipeline students funded.
  • Two less research infrastructure grants were awarded (28 compared to a performance target of 30) due to National Treasury cutting funds from the Research Infrastructure budget allocation.

Programme 5:

  • Three less (three submitted instead of six) statistical reports and policy briefings submitted to Cabinet.
  • Due to on-going capacity challenges, the target for the time taken for pre-approval decisions for the R&D Tax Incentive was once again not met (an average of 101 days instead of 90 days).
  1. Auditor-General’s report on the performance report of the Department of Science and Technology

The AG does not express an opinion or conclusion on the reported performance information. However, the AG does test the usefulness and reliability of performance information for selected Programmes. In this case, Programmes 2, 4 and 5 were selected. During the audit process the AG identified material misstatements in the reported performance information of Programme 5. However, as these misstatements were subsequently corrected by the Department, the AG did not raise any material findings on the usefulness and reliability of the reported performance information.

  1. ENTITIES OF THE DEPARTMENT OF SCIENCE AND TECHNOLOGY
  2. 2017/18 Performance of the entities that report to the Department of Science and Technology

The eight entities that report to the Department serve as its implementing agencies. Table 3 shows the performance of the entities for the 2017/18 financial year, who jointly achieved an overall average performance of 76%. Of the entities pursuing technology research and development, the CSIR had the lowest performance at 46% and SANSA and TIA had the highest, each achieving 85% of their performance targets.

Table 3: Entity performance for the 2017/18 financial year.

Entity

Number of targets

Achieved

Not achieved

Overall performance

Academy of Science of South Africa

15

14

1

93%

Council for Scientific and Industrial Research

28

13

15

46%

Human Sciences Research Council

23

16

7

70%

National Advisory Council on Innovation

8

5

3

62.5%

National Research Foundation

39

25

14

64%

South African Council for Natural Scientific Professions

13

13

--

100%

South African National Space Agency

20

17

3

85%

Technology Innovation Agency

26

22

4

85%

Overall average performance of entities

76%

 

Some of the notable achievements of these entities that demonstrate how they contribute to the development and enhancement of the NSI, and how STI serves society and supports economic development, include:

 

  • ASSAf - published 14 evidence-based reports, of which three were consensus study reports; namely, The State of Climate Change Science and Technology in South Africa, Revitalising Agricultural Education and Training (AET) in South Africa, and The State of Research, Development and Innovation of Electrical Energy Efficiency Technologies in South Africa.

 

  • ASSAf – hosts the Scientific Electronic Library Online (SciELO) South Africa Collection, and increased the number of its journals from 65 to 72. SciELO South Africa is a full-text searchable database of selected, high-quality open access South African scholarly journals. It is the first fully open access platform for scholarly publishing in South Africa and on the continent, and the collection is included in the Web of Knowledge (WoK) and SCOPUS search platforms, significantly increasing the visibility of South African scholarly journals.

 

  • CSIR - developed a compact battery-operated device to monitor rock-mass for micro-seismicity. This device optimises safe re-entry after hazardous events (specifically for use in mines).

 

  • CSIR - developed and patented a diabetes breath analyser, an alternative to the finger-prick blood test for detecting high blood sugar levels. A micro-nanochip detects acetone, a by-product of high blood sugar levels.

 

  • CSIR - developed a fully biodegradable plastic material from agricultural waste by-products and biopolymers. The material has been tested and validated as per international norms and standards

 

  • HSRC - conducted a detailed study to assess possible settlement upgrade strategies without de-densification and used the Joe Slovo Park (JSP) settlement in Cape Town as the main case study to recommend a settlement management and development approach to National Treasury and the City of Cape Town.

 

  • HSRC- the Department, through its Chief Directorate: Science and Technology for Social Impact, embarked on an initiative to support several technology projects in 27 Priority District Municipalities (PDM). The core purpose of the Innovation Partnership for Rural Development Programme (IPRDP) is to strengthen municipal capabilities in science and technology leadership. Several science councils, universities and private implementation agencies have been contracted to demonstrate a suite of innovations in basic public services in remote and resource poor local municipalities. The HSRC is leading the monitoring and evaluation component of the PDM. The IPRDP is concerned essentially with demonstrating water, sanitation and energy technologies to improve basic public services in targeted rural communities.

