ATC121029: Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries on the Performance of the Department of Agriculture, Forestry and Fisheries, dated 23 October 2012

Agriculture, Forestry and Fisheries

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES ON THE PERFORMANCE OF THE DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES, DATED 23 OCTOBER 2012

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES ON THE PERFORMANCE OF THE DEPARTMENT OF AGRICULTURE, FORESTRY AND FISHERIES, DATED 23 OCTOBER 2012

The Portfolio Committee on Agriculture, Forestry and Fisheries (hereinafter referred to as the Committee), having assessed the performance of the Department of Agriculture, Forestry and Fisheries (hereinafter referred to as the Department), reports as follows:

1. Introduction

1.1. Mandate of the Committee, including provision of Section 5 of the Money Bills Amendment Procedure and Related Matters Act, 2009 (No. 9 of 2009).

According to Section 5 of the Money Bills Amendment Procedure and Related Matters Act, the National Assembly, through its Committees, must annually assess the performance of each national department. The Committee must submit an annual Budgetary Review and Recommendation Report (BRRR) for each department that falls under its oversight responsibilities for tabling in the National Assembly. These should be considered by the Standing Committee on Appropriations when it is considering and reporting on the Medium Term Budget Policy Statement (MTBPS) to the House.

2. The Department of Agriculture, Forestry and Fisheries

2.1. Mandate, Vision and Mission

Mandate

The Department’s legal mandate covers the agriculture, forestry and fisheries value chains: from inputs, production and value adding to retailing. The aim of the Department is to lead, support and promote agriculture, forestry and fisheries resources management through policies, strategies and programmes to enhance sustainable use and to achieve economic growth, job creation, food security, rural development and transformation. The Department also aims to oversee the performance of state-owned entities within its portfolio.

Vision

A leading, dynamic, united, prosperous and people-centred sector.

Mission

Developing and sustaining a sector that contributes to, and embraces: economic growth (and development), job creation, rural development, sustainable use of natural resources and food security.

2.2. Strategic Priorities and Measurable Objectives of the Department

2.2.1 The Government Priority Outcomes

The Government priority outcomes through which agriculture, forestry and fisheries sectors will play a role in addressing the country’s broad national challenges in the medium term strategic framework (MTSF) are:

· Decent employment through inclusive economic growth (Outcome 4);

· Vibrant, equitable and sustainable rural communities contributing towards food security for all (Outcome 7); and

· Protect and enhance our environmental assets and natural resources (Outcome 10).

2.2.2 Strategic Goals and Objectives of the Department

The Department plans to contribute towards the achievement of the Government priority outcomes over the medium term expenditure framework (MTEF) through six key strategic goals as identified in the Department’s 2011/12 Strategic Plan. Under each strategic goal, there is a number of strategic objectives (in bullets) through which the Department based and measured its programme performance.

These strategic objectives and goals are as follows:

  1. Increased profitable production of food, fibre and timber products by all categories of producers (subsistence, smallholder and commercial)
  • Promote efficient production, handling and processing of food, fibre and timber
  • Coordinate government food security initiative
  • Improve production systems anchored in commodities with a competitive and comparative advantage in each province
  • Comprehensive support towards rural development.

  1. Sustained management of natural resources

· Promote environmentally sustainable production systems

· Ensure the sustainable management and efficient use of natural resources

· Ensure protection of indigenous genetic resources

· Increase contribution to green jobs to improve livelihoods.

  1. Effective national regulatory services and risk management systems

· Promote safe food by managing the level of risks associated with food, diseases, pests, natural disasters and trade

· Establish and maintain effective early-warning and mitigation systems.

  1. A transformed and united sector

· Increase equity, ownership and participation of previously disadvantaged individuals (PDIs)

· Enhance systems to support the effective utilisation of assets

· Improve social working conditions in the sector

· Provide leadership and support to research, training and extension in the sector.

  1. Increased contribution of the sector to economic growth and development

· Increase growth, income and sustainable job opportunities in the value chain

· Increase the level of public and private investment in the sector

· Increase market access for South African and Africa agricultural, forestry and fish products, domestically and internationally

· Increase production of feedstock to support the manufacturing sector

· Promote the use of feedstock by production for renewable energies.

  1. Effective and efficient governance

· Establish and strengthen cooperative governance and functional relations with local and international stakeholders

· Strengthen policy, planning, monitoring, evaluation, reporting and sector information

· Provide effective audit, investigative and legal, human resources and financial risk management

· Improve departmental services excellence through implementation of quality standards, Batho Pele principles and the general legislative mandate

· Provide leadership and manage communication and information.

2.2.3 The Department’s Programmes

Programme

Purpose

1. Administration

The programme provides strategic leadership, management and support services to the department. The aim of the programme is to lead, support and promote agricultural, forestry and fisheries resource management through policies, strategies and programmes to enhance sustainable use; and to achieve economic growth, job creation, food security, rural development and transformation.

2.Economic Development, Trade and Marketing

To ensure value chain integration and facilitation of market access for agriculture, forestry and fisheries products in support of economic growth, job creation and development.

3.Food Security and Agrarian Reform

The programme facilitates and promotes food security and agrarian reform programmes and initiatives.

4. Agricultural Production, Health and Food Safety

The programme manages the risks associates with animal diseases, plant pests, genetically modified organisms and registration of products used in agriculture, promotes food safety and creates an enabling environment for increased and sustainable agricultural production.

5. Forestry and Natural Resource Management

The programme develops and facilitates the implementation of policies and targeted programmes to ensure management of forests, sustainable use and protection of land and water as well as managing agricultural risks and disasters.

6.Fisheries Management

The programme promotes the development, management, monitoring and sustainable use of marine living resources and the development of South Africa ’s fisheries sectors. Sustainable livelihoods will be achieved through aquaculture growth and fisheries economic development.

