ATC141024: 2014 Budgetary Review and Recommendations Report of the Portfolio Committee on Agriculture, Forestry and Fisheries
Agriculture, Land Reform and Rural Development
The Budgetary Review and Recommendations Report of the Portfolio Committee on Agriculture, Forestry and Fisheries, dated 23 October 2014.
The Portfolio Committee on Agriculture, Forestry and Fisheries (hereinafter referred to as the Committee), having considered the performance and submission to National Treasury for the medium term period of the Department of Agriculture, Forestry and Fisheriesreports as follows:
1. Introduction
1.1. Mandate of the Portfolio Committee on Agriculture, Forestry and Fisheries.
The mandate of the Committee is to c onsider, 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) and its entities, namely,
1.1.1 The Agricultural Research Council (ARC)
1.1.2 Onderstepoort Biological Products (OBP)
1.1.3 National Agricultural Marketing Council (NAMC)
1.1.4 Perishable Products Export Control Board (PPECB)
1.1.5 Marine Living Resources Fund (MLRF)
1.1.6 Ncera Farms (Pty) Ltd (hereinafter referred to as Ncera)
1.1.7 The South African Veterinary Council (SAVC), which is a non-profit entity and representative professional body for veterinary and para-veterinary professions.
The Committees 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.
1.2. 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 Departments 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.
During the 2013/14 financial year, the D epartment reviewed its strategic goals andassociated objectives to address priorities that are identified in the National Development Plan (NDP). Through the process, the Department reduced its strategic goals from six in prior years (including 2013/14) to the following four goals, effective from 2014/15:
|
Strategic Goal |
Strategic Objectives
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1: Effective and efficient strategic leadership, governance and administration |
1.1 Strengthen the culture of compliance with statutory requirements and good governance practice. 1.2 Strengthen the support, guidance and interaction with stakeholders in the sector 1.3 Strengthen institutional mechanisms for integrated policy and planning in the sector
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2: Enhanced production, employment and economic growth in the sector
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2.1 Advance APAP through increased production and productivity in prioritised value chains 2.2 Effective management of biosecurity and sector related risks 2.3 Ensure support for market access and processing of agriculture, forestry and fisheries products
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3: Enabling environment for food security and sector transformation
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3.1 Lead and coordinate government food security initiatives 3.2 Enhance skills capacity for efficient delivery in the sector 3.3 Strengthen planning, implementation and monitoring of comprehensive support programmes
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4: Sustainable use of naturalresources in the sector
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4.1 Ensure the conservation, protection, rehabilitation and recovery of depleted and degraded natural resources 4.2 Ensure appropriate responses to climate change through the implementation of effective prescribed frameworks
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The Department further contributes directly to three of the national Government priority outcomes, namely:
· Outcome 4: Decent employment through inclusive economic growth. Due to its labour- intensiveness and the ability to absorb unskilled and semi-skilled labour, agriculture
has great potential to assist Government in the fight against poverty and unemployment. Various job creation interventions that are specific to the sector have been identified and outlined in other Government policy instruments.
· Outcome 7: Vibrant, equitable and sustainable rural communities contributing towards
food security for all. O utcome 7, which focuses on rural development, is chaired by the Department of Rural Development and Land Reform (DRDLR), while DAFF is co-chairing, given its role in the economic development of the rural poor. In addition, the Department is responsible for the Agrarian Transformation pillar of the Comprehensive Rural Development Programme (CRDP) of the DRDLR through which it must ensure food security through agricultural production in rural areas. In this regard, the two Departments are expected to work collaboratively to ensure accelerated development and increased agricultural production in rural areas.
· Outcome 10: Protect and enhance environmental assets and natural resources. As agriculture, forestry and fisheries sectors are all based on finite resources, the Department is responsible for ensuring the sustainable use and management of these resources including rehabilitation and/or restoration of degraded areas where necessary.
The following are six programmes of the Departmentthrough which it carries out its mandate and addresses its strategic goals and Government outcomes:
Programme 1: Administration
Programme 2: Agricultural Production, Health and Food Safety
Programme 3: Food Security and Agrarian Reform
Programme 4: Economic Development, Trade and Marketing
Programme 5: Forestry and Natural Resources Management
Programme 6: Fisheries Management
1.3. 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 Parliaments National Assembly, through its Committees, to make recommendations to the Minister of Finance to amend the budget of a national department. In October each year, Committees reporting to the National Assembly must submit a Budgetary Review and Recommendation Report (BRRR) for each department that falls under its oversight responsibilities, in this case, the Department of Agriculture, Forestry and Fisheries.The BRRReport:
· must provide an assessment of the Departments service delivery performance given available resources;
· must provide an assessment on the effectiveness and efficiency of the Departments 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).
1.4. 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 2013/14:
1.4.1 Briefings by the Department on all four quarterly performance and expenditure reports of the Department for the 2013/14 financial year and the first quarterly report for the 2014/15 financial year.
1.4.2 Oversight visits to:
a) TheFree State Province in August 2013 to oversee the implementation of the mechanisation and other infrastructure development programmes including the utilisation of conditional grants.
b) KwaZulu-Natal (KZN), Limpopo and North West as part of the ad hoc Committee to exercise coordinated oversight on the reversal of the legacy of the Natives Land Act of 1913 between 06 August and 22 October 2013.
c) Ncera in November 2013to meet with the stakeholders of the entity to report back on the outcomes of the Committee engagements with the Department regarding deregistration of the entity and associated future plans.
d) The ARC and OBPin February 2014 to oversee progress in the establishment of the Foot-and-Mouth Disease (FMD) Facility at the ARC and the modernising of vaccine manufacturing facilities at OBP; as well as progress regarding previous Committee recommendations that were made in relation to the two entities.
e) Ncera in September 2014 to get a better understanding of the situation that led to the previous Committee recommending deregistration of the entity, to determine the Departments progress on deregistration and to meet and engage with stakeholders regarding the future of Ncera.
1.4.3 Invited the Auditor-General (AG) to give input on the relevance and alignmentof the Departments Strategic Objectives for the 2013/14 Annual Performance Plan (APP).
1.4.4 The Committee held briefings and considered the Strategic Plan and Budget of the Department for the 2014/15 financial year, including those of its entities, viz. ARC, OBP, NAMC, PPECB, MLRF and Ncera.
1.4.5 On 14 October 2014, the Auditor-General (AG), the Financial and Fiscal Commission (FFC) and the Department of Planning, Monitoring and Evaluation (DPME) were invited to give input on the Department and the entities annual performanceand expenditure for the 2013/14 financial year.
1.4.6 Subsequently, on the 16 th and 17th October 2014, the Committee held briefings and considered the Annual Reports of the Department and all its entities for the 2013/14 financial year.
The BRR Report also draws from other expert presentations and inputs including assessment reports from the DPME.
1.5. 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 including shortcomings and developments; an overview of the Committees previous budgetary and service delivery performance findings and recommendations; the Departments financial and service delivery performance for the 2013/14 financial year to date; and further observations and recommendations including those from oversight visits. As funding for the activities of most of the Departments entities is encompassed within the Departments programmes, key issues relating to only those entities that receive budgetary allocation from the Department are discussed under those relevant programmes.
2. Overview of the key relevant policy focus areas
In the medium term, the Departments 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, food security and rural development and natural resources management; New Growth Path (NGP); the National Development Plan (NDP); the Medium Term Strategic Framework (MTSF) and the Industrial Policy Action Plan (IPAP). This section will also provide a brief overview of the Departments policy initiatives for the 2013/14 financial year and the medium term period.
2.1 The New Growth Path (NGP)
The NGPwas adopted by Government in 2010 as a framework for economic policy and a driver of the countrys job strategy. The NGP identifies the agricultural value chain (agroprocessing) as one the key job drivers. This is linked to Outcome 4 of Governments priority outcomes and it is therefore expected that the Departments performance trends will show progress towards the achievement of this outcome.
The NGPs aim for agriculture is to create 145 000 jobs from agro-processing by 2020; to place 300 000 households in smallholder schemes by 2015 and to upgrade employment on commercial farms, which at the time (2010/11), stood at approximately 660 000. In total, the NGP expected creation of 500 000 jobs from the agricultural sector (includes forestry and fisheries) by 2020, which is a period of 8 years from 2011/12 financial year.