 

  • HSRC – conducted a project on “Reducing Spatial Inequalities through Better Regulation” for the Parliamentary High-level Panel on the Assessment of Key Legislation and Acceleration of Fundamental Change, examined the persistence of spatial inequality in the country and offered policy solutions for a more equal society in future.

 

  • NACI – launched the National STI Information Portal, which will enhance the monitoring, evaluation and learning capability of the NSI, serve as centralised storage of national STI data, and meet the systemic information needs of policy makers.

 

  • NACI – completed an analysis of Government Support Programmes for Business Research and Innovation. NACI conducted a desktop study of government support programmes, such as the Support Programme for Industrial Innovation, the Technology and Human Resources for Industry Programme, and the R&D Tax Incentive, Sector Innovation Fund and Seed Fund programmes. The purpose was to establish whether these programmes had achieved their intended outputs or outcomes (in the form of technology development, human capital development, government, academia and industry partnerships and leveraged funding).

 

  • NRF, as the funding disbursement agency of the Department, is mandated to ensure that it resources the research and transformation agenda of the NSI. Hence, the NRF has:
    • Between 2014 and 2017, increased the number of postgraduate students supported from 9 771 to 14 598; increased the number of rated female researchers from 889 to 1 285; and increased the number of rated black researchers from 668 to 1 069.
    • Invested in cutting-edge infrastructure platforms. For example, GAMKA, a high-end spectrometer for probing the structure of subatomic matter, bolstering South Africa’s ability to perform cutting-edge experimental sub-atomic / nuclear physics research. A 3 MV Tandetron Accelerator for advanced materials science research.
    • Successfully established the South African Radio Astronomy Observatory (SARAO), which built and delivered the MeerKAT Radio Telescope (that will form part of Phase 1 of the Square Kilometre Array Telescope. The MeerKAT, officially launched in June 2018, has collected the clearest image yet of the centre of the Milky Way galaxy.

 

  • SACNaSP – increased the number of registered scientists by 2 037 to 12 964, and developed the Continuous Professional Development and Candidate Mentoring Phase Programmes for natural scientists that seek to promote the professional development and transformation of the natural science sector.

 

  • SANSA - all aircraft of the South African Air Force (SAAF) are required by law to have a magnetic compass as an important back-up to the integrated navigation system. Magnetic compass swings are conducted periodically for all aircraft, to ensure the calibration of these lifesaving navigational tools. SANSA is the only organisation performing compass swings in South Africa - making this an invaluable service to the nation and annually ensuring the safety of thousands of aircraft.

 

  • SANSA – provides space weather knowledge, expertise, products and services through the SANSA Space Weather Centre, which is the only Regional Warning Centre for Africa under the International Space Environment Service (ISES). The Centre provides forecasts and warnings of adverse space weather that can negatively affect modern day technology such as communication and navigation systems, power grids, mobile phones and avionics, to name a few. For example, in September 2017, the Centre recorded the strongest solar flare in over a decade. The resulting intense space weather event caused high frequency (HF) radio blackouts across the daytime side of Earth affecting HF communication over Africa, Europe and the Atlantic Ocean. The solar flare was accompanied by a coronal mass ejection (CME) which travelled towards Earth at a speed of over 1 200 km per second impacting the Earth’s magnetic field. The impact of the CME sparked a strong geomagnetic storm on Earth that affected HF communication, navigation systems such as GPS, and communication systems such as DStv, mobile phones and internet connectivity.

 

  • SANSA Earth observations - the Department of Water and Sanitation (DWS) is benefiting from the national water body dataset (developed by SANSA) for water licensing and inventory purposes. In addition, the mapping (SANSA’s satellite imagery database) of irrigated and non-irrigated areas provides the DWS with a reliable means of verifying water usage in various water catchment areas.