3. Analysis of Strategic and Operational Plans of the Department

The Department underwent major restructuring that resulted in the renaming and/or combining of some of its programmes and reprioritising of its budget. While the Department had seven programmes in the 2010/11 financial year, in the reporting for the 2011/12 financial year, the Department has six programmes (as indicated in 2.2.3 above), three of which with new names. The Department has done away with the former Programme 2: Production and Resources Management and Programme 3: Agriculture Support Services.

The sustainable use and protection of land and water mandate of the former Programme 2 and the disaster risk and management services mandate of the former Programme 3 have been added to the Forestry programme in the current medium term expenditure framework (MTEF) period. The rest of the activities of the former Programme 2, viz. agricultural productivity and infrastructure development now fall under the new Agricultural Production, Health and Food Safety Programme and the Food Security and Agrarian Reform Programme, respectively. The rest of the activities of the former Programme 3 are now split between the Administration; Trade Promotion and Market Access; as well as the Food Security and Agrarian Reform Programmes. These changes and how the budget was reprioritised presented a challenge in terms of continuity from the previous financial year, which was not explained in the Department’s Strategic Plan but the National Treasury’s Estimates of National Expenditure showed that there was a budget for these ‘new’ programmes in the 2010/11 financial year.

For all programmes of the Department, some strategic outcomes and indicators were not aligned with the strategic goals and/or objectives. These issues were also highlighted in the high level review of the Department’s 2011/12 Strategic Plan by the Office of the Auditor-General. The indicators were either not relevant or specific to the stated strategic objective or outcome and some were not quantifiable. The highlighted issues raised concerns regarding the level of the Department’s engagement in the strategic planning process and the people who were involved in the planning.

As an example, in the Food Security and Agrarian Reform Programme, under Strategic Goal 4, the strategic objective is to provide leadership and support to research, training and extension in the sector. This is assumed to be referring to extension personnel, research institutions/agencies and all categories of producers in the sector. The strategic outcome is increased production enabled by extension support and appropriate technologies and the outcome indicator, which addresses one aspect of both the strategic objective and outcome, is 2 000 extension personnel receiving targeted technical and generic training.

4. Analysis of the Annual Report and Financial Statements of the

Department

This section provides the summary of expenditure and selected performance or non-performance areas for each programme in relation to key measurable objectives for the 2011/12 financial year as outlined in the Department’s Strategic Plan and Annual Report for the 2011/12 financial year.

According to the Department’s Annual Report for the 2011/12 financila year, out of the total number of planned targets, only 43 targets were achieved, this represent 51 per cent of the total planned targets that were achieved during the year under review. However, according to the Committee’s analysis, the Department had a total of 114 targets and fully achieved 23 (approximately 20 per cent) of these. The Committee considered partial achievements, non-aligned and immeasurable targets as non-achievements. Various reasons that have been given for non-performance include budgetary constraints, lack of personnel, extensive Cabinet processes, and others. However, central among these was poor planning and the non-alignment of indicators, targets and actual performance with the strategic goals or objectives as previously highlighted. In the year under review (i.e. the 2011/12 financial year), the Department planned to review and table in Parliament five pieces of legislation, but none of these were tabled.

4.1 Budget Overview and Expenditure

Table 1: Total Budget Appropriation and Expenditure

Appropriations

Financial Year

Actual Expenditure

Variance (under spending)

R4.96 Billion

2011/12

R4.93 Billion

R36 Million

R3.9 Billion

2010/11

R3.8 Billion

R103 Million

R3.8 Billion

2009/10

R3.7 Billion

R35 Million

Source: Annual Report (DAFF), 2011 and 2012

Expenditure

The Department was appropriated a total amount of R4.96 billion in the 2011/12 financial year, which was R1 billion more than the R3.9 billion that was appropriated in the 2010/11 financial year (see Table 1 -above). Despite not achieving most of its delivery targets, the Department spent 99 per cent of its appropriated budget in the 2011/12 financial year, which is 2 per cent more than the 97 per cent expenditure that it achieved in the 2010/11 financial year. Slightly more than half of the Department’s budget was spent between two programmes, namely, Programme 1, Administration (27 per cent) and Programme 3, Food Security and Agrarian Reform (25 per cent) – see Table 2. Approximately 80 per cent (R1 billion) of Programme 3’s allocation was spent on Comprehensive Agricultural Support Programme (CASP).

An amount of R1.65 billion (33.7 per cent of total appropriation) was transferred to provinces for conditional grants and R1 billion (20 per cent of total appropriation) was transferred to public entities. Two thirds (75 per cent) of the transfer to public entities was to the Agricultural Research Council (R755 million) and 20 per cent to the Marine Living Resources Fund (R201 million). The Department paid R1.2 million to the Public Service Education and Training Authority in respect of training. The Department also transferred an amount of R37.3 million to public corporations (i.e. Ncera Farms (Pty) Ltd, Forest Sector Charter Council and Land Bank). Approximately 80 per cent of the allocation to public corporations was transferred to the Land Bank.

The Department failed to spend an amount of R36 million (associated programme shown in brackets -below), which it attributed to:

· The procurement of IT equipment worth R3.3 million that was not concluded in the year under review (2011/12) (Administration Programme).

· The procurement of mobile veterinary clinics as part of the Primary Animal Health Care Programme worth R18.8 million that was not concluded in the year under review (Agricultural Production, Health and Safety Programme).

· Transfer payments (purpose not explained) of R6.7 million that were not made due to Memoranda of Understanding (MoUs) not finalised during the year under review (Food Security and Agrarian Reform Programme).

