agricultureBRRR

5.  BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES dated 19 october 2017.

The Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries, dated 19 October 2017.

The Portfolio Committee on Agriculture, Forestry and Fisheries (hereinafter referred to as the Committee), having considered the performance and expenditure for the 2016/17 financial year and submission to National Treasury for the medium term period of the Department of Agriculture, Forestry and Fisheries reports as follows:

1.       Introduction

1. Mandate of the Portfolio Committee on Agriculture, Forestry and Fisheries.

The mandate of the Committee is derived from Section 55 and 56 of the Constitution of the Republic of South Africa and provisions that are contained in the Rules of the National Assembly. The Committee is mandated to consider, amend and/or initiate legislation that is specific to, or impacts on agriculture, forestry and fisheries; monitor and oversee the activities and performance of the Ministry and the Department of Agriculture, Forestry and Fisheries (hereinafter referred to as the Department or DAFF) and its entities. The Committee’s mandate is to also consider and review the budget of the Department and its entities; consider sector-related international treaties and agreements; and provide a platform for the public to participate and present views on specific topics and/or legislation in relation to the three sectors. 

The Department’s entities are, namely, the Agricultural Research Council (ARC), Onderstepoort Biological Products (OBP), National Agricultural Marketing Council (NAMC), Perishable Products Export Control Board (PPECB), Marine Living Resources Fund (MLRF) and Ncera Farms (Pty) Ltd. The Committee also considers the Annual Plans and Reports of the South African Veterinary Council (SAVC), which is a non-profit representative body for the veterinary and para-veterinary profession and a key stakeholder in the agricultural sector.  

1. Core Functions of the Department of Agriculture, Forestry and Fisheries

The aim of the Department of Agriculture, Forestry and Fisheries (hereinafter referred to as the Department) is to lead, support and promote agricultural, forestry and fisheries resources growth and management through policies, strategies and programmes that contribute to and embrace economic growth and development; job creation; sustainable use of natural resources; food security and rural development. The Department’s legislative mandate is derived from Section 27(1)(b), as well as Section 24(b)(iii) of the Constitution of the Republic of South Africa. The Department also contributes directly to three of the national Government priority outcomes as outlined in the Medium Term Strategic Framework (MTSF) in Section 2 of this document.

Its activities are guided by the following four strategic goals and associated objectives to address priorities that are identified in the National Development Plan (NDP):

The Department carries out its mandate through six programmes, namely, Administration; Agricultural Production, Health and Food Safety; Food Security and Agrarian Reform; Economic Development, Trade and Marketing; Forestry and Natural Resources Management as well as Fisheries Management.

1. Purpose of the Budgetary Review and Recommendation Report

The process for the budgetary review and recommendation is set out in Section 5 of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009). The Act sets out the process that allows Parliament’s National Assembly, through its Committees, to make recommendations to the Minister of Finance to amend the budget of a national department. The Budgetary Review and Recommendation Report (BRRR) for each department that falls under each National Assembly Committee’s responsibilities, in this case, the Department of Agriculture, Forestry and Fisheries:

• must provide an assessment of the Department’s service delivery performance given available resources;
• must provide an assessment on the effectiveness and efficiency of the Department’s use and forward allocation of resources; and
• may include recommendations on the forward use of resources.

The BRR Report may also act as a source documents for the Standing/Select Committees on Appropriations/Finance when they make recommendations to the Houses of Parliament on the Medium-term Budget Policy Statement (MTBPS).

1. Preparation for the BRR Report 

In preparation for the BRR Report and in compliance with its mandate as set out in Section 5(1) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009), the Committee undertook the following activities in 2016/17:

1. Briefings by the Department on all four quarterly performance and expenditure reports of the Department for the 2016/17 financial year and the first quarterly report for the 2017/18 financial year.
2. Oversight visits to:

1. Mpumalanga Province in March 2017 and North West Province in September 2017 to oversee the implementation of the Fetsa Tlala Food Production Initiative; support to smallholder producers and aquaculture development.
2. Knysna, Western Cape Province in June 2017 to assess the impact of the fire that broke out in the Garden Route area on farmers, farm workers and agricultural infrastructure. 
   1. Held briefings and considered the medium term Strategic Plan, the Annual Performance Plan and Budget of the Department for the 2016/17 financial year, including those of its entities, viz. ARC, OBP, NAMC, PPECB and MLRF; as well as SAVC.  
   2. Received inputs and briefings on the  2016/17 Annual Reports of the Department and its entities from the Auditor-General and the Department of Planning, Monitoring and Evaluation on the Department’s  Management Performance Assessment Tool (MPAT) and MTSF Outcomes.  
   3. Subsequently, on the 10th and 11th October 2017, the Committee held briefings and considered the Annual Reports of the Department and its entities for the 2016/17 financial year.
   4. The BRR Report also draws from other expert presentations and inputs that the Committee received throughout the 2016/17 financial year.
3. Outline of the Contents of the Report

The Report reflects on Government key policy areas including those of the Department as they relate to the national Government Priority Outcomes; the Department’s financial and service delivery performance for the 2016/17 financial year to date; an overview of the Committee’s previous budgetary and service delivery performance findings and recommendations; and further observations and recommendations from other Committee engagements with Department including those from oversight visits.

2.         Overview of the key relevant policy focus areas

In the medium term, the Department’s plans are informed and aligned with government-wide planning and policy mandates. Its initiatives are focused at fulfilling Outcomes 4, 7 and 10, which respectively relate to job creation, rural development and food security as well as natural resources management; the National Development Plan (NDP); the Medium Term Strategic Framework (MTSF) and the Agricultural Policy Action Plan (APAP), which is implemented as the revitalisation of the agriculture and agroprocessing value chain (RAAVC). This section will provide a brief overview of these policy interventions including the Department’s key policy foci for the 2016/17 financial year and the medium term period.

2.1       The National Development Plan (NDP)

The NDP recognises that agriculture is the primary economic activity in rural areas and has set out specific objectives and milestones for the sector, viz:  

Inclusive rural economy (Outcomes 4 & 7) - one million new jobs by 2030 i.e. an additional 643 000 direct jobs and 326 000 indirect jobs in the agriculture, agroprocessing and related sectors by 2030. The direct action to achieve this include amongst other interventions, increased infrastructure investments for the development of new irrigation systems (Umzimvubu River Basin in the Eastern Cape and Makhathini Flats in KwaZulu-Natal (KZN)); and a third of food trade surplus in the country should be produced by smallscale farmers or households.

Environmental sustainability and resilience (Outcomes 10) – increased investment in new agricultural technologies, research and the development of adaptation strategies for the protection of rural livelihoods. The action towards this target involves channelling public investment into research, new agricultural technologies for commercial agriculture; as well as the development of adaptation strategies and support services for smallscale and rural farmers.

2.2       Medium Term Strategic Framework (MTSF): 2014-2019

The MTSF is the Government’s strategic plan for the 2014 to 2019 period. It is a five-year implementation phase of the NDP that is outcomes-based, and also takes into account the NGP, IPAP and other Government policy foci. The two over-arching strategic themes of the MTSF are radical economic transformation and improving service delivery. The MTSF’s aim is to ensure policy coherence, alignment and coordination across Government Plans, as well as alignment with budgeting processes. The MTSF 2014 -19 sets out the following service delivery targets that are linked to the Ministry of Agriculture, Forestry and Fisheries:

2.3       The Department’s Key Policy Developments

1. National Food and Nutrition Security Policy

In September 2013, Cabinet approved the National Food and Nutrition Security Policy, which is a collaboration between the Department and the Department of Social Development. The Policy seeks to ensure the availability, accessibility and affordability of safe and nutritious food at national and household levels. To further realise some of the policy objectives, the President subsequently launched the Fetsa Tlala Food Production Initiative in October 2013 to address increasing household food insecurity in the country. The aim of Fetsa Tlala is to put 1 million hectares of fallow land particularly in the former homelands, under production by 2019. The programme also seeks to link smallholder producers to government institutions for preferential procurement (market access). Following some impact evaluations that were done by the Presidency, towards the end of 2015, coordination of Food Security was placed under the leadership of the Deputy President. Through the Deputy Presidency’s Office, an Intergovernmental Technical Working Group was established to develop the National Food and Nutrition Security Plan that will be an implementation arm of the Policy. The Department of Planning, Monitoring and Evaluation reported that the costing of the National Food and Nutrition Security Implementation Plan is currently underway.