2.2 The National Development Plan (NDP)
The NDP (Vision 2030) was adopted in September 2012 as the countrys roadmap to address continuing poverty, inequality and unemployment that are negatively affecting the lives of many citizens. Its overarching aim is to eliminate poverty and reduce inequality by 2030. 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 will include:
o Increased infrastructure investments for the development of new irrigation systems in the Umzimvubu River Basin in the Eastern Cape and the Makhathini Flats in KwaZulu-Natal (KZN).
- 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 involves:
o 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.
2.3 The Industrial Policy Action Plan (IPAP): 2013/14 to 2015/16
The IPAPis derived from the National Industrial Policy Framework that was adopted by Government in 2007. It is one of the key pillars of the NGP and is also informed by the NDP. The overarching goal of the IPAP is to prevent decline in the countrys industries and to support growth and diversification of the manufacturing sector, which can generate jobs in a range of primary and service sector activities. Key areas of intervention include beneficiation, infrastructure development, local procurement and supplier development, regional economic development and industrial integration, new export markets and participation in BRICS. In terms of agriculture, forestry and fisheries, the IPAP 2013-2016 focuses on:
1. Development of the organic food sector.
2. Supporting public-private partnerships (PPP) for food security.
3. Promote public and private investments in aquaculture.
4. An integrated approach to fast-tracking the issuance of water licences and accelerate forestry development.
5. Productivity improvement and sustainable supply of raw material for the sawmilling industry.
2.4 Medium Term Strategic Framework (MTSF): 2014-2019
The MTSF is the Governments strategic plan for the 2014 to 2019 electoral term that puts into action the NDP objectives. It is essentially the first 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 strategicthemes of the MTSF are radical economic transformation and improving service delivery.The MTSFs aim is to ensure policy coherence, alignment and coordination across Government Plans, as well as alignment with budgeting processes. It sets out actions Government will take and targets to be achieved. In terms of agriculture, forestry and fisheries, the main policy imperatives are:
1. Improved food security
2. Smallholder farmer development and support (technical, financial and infrastructure) for agrarian transformation
Some of the performance targets that are set out in the MTSFand are informed by the NDP include:
Outcome 4: - implementation of the APAP.
- Implementation of the Comprehensive Africa Agriculture Development Programme (CAADP).
- Implementation of the Agricultural, Forestry and Fisheries Market and Trade Development Strategy.
- Smallholder producer (agriculture, forestry and fisheries) development and comprehensive support.
- Infrastructure development for economic development.
Outcome 7: - Implementation of the Food and Nutrition Security Strategy
- Development and implementation of policies that promote the development and support of smallholder producers.
- Provide necessary support to smallholder producers to ensure production efficiencies.
- Ensure that 1 million hectares of underutilised communal land and land reform projects are under production (Fetsa Tlala).
- Expand land under irrigation.
Outcome 10: - combat land degradation in forestry areas.
- Produce scientific update of resource status and recommendations for subsequent seasons sustainable catch for abalone, West Coast Rock Lobster (WCRL) and deep-water hake.
- Develop and implement climate change sector adaptation strategies/plans for agriculture and marine fisheries.
2.5 The Departments Key Policy Developments
In the 2013/14 financial year, the Department introduced new, and reviewed existing, policies to realise the objectives of the key Government policy priorities and outcomes. The following are some of the key policy developments:
a) National Food and Nutrition SecurityPolicy
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.
b) Smallscale Fisheries Policy
The Smallscale Fisheries (SSF) Policy was adoptedby 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.TheDepartment needs to fast track the development of the implementation plan for the policy.
c) The Integrated Growth and Development Policy (IGDP)
The IGDPwas 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 Africas agriculture, forestry and fisheries sectors . It was first published in 2012 but has since been revised to align with the IPAP 2013-16, NGP and NDP. 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. It also seeks to develop a common vision encompassing all three sectors, and to develop an integrated implementation framework which allows common issues to be addressed in unison, and specific issues to be addressed in separate policies and strategies.
d) The Agricultural Policy Action Plan (APAP)
TheAPAP is an implementation arm of the IGDP that was developed in 2013 and seeks to translate the high-level responses offeredin the IGDP, into tangible, concrete steps to promote food production and employment. It is based on the model of the IPAP. It is a five-year plan that aligns itself with the NGP, NDP, IPAP and the MTSF; 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.
3. Summary of previous key financial and performance
recommendations of Committee
3.1 2013/14 Budget Vote Report and BRRR Recommendations
The following are some of the recommendations that were made by the previous Committee for the attention of the Minister of Agriculture, Forestry and Fisheries:
3.1.1 Provide the Committee with a plan or strategy on how the Department plans to address consistent vacancies in the Department, particularly at senior management service (SMS) level as these impact on the ability of the Department to carry out its mandate, on service delivery and effective utilisation of its budget. Lack of skills associated with the high vacancy rate was also linked to the continued use of consultants to carry out Departmental functions. The Committee considered use of consultants an ineffective use of limited financial resources and an indication of poor accountability within the Department. Although the vacancy rate in 2013/14 has been reduced from 13per cent to 9.5per cent, the plan was never submitted.
3.1.2 Strengthen the Departnets monitoring and evaluation (M & E) system to ensure accountability; and consider establishing an M & E team within the Department that will focus on monitoring and evaluating the set targets against delivery specifically for the conditional grants that are transferred to provinces (e.g. CASP, Ilima/letsema, LandCare) including the Disaster Management Funds. The Department must report on these to the Committee on a quarterly basis as a substantial portion (approximately 40 per cent in 2013/14) of the Departments budget is allocated to conditional grants. The Department has an M & E Chief Directorate but its activities have not been well articulated or communicated to the Committee.The Department have recently indicated the existence of an M & E Plan that is ineffective and need review.
3.1.3 Address repeat findings by the Auditor-General (AG) on annual financial statements of the Department, which include lack of leadership, unreliability of information and weak internal controls (risk management) due to absence of an internal audit unit and non-compliance with legislation and regulations. In this regard, the Department must ensure that action is taken against transgressors in terms of the Public Finance Management Act (PFMA) (Act No. 1 of 1999) and National Treasury Regulations. This should apply to the Department, its entities and provinces in terms of conditional grants. T he Minister was asked to table a report in Parliament with an action plan for rectifying the repeat findings. While a report was not submitted to the Committee, the Department and the AG have reported on the progress that has been made to address some of the AG findings, including the establishment of an Internal Audit Committee.
3.1.4 Ensure that during the MTEF period, sufficient funding is set aside to implement new programmes and legislation that has been and/or will be brought before Parliament. The Department reported that they continuously make submissions to the National Treasury in this regard.
3.1.5 Provide a detailed report to the Committee by March 2014, on mentorship programmes and strategic partnerships in agricultural land reform projects that they are funding. The Committee has observed during some of its oversight visits that some of the partnerships were benefiting the mentors or strategic partners at the expense of land reform beneficiaries. The report has not been submitted to the Committee.
The following are some of the recommendations that were made by the previous Committee for the attention of the Minister of Finance:
3.1.6 Considers continued and significant budget allocation to the Onderstepoort
Biological Products (OBP), which is a National Key Point that plays a very important role in the countrys food safety, the prevention and management of livestock diseases. Old infrastructure and equipment inhibits the OBPs ability to produce sufficient quantities of vaccines for economically important livestock diseases. The Minister referred to the R492 million that was allocated to the OBP for the MTEF period (2012/13 to 2015/16). However, the MTEF allocation was specifically for infrastructure refurbishment, not operational activities.
3.1.7 Consider a budgetary increase for Programmes 2 and 3 in 2014/15 going forward given the focus on subsistence and smallholder producers and their needs, the implementation of the Fetsa Tlala Food Production Initiative, the persistent challenges associated with diseases of economic importance that have a negative impact on exports. The 2014/15 budget reflected increases in the two programmes but these were not necessarily for Fetsa Tlala or addressing challenges associated with animal diseases. Fetsa Tlala has since been funded through the CASP grant.