· Transfer payments of R3.4 million to international organisations that could not be concluded during the year under review (Economic Development, Trade and Marketing Programme).

· The procurement of capital assets for forestry operations worth R2.1 million that was not concluded in the year under review (Forestry and Natural Resources Management Programme).

· Other minor payments for capital assets across all programmes, to the value of R781 000.

The unspent amounts (above) add up to R35.1 million, leaving an unspent amount of R1.1 million that was not accounted for. The Department claimed that this was a miniscule amount considering that the circumstances mentioned above, worth R35 million, were beyond their control. This is true as it is far less than R27 million that was not accounted for in the 2010/11 financial year. However, for a Department that could not fully achieve 80 per cent of its targets where in some cases lack of funds were cited as a reason, any unspent and unaccounted for funds means a lot. In addition, the circumstances that resulted in under spending, which the Department claims were beyond its control, could have been prevented with proper planning, monitoring and evaluation; as well as by ensuring that activities are initiated from the very first quarter instead of the last two quarters of the financial year.

The Department’s revenue increased to R177.4 million in the reporting year compared to the 2010/11 financial year of R156.9 million, due to increases in sales of goods and services.

Also included in the revenue was an amount of R28 million that was a refund received from provinces for unspent conditional grants. The latter represents an increase of 90 per cent from the previous year’s R2.7 million worth of conditional grants that were unspent by provinces. This is a very serious concern as conditional grants play a central role in supporting subsistence and smallholder producers that are the focus of the Department.

4.2 Programme Performance and Expenditure

Table 2: Programme budget and expenditure

Programme

Final

Appropriation

R’000

Actual Expenditure

R’000

Variance

(unspent)

R’000

Programme

Expenditure

in %

% of Total Vote Actual Expenditure

Administration

Economic Development, Trade and Marketing

Food Security and Agrarian Reform

Agricultural Production, Health and Food Safety

Forestry and Natural Resources Management

Fisheries Management

1 345 746

193 622

1 254 360

908 650

910 100

351 971

1 339 756

190 185

1 249 371

889 347

907 662

351 952

5 990

3 437

4 989

19 303

2 438

19

99.6

98.2

99.6

97.9

99.7

99.9

27.2

3.9

25.4

18.0

18.4

7.1

TOTAL

4 964 449

4 928 273

36 176

99.2

99.3

Source: Annual Report (DAFF), 2012

Programme 1: Administration

Out of 39 targets that were supposed to be achieved under this programme, only six were fully achieved without any conditions. Of the 6 achieved targets, only one is new and directly linked to service delivery or national outcomes, that is, the development of a Wholesale Financing Facility Model through the Land Bank. Others are continuous Departmental standard operating procedures.

In terms of farmer development and support, one of the targets was to have 10 000 smallholder farmers accessing financial services, which was also an exact target for subsistence farmers, although the Department has never given a distinct difference between the two or a proper definition of each. The vague difference that was given to the Committee was that subsistence farmers were poor farmers that were supported through Ilima/Letsema (mostly agricultural starter packs not financial services) and the smallholder farmers were supported through the Comprehensive Agriculture Support Programme (CASP) and the Micro-agricultural Financial Institutions of South Africa (Mafisa).

In reporting how the target of 10 000 farmers accessing financial services was achieved in each case, the Department reported that 72 856 smallholder farmers (Annual Report, page 31) were supported through CASP and Ilima/Letsema grants, notwithstanding that the latter was supposed to be supporting subsistence farmers. The true reflection of the target’s performance, which was not achieved, was 5 310 clients that received Mafisa loans during the 2011/12 financial year. A similar arbitrary figure of 47 818 subsistence farmers receiving support through CASP and Mafisa was also reported, details of which were not included as they were supposed to be available in June 2012.

The Department also did not achieve one of its most important targets that of reducing its vacancy rate to 12 per cent. Instead, its vacancy rate increased to 13.4 per cent during the 2011/12 financial year. This was a concern considering that in some of its programmes where the Department did not achieve its targets, lack of capacity was cited as a reason. The Department cited delays in qualification verification by the South African Qualifications Authority (SAQA), as well as citizenship and criminal checks by the State Security Agency (SSA) as reasons for the inability to fill vacancies.

The Department failed to organise at least 8 per cent of farmers into producer associations. This was also an arbitrary target as the Department did not explain which category of farmers were going to be organised into producer organisations and what was the total number of those farmers on which 8 per cent was based. Commercial farmers, whether developing or developed, were already affiliated to producer organisations, some of which were working with subsistence farmers.

The Department planned to finance and support 284 distressed farmers but only reported that R24 million was transferred to the Land Bank for this purpose but did not say whether the money was used for the purpose or not, and if it was, how many farmers were assisted. The Department mentioned that provinces provide the assistance but do not necessarily report to the Department, which happens to provide the funding. This clearly shows the lack of an effective monitoring and evaluation system within the Department.

Programme 2: Economic Development, Trade and Marketing

The programme had 16 targets for the 2011/12 financial year and, only three of the 16 targets were fully achieved. Other targets were partially achieved, vaguely reported or not achieved. Of the three targets that were achieved, two were vague, for example, the Department planned to establish 90 cooperatives and the achievement was that 91 cooperatives were registered. In the 2010/11 financial year, the Department failed to establish and support 3 cooperatives but instead assisted 241 cooperatives to register - it is assumed that these were the same 241 cooperatives that make the baseline for the 2011/12 financial year.

Another target under this Programme was to align the Department’s agroprocessing plans and strategies with that of the Department of Trade and Industry (DTI) and Economic Development Department (EDD). The reported actual performance was the completion and approval of one Agroprocessing Strategy by Departmental Executive Committee (DEXCO), which was reported to be aligned with the DTI and EDD programmes.