1. Smallscale Fisheries Policy

The Smallscale Fisheries (SSF) Policy was adopted by Cabinet in June 2012. It provides legal recognition to smallscale fishers and aims to provide rights to smallscale fishing communities and to ensure their equitable access to marine resources. However, the policy could not be implemented before amending the Marine Living Resources Act (MLRA), (Act No. 18 of 1998), a process that was undertaken in 2013. The resultant Marine Living Resources Amendment Bill was signed into law in 2014.  The Department has since finalised Regulations for the implementation of the SSF Policy, which was supposed to be implemented by February 2016 through a new fishing rights allocation process (FRAP) that will include smallscale fishers, who were previously excluded from participating. However, after requests from stakeholders, the Minister granted an extension for the registration of fishing communities as smallscale fishers. As a result, the SSF Policy could not be implemented during 2015/16 but was expected to be implemented in the reporting financial year (2016/17). However, due to additional extensions to the period for registration of fishing communities, the Plan was not implemented in 2016/17 and is expected to be implemented by the end of the current financial year, 2017/18.  

1. The Agriculture, Forestry and Fisheries Strategic Framework (AFFSF)

The Agriculture, Forestry and Fisheries Strategic Framework (AFFSF) was developed in response to the Government Priority Outcomes that relate to job creation, rural development and food security, to which DAFF contributes, and to provide a long-term strategy for an integrated growth and development of South Africa’s agriculture, forestry and fisheries sectors. Its primary purpose is to achieve the transformation and restructuring of the agriculture, forestry and fisheries sectors that are currently dominated by a small number of large companies, and to ensure that constraints experienced in the areas of input supply, production and marketing are addressed cost-effectively and in a timely manner.

1. The Agricultural Policy Action Plan (APAP)

The APAP is an implementation arm of the AFFSF that was approved 2014. The APAP seeks to translate the high-level responses offered in the AFFSF into tangible, concrete steps to promote food production and employment. It is a five-year plan that aligns itself with the NGP, NDP, IPAP and the MTSF. The APAP’s first implementation was during the 2015/16 financial year and will be updated on an annual basis. Its encompassing objectives are to promote labour absorption; broaden market participation; and strategic interventions that are aimed at increasing value-chain efficiencies and competitiveness focusing on selected subsectors and/or value chains. Following the Present’s pronouncement during the 2015 State of the Nation Address (SONA) on the Revitalisation of the Agricultural and Agroprocessing Value Chain (RAAVC) as part of the Nine-Point Plan, the Department reported that the APAP now forms an integral part of RAAVC.  The APAP/RAAVC focuses on the following key sectoral interventions:

1. Poultry/soya beans/maize integrated value chain.
2. Red meat value chain.
3. Wheat value chain.
4. Fruit and vegetables.
5. Wine industry.
6. Sugarcane.
7. Biofuels value chain.
8. Forestry.
9. Smallscale fisheries.
10. Aquaculture Competitiveness Improvement Programme (ACIP). 

3.         OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

3.1       Overview of Vote Allocation and Departmental Expenditure (2014/15 – 2019/20)

The budget allocation to Vote 24: Agriculture, Forestry and Fisheries has been increasing exponentially across Programmes in the previous medium term expenditure framework (MTEF) period ending in 2014/15 (see Table 1 below) but saw a decrease in the 2015/16 financial year and a stagnant growth in the reporting financial year (2016/17) due to Cabinet-wide reductions.

Table 1. The Department’s spending trend across programmes 

Source: Estimates of National Expenditure (National Treasury), 2017.

However, for the current MTEF period (i.e. 2017/18 to 2019/20), the Department’s budget allocation will again increase exponentially. The budget improvements are attributed to increases in the Department’s key programmes, namely, Programme 2: Agricultural Production, Heath and Food Safety and Programme 3: Food Security and Agrarian Reform (Table 1).

The Department was appropriated a total amount of R6.5 billion in the 2016/17 financial year, a slight increase from the R6.4 billion that was appropriated in the 2015/16 financial year (see Table 1). In the reporting year (2016/17), the Department spent 99.6 per cent of its total appropriation, which is a reduction from the previous financial year’s 99.9 per cent spending. Approximately 54 per cent (R3.5 billion) of the Department’s total expenditure for 2016/17 went to transfers and subsidies, which is less than the 57.9 per cent (R3.7 billion) that was spent under transfers and subsidies in 2015/16. Transfers and subsidies constitute inter alia, conditional grants, transfers to Departmental entities, academic institutions and membership fees to international organisations. Approximately R2.2 billion (34 per cent) of the Department’s total budget for 2016/17 was allocated to conditional grants and 100 per cent of the conditional grants allocation was reportedly spent.  Of the R2.2 billion for grants, R1.64 billion (75 per cent of conditional grants appropriation) was allocated to the Comprehensive Agriculture Support Programme (CASP).

The Department’s underexpenditure in the reporting year (2016/17) is R24 million, which is three times the underexpenditure of   R8.2 million in 2015/16 (see Table 2). As in the previous two financial years, most of the unspent funds were on payment for capital assets (Programme 1) and transfers and subsidies (Programmes 3 and 5). Both Programme 1 and Programme 3 have been consistently underspending allocated funds for the past three financial years. Programme 3 is responsible for some conditional grants transfers (CASP and Ilima/Letsema), transfers to Ncera Farms (Pty) Ltd, Agricultural Colleges and a skills development and training fund to the Perishable Products Export Control Board (PPECB).

Programmes 5 is responsible for further CASP transfers for the Disaster Relief Fund; and the distribution of the LandCare conditional grant. Programme 2, which received 30 per cent of the total budget of the Department in 2016/17 is the Programme through which allocations to the ARC and Ilima/Letsema are made. Programme 2 in the previous MTEF period was also responsible for transfers to the OBP for the refurbishment and modernisation of vaccine manufacturing infrastructure for increased biosafety. This was a once-off funding allocation from National Treasury that ended in 2015/16, hence the decline in the Programme’s budget allocation for 2016/17.  

Irregular, fruitless and wasteful expenditure

In 2016/17, the Department incurred irregular expenditure of R2.8 million of which R2 million was condoned and the Department closed the financial year with irregular expenditure of R790 000. In both financial years, the irregular expenditure was identified through various internal control measures. As in previous years, the irregular expenditure was in respect of non-adherence to supply chain management procedures. These were not specified by the Department but were indicated by the Auditor-General as relating to procurement without invitations for three written quotations and procurement without invitations for competitive bids.

Fruitless and wasteful expenditure in 2016/17 increased significantly from the previous year’s R1 400 to R379 000.  The fruitless and wasteful expenditure was due to interest paid on an overdue account (R17 000), a prior year cancellation of a Department of Public Works project – upgrading of the reception area at Agriculture Place (R363 000) and a no-show incident for a booking that was made in advance (R27 000).  

3.2       Financial Performance per Programme in 2016/17

Table 2. DAFF Programme Budget and Expenditure

Source: Annual Report (DAFF), 2017

Programme 1: Administration

The Administration Programme spent 98.2 per cent of its allocated budget for 2016/17, which is far less than the 99.6 per cent expenditure for the 2015/16 financial year. Spending patterns in this Programme have regressed as it encountered both underexpenditure and overexpenditure; and he reason for underexpenditure is a major concern. For three consecutive years, underspending in Programme 1 has been attributed to unspent funds (R23.1 million) for capital works in respect of the Stellenbosch Plant Quarantine Station due to delays in the Department of Public Works processes.

In 2016/17, the unspent funds were R23.1 million while in 2015/16, R2.8 million was not spent for the capital works. The fact that the same reasons are provided for not spending funds and finalising a project after three years shows that the Department’s monitoring and evaluation is not effective. Under the same Programme 1, the Department overspent in goods and services for Operation Phakisa, Ministerial Stakeholder Engagements and Property Management, which decreased underspending for Programme 1 to R15.1 million, which still accounts for 63 per cent of the Department’s total underexpenditure for 2016/17. 