3.1.8 In the MTEF period, consider an additional funding allocation for Working for Fisheries (WfF), the programme of the Expanded Public Works Programme (EPWP) that is responsible for job creation in the fisheries sector; to ensure that it specifically covers the entire South African coastline in terms of job creation. From 2014, the Department must report on progress in this programme along with other conditional grants on a quarterly basis
In response to the 2013 BRRR recommendation for additional funding for Programmes 2 and 3, the National Treasury did not support the recommendation citing underspending averaging 6.5 per cent in the medium term expenditure framework (MTEF) period on conditional grants that are transferred through these programmes. In terms of addressing challenges associated with animal diseases, Treasury referred to the R492 million that was allocated to the OBP in the medium term from 2013/14 to 2015/16 for modernising vaccine manufacturing facilities.
However, vaccines only address one aspect of animal disease management (i.e. prevention and only when used appropriately and timeously) and the rest is the responsibility of the Department including its provincial counterparts. The Committee recommended additional funding in particular for Programme 2 in light of the fact that the country has in the past few years, been experiencing repeat outbreaks of diseases of economic importance such as citrus black spot (CBS), Rift Valley fever (RVF), avian influenza, foot-and-mouth disease (FMD), etc., and the management of these requires sufficient resources and skills capacity. In addition, the Department planned to implement Compulsory Community Service for veterinary professionals from 2015/16, which will also require additional resources as these trainee professionals are meant to be placed in rural and remote areas.
3.2 2014/15 Committee Strategic Plan and Budget Vote Report
During the 2014/15consideration of strategic plans and budget process, the Committee made recommendations that the Minister of Agriculture, Forestry and Fisheries should:
3.2.1 Enforce intergovernmental relations (IGR) to avoid duplication of activities from limited financial resources and to ensure optimal resource use for efficient service delivery and maximum impact. For example, DAFF should be involved in collaborative activities with its entities and other Departments such as Rural Development and Land Reform, Trade and Industry, Environmental Affairs, Water and Sanitation, Public Works and others.
And the Minister should ensure that the Department of Agriculture, Forestry and Fisheries (DAFF):
3.2.2 Develops a strong business case that will be presented to the National Treasury for additional funding for DAFF that will also include a plan that shows how the Department will work in a coordinated and collaborative manner with its entities by the end of September 2014.
3.2.3 Provides an action plan to the Committee on the implementation of the Integrated Growth and Development Plan (IGDP) and Agricultural Policy Action Plan (APAP) before the end of the second quarter of 2014/15 (October 2014).
3.2.4 The NAMC submits a detailed report of projects that are funded through the Strategic Integrated Infrastructure Project 11 (SIP 11) that is aimed at improving investment in infrastructure to support agricultural, forestry and fisheries production (including aquaculture). The NAMC should also provide a full briefing to the Committee on its role in SIP 11 during the second quarter of the 2014/15 financial year.
3.2.5 Provides the Committee with a report on research that has been conducted on new fisheries within 30 days after the adoption of the Budget Report by the National Assembly.
3.2.6 Works with the ARC to develop a Master Plan that will inform how the ARC will incorporate Ncera Service Centre within its livestock improvement programmes. The Plan must include an additional budget allocation to the ARC that will assist the programme for the benefit of the Eastern Cape Province.
4. OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE
4.1 Overview of Vote Allocation and Spending (2010/11 - 2016/17)
The Departments budget allocation has been increasing exponentially across programmes in the previous medium term expenditure framework (MTEF) period from 2010/11 to 2013/14 (see Table 1 on next page). However, a slower growth is observed in the next MTEF period with the budget allocation slightly decreasing for some of the programmes between 2015/16 and 2016/17. The total budget allocation to the Department will decline by approximately R335 million in the MTEF period. This is due to Cabinet approved reductions and an annual shifting of R22 million in the MTEF to the Department of Environmental Affairs (DEA) in line with the shift of the Knysna Indigenous Forest management function from DAFF to DEA. Other reported reductions, which are not expected to impact service delivery, will be on transfers and entities and goods and services across all programmes.
As in the previous year and consistent with the key intervention areas of the Department and Government policy initiatives, the largest allocation from the Departments budget is shared amongst three programmes, namely, Agricultural Production, Health and Food Safety (Programme 2), Food Security and Agrarian Reform (Programme 3) and Forestry and Natural Resources Management (Programme 5) see Table 1 on next page. During the 2013/14 financial year, approximately 78per cent of the Departments budget was spent among the three programmes. The three programmes are responsible for transfers of conditional grants to provinces and some of the entities. They also contribute to the Government priority outcomes as follows, Programmes 2 and 3 to Outcome 7 (food security and rural development), Programmes 3 and 5 to Outcome 4 (job creation) and Programme 5 also contributes to Outcome 10 (natural resources management).
Programme 2, which received the largest share of the total budget of the Department (approximately 32 per cent of appropriation in 2013/14) is the Programme through which allocations to the ARC, Ilima/letsema and the OBPs funding for the refurbishment and modernisation of vaccine manufacturing infrastructure are made.
Table 1. The Departments spending trend per programme (Estimates of National Expenditure, 2014)
|
Programme
R Million |
2010/11 |
2011/12 |
2012/13 |
2013/14 |
2014/15 |
2015/16 |
2016/17 |
|
|
Audited Outcomes |
Audited Outcomes |
Audited Outcomes |
Adjusted Appropriation |
Audited Outcomes |
MTE Estimates |
MTE Estimates |
MTE Estimates |
|
|
Administration |
478.8 |
582.0 |
644.9 |
670.9 |
670.9 |
694.6 |
725.6 |
763.9 |
|
Agricultural Production, Health and Food Safety |
1 234.4 |
1 644.9 |
1 874.8 |
2 036.5 |
2 036.5 |
2 199.8 |
2 252.7 |
2 089.4 |
|
Food Security and Agrarian Reform |
1 050.9 |
1 251.6 |
1 405.2 |
1 599.3 |
1 599.3 |
1 711.1 |
1 718.8 |
1 768.7 |
|
Economic Development, Trade and Marketing |
145.3 |
190.2 |
212.2 |
258.2 |
258.2 |
294.2 |
247.5 |
309.9 |
|
Forestry and Natural Resources Management |
661.5 |
884.7 |
1 191.8 |
1 183.6 |
1 183.6 |
1 364.9 |
1 233.4 |
1 279.3 |
|
Fisheries Management |
259.1 |
352.0 |
484.3 |
433.7 |
433.7 |
427.8 |
443.3 |
462.9 |
|
Total |
3 830.0 |
4 905.3 |
5 8132.2 |
6 182.3 |
6 182.3 |
6 692.4 |
6 621.2 |
6 674.2 |
|
|
||||||||
The allocation to the OBP is for the medium term ending in 2015/16, hence the observed decrease in Programme 2 allocation in 2016/17 (Table 1). Allocations for CASP, which still constitute the largest share of the R2.1 billion (34per cent of the total Department Vote appropriation) that goes to conditional grants,are made through Programme 3 and Programme 5. Programme 3 is also responsible for transfers to Ncera, Agricultural Colleges and a skills development and training fund to the PPECB.The CASP allocation to Programme 5 is for the Disaster Relief Fund. Programme 5 is also responsible for the distribution of LandCare grants.
4.2 Financial Performance in 2013/14
The Department of Agriculture, Forestry and Fisheries (DAFF) was appropriated a total amount of R6.18 billion in the 2013/14 financial year, a slight increase (1.3 per cent in real terms) from theR5.86 billion that was appropriated in the 2012/13 financial year (see Table 2). In the reporting year, the Department spent 98.9 per cent of its total appropriation.Approximately 59 per cent of the Departments appropriation for 2013/14 went to transfers and subsidies, which consist of conditional grants and transfers to entities. The ARC received 69 per cent (950 million) of the total transfers to entities and CASP received approximately 80 per cent (R1.6 million) of the total transfers for conditional grants. The increase in CASP funding in the MTEF is due to the implementation of the Fetsa Tlala Food Production Initiative.