Programme 3: Food Security and Agrarian Reform

The Department had 13 targets under this programme. In essence, only two of the 13 targets were achieved. The Committee is of the view that the explanations given or the reported information in some cases were not necessarily linked nor do they directly measure the planned target.

As an example, the Department planned to have at least three Colleges of Agriculture have their norms and standards approved by Heads of Departments (HODs). In the 2010/11 financial year, three colleges were reported to have achieved this and even implemented their norms and standards. These colleges were Glen (in Free State ), Taung (in North West ) and Fort Cox (in Eastern Cape ). Interestingly, the Department again reports as an achievement of the target for the 2011/12 financial year, Taung, Glen and Tsolo (in Eastern Cape ). This essentially means that only one new college, Tsolo, has been added in the reporting year.

The Food Security Policy and the Zero Hunger Strategy, that were supposed to be approved in the 2011/12 financial year, were temporarily withdrawn. A Policy on Mechanisation Support Model could not be approved and the Department reported that it will be finalised in the first quarter of the 2012/13 financial year. However, tractors and other farming equipment have been distributed in some provinces since June 2011, without the Policy. During a Committee meeting in September 2011, a representative from developing farmers’ organisation confirmed that the tractors that the Department was buying on their behalf without consulting them, were not what the farmers wanted.

The Department is responsible for the Agrarian Transformation pillar of the Department of Rural Development and Land Reform (DRDLR)’s Comprehensive Rural Development Programme (CRDP), which should be covered in this Programme and under Outcome 7. However, the Department had no set targets or even specific collaborative projects with the DRDLR (for all three sectors) that have been budgeted to ensure that Outcome 7 is realised. Where the Department was specifically involved in the CRDP in some provinces, it was through provincial personnel initiatives, otherwise in most provinces its involvement and contribution to the CRDP was haphazard.

The Department signed service level agreements (SLAs) with the Agricultural Research Council (ARC) on targeted and priority research in the 2010/11 financial year, which were supposed to be implemented in the 2011/12 financial year. This was not achieved; instead, the Department recycled the target and reported about engagements with the National Agricultural Research Forum and further developments of SLAs with the ARC to carry out the research and development projects.

Programme 4: Agricultural Production, Health and Food Safety

This programme only used 97.9 per cent of its allocated budget and had an unspent amount of R19 million (Table 2 -above), which was meant for the procurement of mobile veterinary clinics. Of the 15 targets that were planned for the 2011/12 financial year, the Department fully achieved three, or possibly, four.

The fourth achievement was questionable since the target was the issuing of 32 000 animal identification marks and the Department managed to issue 23 273 identification marks. The reason given was that the 32 000 target was predicted outside the control of the Directorate (Veterinary Public Health) that was involved with the issuing of animal identification marks, which does have the correct predictions on applications for identification marks. This emphasises the issue that has been highlighted regarding the Department’s strategic planning process and setting of targets.

Programme 5: Forestry and Natural Resources Management

The Department did not fully achieve any of its seven set targets for this programme. Lack of funds or limited budget and unverified information (e.g. 2 898 supported small growers but only 71 verified) were cited as some of the reasons for not achieving some of the targets. Poor reporting and verification structures and processes between the Department and the provinces have also been highlighted as a challenge in the 2010/11 financial year and these have also been consistently raised by the Auditor-General.

In one instance, the indicator was a number of irrigation schemes revitalised for smallholder farmers and the target was given as 0.5 per cent. Unfortunately, the actual performance of two irrigation schemes that were revitalised (Makhathini in KwaZulu-Natal and Taung in North West ) does not mean anything as there was no number of irrigation schemes on which the 0.5 per cent was based.

This programme used an amount of R5.6 million on seven consultants for a period of 575 working days . The consultants were used for the assessment of forestry transport infrastructure requirements (six consultants for R1.55 million) and an environmental impact assessment (EIA) in the northern Eastern Cape (one consultant for R4.1 million).

Programme 6: Fisheries Management

It has to be clarified that the Branch plans and reports as both an entity Marine Living Resource Fund (MLRF) and a Programme within the Department on relatively similar targets. There were some difficulties in measuring performance because some deliverables reported as being delivered by the Branch are actually delivered by the MLRF. The way the targets were structured in both the Strategic Plan of the Branch and the MLRF were different. For example, the Branch would group similar activities under one target, while, in the MLRF, each activity would be a stand-alone target.

This programme had 24 targets set for the 2011/2012 financial year from which the Branch had to deliver. The nine achieved targets (38 percent) include, among others, the establishment of aquaculture development zones and producer associations, implementation of the Working for Fisheries Programme (WFFP), implementation of the fish stocks recovery plan, feasibility studies on two new fisheries, and scientific recommendations on catch limits for 22 fishery sectors. The reasons cited for failure to deliver include delays from compulsory consultation processes, expiration of vessel’s management contract, supply chain processes and decisions to move some targets to the following financial year.

Most of the functions of the Branch were funded through the MLRF, while the compensation to employees was funded by the Department. The Branch had an increase in the appropriated budget from R303.6 million (DAFF Annual Report 2011) or R259.1 million (DAFF Annual Report 2012) in 2010/2011 to just under R352 million in 2011/2012. The expenditure of both financial years was approximately 100 percent because under-spending did not even amount to 0.1 percent of the final appropriation. It has however been noted that, for successive years, the Branch has maintained the highest overtime expenditure in comparison to the other programmes within the Department. The amount increased from R6.7 million during the 2010/2011 financial year to just over R7.1 million during the 2011/2012 financial year. The Branch did not fully recover all the monies which were as a result of irregular expenditure.