Programme 2: Agricultural Production, Health and Food Safety

This is the Programme in the Department that has been consistently utilising almost 100 per cent of its budget allocation (99.6 per cent in 2014/15 and 100 per cent in the previous and reporting financial years (i.e. 2015/16 and 2016/17). Out of the allocated R1.9 billion for the Programme in 2016/17, R235 000 was not spent, mostly under the Inspection and Laboratory Services Subprogramme (R142 000) in respect of goods and services. 

Programme 3: Food Security and Agrarian Reform

The Programme is responsible for producer support through conditional grants and equitable share and contributes to Outcomes 4, 7 and 10. In this Programme, the Department spent 99.9 per cent of the allocated budget, which is an improvement from the previous year’s 99.8 per cent expenditure. Approximately 2.1 million was not spent in this Programme during 2016/17. Although the amount is less than the R3.74 million that was not spent in 2015/16, it is a concern that more than 50 per cent (R1.3 million) of the amount that was not spent was under the Sector Capacity Development Subprogramme and mostly in respect of the Economic Competitiveness and Support Package for Provincial and Rural Agricultural Colleges (capital projects – machinery and equipment).

In the previous financial year, 2015/16, most of the R3.5 million that was not spent under the same Subprogramme was for the same Economic Competitiveness and Support Package for Provincial and Rural Agricultural Colleges. The Sector Capacity Development Subprogramme is important in the revitalisation of Agricultural Colleges, which can play a significant role in realising radical economic transformation by providing the requisite entrepreneurial skills in agriculture to the youth and smallholder producers and also in the strengthening of support to the smallholder sector. The remaining R872 000 that was not spent during 2016/17 was under the Food Security Subprogramme.  

Programme 4: Trade Promotion and Market Access

 In Programme 4, the Department’s spending improved from 99.8 per cent in 2015/16 to 99.9 per cent of its allocated budget in the reporting year. The Programme underspent R236 000, which is an improvement from the previous financial year’s R569 000 (Table 2).  As in the previous two years, most of the underspending was in the International Relations and Trade Subprogramme (R204 000). Within the latter Subprogramme, most of the underspending was in respect of payments to foreign governments and international organisations (R139 000), which has been the case in both previous financial years.  

Programme 5: Forestry and Natural Resources Management

Programme 5 spent 99.4 per cent of its allocated budget, a regression from the previous financial year’s 99.9 per cent spend. During the 2016/17 financial year, the Department did not spend R6.4 million of its allocation for Programme 5 (underspending in this Programme in 2015/16 was R564 000).  Approximately 95 per cent of the unspent funds were under the Natural Resources Management (NRM) Subprogramme (R6 million), mostly in respect of CASP Indirect Grant for drought relief. This is attributed to delays in fodder distribution to Northern Cape farmers as a result of late implementation of supply chain management procedures by the Northern Cape Province. Considering that the drought started in the 2014/15 financial year, the stated reason indicates poor planning and lack of intergovernmental relations; as well as lack of monitoring and evaluation on the part of DAFF, which disburses the funds. The Subprogramme also underspent allocated funding under goods and services in the previous financial year.

Programme 6: Fisheries Management

The Fisheries Management Programme is funded directly by DAFF for personnel costs, while its operations are funded through the Marine Living Resources Fund (MLRF). The Programme has consistently spent almost 100 per cent of its budget for the past five financial years including the year under review (2016/17) in which it spent 100 per cent of the allocated budget to the MLRF. The Programme underspent R18 000 in 2016/17, which is R1 000 more than the previous year’s R17 000. The underspending, as in previous years, was in respect of personnel related costs i.e. compensation of employees to a large extent (R15 000), and to a lesser extent, transfers to households.

In the year under review, the MLRF, as in the previous financial year, has received an unqualified audit opinion with findings from the Auditor-General (AG). The AG highlighted that the entity did not address major audit issues that were raised in previous years and did not follow-up on recommendations made. The AG reported that there is lack of skills and required competencies within the MLRF in the supply chain management (SCM) unit; as well as non-adherence to SCM policies. Poor management of procurement and contracts is a recurring matter with the MLRF. In the year under review, transactions above R500 000 were procured without inviting competitive bids and lack of oversight by management resulted in irregular expenditure of approximately R91 million (more than the previous year’s R12 million) in respect of awarded tenders (these were mostly to harbour management implementers) and fruitless and wasteful expenditure of approximately R1.3 million.  

3.3       Report of the Auditor-General of South Africa

In terms of financial statements, the Department received an unqualified audit opinion from the Auditor-General of South Africa (AGSA) for the 2016/17 financial year. In 2014/15, the AG commended the Department for not having material adjustments on financial information but raised a concern with material adjustments on performance information. However, in the previous financial year (2015/16) and the year under review (2016/17), the Department regressed as there were material findings that necessitated corrections on its financial statements. In this regard, the Department’s audit outcomes have been stagnant as the quality of the annual performance report that is submitted for auditing remained unchanged from the previous financial year. Concerns were raised by the AGSA regarding the Department’s expenditure management as irregular, fruitless and wasteful expenditure was increasing.

Without qualifying the opinion on the Department’s financial statements, the AGSA drew attention to the following material findings and matters of emphasis for the year under review (all are repeat findings):

• Non-compliance with legislation i.e. National Treasury Regulations and Public Finance Management Act (PFMA) (Act No.1 of 1999) – the Department’s financial statements submitted for auditing were not prepared according to prescribed Financial Reporting Framework as required by Section 40(1)(b) of the PFMA. Material misstatements of commitments, accruals and payables identified by the auditors in the submitted financial statements were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.
• Transfer of funds – The expenditure for the programmes that are funded by the Comprehensive Agriculture Support Programme (CASP) was not adequately monitored in accordance with the Framework for the Conditional Grant, as required by Section 9 (1)(b) of the Division of Revenue Act (DORA). In addition, this is notwithstanding the fact that the Department has put aside R60 million for the MTEF period starting in 2015/16 to monitor the utilisation of the CASP grant.
• Usefulness and reliability of reported performance information, as well as adjustment of material misstatements – The AG identified material misstatements in the Annual Performance Report submitted for auditing on the reported performance for Programme 3: Food Security and Agrarian Reform and Programme 4: Trade Promotion and Market Access. It should be noted that these are repeat findings as in the previous financial year, 2015/16, the two Programmes (including Programme 5) were affected, but management subsequently corrected some of the misstatements and in this regard, the AG raised material findings on the usefulness of information only for Programme 4: Trade Promotion and Market Access, which is the case again for the year under review, 2016/17.
• 33% of the targets for Programme 4 were not specific in clearly identifying the nature and required level of performance, therefore, not measurable. In the previous financial year, 29% of the targets were not measurable.
• Expenditure management – the Department did not take effective steps to prevent irregular expenditure of R899 000 (Note 26 of financial statements on page 261 of Annual Report) as required by Section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1. The amount was related to non-adherence to supply chain management (SCM) procedures.
• Deficiencies in internal controls in respect of Leadership –
  • The management did not exercise adequate oversight in the areas of performance planning and compliance with the National Treasury’s Framework for Managing Programme Performance Information (FMPPI) to ensure that performance targets were specific in clearly identifying the nature and required level of performance (e.g. Programme 4: Trade Promotion and Market Access). 
• The Department’s monitoring controls were not always effective to ensure the complete recording of commitments, accruals and payables, which resulted in the financial statements being subjected to material corrections.
• Action plans for the implementation of audit recommendations were not adequately monitored, resulting in a recurrence of material audit findings.
• Financial and performance management – the Department did not always implement adequate reviewing and monitoring controls over information received from the Branches and Regions for reporting purposes. This resulted in the Performance Report and Financial Statements being subjected to material corrections after having been submitted for auditing.

The AGSA highlighted the following three key root causes of audit findings for DAFF and the MLRF:

• Slow response by management to monitor and evaluate quarterly reporting, and lack of continuous training interventions to up-skill staff in the finance unit to effectively support the Chief Financial Officer.
• Lack of skills and competency in the supply chain management (SCM) unit and non-adherence to SCM policies when appointing implementing agents.
• Inadequate processes and procedures to ensure that financial statements submitted for audit are valid, accurate and complete.