 

  • SANSA Earth observations - one of the inhibitors to agricultural growth is access to actionable information. A number of crop monitoring products (such as Crop Arable Land Fraction and Crop Anomalies) and biophysical products (such as Chlorophyll Content and Canopy Water Content) were produced and distributed to stakeholders and used for precision farming.

 

  • SANSA - the consortium of Cape Peninsula University of Technology (CPUT), Stone Three and Clyde Space is involved in the development of a South African constellation of low cost nanosatellites to facilitate South African Marine Domain Awareness (MDA), as required by Operation Phakisa. The MDA constellation will provide South Africa with security and control of its maritime data with associated improved control over data cost and access. In addition, with its flexible communications platform, the MDA nanosatellite constellation will also enable various other satellite-based services for South Africa and the greater continent.

 

  • TIA – in the last five years, has:
    • Contributed R6.8 billion in terms of Gross Domestic Product (GDP), created 16 289 jobs, and supported 11 350 small and medium enterprises.
    • Disbursed R1.9 billion in grants to support technology development and infrastructure, developed 303 knowledge products, had 63 technology innovation projects taken up by the market, and received R10.3 million in royalties from the projects it has supported.

 

  • TIA’s technology investments have resulted in, among many others:
    • SLIEK (Pty) Ltd developing and optimising the production process of lactase enzymes to enable lactose-intolerant individuals to consume dairy products.
    • SA Cardiosynthesis (Pty) Ltd developing synthetic heart valves aimed at replacing metal or tissue based alternatives.
    • Para-Tube technology that assists persons confined to wheelchairs to use ablution facilities.
    • AgriProtein Technologies (Pty) Ltd who convert organic waste to animal feed protein.
    • Mabu Casing Soil technology that provides a 100% natural soil casing pith to be used as a substitute for peat in the mushroom and horticulture industries.
    • Settled Bed Detector Probe technology that minimises blockages in slurry pipelines for ore mining tailings.
    • The development of membrane electrode assembly (MEA) for the production of hydrogen fuel cells that generate clean energy.

 

The targets that were not achieved by the entities include:

 

  • ASSAf did not meet the planned targets for the proportion of women members, and the number of Science-for-Society Gold medals awarded.

 

  • CSIR did not meet the planned targets for contract and royalty income, numbers of science, engineering and technology (SET) staff, black SET staff, female SET staff, SET staff with PhDs, total number of Chief Researchers, the total number of Principal Researchers, and the number of Principal Researchers who are female. The financial and governance targets that were not achieved were as follows:
    • Total income for the period amounted to R2.5 billion and was R359 million below target. The CSIR generated R1.77 billion in contract income, which was significantly lower than the target of R2.1 billion.
    • A net loss of R14 million was recorded against a profit target of R64 million.
    • The CSIR only managed to achieve a Level 3 B-BBEE status against a Level 2 target.

 

  • HSRC did not meet the planned targets for book chapters published, employing African and postgraduate research fellows, doctoral students completing their degrees, gender and race targets for senior researchers, and for securing the targeted percentage of multi-year research grants.

 

  • NACI did not meet the target to develop a framework for the new STI decadal plan and conduct a foresight exercise. The framework is dependent on the finalisation of the new STI White Paper, which is still a draft and open for public comment.

 

  • NRF did not meet the following planned targets:
    • 1 786 female researchers were funded, against a target of 2 450.
    • 8 266 female postgraduate students were supported against a target of 8 700. The shortfall was mainly at Honours level and due to the reduction in the Scarce Skills Development Fund, which resulted in 920 fewer students supported.
    • There were 908 publications, related to the use of equipment funded by the National Equipment Programme (NEP) against a target of 1 250 publications. The 27% underachievement was attributed to timing differences between commissioning the equipment and the production of research outputs.
    • The cumulative annual staff turnover was 8.8%, against a target of 6%.