4.3. Human Resource Management

The Department’s vacancy rate, which was reduced to 11 per cent in the 2010/11 financial year, has increased to 13.4 per cent by the end of the fourth quarter in the 2011/12 financial year. The figure represents 949 vacancies excluding the Minister and the Deputy Minister. The Department’s key challenges were the loss of key personnel due to an absence of an effective retention strategy and delays in appointments, particularly at Senior Management Service (SMS) level; as well as the inability to fill vacancies timeously.

In its organogram that was presented to the Committee, the Department had nine key branches headed by nine Deputy Director-Generals (DDGs). Of the nine DDGs, only three have been appointed and six were in the acting positions. The DDGs in acting positions has been the case since the finalisation of the Department’s restructuring process in 2010.

The majority of the acting DDGs generally act in one position for 3-6 months before they are either removed or transferred to act as DDGs in another branch. The same with the Chief Directors, particularly in the Fisheries Management and the Agricultural Production, Health and Food Safety programmes where a number of positions are vacant with no acting person.

In Fisheries, about five people (including the current acting DDG) have acted as DDGs since its transfer to the Department in July 2009 from the Department of Water and Environmental Affairs (DWEA). Two of those DDGs acted in the year under review. Of the five that acted, only one had the background and experience in Fisheries and has since been removed as acting DDG in the Branch.

From 2009, the Department did not have an appointed accounting officer, i.e. the Director-General (DG) until late 2010. Various personnel have acted in this position until the appointment of the DG in September 2010. The DG has been suspended in June 2012 and the DDG Cooperate Services was acting in this position.

This implied that since 2009, the Department had never had a permanent accounting officer to present and account on its annual report. During the presentation of the annual report for the 2010/11 financial year, the appointed DG, who is currently on suspension, could not account on theaAnnual report as he was not in the position for the full period. Unfortunately, in the financial year under review, given that the same DG who was appointed in 2010 has been suspended, an acting DG presented the annual report.

Without the ability to appoint accountable persons in such key positions, there can be no stability and progress in terms of service delivery in the Department irrespective of how much budget is allocated.

It should be noted that during the period from the 2009/10 financial year to date, the Department has been losing some key and experienced personnel to provinces and other state departments. Some personnel are suspended and reinstated without charges being laid against them.

4.4. Virements and Shifting of Funds

Although Section 43 of the Public Finance Management Act, 1999 (No. 1 of 1999) makes provision for virements and the shifting of funds from one programme to the other, as well as movement of funds within the programme, there are certain requirements that need to be met by an accounting officer. These conditions are as follows:

Section 43(2) of the Public Finance Management Act provides that “the amount of a saving under a main division of a vote that may be utilised in terms of (1) may not exceed 8 per cent of the amount appropriated under that main division.” Moreover section 43(4) does not authorise the utilisation of a saving in:

(a) An amount is specifically and exclusively appropriated for a purpose mentioned under a main division within a vote;

(b) An amount appropriated for transfers to another institution and; and

(c) An amount appropriated for capital expenditure to defray current expenditure.

Virements of R25 million were approved in Programme 5: Forestry, sub-programme Forestry Oversight; from goods and services to compensation of employees. Shifting of funds approved by the Accounting Officer amounted to R12 million (see National Treasury’s Expenditure Report for the fourth quarter of the 2011/12 financial year).

4.5. Auditor-General’s Report

In expressing his opinion, the Auditor-General (AG) indicated that the financial statements of the Department present, in all aspects, a fair financial position of the Department as at 31 March 2012 and its financial performance and cash flows for the year ended, in accordance with the Departmental Financial Reporting Framework prescribed by the National Treasury and in line with the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999). However the AG in his report drew attention in respect of the following matters:

4.5.1 Usefulness of the information

  • Reasons for major variances not explained : A total of 46 per cent of major variances between planned and actual achievements were not explained in the annual performance report due to a limited review of the presented annual performance report by the management.
  • Reported indicators and target not consistent with planned indicators and target : The annual performance report submitted did not include the actual performance of 56 per cent of all planned indicators and targets as specified in the Strategic and Annual Performance Plan for the year under review, as required by the PFMA. This was due to lack of monitoring of the completeness of reporting documents by management.

4.5.2 Compliance with laws and regulations

  • Non-compliance with regulatory and reporting requirements (PFMA and Treasury Regulations) – The Accounting Officer did not take steps to prevent irregular expenditure and fruitless and wasteful expenditure, as required by the PFMA. For 11 months, the Department did not have a Human Resource Plan as required by Public Service Regulations. The plan was only approved in March 2012. Goods and services with a transaction value of between R10 000 and R500 000 were procured without obtaining written price quotations from at least three different prospective providers as per the requirements of National Treasury Regulations. This issue was also raised in the 2010/11 financial year. Financial statements submitted for auditing was not prepared in all material respects in accordance with the PFMA and these were subsequently corrected, hence the unqualified audit opinion.

4.5.3 Internal Control

  • Lack of leadership : The Accounting Officer did not exercise oversight responsibility over reporting and compliance with laws and regulations and internal controls. For example, control weaknesses reported were not in all cases analysed by management and appropriate follow-up actions were not taken to address the root causes impacting on the financial and performance reporting.
  • Governance : Due to inadequate resources within the Internal Audit function, ongoing monitoring and supervision were not undertaken to enable an assessment of the effectiveness of internal controls over compliance and performance reporting.
  • Finance and performance management: The Department did not always prepare regular, accurate and complete financial and performance reports that were supported and evaluated by reliable information. As a result, material adjustments were made to the financial statements that were submitted for audit and the AG could not verify the validity, accuracy and completeness of the performance information that was reported.