Underexpenditure in the reporting year (2013/14) is approximately R70 million, which is approximately R15 million more than in 2012/13 (see Table 2). More than 64 per cent of the unspent amount was in goods and services (R45.3 million). Only two programmes, namely, Programmes 4 (Economic Development, Trade and Marketing) and 6 (Fisheries Management) spent 100per cent of their allocated budgets. However, Programme 4 only completed 83per cent of the planned targets. Poorly performing Programmes in terms of completion of planned targets, were Programme 5, which completed 64per cent of targets but spent 98per cent of the budget; Programme 3 completed 75per cent of planned targets but spent 99per cent of the budget; Programme 1 (Administration) completed 76per cent of targets but spent 96.7per cent of its budget and Programme 2 completed 83per cent of planned targets but spent 99.5per cent of its budget.
Lack of accountability on the utilisation of conditional grants by provinces, which is attributed to the Departments poor monitoring of the grants and skills capacity and poor planning in provinces, remains a challenge. This is evident in the performance of Programmes 3 and 5, which are both responsible for disbursing the grants. Usefulness and reliability of information for verification of targets completed in these grants particularly in Programme 5, is a persistent challenge that has been consistently highlighted by the AG as a repeat finding. The AG attributed this to lack of regular physical oversight visits (ideally, on a monthly basis) by the Department, which relies on written reports for monitoring the grants.
Table 2. Programme Budget and Expenditure
|
Programme |
2013/14 |
2012/13 |
||||
|
Final appropriation R000 |
Actual expenditure R000 |
Under expenditure R000 |
Final appropriation R000 |
Actual expenditure R000 |
Under expenditure R000 |
|
|
Administration |
704 671 |
681 583 |
23 088 |
660 453 |
647 240 |
13 213 |
|
Agricultural Production, Health & Food Safety |
2 010 320 |
2 000 946 |
9 374 |
1 875 189 |
1 874 832 |
357 |
|
Food Security & Agrarian Reform |
1 604 592 |
1 590 101 |
14 491 |
1 415 482 |
1 402 877 |
12 605 |
|
Economic Development, Trade & Marketing |
256 452 |
256 334 |
118 |
212 506 |
212 169 |
337 |
|
Forestry & Natural Resources Management |
1 168 579 |
1 144 699 |
23 880 |
1 220 945 |
1 191 785 |
29 160 |
|
Fisheries Management |
437 668 |
437 650 |
18 |
484 352 |
484 330 |
22 |
|
Total |
6 182 282 |
6 111 313 |
70 969 |
5 868 927 |
5 813 233 |
55 694 |
Source: Annual Report (DAFF), 2014
4.3 Report of the Auditor-General and Other Oversight Institutions
4.3.1 The Auditor-General of South Africa
In terms of financial statements, the Department received an unqualified audit opinion from the Auditor-General (AG) for the 2013/14 financial year. Without qualifying the opinion, the AG drew attention to the following matters, which were mostly repeat findings:
· Internal auditing and risk management no internal audit reports were submitted in 2013/14 as the Internal Audit Committee only had one member as others have resigned earlier in the year.
· Deficiencies in internal controls.
· Usefulness and reliability of reported information including indicators that are not verifiable.
· Non-compliance with National Treasury Regulations and PFMA reporting requirements.
Notwithstanding the repeat findings, which were also attributed to instability in the Departments senior management service level (the Accounting Officer was appointed on 01 October 2013) in 2013/14, the AG commended the Departments willingness to rectify the weaknesses that are linked to the audit findings. In this regard the AG highlighted some of the progress that has been made to address past findings and indicated that the Departments Accounting Officer and the Finance Directorate interact with the AG on a regular basis; and have also solicited the assistance of the National Treasury for some of the finance related matters. Some of the issues that have been addressed include the establishment in March 2014, of an Internal Audit Committee and a Risk Management Committee.
In response to the AGs findings, the Department also presented corrective measures to the Committee to address the findings during the current financial year. These include inter alia:
· Compilation of the audit matrix for the 2013/14 audit findings to ensure compliance before the AGs interim audit in November 2014.
· Made it compulsory for all Deputy-Director Generals (DDGs) to attend the Audit Steering Committee meetings for the 2014/15 audit period and sign-off on al findings.
· With effect from the 2014/15 Second Quarter, Departmental Branches to report to the Executive Committee on a monthly basis and Departmental performance reviews at the end of each quarter.
· Revised templates for Quarterly Performance to strengthen accountability and address audit findings.
· Existing Operational Planning as well as Monitoring, Evaluation and Reporting Guidelines reviewed on an annual basis
4.3.2 The Financial and Fiscal Commission (FFC)
The FFC analysed the Departments spending trend from 2011/12 to 2016/17 and also included comments on the MTEF budget allocation. While giving an overview of the performance of conditional grants they highlighted the long history of poor performance by conditional grants. In this regard, they emphasised the need for regular oversight visits to projectsby Parliament and holding provincial Accounting Officers accountable for conditional grants as they bid for them. The FFC recommended that due to poor performance and overlapping objectives, current conditional grants should be consolidated into a comprehensive agricultural and rural development finance programme that will preferably be administered by one Department. The FFC reported that this is an old recommendation from as far back as 2007/08 financial year, which unfortunately was not supported by Government. The FFC indicated that they feel strongly about the recommendation as it will minimise administrative burden on provinces and improve efficiency of spending of conditional grants. It was however, mentioned that the Department is in discussion regarding the consolidation of conditional grants.
4.3.3 The Department of Planning, Monitoring and Evaluation (DPME)
The DPME presentation focused on Outcome 7 (rural development and food security) and to some extent, Outcome 4. The DPMEs management performance assessment tool (MPAT) for 2013/14 was consistent with the AG findings. In terms of the MPAT Scorecard for the Department, the Department scored poorly in addressing matters associated with recruitment and retention; internal audit, risk management and fraud prevention; and management structure and diversity. The Departments intervention programmes were found not to have a significant impact on food security (13 million households vulnerable to hunger) and rural development; sector transformation through new entrants; and increased contribution to GDP growth. Some of the underlying factors that need to be addressed were high vacancy levels at SMS level, weak relationships between the Department and the industry, and lack of coordination between the Department and DRDLR. In terms of employment (Outcome 4), reports from conditional grants were found to be contradictory. In addition, different data sources have been used for the baseline, and targets and performance measurements on rural employment were not comparable.Interventions were suggested to strengthen collaborations with the established commercial sector; use of Government procurement to create opportunities for black commercial farmers and to review and accelerate initiatives to strengthen agricultural support to black commercial farmers.
4.4 Vacancy Rate and Skills Capacity
The Department did considerably well in decreasing its overall vacancy rate from 13 per cent in 2012/13 to 9.5 per cent in 2013/14 (1.5 per cent less than the targeted 11 per cent). However, the Department still has relatively high number of vacancies at the SMS level (12.5 per cent) and the highly skilled supervision level (16.5 per cent), as well as in Programme 3 (11.8 per cent) and Programme 4 (14.1 per cent).The Department has not met the 2 per cent equity target aimed at enhancing employment opportunities for people with disabilities (only 1.1 per cent has been achieved as in 2012/13) and is still below 50 per cent in terms of female representation in SMS positions. The vacancy rate at the end of Quarter 1 in 2014/15 (June 2014) was at 10 per cent. The AG also highlighted that the Department still struggles to fill SMS vacancies within six months. The Department stated that this is due to delays in the prescribed personnel suitability checks conducted by the State Security Agency (SSA) and the South African Qualifications Authority (SAQA); and the unavailability of members to sit on shortlistings and interview panels. In this regard, the Department
Currently, the Department has 3 vacancies for DDGs and these include that of the Forestry Branch, which became vacant when the previous DDGs contract expired in July. This however, was not an emergency and could have been planned for in advance considering that Forestry has been underperforming and consistently utilising consultants due to skills shortages. The vacancy, if not filled within the next few months, may impact the Branchs performance in the end of this financial year particularly the repeat findings related to CASP and LandCare grant allocations.
Other important DDG vacancies are that of Agricultural Production, Heath and Food Safety which became vacant when the DDG was transferred to Fisheries and the one for Policy,Planning, Monitoring and Evaluation Branch due to the previous DDG being deployed to Brazil as an Agricultural Attaché. The latter position was advertised in September and it is hoped that an appointment will be made soon given that the Department is still challenged in respect of policy development, planning and M & E. As the AG highlighted lack of physical monitoring in respect of conditional grants, the Branch plays a key role in ensuring that the Departments ineffective M & E Plan is reviewed for efficient and results-driven monitoring and evaluation of the implementation of policies and plans. In addition, the Branch should ensure that M & E practitioners are capacitated and well-resourced to carry out physical monitoring of all funded projects.