 

  • SANSA did not meet the following planned targets:
    • Achieved 4 of the targeted 5 high-impact products and services.
    • Secured R235 million of the targeted R251 million in contract income.
    • Did not complete the annual exercise to estimate the monetised impact from space related activities.

 

  • TIA did not meet the target set for external income received, supported less previously disadvantaged small and medium enterprises, did not achieve the investment approval turnaround time, and did not achieve the target for project funding in relation to total expenditure.

 

One of the key concerns, is that the CSIR, HSRC, SANSA and TIA did not meet the targets set for securing the external income on which they are heavily reliant, since the Parliamentary grant is wholly insufficient to ensure the sustainability of these entities.

 

The eight entities received R2.5 billion (35.5%, Parliamentary grant only) of the R7 billion allocated to Transfers and subsidies. Five of the entities reported a surplus for the 2017/18 financial year, with the NRF reporting a break-even financial position and the CSIR reporting a net loss of R14 million. The CSIR, HSRC, SACNaSP, SANSA and TIA, all received clean audit opinions (unqualified with no findings), while ASSAf and the NRF were awarded unqualified audit opinions with findings. The NRF’s audit finding relates to not taking effective and appropriate steps to prevent irregular expenditure amounting to R30.5 million. The audit finding of ASSAf relates to the ongoing issue of ASSAf not fully complying with section 2(2) of the ASSAf Act (Act 67 of 2001), which requires that ASSAf must comply with the provisions of the Public Finance Management Act (Act 1 of 1999).

 

The CSIR (R7.4 million), HSRC (R186 000), and NRF (R30.5 million) incurred irregular expenditure amounting to R38.1 million. When adding the R14.5 million irregular expenditure incurred by the Department, the total irregular expenditure for the S&T portfolio amounted to R52.6 million. This is a significant increase from the R12.1 million irregular expenditure incurred during the 2016/17 financial year. All instances of irregular expenditure were as a result of contravening supply chain management legislation. The CSIR (R78 942), HSRC (R185 000), NRF (R27 000), and TIA (R80 000) incurred fruitless and wasteful expenditure amounting to R370 942. This is significantly less than the R4 million fruitless and wasteful expenditure incurred during the 2016/17 financial year and resulted from interest, penalties and cancellation fees. The Department and its entities, explained in detail to the Committee and the AG, how each instance of irregular and fruitless and wasteful expenditure was incurred.

 

The entities did not incur any unauthorised expenditure during the 2017/18 financial year.

 

  1. Finance and Service delivery performance assessment

 

The Department has consistently demonstrated that it can spend, to a significant degree, its budget allocation according to spending targets, and that it has taken the necessary steps to ensure that the same progress is made with achieving its performance targets. For the 2017/18 financial year, the Department’s budget allocation declined in real terms by 4.3%; it spent 99.1% of its budget and achieved 84% (89% in 2016/17) of its performance targets. A recurring issue for the Department is that, due to capacity constraints (i.e., technical expertise and numbers of staff) it cannot meet the targets set for administering the R&D Tax Incentive.

 

The Department and the entities have also continued their efforts to ensure that operational costs are kept within acceptable margins so that the bulk of the publicly allocated and externally sourced funds are used to fulfil core mandates. However, after successive years of budget cuts and below inflation increases in the Parliamentary grant allocation, the ability of the Department and its entities to fulfil their mandates is increasingly hampered. Due to the weak state of the economy, the external funding the entities rely on to execute their functions has also declined; and increasingly, public entities are finding that they have to compete with the private sector for Government contracts to ensure financial sustainability.