4.5.4. Financial Reports and Risk Management

As reported in the 2010/11 financial year and prior financial years, the Department’s Audit Committee highlighted that the system of internal control applied by the Department over financial risk and risk management was not operating effectively, efficiently or transparently. In addition, as also reported in previous years, the Department’s Internal Audit was under-resourced and given its current budget and other operational constraints, it cannot operate optimally in order to address and manage risks that were pertinent to the Department in the absence of a reliable risk assessment with concomitant controls identified to mitigate risks.

· The Chief Audit Executive did not effectively report, operationally and administratively to the Accounting Officer and was suspended on 22 July 2011. This was done without any input from the Audit Committee and without the Audit Committee being apprised of the reasons for his suspension. His suspension was then lifted on 18 June 2012 without an explanation, and to date no charges have been brought against him. This implies that for half of the 2011/12 financial year, the Department operated without an Internal Audit Executive.

· The Internal Audit Committee noted that certain matters that were raised in prior years indicative of deficiencies in the system of internal control and deviations therefore, in certain instances, have not been fully and satisfactorily addressed.

· The Audit Committee had requested but has not been presented with forensic investigation reports that were commissioned by the Department.

· Internal audits that were conducted in the year under review were not addressed, or in certain instances, not acted on at all by management or the Accounting Officer.

· Attempts made by the Audit Committee to meet with the Accounting Officer to address governance concerns prior to his suspension, were unsuccessful. Further attempts to meet with the Executive Authority after the suspension of the Accounting Officer, were also unsuccessful.

The serious issues that were raised by the Internal Audit Committee were in contrast to the picture that the Department portrayed in its annual report, where it reported that the Audit Committee and the Internal Audit Unit hold meetings with the Accounting Officer, the Chief Financial Officer, the Office of the Auditor- General and the Head of Internal Audit to discuss audit findings and risk management.

5. Consideration of Reports of Committee on Public Accounts

The Department did not appear before the Committee on Public Accounts during the year under review 2011/12.

6. Consideration of Reports of Standing Committee on Appropriations

The Standing Committee on Appropriations was established in terms of section 4 (3) of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009). The Act requires this Committee to consider and report on spending issues and on actual expenditure published by the National Treasury. The Committee has adopted a tradition of inviting both National Treasury and the affected departments to account on government spending.

However, the Department did not appear before the Standing Committee on Appropriations for the year under review, 2011/12.

7. Consideration of Other Sources of Information

7.1 The 2011 State of the Nation Address

During the 2011/12 financial year, the creation of decent jobs was one of the main focus areas of Government as was emphasised by His Excellency President Jacob Zuma in his 2011 State of the Nation Address in Parliament; and also in the country’s New Growth Path (NGP) in which the agricultural value chain is one of the job drivers. This is linked to Outcome 4 of Government’s priority outcomes and i t is therefore expected that the Department’s performance during the 2011/12 financial year will show progress towards the achievement of this outcome.

The NGP’s a im for agriculture is to create 500 000 jobs from agriculture and agro-processing by 2020; to place 300 000 households in smallholder schemes by 2015 and to upgrade employment on commercial farms. Key integrated policies were to be developed to link smallholder schemes to land reform and provide integrated support (economic and social programmes), address high input costs, support farm worker organisations, and support growth in commercial sector by addressing price fluctuations in maize and wheat (staple food).

7.2 Committee Oversight Reports

The Committee undertook joint oversight visits with Portfolio Committee on Rural Development and Land Reform to the Northern Cape on 28 February to 1 March 2011, Limpopo on 2 to 4 March 2011, Free State on 25 to 29 July 2011 and Mpumalanga on 2 to 5 August 2011 . The objectives of these oversight visits were as follows:

  • To assess progress in the implementation of rural development initiatives under the Comprehensive Rural Development Programme (CRDP) involving youth development initiatives under the National Rural Youth Service Corps, commonly known as NARYSEC;
  • To investigate the extent of the challenge of post settlement for land reform beneficiaries; and
  • To assess how the Revitalisation and Development Programme and other support programmes such as the Comprehensive Agriculture Support Programme (CASP) could address the weaknesses of the current post-settlement support from government .

7.2.1 Oversight Visit Recommendations

In view of the observations the above-mentioned committees recommended the following:

Ÿ There was a need to assist the Land Reform for Agricultural Development (LRAD) beneficiaries struggling to repay their Land Bank loans. However, the means of assistance should be sought in consultation with the beneficiaries themselves. Therefore, the Department of Rural Development and Land Reform (DRDLR) should facilitate support mechanisms from DAFF and the Land Bank in order to ensure that the gains attained through enabling access to land by the black farmers are not undermined. The DRDLR and the DAFF should report to Parliament about the plans of support and progress to that effect within two months after the adoption of this report.

Ÿ The DRDLR and DAFF should include in the monitoring and evaluation of programmes indicators that illustrate whether developmental initiatives are improving the livelihoods of beneficiaries. Success of land reform projects, especially joint ventures (strategic partnerships and equity schemes) should not only be judged by increase in productivity and maximisation of profits only. Changes in socio-economic conditions of the beneficiary households should be accorded even greater attention.

Ÿ The DRDLR should put in place mechanisms that clarify the role of STRIF in post settlement support for land restitution, LRAD and PLAS projects. Support mechanisms should transcend the narrow focus on profiling and training of beneficiaries but extend towards coordination of extension support from the DAFF/DARD, Municipalities and any other government or non-government agencies involved in agriculture and rural development.

Ÿ The DRDLR and DAFF should be involved in the formulation of all agreements for strategic partnership or equity schemes. The Northern Cape DARD and the Provincial DRDLR should within one month of the adoption of the oversight report, submit progress report in support of Silvermoon to finalise mentorship or strategic partnership – whichever model is deemed appropriate.