4.5 Quarterly Financial Performance
4.5.1 First Quarter 2013/14 and 2014/15
For the first quarter of 2013/14, the Department spent R1.3 billion, which is equivalent to 21.1 per cent of the budget, far less than the expected 25 per cent of the total budget. Worst performances were in Programmes 3 (12.2 per cent) and 5 (19 per cent). Programme 4 overspent in the 2013/14 First Quarter (38.4 per cent) due to a once-off transfer to the NAMC.
For the First Quarter of the current year, 2014/15, the Department spentapproximately R1.7 billion, which is equivalent to 24.8 per cent of the budget. However, out of 55 targets planned for the Quarter, the Department completed 25 (45 per cent). The Department was confident that this will not affect the annual performance as some of the targets are in progress and continuous. None of the programmes achieved 100 per cent spend in Quarter 1. Programme 2 was close with 90 per cent spend.
In both financial years, the First Quarter overall variation from the financial plans in the Department was mainly under transfers and subsidies (public entities and conditional grants to provinces) and goods and services for some of the Programmes. These are matters that need to be closely monitored.
The Department normally underspends in Quarters 1 to 3 due to delays in signing of memorandum of understanding and compliance certificates in respect of conditional grants transfers. Despite the Departments assurance to the contrary in the 2014/15 Quarter 1 briefing, these spending and performance trends will subsequently have an impact on the annual spending of the grants by some of the provinces. The Eastern Cape and the North West provinces were consistently underspending in the medium term.
4.6 Discussion on Financial Performance
Although there has been a significant improvement compared to prior years, the Department still has a challenge with effectively and efficiently spending its budget as planned and on planned targets, to ensure service delivery. Underspending and non-achievement of targets is largely through conditional grants to provinces, where service delivery needs to take place. This is still a challenge which has also been raised by the FFC. Any suggested additional budget allocation must be accompanied by an Action Plan that addresses previous challenges while clearly outlining how the additional budget is going to be effectively and efficiently used.
The Department is commended for the corrective measures that are put in place to address repeat findings from the AG, which are at the centre of most of its performance challenges. However, greater attention still needs to be paid on filling vacancies at SMS and highly skilled levels and addressing equity particularly for people with disabilities. The Department must prioritise monitoring and evaluation of internal processes and conditional grants in provinces as underspending negatively impacts service delivery; and must further tighten internal controls and address lack of capacity in provinces. The Department has indicated that an M & E Plan is in place but has not been effective and needs to be reviewed. In terms of intergovernmental relations (IGR), the Department indicated that they are working collaboratively with the DRDLR and have agreements that will be realised through the implementation of the APAP.
5. Overview and assessment of service delivery performance
5.1 Service Delivery Performance for 2013/14
In its 2013/14 Annual Performance Plan (APP), the Department set itself 52 targets for the year on which the budget was to be spent. It managed to spend 98.9 per cent of the budget but achieved only 41 targets (79 per cent) out of the 52. The proportion of targets that were achieved is conservative as some of the targets were partially completed and some were in progress. These included the conservation of animal genetic resources (Programme 2), implementation of an International Relations Strategy (Programme 4) and over reporting of the number of hectares that are rehabilitated (Programme 5). Due to some of these anomalies, the Financial and Fiscal Commission (FFC) place the number of achieved targets at 39 (75 per cent). While the Departments expenditure is expected to be aligned with achievements, the 75 per cent achievement of targets is an improvement from the 2012/13 financial year where the Department spent 99 per cent of the budget but only achieved less than 50 per cent of the planned targets.
5.1.1 Programme Performance and Expenditure
In previous years, the biggest challenge in reviewing the Departments programme performance and associated expenditure has been the intermittent changes in the presentation of performance targets in the Annual Report versus those that are in the Strategic Plan or Annual Performance Plan.This has been addressed and improved significantly in the 2013/14 Annual Report, with the exception of some errors and omissions. Whilst there is still a few anomalies in reporting, there is a significant improvement in the manner in which information is presented and the kind of information that has been included in the 2013/14 Annual Report. The challenge still remains with assessing service delivery performance that is linked to conditional grants within Programmes as programme expenditure is presented separately from performance targets. In addition, whilst the Departments activities are informed by the key Government policies initiatives such as the NDP, IPAP and the MTSF, when reporting, the Department does not always align its activities and Programmes including reporting, to these initiatives.Another challenge is the ambiguous targets that eventually reflect as duplication across Programmes, a case in point being the increase in the number of hectares under irrigation (250 hectares at Vaalharts Irrigation Scheme under Forestry Programme) and number of infrastructure anchor projects established (Vaalharts Irrigation Scheme under Food Security Programme). This has been reported and counted as an achievement under both Programmes as will be indicated below under Programmes.
Programme 1:Administration
The Administration programme spent 96.7per cent of its budget in 2013/14, slightly less than the 98 per cent spend in 2012/13. Out of 15targets that were supposed to be achieved under this programme, only 11 (73 per cent) were achieved.
The Department did not reach 100 per cent compliance to the P erformance Management and Development System (PMDS) by its personnel. It achieved 92 per cent in 2013/14, which is slightly more than the 89 per cent that was achieved in 2012/13. Notwithstanding the importance of, and the Committee emphasis on M & E, the Departments spending on the Policy Planning, Monitoring and Evaluation sub-programme has been decreasing in the last MTEF, from R101 million in 2011/12, R72 million in 2012/13 and R67 million in 2013/14.
Programme 2: Agricultural Production, Health and Food Safety
This programme has been consistently utilising almost 100 per cent of its budget allocation (99.9 per cent in 2012/13 and 99.5 per cent in 2013/14). It underspent under goods and services (R9.1 million) in the Animal Production and Health sub-programme. The programme had 6 targets for the 2013/14 financial year and5 of these were achieved (83 per cent), a marked improvement from the previous year where it achieved 60 per cent of planned targets. Under this programme, the Department has managed to reach the set targets for the number of producers that are benefiting from animal improvement schemes (Kaonafatso ya Dikgomo (1 200) and the pig improvement scheme (100)) for the 2013/14 financial year. The Department did not fully achieve the target for conservation of indigenous animal species (Afrikaner cattle in North West and Zulu sheep in KwaZulu-Natal (KZN)), citing misalignment of activities with the breeding seasons and subsequently, the gestation period for each species. The reasons given highlight poor planning and possibly, lack of capacity as any animal scientist will take the cited reasons into account when planning for breeding purposes before a service provider is appointed.
Programme 3: Food Security and Agrarian Reform
In this Programme,the Department spent 99 per cent of its allocated budget (similar to the previous year) but only achieved 75 per cent of its planned targets (3 out of 4). Achievements under this programme include the accreditation of Tsolo and Potchefstroom Agricultural Colleges by the Department of Higher Education and Training (DHET); establishment of anchor projects in Taung/Vaalharts (265 hectares) and Makhathini Irrigation Schemes and support of 16 000 smallholder producers with training, advisory services and infrastructure support. The Department also planned to support 130 000 subsistence farmers in the year under review (2013/14) with production inputs, training and advisory services. The Department only managed to assist 40 000 subsistence farmers as verification documents for 90 000 were disqualified. Although the programme was not planned for, but introduced by the President in October 2013, the Department reported an achievement of 104 000 hectares of fallow land that was brought into production of maize and dry beans under Fetsa Tlala Production Initiative through CASP funding.
A continuing challenge is underspending of the grants, which in the 2013/14 financial year amounted to R14.5 million due to transfers and subsidies in the Food Security Sub-Programme and current payments in the Sector Capacity Development sub-programme.That underspending was in these two subprogrammes is a serious concern given increasing household food insecurity particularly in rural areas, lack of skills capacity and the extension service that is not responsive to the needs of developing farmers.