Notwithstanding the matters of emphasis and other areas of concern, the AGSA reported that there has been an improvement with respect to addressing fraud and consequence management by both DAFF and the MLRF. It further reported that while in the previous financial year both did not investigate reported unauthorised, irregular and fruitless expenditure, reported cases were investigated in 2016/17 including supply chain management (SCM) cases that were reported to management for investigation. However, there has been slow response by management to improving key controls and addressing risk areas including implementation of recommendations by oversight bodies such as parliamentary Committees and the Standing Committee on Public Finance (SCOPA). This was reportedly the case for both DAFF and its public entities.  

The AGSA recommended that the Portfolio Committee should request DAFF management to provide regular feedback on the implementation of the Audit Action Plan (Audit Matrix) including progress during quarterly reporting. In addition, the Committee should also get independent assurance from the Internal Audit Committee about the reliability, completeness and credibility of information that is presented to the Portfolio Committee during quarterly reporting. The AGSA highlighted that the Department’s Internal Audit Committee needs to be more proactive to assist the Department in addressing root causes of poor audit outcomes; and the Department needs to enhance its project management including monitoring and evaluation of disbursed funds.

3.4       Response from the Department on issues raised by the AGSA

To address the audit findings by the AGSA on the 2016/17 annual report, the Department presented corrective measures, which it has also presented in the past year and during its Annual Performance Plan briefings earlier in the year. These include an Audit Matrix for the 2016/17 audit findings; compulsory attendance of Audit Steering Committee meetings by Deputy Director-Generals (DDGs); Branches reporting on their performance monthly to the Department’s Executive Committee (EXCO) and Performance Reviews held at the end of each Quarter; and the Policy, Planning, Monitoring and Evaluation (PPME) Branch facilitating engagements with the AGSA.    

In the previous financial year, 2015/16, in response to the key root causes of audit findings, the Minister of Agriculture, Forestry and Fisheries committed to the following inter alia:

1. Implement a Plan to identify specific areas where service delivery will take place.
2. Ensure a linkage between the budget and targets in the Strategic and Annual Performance Plans. It was further reported that the Department was consulting with National Treasury on the matter.
3. The Department will implement daily, weekly and monthly checks and balances to ensure the credibility and completeness of financial and performance information that is presented to management and oversight Committees.
4. Collaborate with the provincial Members of the Executive Council (MECs) to ensure proper monitoring and evaluation of Division of Revenue Act (DORA) funds. In addition, a task team was established to identify employees to assign to monitoring the Comprehensive Agriculture Support Programme (CASP)-funded projects.

In addition to the above corrective measures, the Department put aside an annual amount of R20 million (R60 million for the MTEF period from 2016/17 to 2018/19) to ensure effective monitoring of the CASP grant. However, notwithstanding the aforementioned measures that were supposed to be implemented in the reporting year including funding for CASP monitoring, the AGSA still highlighted repeat audit findings in the Department’s financial management and these include poor monitoring of conditional grants. The Department did not report on how the annual R20 million for the monitoring of CASP was utilised.

3.5       Discussion on Financial Performance

The regression in terms of the Department and some of the entities’ financial performance compared to prior years was noted with concern. It was further recognised that the Department still has a challenge with effectively and efficiently spending its budget as planned and on planned targets, to ensure service delivery and value for money. This is a concern for the Committee as it is acknowledged that adequate funding remains a challenge to ensure that the Department carries out all its mandated activities as highlighted in the NDP, MTSF and other Government directives (e.g. SONA). The main challenges regarding budgetary use is proper planning, monitoring and evaluation (M & E) of transferred funds and leadership accountability (consequence management). In previous financial years, underspending and non-achievement of targets were largely through conditional grants to Provinces, where service delivery needs to take place. It has been noted that spending in this regard has also improved but on-time verification and reliability of reported information is still a major concern, which makes it a challenge to measure service delivery and value for money.

The Department’s unqualified audit opinion received from the AGSA was acknowledged but there was a concern that the outcome was attained after the AGSA has given the Department an opportunity to make material adjustments on its financial statements, which was also the case in the previous financial year. The Department was commended for the corrective measures that are put in place to address repeat findings from the AGSA, which contribute to some of its performance challenges. However, the Committee noted that while some repeat findings from prior years have been addressed, the Department does not ensure effective implementation of its Audit Matrix to prevent further findings.

Physical monitoring in respect of conditional grants, which is a repeat concern, was emphasised to ensure efficient and results-driven monitoring and evaluation of the implementation of policies and plans. In this regard, financial resources need to be available to ensure that M & E practitioners are capacitated and well-resourced to carry out physical monitoring of all funded projects. Value for money in terms of transferred funds cannot be guaranteed without effective monitoring and evaluation.

4.         Overview and assessment of service delivery performance

4.1       DAFF Service Delivery Performance for 2016/17

For the 2016/17 financial year, the Department had 75 planned targets as listed in the 2016/17 Annual Performance Plan. Out of the 75, the Department achieved 60 targets (80%), which is a regression from the previous two financial years i.e. 81.7% (58 out of a total of 71 targets) in 2015/16 and 81.8% (45 out of the total of 55 targets) in 2014/15.    Despite achieving 80% of its planned target for the year under review, the Department spent 99.6% of its allocated budget for the year. The Department’s service delivery performance regressed across most Programmes except in Programme 5 and remained stagnant for Programme 6.

DAFF Programme Performance

Table 3. Summary of Target Achievements and Expenditure for 2016/17 per Programme

Programme 1: Administration

Out of the planned 21 targets under Programme 1 for the 2016/17 financial year, the Department only achieved 16 targets, which is a regression from the previous financial year’s achievement of 19 out of a total of 22 targets.  As in the previous financial year, the Department failed to finalise new misconduct cases within 100 days. Out of a total of 31 misconduct cases received, the Department only finalised six within 100 days citing the complexity of the process, delays in availability of employees’ union representatives and difficulty in resolving labour relations issues. Despite this being a recurring challenge for Human Resources Management that has also been raised by the DPME through the MPAT, the Department has not provided corrective measures on how it plans to address the challenge.

The Department did not achieve the target that is linked to the APAP, which is the key instrument through which the Department is supposed to respond to the NDP mandate and contribute to the MTSF targets (particularly Outcomes 4 and 7) and forms part of the Nine-Point Plan (RAAVC). This is also a recurring non-achievement from the previous financial year. The Department also did not implement the Integrated Development Finance Framework that was supposed to be implemented during the year under review citing non-approval of the recommendations on funding modalities.

Programme 2: Agricultural Production, Health and Food Safety

Out of a total of 10 targets that were planned for this Programme in 2016/17, 8 targets were achieved (80%). Under this Programme, the Department has been unable to meet its set target for the deployment of veterinary graduates to rural communities for the Compulsory Community Service (CCS) programme since its inception in 2015/16; and this was the case for the year under review.  However, for the current year, 2017/18, the Department has increased the number to 150. To address the shortage of veterinary graduates in the country, the Department plans to recruit veterinary graduates for the CCS programme from other countries although it also highlighted challenges with getting work permits for foreign graduates.

Programme 3: Food Security and Agrarian Reform

For the 2016/17 financial year, the Department had 7 planned targets for Programme 3. Of the 7 planned targets, 5 targets were achieved (71%). The main challenge in this Programme is timeous validation of information that is received from Provinces in respect of the number of hectares of underutilised communal land that has been put under production and the number of households that benefited from food and nutrition security initiatives. This is a serious concern as both targets are supposed to play a central role in the achievement of Outcome 7 (rural development and food security). In the case of communal land that was put under production, the planned target was not met in 2016/17 and drought, as in the previous year, was cited as the main reason for underachievement.

The Branch plans to address the challenges by undertaking weekly special meetings chaired by the DDG of Programme 3, over and above the Quarterly Management meetings for discussing performance status. DPME is also invited to participate in the meetings. The Committee has consistently raised concerns about poor monitoring and evaluation (M & E) of provincial activities by the Department. Therefore, the Committee needs to oversee progress in this regard and the effectiveness of such interventions should be evident when the Department briefs the Committee on the Second Quarter Performance for 2017/18.