 

During its interaction with the Department and the entities on the 2017/18 Annual Reports, the Committee noted the following key challenges:

 

  • The below inflation increases to the Parliamentary grant.
  • All entities are struggling to retain and recruit skilled staff, and up-skill existing staff. This has a cumulative effect on the entities’ ability to meet performance targets.
  • The CSIR, NRF, SANSA and HSRC are all struggling to maintain and update, as well acquire, new research infrastructure, needed for R&D and skills development.
  • The status of ASSAf with regard to being classified and listed in the Schedules of the Public Finance Management Act (Act 1 of 1999), after approximately four years, remains unresolved.
  • The CSIR could only secure R1.77 billion in contract income due to changes in procurement requirements imposed by National Treasury on State-owned Enterprises (SOEs) and government departments.
  • SANSA’s salary budget (scarce and highly-skilled individuals) amounts to R110 million, its Parliamentary grant is R131 million, essentially leaving R20 million to run a Space Agency. Hence, SANSA has to secure contract funding to ensure its sustainability.
  • To date, SANSA has not been able to implement its Space Engineering Division because of the lack of funds. Despite having to perform against targets to build the next earth observation satellite, i.e. EOSat1. The satellite build has been compromised by a dire lack of funding, and will in all likelihood be subjected to a redesign process to scale back the development costs.
  • SANSA has also not been able to fulfil its mandate in relation to Global Navigation Satellite Systems and Telecommunications, due to a lack of funding.
  • The HSRC has to secure external income to cover a proportion of its salary bill and to conduct research.
  • The HSRC occupies an old building and relies on legacy systems (research infrastructure) to store and safeguard its research databases. These are increasingly costing more to maintain. The building alone costs approximately R40 million annually to maintain and ensure that it complies with health and safety standards.
  • The NRF is supporting increasingly higher numbers of postgraduate students, but the quality of the support is adversely affected by below inflation increases to awards made to students. Furthermore, of importance, is that NRF funded students finish their degrees faster and attain these degrees at a younger age, than other South African students.
  • The NRF’s support to researchers is becoming less attractive due to the declining growth in the size of the research grant.
  • SACNaSP’s bad debt increased by 52% due to registered scientists not paying the annual subscription. Furthermore, despite existing legislation, there is still a huge number of natural scientists practicing without being registered.

 

Overall, the Department with its entities have shown that they can spend their allocated budget and achieve a significant percentage of their performance targets, as well as ensuring that they closely adhere to legislative prescripts in managing the allocations received from the public purse. The shortcomings in corporate governance identified in previous financial years have received attention; hence, the steady improvement in the audit outcomes for the current financial year. Existing issues relating to supply chain management have been acknowledged, and plans to address and improve on these are in progress.

 

  1. COMMITTEE OBSERVATIONS

 

The Committee is pleased with the performance of the Department and its entities and is of the view that greater impact and an acceleration of the change needed by the economy can only be achieved with the allocation of additional resources. Particularly for human capital development, research, and innovation to increase the knowledge generation capacity of the system, the development of new industries and for the provision and maintenance of research infrastructure.

 

The Committee recognises the significant contribution of the Department and its entities towards the goals of the NDP; ensuring that the knowledge generated is used to enhance existing and create new industries, and is used to enhance and drive social development. However, given the portfolio’s resources, the rate of progress within these priority objectives is not at the desired level.

 

Many challenges persist and one of the biggest threats to the objectives of the Department and its entities, and to that of the NDP, is the inadequate level of investment in RDI by both the Government and the private sector. Therefore, the Committee disagrees with the response offered by the National Treasury in relation to the surpluses reported by the Department and the entities. The Committee maintains that performance delivery has been structured around the budgets that have been allocated, and not according to all the responsibilities that they are mandated to fulfil. This has meant that the STI mandate cannot be fully implemented at the current levels of funding.

 

Science related inflation is higher than standard inflation. Hence, allocations that grow in line with standard inflation only marginally assist the STI objectives. Allocation increases below standard inflation further exacerbate the sub-optimal funding environment that prevails. Furthermore, relying on external funding to fulfil government-specific mandates poses the risk that R&D focus may shift to the needs of the funder and away from Government’s priorities.