Programme 4: Economic Development, Trade and Marketing
Programme 4 significantly improved its budget spending to 100 per cent in the year under review compared to 99.8 per cent in 2012/13. Despite spending almost all of its budget, the Programme managed to fully achieve only 3 out of its 6 planned targets for the 2013/14 financial year. The fourth target, implementation of South-South Cooperation Agreements with a focus on BRICS, was partially achieved. In this regard, as agreements with Russia, Cuba and Turkey are reportedly in progress. The Programme regressed in terms of achievement of targets from the previous financial year where it achieved 61.5 per cent of the planned targets.The Department could not implement CAADP but only managed to finalise consultations with provinces and other stakeholders, a process through which a draft CAADP Country Compact was reportedly developed.
Under this Programme, the Department facilitated the identification of and provision of support to two agroprocessing enterprises. However, these were not funded by the Department but through provincial equitable shares citing rigorous appraisal process for accessing AgriBEE Funds from the Land Bank. The Department has for the last few years been unable to deliver on sector transformation through the AgriBEE Fund, citing Land Bank processes. However, an amount of approximately R231 million AgriBEE Fund was returned to National Treasury in the last MTEF due to poor performance of the Fund. To ensure the realisation of radical transformation of the sector, this should be one of the focus areas under this Programme. It is unacceptable that much-needed funds have to be returned to Treasury due to poor intergovernmental relations (IGR) and lack of planning and vision on the part of the Department.
Programme 5: Forestry and Natural Resources Management
The Forestry and Natural Resources Management Programme spent 98 per cent of its budget, which is slightly more than the 97.6 per cent spend in 2012/13. Approximately R23 million was unspent in this Programme, which includes R11 million under goods and services, R9 million under compensation of employees and R3 million in respect of LandCare allocation for the Eastern Cape that was withheld due to underspending. The Department has set itself 14 targets under this Programme but on the Annual Report, some of these were merged and it ended up with 7 targets, making assessment of the actual achievement difficult. However, the Department reported that 9 out of 14 targets (64 per cent) were achieved under the Programme. Some of the achievements include the approval of climate change adaptation and mitigation programmes, and 265 hectares that were revitalised at Vaalharts Irrigation Scheme. The implementation of DAFF Plantation Growthand small, medium and macro enterprises (SMME) Strategies was not achieved. In this regard, the Department only managed to develop guidelines for SMMEs and a progress report on the state of the State Plantation Growth Strategy.
Programme 6: Fisheries Management
The Fisheries Management programme has consistently spent almost 100 per cent of its budget for the past two financial years and has done the same in the year under review (2013/14). The Department, under this Programme, reportedly achieved all of its set targets and exceeded some. A notable and commended achievement being in the aquaculture sector where more than 200 per cent achievement was received through supporting 23 fish farms against the set target of 10 farms. It is reported that this was achieved through aquaculture campaigns and partnerships with other Government departments, which increased investment in the sector. Some of the notable achievements that were not in the Annual Performance Plan (APP) is the finalisation and gazetting of the National Aquaculture Policy Framework and its implementation plan; green status (sustainable fish farming practise) of farmed dusky kob, and the review of various laws that govern aquaculture and are not under the Ministry of Agriculture, Forestry and Fisheries. The plan is to develop a single aquaculture legislation. These are commendable initiatives as aquaculture development is also central to the realisation of key Government Policy Initiatives and Outcomes (job creation, food security).
5.1.2 Performance of Conditional Grants in 2013/14
The Department is commended for providing information on conditional grants although there is still room for improvement regarding consistency in reporting and the alignment of the grant activities and budgetary spending, with the Programmes and Priority Outcomes. As a result, trying to link achievements and grant performance within and among Programmes becomes cumbersome and result in anomalies, and possibly, double counting. As an example, CASP budget allocation is disbursed through Programme 3 (Food Security) and Programme 5 (Forestry), thus contributing to all 3 Outcomes that the Department contributes to.
1. CASP : the conditional grant received approximately R1.6 billion, all of which was transferred to provinces. An amount of R846 million of the allocation (53 per cent) was spent on infrastructure, mechanisation and production input support; 21 per cent (R340 million) was spent on the Extension Recovery Plan/Programme (ERP) and 19 per cent (R301 million) was spent on repair of flood damaged infrastructure including support to affected farmers. The remaining R115 million was used on farmer training andcapacity building; and revitalisation of Agricultural Colleges.In the year under review, the Department received rollovers from Treasury amounting to R307.3 million, thus increasing available budget to R1.9 billion. A 99.5 per cent expenditure was realised on CASP.
A total of 39 194 farmers were reportedly supported though CASP in 2013/14 (smallholder: 20 154; subsistence: 17 193 and black commercial 1 847). In addition, 35 994 people indirectly benefitted from CASP and of these indirect beneficiaries, 63 per cent were male, 37 per cent were female, 12 per cent were youth and only 0.2 per cent were people with disabilities. The total number of jobs that was created in the year under review was 9 932. Of these jobs, 2 085 were permanent and the rest was temporary or seasonal.
2. Ilima/letsema: R438 million was transferred to provinces for this programme and an additional R16 million was approved in rollovers resulting in a total budget of R454.5 million. Provinces spent R424 million (93 per cent of the allocation). Under this grant, 63 448 farmers were supported and 34 146 of these were subsistence (54 per cent), 25 539 smallholders (40 per cent) and 3 763 black commercial (6 per cent). A total of 16 948 jobs were reportedly created through Ilima/letsema; 7 951 (47 per cent) of these were permanent and 8 997 were temporary or seasonal. In terms of gender, 46 per cent of the jobs went to males while the rest went to females. A total of 147 990 people indirectly benefitted from Ilima/letsema as follows: 126 246 adults (63 166 males and 63 080 females), 21 744 youth and 236 people with disabilities (148 males and 88 females).
3. LandCare: R108.9 million was allocated and R105.8 million was transferred to provinces. Of the allocated amount, R3.1 million was withheld by Treasury on request from the Department due to unsatisfactory project reporting from the Eastern Cape and North West. The provinces spent 96 per cent of the transferred funds (R102 million). LandCare implemented 176 projects, 167 of these were job-creation projects and the other 9 projects were awareness campaigns by DAFF and provincial officials. A total of 42 163 people benefitted, namely, 10 821 males, 18 426 females, 287 people with disabilities and 12 916 youth (JuniorCare). LandCare created 4 973 work opportunities; and 50 941 hectares were rehabilitated.
4. Extension Recovery Plan (ERP): A total of R339.9 million was transferred. The significant allocations under this programme was for recruitment and extension personnel (37 per cent), provision of ICT infrastructure (28 per cent) and visibility and accountability (16 per cent). The provinces only managed to appoint 84 extension officers out of the targeted 324. These appointments were only in Eastern Cape (14), Mpumalanga (21) and North West (49).
The Department has previously indicated that CASP was specifically for smallholder producers and Ilima/letsema for subsistence producers, yet the figures above tell a different story. Given the disparities in how the grants were used and possible duplication of activities amongst the first three grants, there is a need for an improvement in the coordination and integration of the conditional grants while looking into FFC recommendations regarding the grants.
The conditional grants are still largely focused on agriculture, and to some extent, forestry and have therefore, not been able to accommodate fisheries. In previous recommendation to the Committee, the FFC have also highlighted that the grants are narrowly focused on certain agricultural activities while more employment opportunities may be generated in complementary sectors that are outside the grant requirements such as agritourism and agroprocessing.
5.2 An Overview of the Performance of the Departments Entities
With the exception of the PPECB, all the Departments entities received financially unqualified audit reports with findings from the AG for the 2013/14 financial year.
5.2.1 Agricultural Research Council (ARC)
The ARC set itself 85 targets to achieve during the 2013/14 financial year and managed to achieve 66 (approximately 78 per cent) targets, which is an improvement from the 2012/13 financial year, where it achieved 59.9 per cent. Non-achievement of targets was attributed to budget constraints and a shortage of technical expertise to finalise research projects. In all its research areas, the ARC has managed to support smallscale farmers through improved technologies and innovations.These are commendable interventions given the many external challenges to the sector that are not exclusive to smallscale farmers but generally impact them the most. However, the entity could not implement the target for establishing one Agricultural Development Centre (ADC) in the Eastern Cape Province as planned. ADCs are aimed at providing services of technology transfer that prioritises support to smallholder and emerging farmers, albeit aligned to the main agricultural activities in a particular area, district, or region.