Programme 4:  Trade Promotion and Market Access

The Department had 15 planned targets under this Programme for 2016/17. Of the 15 targets, 13 targets were achieved (87%).  This Programme received a qualified opinion from the AG in respect of usefulness and reliability of performance information as 33% of its targets were not measurable.   Under this Programme, the Department did not achieve targets relating to the development of AgriBEE Enforcement Regulations due to non-conclusion of consultations and the approval and launch of the CAADP National Investment Plan due to budgetary constraints.  

This is the fourth consecutive year that the Department falls short of achieving a target that is linked to the Comprehensive Africa Agriculture Development Programme (CAADP), which is also an MTSF target.  

CAADP is not just a NEPAD programme but a Pan-African Framework for accelerating long term agricultural development and growth among African countries and focuses on improving food security, nutrition and increasing incomes in Africa's largely farming based economies. Its overall goal is to eliminate hunger and reduce poverty in Africa through agriculture. For CAADP, the most notable achievement in terms of implementation, will be the development of an Investment Plan, which is supposed to be a well-consulted plan that has the buy-in of all relevant stakeholders. Given the Department’s budgetary constraints, this should be a priority. It is also a concern that the Department did not suggest a strategy on how to address underperformance in this area as it has done with other targets in some of its Programmes.

Programme 5: Forestry and Natural Resources Management

Out of 12 targets that were planned for 2016/17 under Programme 5, the Department achieved 11 targets (92%). This Programme’s performance has improved significantly when compared to the previous financial year, when the Department achieved 6 out of 9 targets (67%). The Department overachieved most targets under this Programme and did not meet the target to get the pre-certification of the PDALF Bill by the Office of the State Law Advisor. Implementation of PDALF is also an MTSF target that the Department is not likely to meet.

Programme 6: Fisheries Management

The Fisheries Management Programme had 10 planned targets for 2016/17 and of the total that was planned, the Department achieved 7 targets (70%). Two of the targets that the Department did not meet under this Programme are recurring and have also not been met in 2015/16. The Department did not get the Aquaculture Bill approved citing a request from NEDLAC for extension of the consultation period; and rights were not allocated to smallscale fisheries cooperatives due to a request from Eastern cape and Western Cape communities to extend the appeals period.

4.2       Briefing by the Department of Planning, Monitoring and Evaluation (DPME)

The DPME presentation focused on Government progress in terms of achieving MTSF 2014-19 targets for Outcome 7 (rural development and food security), which is led by the Department of Rural Development and Land Reform (DRDLR) and where relevant, Outcome 4 (job creation); as well as DAFF’s results on the Management Performance Assessment Tool (MPAT). DAFF leads sub-outcome 3 of Outcome 7, which focuses on food security. The DPME reported that there is a need to intensify food security interventions to reduce the proportion of households that are vulnerable to hunger. Statistics South Africa (StatsSA)’s General Household Survey (GHS) showed that instead of decreasing, the proportion of food insecure households increased from 10.5% in 2007 to 13.4% in 2016. This was attributed to most households being dependent on social grants for purchasing food rather than food production initiatives. Therefore, the MTSF target to reduce the proportion of households vulnerable to hunger to less than 9.5% by 2019 may not be achieved.  The DPME further reported that their analysis showed that newly acquired land by previously disadvantaged individuals (PDIs) remain fallow, which implies that farmer support programmes are either inadequate or not yielding the desired impact; and some Government support packages tend to cause dependency.

Regarding job creation (Outcome 4), DPME reported that, as in the previous financial year, little progress has been made in the reduction of rural unemployment. However, the CASP grant was commended as through its interventions in 2016/17, there was a significant number of jobs that were created although most of them were seasonal/temporary (i.e. 5 484 versus 2 410 permanent jobs). More jobs were reportedly created in KwaZulu-Natal followed by the Western Cape Province. The DPME noted that that the slow growth and loss of jobs in the agricultural sector can be attributed in part to the global economic decline but DAFF has not been successful in addressing constraints to investment in the sector. DAFF’s interventions to stimulate production by smallholders did not show significant impact on key indicators such as transforming the sector through new entrants that become successful at a commercial scale; industry growth both in terms of contribution to the Gross Domestic Product (GDP), employment and household food security; as well as utilisation of agricultural land. The root causes for the poor performance in the year under review, as in the previous year, were attributed to weak relationships between Government and the industry as well as high number of vacancies at senior management level.

In terms of the Management Performance Assessment Tool (MPAT), it was reported that there has been some progress in the overall management performance assessment of the Department for 2016/17 particularly in key performance areas (KPAs) for Financial and Strategic Management. However, the Department scored slightly below compliance level in Governance and Accountability with respect to fraud prevention, ICT corporate governance, Promotion of Access to Information Act (Act No.2 of 2000) – PAIA and Promotion of Administrative Justice Act (Act No.3 of 2000) – PAJA; as well as in Human Resources Management with respect to management structures and handling of disciplinary hearings. The performance for Human Resources Management has been below compliance level even in the previous financial year. In terms of Financial Management, the Department has been performing well except with the payment of suppliers. As in previous financial years, some of the reasons for the Department’s downgraded scores were absence or lack of evidence and late submission or feedback to policy departments (e.g. Department of Public Service and Administration (DPSA), DPME). 

DPME also reported that it is in the process of developing guidelines for purposes of assessing the performance of Public Entities independently.

4.3       An Overview of the Performance of the Department’s Entities

With the exception of the PPECB and the NAMC, which both received clean audits, three of the Department’s entities received financially unqualified audit reports with findings from the AGSA for the 2016/17 financial year. These also include the MLRF, whose activities are reported under Programme 6 (Fisheries Management). The ARC, which receives the largest proportion of the Department’s transfers to entities, received a qualified audit opinion from the AGSA for the 2016/17 financial year. The PPECB, which is self-funded through service fees and levies, once again received a clean audit as it has been the case for the past ten financial years. Regarding Ncera, the AGSA noted that it received an unqualified audit only because the entity has been using consultants to do its financial statements as it does not have an Internal Audit Function and an Audit Committee.

4.3.1 Agricultural Research Council (ARC)

The ARC receives the largest share of the transfers to entities. For the year under review (2016/17 financial year), the ARC had a total budget of approximately R1.1 billion, which is a decrease from the previous financial year’s R1.24 billion. The budget comprised of the Parliamentary Grant (PG) from DAFF and transfers from the Department of Science and Technology (R759 million) and self-generated revenue (R438 million). The ARC incurred expenditure of approximately R1.2 billion and ended the 2016/17 financial year with a deficit of R86 million, which is a 26% increase from the previous year’s R68 million deficit. The ARC reported that it experienced deficits for 2 consecutive years due to the decrease in the PG; and this also had an impact on the entity’s ability to raise external revenue.  The entity could not fill vacancies and has not been filling vacancies for the past two years as it was forced to pay salary increases from its revenue. It was reported that salary increases could not, and have not been paid in the current financial year (2017/18).

The ARC received a qualified audit opinion from the AGSA with findings on non-compliance with legislation and deficiencies in internal controls.  in respect of leadership and financial performance and management. The findings were in respect of inter alia:

• PFMA contravention – annual financial statements submitted for auditing not prepared according to the PFMA; expenditure was incurred in excess of the approved budget; and effective and appropriate steps not taken to collect all monies due to the entity.
• Expenditure management – effective steps not taken to prevent irregular expenditure amounting to R199.3 million.
• Asset management – proper control systems to safeguard and maintain assets were not adequate as required by the PFMA.
• Procurement and contract management – sufficient audit evidence could not be obtained that all contracts were awarded and quotations were accepted in accordance with legislative requirements.  
• Leadership – management has not provided adequate direction and oversight of the control environment, financial management and compliance with laws and regulations. - Key controls were not adequate resulting in inaccurate and incomplete financial statements being submitted for audit and non-compliance with applicable legislation. 

- Action plans implemented by management did not adequately address root causes of previously raised audit findings. 

- Management did not adequately implement consequence management at all times.

• Financial and performance management – management did not formulate and implement record management policies and procedures.

- Compliance monitoring controls implemented by the ARC not adequate to prevent material non-compliance with key legislation.

- Implemented business processes not fully supported by the information system.