 

The Committee is of the view that since Government invests in science councils to address national priorities through evidence-based studies, national departments should make better use of the expertise and resources resident within these science councils to provide the advice and services needed. This would potentially lessen Government’s dependence on private consultants for policy analysis and advice, it could lessen the strain on entities that have to source external funds to supplement their Parliamentary grant, and ensure that the national research agenda is not compromised by the objectives of those providing additional funding.

 

The Committee notes that all the entities require additional funds to that which is currently allocated by the Department to fulfil their mandates and cover the operational costs. Furthermore, entities are required to pay Value Added Tax (VAT) on the Parliamentary grant, and recent Treasury regulations stipulate that Memorandums of Agreement are no longer accepted to secure remunerated services. Entities now have to submit tender bids for these contracts. In relation to the latter, the CSIR reported a shortfall of R300 million in contract income.

 

The Committee recognises the RDI work of the Department and its entities that is of the highest international standard and is being used globally. The Committee encourages that the Department continues its focus on R&D in the existing areas of competitive advantage and in areas where existing markets are set to grow. For example, the South African space industry, which is very small currently, can become a key player in the global space economy, provided it is supported by a well-resourced national space programme, implemented by SANSA. Therefore, it is crucial that investment in SANSA be prioritised so that it can fulfil its current mandate, and ensure that South Africa can be competitive in the global space economy.

 

The Committee notes that the graduation rate and time to completion of degrees by postgraduate students funded by the NRF is well above the national average. This despite the bursary value not being commensurate with the actual cost of postgraduate study and the growth of the research grant not being in line with macro-economic factors. Furthermore, the Committee noted the lack of mechanisms to track graduates once they have attained their qualifications and to what extent they have been absorbed within the NSI.

 

The Committee notes with concern that the Department continues to struggle to reach the desired turnaround time for the processing of applications for the R&D Tax Incentive Initiative.

 

The Committee is cognisant that due to financial constraints, all entities are struggling to retain and recruit skilled staff, and up-skill existing staff and that this has a cumulative effect on the entities’ ability to meet performance targets.

 

The Committee welcomes the intention to develop a framework to realise the science communication and public engagement mandate of the Department and its entities.

 

  1. RECOMMENDATIONS

 

The Portfolio Committee on Science and Technology recommends the following:

 

That the Minister of Science and Technology continues her engagement with the National Treasury to secure additional funding for the science and technology portfolio and that the Committee supports all funding requests made in this regard.

 

That the Minister of Science and Technology advises against all proposed funding reductions from the National Treasury and that the regulations regarding the non-acceptance of Memoranda of Agreement for remunerated services be reconsidered in light of the adverse effect it has had on entities like the CSIR who could not secure its targeted contract income.

 

That the National Treasury elaborates on their view that, “the department’s six entities are adequately funded to deliver on their mandate given the yearly applications to the National Treasury to retain surplus funds.” The Committee maintains that the performance delivery of the entities has been structured around the budgets that have been allocated to them, and not according to all the responsibilities that they are mandated to fulfil.

 

That the Department of Science and Technology and the entities explore the advantages/disadvantages of deregistering from paying VAT on the Parliamentary grant, and then to provide the Committee with a detailed report on the outcome of this study.

 

That the Department of Science and Technology provides the Committee with a detailed report on the administrative challenges and its impact on the uptake of the R&D Tax Incentive.

 

That the Department of Science and Technology provides the Committee with a detailed report on the outcomes of the various studies that have been conducted to inform the enhancement of the PhD Programme.

 

That the Department ensures full compliance with legislative prescripts to maintain their unqualified audit outcomes and that the issues regarding the audit status of ASSAf be resolved.

 

That the Committee’s recommendations be considered and responded to by 31 March 2019.

 

  1. CONCLUSION

 

The Committee expressed its thanks and appreciation to the staff and officials supporting the Committee.

 

The Committee thanks the Minister, the Department and the entities for their co-operation and commitment.

 

The Democratic Alliance and the Economic Freedom Fighters reserve their opinion on the Report.

 

 

 

Report to be considered.