For the 2013/14 financial year, the ARC had a budget of approximately R1.63 billion, which comprised the Parliamentary Grant of R866 million from DAFF (Operational and Capital expenditure), National Treasury (Economic Competitiveness and Support Packages projects) and the Department of Science and Technology (DST) (operational expenditure); as well as R466 million from self-generated revenue. This represents an increase in allocation of over 38 per cent (R527 million). In the year under review, the ARC used approximately 91per cent of its budget and had a surplus of R158 million. The ARC received an unqualified audit opinion with findings on predetermined objectives and deficiencies in internal controls that led to an increase in irregular expenditure.
5.2.2 Onderstepoort Biological Products (OBP)
The OBP planned for 102 targets in the 201314 financial year and only achieved 52 of the planned targets (approximately 51 per cent). S ome of the OBPs targets were not specific or measurable, and hence , it was difficult to quantify those that have been achieved. In many instances, the reasons for the variance and non-achievement were attributed to f inancial and capacity constraints, operational inefficiencies due to ongoing refurbishments and equipment breakdown. The entity experienced a drop in overall sales, both in the domestic market and export markets and has lost market share both within the total animal health market and the vaccine market segment. The OBP has an unusually high staff turnover of 18 per cent (almost double the 9.5 per cent from 2012/13), which further limit its ability to carry out its mandate. The entity needs to evaluate and address the reasons for staff to leave the entity at such an alarming rate.
The entity has recorded a net revenue of R87million in the year under review, which represents a decline of about 2.2 per cent (R1.9 million) compared to the 2012/13 financial year (R88 million). The entity also incurred an operating loss of R27 million, which was mainly due to lower sales than anticipated. The OBP does not receive a G overnment grant but funds all its operations from i ts self-generated revenue (mostly from sale of vaccines). The OBPs financial performance improved from a qualified audit opinion in 2012/13 to an unqualified audit opinion in the year under review. However, the AG highlighted some findings in respect of measurability and reliability of performance targets, deficiencies in internal controls and non-compliance with Treasury Regulations.
Certain vaccines that are associated with the prevention of diseases of economic importance are only manufactured by OBP locally. These include vaccines for Rift Valley Fever (RVF), Bluetongue, Brucellosis Strain 19 (currently in short supply) and African Horse Sickness. It was reported that upgrading of the vaccine manufacturing plant is impacting on the entitys production capacity, and subsequently its generated revenue, where some sections have to be closed (e.g. Virology). Challenges were reported with the release of vaccines for Chlamydia; and back orders have been closed for Brucella and African Horse Sickness (AHS).
5.2.3 National Agricultural Marketing Council (NAMC)
Out of 152 targets, the NAMC achieved 67 per cent (104 targets), far less than the 89 per cent it achieved in the 2012/13 financial year. In the 2013/14 financial year, the NAMC received a Government grant of R33.8 million (almost R2 million less than the previous year), sponsorship for R26.6 million and generated an interest (from Trusts levies) of R872 000. The total expenditure for the year was R59.9 million and the NAMC realised a surplus of R1.4 million in the reporting year. The entity incurred irregular expenditure worth R73 000 due to non-submission of a tax clearance certificate by a supplier. The NAMC received an unqualified audit opinion but could not receive a clean audit due to AG findings related to predetermined objectives. The NAMC is also the Programme Management Unit (coordinating function) for Fetsa Tlala Food Production Initiative. In this regard, the NAMC has drafted a business plan for the Fetsa Tlala Initiative outlining land to be targeted, hectares to be planted and the costs.
5.2.4 Perishable Products Export Control Board (PPECB)
The PPECB for the fifth consecutive year, received a financially clean audit (financially unqualified with no findings). The Committee congratulated the PPECB for the clean audits. The PPECB does not receive a Government grant but in the 2013/14 financial year, it received R600 000 in respect of farmer capacity building and training from the Department. The entity spent all the allocated funding.
5.3 Service Delivery Performance Observations/Findings
5.3.1 Lack of collaboration and integrated activities between the Department and its entities, amongst the entities and between the Department and the DRDLR have been found to negatively impact service delivery in general, and in most land reform and rural development projects that were visited under the Comprehensive Rural Development Programme (CRDP), which is linked to both Outcomes 4 and 7. While the Department has alluded to better cooperation for example, between DAFF and DRDLR, some of the proposed policies from both Departments, do not reflect this.
5.3.2 The Department does not always monitor and evaluate the impact of provincial projects that it funds, including those that are funded from conditional grants. In most cases, the Department relies on reports from provinces, which are not always a true reflection of what is happening on the ground.
5.3.3 Lack of awareness of the Departments funding programmes such as Mafisa and its funding criteria by developing farmers, most of whom do not meet credit criteria in commercial institutions.
5.3.4 Lack of access by developing producers and new entrants into the agricultural and fisheries value chains, which are largely monopolised by a few big players. The few small producers that are in the industry are operating as contractors for the big commercial companies. The Department needs to assist the small producers with the required infrastructure and training to enable them to be independent.
5.3.5 Unbalanced relationships between land reform beneficiaries and strategic partners or
Mentors, where in most cases there are no skills that are transferred from Mentors or strategic partners to beneficiaries. In some instances, beneficiaries end up being employees in their own farm while the strategic partner runs the business. In some cases, the partners leave the business defunct and beneficiaries indebted.
5.4 Discussion on Service Delivery Performance
While the Department tends to overemphasise a financially unqualified or clean audit as an achievement, it should be noted that this is only an indication of good financial governance and is not related to service delivery or achievements of outcomes as is shown by spending 98.9 per cent of the budget when two thirds of the planned targets were achieved. Across all programmes, the Department seems to make plans and set targets without linking them to its budget and personnel availability to ensure effective service delivery.
During the 2013 and 2014 State of the Nation Addresses (SONA), President Jacob Zuma emphasised the implementation of the NDP through theMTSF. He stressed that Departments must align their activities with these plans. The NDP expects that by 2030, a third of food surplus in the country should be produced by smallscale farmers or households. While the Departments Programmes and resource allocation were previously not clearly reflective of how the objectives of the NDP and the MTSF will be implemented on an annual basis leading up to 2019, the development of the APAPis commended and its implementation is of utmost importance.
Some progress has been achieved through the Departments Programmes for Outcomes 7 and 10. During 2013/14 financial year, the Department managed to put 104 000 hectares of fallow land under maize and dry bean production under the Fetsa Tlala Initiative. However, u nsatisfactory and little progress in some cases has been achieved in Outcome 4 (job creation). This then puts an emphasis on the effective implementation of the APAP, which is one of the Departmental targets that are set out in the MTSF towards the realisation of the NDP objectives. Over the past five years, exports of high-value and labour-intensive products, some of which are agricultural products, have been found to be decreasing. This has a negative impact on sector performance and employment.The APAP, which is an implementation arm of the IGDP, has a great role to play in the realisation of Outcome 4. The IGDP seeks to close thepolicy vacuum that existed within the Department since 2009 due to a lack of a comprehensive and coherent agricultural, forestry and fisheries policy to address the current challenges and to ensure the development and transformation of the sector.
Revitalisation of irrigation infrastructure has been highlighted as a focus area by Government since 2007. Given the advent of climate change and the general lack ofaccess to water by smallscale farmers, irrigation for most areas is a necessity. In addition, irrigation infrastructure development can also have a positive multiplier effect on the development of forestry and fisheries (aquaculture) enterprises in rural areas while also addressing job creation. The revitalisation of the Taung (North West)/Vaalharts (Northern Cape) and Makhathini Flats (KZN) Irrigation Schemes are welcome interventions. The Department however, needs to ensure that previous challenges associated with the Schemes management and maintenance, as well as water licensing are addressed.
A lot has been said about conditional grants and how allocated financial resources are not effectively and efficiently addressing service delivery needs. To ensure IGR and to further address challenges associated with provincial utilisation of the grants, the Minister has however, reported to the Committee that he holds regularconsultations with provincial MECs and Departmental Heads to ensure accelerated and effective service delivery particularly regarding the use of conditional grants.