In the previous two financial years, the AGSA did raise serious concerns about the financial health of the ARC as the entity had to do material adjustments to its financial statements to receive an unqualified audit. The AGSA also highlighted that there is significant doubt that operations in the ARC can continue in future as the entity is technically insolvent (unfavourable financial viability).  The ARC admitted that in the previous year, the Audit Action Plan was developed by the ARC management without involving the Internal Audit. In the reporting year, the Audit Action Plan has been developed in consultation with Internal Audit as well as the AGSA for further assistance. The new Audit Action Plan also goes into details on every operational matter and focuses on the root causes (rather than symptoms) and the entity plans to eliminate root causes and findings by 31 December 2017. As part of its remedial actions, the ARC reports regularly to the Council/Board and is retraining its personnel.

Targets achieved: Despite the financial challenges the ARC’s performance improved from the previous financial year. In 2016/17, the entity achieved 38 targets out of the total of 52 targets (73%). In 2015/16, the ARC achieved 32 out of 50 targets (64%). The ARC significantly over-achieved all its planned targets for Programme 4 (Mechanisation and Engineering), Programme 7 (Smallholder Agriculture Development) and Programme 8 (Training and Extension). While in 2015/16 financial year, the ARC saw an almost 50% increase from the previous year in the number of registered cultivars with Plant Breeders’ Rights (increase in intellectual property – IP), in 2016/17, the entity could not meet the target and achieved almost 50% less than the planned target. This was attributed to the Registrar for Plant Breeders Rights requiring further observations on cultivar performance in the field.  

4.3.2 Onderstepoort Biological Products (OBP)

The OBP does not receive a Government grant but funds all its operations from self-generated revenue (mostly from sale of vaccines). The entity increased its revenue from R92.7 million in 2015/16 to R174 million by the end of 2016/17 due to changes in its distribution model and increased export markets particularly to Europe. The entity’s profit also increased in the MTEF period from R9 million in 2013/14 to R48 million in 2016/17.

In the year under review, the OBP received an unqualified audit opinion with findings from the AGSA, a regression from the previous financial year’s clean audit which saw the entity receiving an award from the AGSA for not having material findings. The 2015/16 clean audit was the first clean audit since the entity’s inception and despite an assurance to maintain the outcome in the year under review (2016/17) and the following financial years, the OBP has unfortunately regressed. For the 2016/17 financial years, the AGSA’s findings were on:

• Leadership -  leadership did not exercise effective oversight regarding the preparation of the annual financial statements; and oversight is required from leadership regarding implementation of internal controls.
• Financial and performance management – management did not always implement and monitor preventative and detective controls to ensure completeness and accuracy of annual financial statements; and did not ensure that annual financial statements are prepared in accordance with applicable reporting framework; and the entity complied with applicable laws and regulations throughout the year.
• Governance – the Audit Committee did not fully exercise their responsibility of overseeing financial reporting, disclosure process, monitoring internal control process and choice of accounting policies.      

The entity gave an assurance that it will receive a clean audit in the current financial year as it has addressed the matters of concern that were raised by the AGSA.

Targets Achieved: In 2016/17, the OBP achieved 22 of its planned targets out of a total of 36 targets (61%). As has been the case with its audit outcome, the performance has also slightly regressed from the previous financial year, when the entity achieved 25 out of 40 targets (62.5%).

4.3.3 National Agricultural Marketing Council (NAMC)

For the 2016/17 financial year, the NAMC received a Parliamentary Grant of R35 million through the Department of Agriculture, Forestry and Fisheries (Vote 24). Its revenue increased by R43.4 million (26% growth) to R78.4 million in the year under review due to interest that was generated (R4.9 million) and sponsorships that were received (R38.5 million).   The total revenue of R78.4 million for 2016/17 was significantly higher than the R63.6 million that was raised in the 2015/16 financial year. The NAMC’s expenditure in 2016/17 was R80.2 million, which left the entity with a deficit of R61 000 against the previous year’s surplus of approximately R1.7 million. The NAMC again incurred no wasteful, fruitless or irregular expenditure in the year under review. Of the total expenditure, 45% was spent on personnel, 45% on operations and the rest accounted for administration and depreciation.

For the second consecutive year, the NAMC received a clean audit and an award from the AGSA for not having material findings in the year under review. The NAMC was commended for maintaining the clean audit status.

Targets Achieved:  The NAMC has achieved all its planned targets for the 2016/17 financial year i.e. all 44 out a total 44 planned targets were achieved (100%), which is a significant improvement from the previous financial year’s 98.2%. The entity overachieved one target under its Programme 2: Markets and Economic Research Centre Performance Information. The amount of money collected in statutory levies has been increasing exponentially over the years. During the period under review, the NAMC collected a total of R489.8 million in statutory levies (in 2015/16 it was R427.8 million that was collected while in 2014/15, R409.1 million was collected).

4.3.4 Perishable Products Export Control Board (PPECB)

As is the case with the OBP, the PPECB does not receive a Government grant but a transfer from DAFF for a joint venture with for transformation and development; as well as the technologist training programme. For 2016/17, as in the previous year, the transfer was R1.1 million (R600 000 for technologist training and R500 000 for transformation and development). The Departmental contribution is a minimal contribution towards the total revenue of approximately R298 million in 2016/17, which is an increase from R286.1 million in the 2015/16 financial year. Approximately 70% of the entity’s revenue went to personnel expenditure in 2016/17 while the rest went to operational expenses and administrative expenses. Employee costs are usually the largest proportion as the entity always expects growth in export volumes, therefore, needs more people for inspections. However, even when volumes drop, the entity cannot release staff as export volumes fluctuate, which puts pressure on expenditure.

After expenditure, the entity ended the 2016/17 financial year with  a surplus of R1.8 million. The PPECB received a clean audit for 2016/17 and is the only entity of DAFF that has been receiving and maintaining a clean audit outcome for more than 7 successive years. It was awarded a Certificate of Excellence by the South African Institute of Chartered Accountants (SAICA) for obtaining clean audits for the last five consecutive years. The PPECB was congratulated on the award and applauded by the Committee for consistently maintaining clean audits. However, in the year under review, it incurred irregular, fruitless and wasteful expenditure relating to procurement of services without obtaining 3 quotes, which was on emergency repairs to a specialised laboratory pump; use of an official vehicle for private use; unapproved data charges for personal use (officials’ tablets) and cancellation of pre-booked trips. All these were detected by the entity’s Internal Audit and disciplinary actions were effected on involved employees.

Targets achieved: Out of the planned total of 14 targets, the PPECB achieved 12 targets (86%) in the 2016/17 financial year, a regression from last year’s 13 out of 14 (93%) achieved.  All the 12 achieved targets were exceeded by varying margins. One of the targets that was not achieved was the number of students graduating through the Agri-Export Technologist Programme (AETP). The planned 30 students could not be achieved as only 25 students were admitted to the Programme in the beginning of the financial year due to budgetary constraints. By the end of 2016/17, 24 students graduated as one student was given an opportunity to further her studies in Russia during the financial year.

4.3.5 Ncera Farms (Pty) Ltd

It was previously recommended by the Committee that Ncera Farms (Pty) Ltd should be deregistered as it was not fulfilling its mandate. Therefore, the Department, as the caretaker of the entity, which does not have a Board of Directors, was asked to present a progress report on the deregistration of Ncera Farms (Pty) Ltd (aka Ncera) and its transfer to the ARC. In addition, a report was sought on the disciplinary action that has been taken against the CEO of the entity, who in 2015/16, received a 51% salary increase for an entity that also had a deficit of R667 297 during that year.  It was reported that an advocate was appointed to investigate the matter of the Ncera CEO’s inflated salary and a report is available. DAFF now needs to interview the CEO and undertake the necessary disciplinary steps.

The Department reported that it is in the process of transferring the 10 farms that are at the centre of conflicts at Ncera to the DRDLR as land administration is the constitutional mandate of that department. The Permission to Occupy letters (PTOs) of the farmers that were awarded the farms have been renewed in August 2016 for a three-year period until July 2019. There was assurance that a final consultation meeting will be held on the 26 October 2017 between DAFF, ARC and the Ncera Centre employees to outline a way forward. After the signing of the Memorandum of Agreement (MoA) between DAFF (representing Ncera) and the ARC, which is expected in December 2017, in January 2018, the Ncera Chief CEO and CFO will be placed within DAFF. The process of transferring Ncera Farms (Pty) Ltd to the ARC with National Treasury, based on the signed MoA, will be done in February 2018.    