Ÿ The DRDLR and DAFF should enhance their capacity for coordination of land reform and agricultural support programmes, integrated as a broader strategy for rural development.

8. Committee’s Observations

The Committee analysed the Department’s 2011-2012 Strategic Plan, the 2011-12 Annual Report of the Department, the State-of-the-Nation Address and the Committee’s oversight reports and observed the following:

  • The Committee is gravely concerned about the instability within the department which impacted negatively on its performance. The Committee noted with regret that no progress has been made in addressing the weaknesses identified by the Auditor-General even in the past financial years.

  • The biggest challenge in reviewing the Department’s programme performance and associated expenditure was that some of the performance targets that were presented in its annual report do not correspond with those that were in its strategic plan. In most cases, there was no uniformity in the units of measurement between the performance targets and the actual achievements. This was viewed by the Committee as a deliberate attempt to confuse readers of the annual report, as it was the issue that has been consistently raised by the Committee.

  • There were numerous subprogramme changes within programmes, particularly in Administration, that appeared in the annual report but were not in the Annual Performance Plan (APP). The subprogrammes under Administration do not correspond with those that were reported under Performance Indicators and Targets for Administration, which further do not correspond with those that were in the APP.

  • Although the Department has a number of actual jobs as a target in its Strategic Plan in terms of job creation (Outcome 4), it often used the terms job opportunities and full-time equivalents when reporting achievements, without giving explanations and budgetary implications. In addition, the term ‘decent job’ as alluded to in the New Growth Path (NGP), has not been defined for any of the three sectors. There is also a conflict in the number of projects implemented under the Working for Fisheries Programme as reported by the Department and the Department of Public Works.

  • It was also noted that, through its failure to meet most of its targets, the Department has coined terms like ‘partial achievement’, which implies that they have done some minimal activity but did not necessarily achieved one target. This was the scenario across all programmes. In almost all programmes where some of the targets could not be achieved, these were rolled over to the 2012/13 financial year.

  • Most of the Department’s performance measures (indicators) and targets were quantitative and do not directly measure or even relate to service delivery, while some targets were different from those that were set in the Strategic Plan. For all the Department’s programmes, some performance measures were not aligned with the Department’s strategic goals and/or linked to the national priority outcomes. These issues were highlighted in the high level review of the Department’s 2011/12 Strategic Plan by the Office of the Auditor-General. These were also raised by the Committee during the Department’s presentation of its Strategic Plan and APP in March 2011, but have not been appropriately addressed in the Annual Report.

  • The Department’s vacancy rate, which was reduced to 11 per cent in the 2010/11 financial year, has increased to 13.4 per cent by the end of the fourth quarter in the 2011/12 financial year. The Department’s key challenges were loss of key personnel due to an absence of an effective retention strategy and delays in appointments, particularly at Senior Management Service (SMS) level; as well as the inability to fill vacancies within three months as per the President’s State of the Nation Address.

  • Despite concerns raised by the Committee on the use of consultants, which in the previous financial year was confined to the Fisheries Management division (R3 million for six consultants), this has increased in the year under review. In the year under review, the Department has made use of 19 consultants to the value of R7.6 million for 1 931 work days. Of this total amount, 74 per cent (R5.6 million) has been used by the Forestry and Natural Resources Management division for seven consultants in a period of 575 work days.

The Committee also noted with concern that:

  • No proper information was given by the Department in regard to the numbers of farmers that were assisted in the year under review and where those farmers were allocated in the country.

  • What was reported by the Department on service delivery especially on disadvantage and poor communities was not the true reflection of what was happening on the ground.

  • There was no mechanism to monitor the tractor mechanisation that was delivered in provinces.

  • Onderstepoort Biological Products (OBP) as a national key point was not getting sufficient Government funding.

  • There was no collaboration between Agricultural Research Council (ARC) and Onderstepoort Biological Products (OBP) on livestock programmes.

The Department was requested to respond in writing giving full details on the suspension of the DG Mr Zita , the liability issue of Dr RP Mohlahlane and the huge expenditure of the Department on foreign travel, catering, unspecified and performance bonus. The Committee wanted clarity on who qualified for performance bonuses in the Department when it was under performing.

The Committee did not support the request by the Department for more funding as there was no proper motivation by the Department as to how it planned to improve the spending of the budget that it had already received.

9. Conclusion

Having interacted with the Department and its entities, the Committee expressed its disappointment on the overall performance of the Department. Some of the entities recognised that coordination and service delivery were still lacking in most areas. The Committee was gravely concerned in particular with the lack of assistance and the absence of monitoring and evaluation of the Ncera Farms (Pty) Ltd by the Department.

10. Recommendations

The Portfolio Committee on Agriculture, Forestry and Fisheries recommends that the Minister of Agriculture, Forestry and Fisheries should ensure the following:

  • The Department of Agriculture, Forestry and Fisheries urgently fills vacant posts with “suitably qualified and competent” personnel, particularly at senior management level in order to sustain stability within the Department within three months. If, after three months, the Department of Agriculture, Forestry and Fisheries has not done so, the Minister of Agriculture, Forestry and Fisheries should ensure that the Department of Agriculture, Forestry and Fisheries comes and report to the Committee on a quarterly basis why they have not done it.
  • The Department of Agriculture, Forestry and Fisheries presents to the Portfolio Committee on Agriculture, Forestry and Fisheries a turnaround strategy on how it is planning to turn the Department around and to reach ALL its targets within its budget in order to function effectively and efficiently.
  • The Department of Agriculture, Forestry and Fisheries tables a report on how it is planning to address all the issues raised by the Auditor-General including that of its entities reporting to it.
  • The Department of Agriculture, Forestry and Fisheries develops to the Committee a national policy to monitor the tractor mechanisation in provinces. The Department should also present a mechanism on how it is planning to align the national policy on the tractor project so that it is harmonised with those of the provinces.
  • The Department of Agriculture, Forestry and Fisheries minimises the use of consultants where at all possible (as per the 2010/11 Committee recommendations).
  • The Department of Agriculture, Forestry and Fisheries provides the Committee with a plan to address the recurrent problems in provinces regarding the spending of conditional grants (as per the 2010/11 Committee recommendations).
  • The Department of Agriculture, Forestry and Fisheries provides an explanation of what happened to the R70 million that has been put aside from departmental savings to implement the Zero Hunger Programme as it was reported to the Committee in February 2012.
  • The Department of Agriculture, Forestry and Fisheries avails funds for fisheries research, particularly aquaculture as it is one of the priority areas for development and report to the Committee on how it is planning to deal with the challenges facing the industry and why government is delaying aquaculture from developing and expanding.
  • The Department of Agriculture, Forestry and Fisheries develops a strategy for continuity of service, particularly on long term contracts such as vessel management to ensure uninterrupted service delivery.
  • The Department of Agriculture, Forestry and Fisheries ensures that its targets as derived from the strategic plan were aligned with those of the Marine Living Resources Fund.
  • The Department of Agriculture, Forestry and Fisheries provides an explanation on causes of delays in the implementation of the Working for Fisheries Programme and also provides measures to address delays.
  • The Department of Agriculture, Forestry and Fisheries comes up with alternative and effective plans to strengthen monitoring, control and surveillance to address poaching. The Department should present to the Committee a full detailed report on conviction rates and penalties, and plans to review or reinstate Green Scorpions and Green Courts.
  • The Department of Agriculture, Forestry and Fisheries provides the Committee with the report on transformation of the fishing sector.
  • The Department of Agriculture, Forestry and Fisheries provides the Committee with the report on moving the Fisheries Branch to Pretoria .
  • The Department of Agriculture, Forestry and Fisheries provides the Committee with a strategy and plan of action of assisting underperforming entities.
  • The Department of Agriculture, Forestry and Fisheries ensures that the Land Bank through the Department’s account to the Committee on the funding that is receiving from the Department.
  • The Department of Agriculture, Forestry and Fisheries presents a detailed report on the Ministry’s budget and come to the Committee to account on the budget report. This report should include information on the extent to which the Deputy Minister of Agriculture, Forestry and Fisheries reached set targets and budget implications thereof.
  • The Department of Agriculture, Forestry and Fisheries presents to the Committee a mechanism on alignment between the Department and provinces on the challenges regarding the spending of conditional grants.
  • The Department of Agriculture, Forestry and Fisheries considers having the monitoring and evaluation team within the Department that will focus on monitoring and evaluating set targets, the funding (conditional grants - CASP and Disaster Fund) transferred to the provinces and report back to the Committee quarterly.
  • The Department of Agriculture, Forestry and Fisheries provides the Committee with full detailed reports on the current investigations and disciplinary actions taken by the Department, including Dr RP. Mohlahlane’s, Mr Zita, Dr Middleton and other investigations.
  • The Department of Agriculture, Forestry and Fisheries provides a progress report regarding pieces of legislation that were supposed to come to Parliament in the year under review, upgrading of agricultural colleges and the accessibility and usability of the Department’s website.
  • The Department of Agriculture, Forestry and Fisheries presents a full report with a plan and budget on the long term fishing rights to be allocated next year. This required report should be submitted to the Committee within three months after the adoption of this Report by the House.
  • The Department of Agriculture, Forestry and Fisheries presents the implementation strategy with timelines and budget on small scale fishing policy within three months after the adoption of this Report by the House.
  • The Department of Agriculture, Forestry and Fisheries provides the committee with the report on compliance with international agreements affecting the fishing industry with start and renewal times as a matter of urgency and within three months.
  • The Department of Agriculture, Forestry and Fisheries provides a turnaround strategy and budget for revitalizing and upgrading the 12 proclaimed fishing harbours within three months.
  • The Department of Agriculture, Forestry and Fisheries reports back on all the recommendations by the Committee on the transformation of fishing industry (ATC dated 8 May 2012) within 3 months.
  • The Department of Agriculture, Forestry and Fisheries ensures that there is collaboration between the Onderstepoort Biological Products and Perishable Products Export Control Board on the live stock industry.
  • The Department of Agriculture, Forestry and Fisheries increases Perishable Products Export Control Board’s budget and mandate to include quality controls and testing of imported fresh and frozen goods in the 2012/2013 budget allocation.
  • The Department of Agriculture, Forestry and Fisheries considers increasing Onderstepoort Biological Products funding for proper equipment.
  • The Department of Agriculture, Forestry and Fisheries ensures that, when entities report on their annual performance, they include financial information that links their targets with the budget.
  • The Department of Agriculture, Forestry and Fisheries briefs the Committee on how it is planning to integrate the National Development Plan in order to internalise it into a policy and to guide plans for the Department, and to include it in the 2012/2013 budget allocation. This briefing should be conducted within three months after the adoption of this Report by the House.
  • The Department of Agriculture, Forestry and Fisheries submits a progress report on the transfer of agricultural colleges to the Department of Higher Education and Training.
  • The Department of Agriculture, Forestry and Fisheries together with Ernst and Young, brief the Committee on the preliminary findings on the first phase of the Ernst and Young forensics report. This briefing should take place within a month after the adoption of this Report by the House.
  • The Department of Agriculture, Forestry and Fisheries submits a progress report on the transformation of the Forestry Industry.
  • The Department of Agriculture, Forestry and Fisheries makes arrangements that its Internal Audit Committee reports its internal audit findings to the Committee quarterly.

Report to be considered

Documents

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