The evaluation impacts of the conditional grants that are commissioned by DPME are a welcome development. In this regard, the Committee need to request the Report of the Impact Evaluation of CASP, which has been receiving the largest allocation of the grants. The evaluation was commissioned in 2013/14. In the current financial year, the DPME has commissioned Impact Evaluations of Ilima/letsema, Mafisa and smallholder farmer support. Impact Evaluation of LandCare will be carried out during the 2015/16 financial year. However, the Department reported that with additional support from DAFF, Impact Evaluation of Mafisa was carried out in 2013/14 and a final report is being compiled along with the CASP report. The Department also indicated that Impact Evaluation of the Extension Recovery Programme (ERP) will also be carried out in 2015/16.
6. COMMITTEE findings and OBSERVATIONS
Governance and operational issues
6.1 The Committee congratulated the Department for the unqualified audit opinion for the fifth consecutive year. However, it raised concerns regarding continuing vacancies at SMS level as they impact on accountability, as well as equity in terms of females and people with disabilities at this level.
6.2 The slow pace of the fullintegration of the Fisheries Management Branch into the Department to minimise duplication of roles, reduce administrative costs and ensure accountability as the Branch in some respects,operates as a separate entity.
6.3 The policies (e.g. extension, mechanisation, aquaculture, smallholder development, etc.) that are important for the efficient execution of the Departments mandate and responsibilities, as well as efficient use of financial resources, have been in the development stage for the past three years. Hence, resulting in inadequate progress in priority areas and essentially no transformation in the sector.
6.4 The generally slow pace of transformation across all three sectors, which is also linked to the inability of the Department to implement the Sector Transformation Charters and to ensure effective utilisation of the AgriBEE Fund.
Service delivery and financial performance
6.5 The Department is commended for reducing the vacancy rate but the Committee is still concerned with the vacancies at SMS level and use of consultants due to lack of certain skills within the Department.
6.6 In addition, the Departments repeat findings from the AG due to the poor M & E and internal auditing functions, which werealso attributed to lack of skills capacity within the Department. The Committee however, recognises that the Department now has a functioning Internal Audit Committee and is addressing other audit matters.
6.7 Unavailability or invisibility of extension officers in some areas where they are needed the most. The Committee requested for the review of extension services and an evaluation of the impact of the Extension Recovery Programme. In the 2013/14 financial year, the majority of provinces failed to appoint required extension officers.
6.8 Most of the budget of the Department to address job creation, rural development and
food security is allocated to conditional grants but their spending in provinces is unsatisfactory and the Committee observed in its oversight visits that the financial investments made have not always yielded expected service delivery and sustainable benefits to beneficiaries on the ground.
7. COMMITTEE Recommendations
The Committee recommends to the National Assembly that the Minister of Finance should consider the following recommendations:
7.1 Whilst the Committee recognises the medium term (2012/13 to 2015/16) allocation to the OBP for the refurbishment and modernisation of the vaccine manufacturing facility, the allocation is not sufficient as the OBP operates on very old infrastructure and equipment, which constrain its ability to produce large quantities of animal vaccines for diseases of economic importance as and when required. Therefore, afurther increase in the budget allocation for the OBPs infrastructure upgrades will be required from the 2015/16 financial year.
7.2 Notwithstanding the allocation for the refurbishment and modernisation of the vaccine manufacturing facility, the OBP, which does not receive a Government grant, is a National Key Point that plays a vital role in the prevention and management of livestock diseases and therefore, food safety. A funding allocationfor operational activitiesis therefore proposedin 2015/16 going forward, for the establishment of a vaccine reserve to ensure the availability of vaccines in sufficient quantities to address animal disease outbreaks, and for manufacturing public good vaccines (orphan vaccines), which are unprofitable for the OBP to produce but are of national importance in animal disease prevention and management.
7.3 The Committee endorses and support the FFC recommendation to consider the consolidation of budget allocations for the Departments conditional grants into one comprehensive fundthat will be administered by one Department to minimise administrative costs, to ensure spending efficiency and maximum value for money and better management and accountability for the funds.
Performance Related Recommendations
The Committee recommends to the National Assembly that theMinister of Agriculture, Forestry and Fisheries should consider the following recommendations:
7.4 Reconsider the recommendations of the Committee in the 2013 BRRR and concerns raised during Committee oversightsvisits as some of the pertinent issues have not been appropriately addressed by the Department, with a particular emphasis on the filling of critical vacancies with the appropriate skills. The Department should provide a report on these to the Committee by the end of February 2015.
7.5 In collaboration with the Minister of Environmental Affairs,consider certain provisions of the National Environmental Management Act (NEMA) (Act No. 107 of 1998) and the Marine Living Resources Act (Act No. 18 of 1998), which are administered by the Minister of Environmental Affairs that restrict the development of aquaculture and small-scale fisheries;andfurther from NEMA, a requirement for veterinarians to obtain permits for rendering services to Threatened and Protected Species such as rhinos.
7.6 Provide the Committee with responses to the 2014/15 Committee Strategic Plan and Budget Vote Report recommendations by the end of November 2014.
7.7 Prioritise and finalise all pieces of legislation that have been reportedly reviewed in 2013/14; and fast track those that negatively impact on how the Department and its entities fulfil their mandates. The Minister should also ensure that before the end of the MTSF period, the Department finalises and tables in Parliament, all other pieces of legislation that needs to be reviewed including other new pieces of legislation that are required for the Department to fulfil its mandate. Progress report and a legislative programme in this regard should be submittedbyFebruary 2015.
7.8 Develop a comprehensive plan that consolidates the conditional grants into a comprehensive one-stop-shop funding facility for presentation to the National Treasuryas has previously been recommended by the Committee and the FFC. The plan must include support for subsistence and smallholder producers in Forestry and Fisheries.
7.9 Provide an update and brief the Committee, before the end of this year, on the status of the IGDP and APAP (including APAP implementation), which are essential for the realisation of the MTSF objectives and targets. Briefing must also include progress on CAADP investment plans.
7.10 Provide an update and briefthe Committee on thefinalisation of the National Policy
on Extension and Advisory Services and the implementation plan for the Smallscale Fisheries Policy before the end of this year.
7.11Ensure that entities under his administration develop restraint oftrade policies
specifically with respect to the ARC, OBP and Fisheries research, to protect intellectual property and prevent loss of critical expertise. A draft report in this regardshould be submitted to Parliament by April 2015.
7.12Submit to the Committee before the end of November 2014, the report on the Spatial Analysis of Agriculture, Forestry and Fisheries, which is important for identifying high potential agricultural land, potential areas for forestry plantations and fisheries resources. And further ensure the protection of high value agricultural land and other related resources from industrial and urban development.
7.13Provide a detailed report to the Committeeby the end of February 2015, on mentorship programmes and strategic partnerships in agricultural land reform and other mentorship projects that are funded by DAFF.
7.14Provide a status update on the implementation of the Agriculture and ForestryTransformation Charters by February 2015 and the development of the Fisheries Transformation Charter by April 2015.
7.15 Fast track the process to fully integrate some of the administrative functions of the
Fisheries Branch into the National Department by the end of August 2015/16.
7.16 Submit to Parliament by April 2015, a detailed plan on the management and
maintenance offisheries vessels to address some of the supply chain management (SCM) irregularities that have been raised by the AG on the financial statements of the Marine Living Resources Fund.
7.17 Develop a preferential procurement plan for local agricultural products and encourageprovinces and local governments to procure such products from developing farmers and animal vaccines from OBP. The plan should be submitted to the Committee by April 2015.
7.18 Fast track the filling of vacancies at senior management level and for critical skills; and align the process with the review of the Departments organogram. The Department should report on progress every quarter.
7.19 By the end of November 2014, submit to the Committee, a plan on the alignment of activities between the Department, its entities and provinces in respect of the implementation of Fetsa Tlala Production Initiative to ensure that 1 million hectares of fallow land is put under production by 2019.
7.20 Submit a comprehensive progress report on the revitalisation of irrigation schemes and Agricultural Colleges to the Committee by February 2015.
7.21 Collaborate with the Ministries of Higher Education and Training and Science and Technology to ensure that the critical research skills needed for agriculture, forestry and fisheries are addressed. This should include a national skills needs assessment across all three sectors and all sectoral disciplines and report to the Committee by July 2015.
7.22 Coordinate and align agricultural research activities and initiatives among its entities and also between the entities and the provincial research stations. The Department should report on this to the Committee by April 2015.
Report to be considered.
Documents
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