The Committee has consistently requested the Department when reporting, to indicate how its planned activities are linked to the NDP and its MTSF targets. In terms of Outcomes, the Department should report on annual targets for each Outcome, as well as cumulative progress towards the achievement of the Outcome. This is important for both the Department and the Committee in tracking progress towards the achievement of the MTSF targets; and will assist the Department in identifying areas where it is experiencing challenges and may not meet MTSF targets e.g. area under irrigation, APAP and CAADP inter alia, so that it can plan accordingly and devise remedial or corrective measures.

In the 2016/17 Annual Report, the Department reported on its contribution to Government Priority Outcomes i.e. Outcomes 4, 7 and 10. However, as in the previous year, the report was not specific and was not aligned to the actual MTSF targets as indicated on sub-section 2.4 of this document, it provided summaries but not specific information. In this regard, the Department ignored the Committee’s assertion to report on the Priority Outcomes as indicated and required in the MTSF. For Outcome 4, the Department reported on jobs created but did not specifically report on MTSF-specific targets relating to APAP, CAADP and development of smallholder producers for market access.

For Outcome 7, the Department did not meet the annual target to table the PDALF Bill, which was developed in 2015/16, in Parliament by the last quarter of 2016/17. In this regard, the Department is not likely to meet the MTSF target of ensuring that by March 2019, PDALF is a signed Act (not a Bill) that has already been implemented and being managed.  It also reported on the number of smallholder producers and households that were supported but was not specific as per the MTSF. It also reported on the development of the Policy for Smallholder Development and Support, which may be achieved in 2019; as well as on the area of unutilised communal land that has been put under production, which is already achieved.

For Outcome 10, the Department met the annual targets in respect of forests and agricultural land that has been rehabilitated although these were not reported under MTSF targets; research reports on prioritised fish stock levels and a climate change adaptation project for the agricultural sector but not forestry and fisheries sectors.

4.5       Discussion on Service Delivery Performance and MTSF Outcomes

The Department and its entities were commended for their efforts in aligning their Programmes with the MTSF Outcomes in order to respond to the NDP mandate although more still needs to be done in aligning the contribution of the Department and entities. Persistent challenges with vague indicators and/or targets, reliability of reported performance information particularly on conditional grants including the monitoring and evaluation (M & E) of grants were highlighted for the Department’s attention. Dissatisfaction was raised regarding the absence of the Chief Financial Officer (CFO) and the Internal Audit Committee when most issues that were raised by the AG were related to finance management. With the assurance that has been provided by the Department’s Executive Authority and the Acting Accounting Officer, as well as planned regular meetings with the Office of the AGSA, the Committee expects significant improvements to be realised in the coming years. As was highlighted by the DPME, concerns were raised with the non-alignment of resource use with actual service delivery as the Department spent almost 100 per cent of its budget but achieved 80% of its planned targets.

Given the statistics from StatsSA on agricultural activity and household food insecurity, there was a concern with the slow progress and the Department’s performance in achieving the MTSF Outcomes, most of which will not be achieved by the end of March 2019 as has been highlighted by the DPME. While some progress has been made in some of the MTSF targets, the Department has made minimal or no progress in some, e.g. additional area under irrigation, smallholder access to markets and targets related to CAADP.

Notwithstanding the Department’s limited funding, smallholder producers are the central focus of the NDP for the sector and the Committee is particularly concerned that the Department is not making significant progress in developing these producers whilst the NDP expects that a third of food surplus in the country should come from these producers by 2030. In addition, when reporting on smallholder support, the Department tends to combine interventions for Outcome 4 and Outcome 7 of the MTSF as one achievement. However, the MTSF is clear in this regard as Outcome 4 relates to market access (which has a direct impact on employment) and Outcome 7 is about production efficiencies to ensure food security (including at household level). Despite the Department’s reported interventions in the development of the smallholder sector as mandated by the NDP, there is no impact of such interventions as most of the households surveyed by StatsSA were producing in backyard gardens to meet household food demand but not for markets.  

There was a concern that the National Food and Nutrition Security Implementation Plan is still not implemented but costing of its activities is still underway. Given the challenge of food insecurity, which is also increasing in urban areas, and the rise in food prices, the Committee is of the opinion that the implementation of the Plan is a matter of urgency.

5.         COMMITTEE findings and OBSERVATIONS

Governance and Operational Matters

1. Instability at the senior management service (SMS) level (acting positions of the DG, DDGs and acting Chief Directors as well as Entities’ CEOs) is negatively impacting the Department’s performance including some of its Entities. The Committee was particularly concerned that the Department’s MPAT scores were lower than average on Governance and Accountability as well as in Human Resources Management.
2. The full integration of the Fisheries Management Branch into the Department particularly the MLRF, in order to minimise duplication of roles, reduce administrative costs and ensure accountability, is slow and concerns the Committee as the Branch in some respects, operates as a separate entity and not a Department Programme. It was noted that the latter requires a review of the Marine Living Resources Act (MLRA) (Act No. 18 of 1998).
3. The Department is slow in processing key and essential legislation particularly the Preservation and Development of Agricultural Land Framework (PDALF) Bill, which is one of the MTSF targets and the Aquaculture Bill; as well as reviewing various outdated legislation including those through which its Entities operate, e.g. those that established the NAMC, the PPECB and the ARC in particular.
4. The slow pace at which the Department develops and implements policies that are essential in addressing some of the sectoral challenges and including NDP priorities such as smallholder development to ensure that two thirds of the country’s trade surplus comes from the smallholder sector by 2030. The policies include inter alia the finalisation of the Draft Policy on Comprehensive Producer Support and the Integrated Funding Development Support Policy; the development of a National Policy on Mechanisation Support and the implementation of the Smallscale Fisheries Policy.
5. The slow progress in the deregistration of Ncera Farms (Pty) Ltd when the decision was taken by the Committee three years ago; including finalising disciplinary procedures against the CEO of the entity who received a 51 per cent salary increase during 2015/16 for an entity that was not fulfilling its mandate and has no governance structures.
6. The Department’s structure (organogram) is not fully and appropriately aligned with its mandate and expected responsibilities particularly the Monitoring and Evaluation (M & E) Unit. The Committee further highlighted that the Department was prioritising administrative posts over critical and ess
7. The Department is conducting inadequate oversight over its Entities. The impact of this is the protracted situation at Ncera Farms (Pty) Ltd for which the Department is a Caretaker; the ARC’s qualified audit opinion which is preceded by material adjustments to its financial statements for previous five consecutive years in order for the entity to receive an unqualified audit opinion; increasing irregular expenditure in the MLRF and the regression in the OBP’s audit outcome (from clean audit in 2015/16 to unqualified opinion with findings in 2016/17).  

Financial Matters

1. Root causes of audit queries are not effectively addressed by the Department as it focuses on symptoms or specific areas that are raised by the AGSA. The top three root causes that were highlighted by the AGSA was slow management response in the M&E of quarterly reporting; lack of skills and competency in supply chain management (SCM) and non-adherence to SCM policies when appointing implementing agents; and inadequate process and procedures to ensure that financial statements submitted for audit are valid, accurate and complete.

1. DAFF has made little improvement in terms of spending its budget, which is still not aligned with the achievement of targets, for both the Department and some of its Entities. The Committee highlighted the following areas from the AGSA’s findings that still needs to be fully addressed within the Department and some of its Entities: leadership with respect to consequence management and prevention of unauthorised, irregular, fruitless and wasteful expenditure.
2. Notwithstanding the Department’s performance, it is seriously underfunded and its budget is not increasing with inflation, which affects transfers to Entities, particularly the ARC. The ARC is not adequately funded given its essential role in ensuring up to date agricultural research and innovation to address imminent sectoral challenges that include climate change related high temperatures, water shortages in some areas, disease outbreaks, new pests, etc.; as well as global competition from other countries.
3. Poor implementation of the Department’s M & E system including monitoring of the utilisation of conditional grants that are transferred to provinces.  The lack of effective M & E result in repeat under expenditure on the same activities, for example, in Programme 1, unspent funds for capital works in respect of the Stellenbosch Plant Quarantine Station due to delays in the Department of Public Works processes (for 2 consecutive years) and in Programme 3, unspent funds for the Economic Competitiveness and Support Package for Provincial and Rural Agricultural Colleges (for 2 consecutive years).

Service Delivery Performance

1. Although national policy imperatives are cited in departmental documents and presentations, little attention is given to the implementation of specific programmes to ensure, for example, that these policies and all MTSF targets will be achieved.  In this regard, minimal progress has been made in achieving the MTSF targets particularly in respect of Outcome 4 (job creation) and Outcome 7 (rural development and food security). The major concerns in this regard are different forms of support to smallholder producers, job losses in the sector, CAADP and food insecurity statistics that were revealed by StatsSA’s Surveys.
2. Lack of efficacy in intergovernmental collaboration and alignment of activities between the Department and its Entities, and between the Department and other Government departments or agencies, remains a concern that impacts optimal delivery of services. However, the Committee commended the development of Operation Phakisa for Agriculture, Land Reform and Rural Development in which the Department and its Entities are also participating, which is expected to address some of the challenges associated with collaboration provided the Programme receives the required funding.
3. Despite corrective measures that were presented to the Committee in the previous year, poor monitoring of conditional grants and validation of performance information remains a challenge that negatively impacts the Department’s performance and service delivery in respect of programmes and/or projects that are funded through the conditional grants.

6.         COMMITTEE Recommendations

The Committee recommends that the Minister of Finance should consider the following in the new budget cycle:  

1. Increasing the budget allocation to the Department of Agriculture, Forestry and Fisheries (DAFF) as the MTEF period allocation to Vote 24: Agriculture, Forestry and Fisheries is disproportionate to what the NDP expects from the sector and is not taking into account sectoral challenges. Notwithstanding the drought that has hit some parts of the country from 2015; the sector faces inter alia climate change-induced disasters (veld fires, floods); disease outbreaks (e.g. Avian influenza, foot-and-mouth disease and citrus black spot) that impact industry performance and subsequently employment; and the rising cost of production inputs that also has an impact on food prices.
2. In addition, the Department has unfunded mandates such as SIP11 for infrastructure development (e.g. enhancing capacity for handling and inspections of bulk imports at the ports); Operation Phakisa for Agriculture, Land Reform and Rural Development, which is expected to play a significant role in ensuring the Revitalisation of the Agricultural and Agroprocessing Value Chain (RAAVC); as well as the Comprehensive Africa Agriculture Development Programme (CAADP), which is an MTSF target. CAADP is a Pan-African Framework for accelerating long term agricultural development and growth among African countries and focuses on improving food security, nutrition and increasing incomes in Africa's largely farming based economies. The Department has been unable to implement CAADP due to budgetary constraints.    
3. Additional funding is proposed for the Agricultural Research Council (ARC) in order to enhance its research capacity and to ensure timeous completion of the Foot-and-mouth Disease (FMD) Facility and other research activities that are responsive to climate change and climate change-related disasters such as the development of drought-tolerant crop varieties, early-warning systems and new vaccines. Funding for the FMD Facility is of utmost importance to ensure that the country can produce the vaccine (it is currently imported from Botswana) as FMD is a disease of economic importance with a negative impact on the red meat industry, the country’s economy and sector employment.
4. Response to the above financial recommendations should be submitted to the National Assembly (NA) not later than 3 months after the adoption of this report by the NA.

The Committee further makes the following recommendations for the attention of the Minister of Agriculture, Forestry and Fisheries:

Governance and Operational Matters

1. Ensure that before the end of the current financial year, vacant positions at SMS level in the Department are filled including the CEO positions at OBP and NAMC; and also ensure the fast-tracking of disciplinary processes regarding the suspended DG of the Department. Report on these matters in Parliament before the end of March 2018.
2. Submit to the National Assembly, a progress report and an Action Plan on the full integration of the Fisheries Management Branch’s duplicate functions to the Department. It was previously reported in March 2016 that the integration will be finalised once an Accounting Officer (Director-General) is appointed and the DG was since appointed in July 2016. The progress report and Action Plan should be submitted to Parliament by the end of February 2018.
3. During each quarterly performance briefing for the 2017/18 financial year, provide progress reports on the processing of legislation such PDALF, Aquaculture Bill, etc. and also submit a Legislative Review Programme to Parliament by the end of February 2018.  
4. Report on progress on the finalisation of the Draft Policy on Comprehensive Producer Support and the Integrated Funding Development Support Policy; the development of a National Policy on Mechanisation Support and the implementation of the Smallscale Fisheries Policy by the end of February 2018.
5. Fast-track the deregistration of Ncera and the transfer of the Centre to the ARC before the end of this financial year. Report on progress to Parliament including action taken regarding the improper salary increase for the entity’s CEO by the end of February 2018.
6. The Policy, Planning, Performance Monitoring and Evaluation Unit of the Department should be restructured to ensure its effective functioning and the Department should submit to Parliament the reviewed full Organogram of the Department inclusive of all levels not just the SMS level, to show alignment with the Department’s mandate and strategic goals, before the end of February 2018.
7. Ensure that the implementation of the Department and the Entities’ Audit Action Plans forms part of the DG and DDGs as well as CEOs’ performance agreements by the end of November 2017. Report on progress to Parliament by the end of March 2018.  

Financial Matters

1. Ensure that the Department and its Entities engage regularly and timeously with the AGSA on all audit findings. In addition, during each Quarterly Report briefing, ensure that the Department present progress on the implementation of its Audit Action Plan and those of Entities to address audit queries, root causes as highlighted in subsection 3.3 above and previous findings by the AG for both the Department and its Entities. Additionally, the Audit Plans should include consequence management.  Report on progress to Parliament, every Quarter.
2. Ensure that the Department DAFF develops a strong business case that will be presented to the National Treasury for additional funding, highlighting the impact of the budget cuts to the sector (including the role of Entities) that has been identified in the NDP and the New Growth Path as one of the key sectors through which increased employment and poverty alleviation can be achieved. In this regard, the negative impact of the budgetary cuts to the ARC in particular, should be highlighted including its role in sector development and in addressing sectoral challenges through research. The Department should report on the submission to Parliament by the end of January 2018.
3. During each Quarterly Report briefing for 2017/18, submit and present a progress report on the monitoring of conditional grants, which get more than two thirds of the Department’ budget. The Department should regularly report on the CASP grant in particular as it has put aside R60 million for the MTEF period ending in 2018/19 for its monitoring. Report every Quarter.

Service Delivery Performance

1. During each Quarterly and Annual Report briefing, the Department’s Report and Plans should clearly show alignment and contribution to the specific MTSF targets to which the Ministry of Agriculture, Forestry and Fisheries contributes. Currently this is not the case as there are MTSF targets that the Department is not reporting on. In addition, the Department and Entities’ Annual and Strategic Plans should show impact of each funded target and intervention. This should be indicated during every Quarterly and Annual briefing to Parliament.  
2. Submit to Parliament a Plan that clearly shows the alignment of the activities of the Department with its Entities to prevent and/or minimise duplication including funding arrangements for effective budgetary use. As an example, the alignment of DAFF and NAMC’s activities in respect of market access for all producers. NAMC reported that it is partnering with DAFF among others, in the AGRIBIZ for Women and Making Markets Matter capacity building programmes; and the alignment of activities between the NAMC, DAFF and the ARC in terms of the National Red Meat Development Programme (NRMDP) and the Vineyard Development Scheme.  Submit the Plan to Parliament by the end of February 2018.
3. Submit and present to Parliament in collaboration with the DRDLR, the implementation plan including funding arrangements for Operation Phakisa for Agriculture, Land Reform and Rural Development, by the end of February 2018.
4. Submit and present to Parliament an Action Plan on how the Department is addressing challenges associated with the utilisation of conditional grants by provinces including timeous validation of performance information to ensure its reliability.  Submit to Parliament by the end of January 2018.

Report to be considered.