ATC151028: Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries, dated 27 October 2015

Agriculture, Forestry and Fisheries

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES, DATED 27 OCTOBER 2015
 

The Portfolio Committee on Agriculture, Forestry and Fisheries (hereinafter referred to as the Committee), having considered the performance and expenditure for the 2014 financial year and submission to National Treasury for the medium term period of the Department of Agriculture, Forestry and Fisheries reports as follows:

 

  1. Introduction

 

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

 

The mandate of the Committee is derived from Section 55 and 56 of the Constitution of the Republic of South Africa and provisions that are contained in the Rules of the National Assembly. The Committee is mandated to consider, amend and/or initiate legislation that is specific to, or impacts on agriculture, forestry and fisheries; monitor and oversee the activities and performance of the Ministry and the Department of Agriculture, Forestry and Fisheries (hereinafter referred to as the Department or DAFF) and its entities. The Committee’s mandate is to also consider and review the budget of the Department and its entities; consider sector-related international treaties and agreements; and provide a platform for the public to participate and present views on specific topics and/or legislation in relation to the three sectors.  The Department’s entities are, namely, the Agricultural Research Council (ARC), Onderstepoort Biological Products (OBP), National Agricultural Marketing Council (NAMC), Perishable Products Export Control Board (PPECB), Marine Living Resources Fund (MLRF), Ncera Farms (Pty) Ltd and the South African Veterinary Council (SAVC).  

 

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

 

The aim of the Department of Agriculture, Forestry and Fisheries (hereinafter referred to as the Department) is to lead, support and promote agricultural, forestry and fisheries resources growth and management through policies, strategies and programmes that contribute to and embrace economic growth and development; job creation; sustainable use of natural resources; food security and rural development. The Department’s legislative mandate is derived from Section 27(1)(b), as well as Section 24(b)(iii) of the Constitution of the Republic of South Africa.

 

The Department contributes directly to three of the national Government priority outcomes, namely:

  • Outcome 4:  Decent employment through inclusive economic growth.
    • Outcome 7:  Vibrant, equitable and sustainable rural communities contributing towards

food security for all.

  • Outcome 10: Protect and enhance environmental assets and natural resources.

 

Its activities in 2014/15 were guided by the following four strategic goals and associated objectives to address priorities that are identified in the National Development Plan (NDP):

 

Strategic Goal

Strategic Objectives

 

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

 

2: Enhanced production, employment and economic growth in the sector

 

 

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

 

3: Enabling environment for food security and sector transformation

 

 

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

 

4: Sustainable use of natural resources in the sector

 

 

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

 

 

The following are six programmes of the Department through 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. Purpose of the Budgetary Review and Recommendation Report

 

The process for the budgetary review and recommendation is set out in Section 5 of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009). The Act sets out the process that allows Parliament’s National Assembly, through its Committees, to make recommendations to the Minister of Finance to amend the budget of a national department. 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 BRR Report:

 

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

 

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

 

  1. Preparation for the BRR Report 

 

In preparation for the BRR Report and in compliance with its mandate as set out in Section 5(1) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009), the Committee undertook the following activities in 2014/15:

 

  1. Briefings by the Department on all four quarterly performance and expenditure reports of the Department for the 2014/15 financial year and the first quarterly report for the 2015/16 financial year.
  2. Oversight visits to:
  1. Ncera Farms (Pty) Ltd 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 Department’s progress on deregistration and to meet and engage with stakeholders regarding the future of Ncera. 
  2. KwaZulu-Natal (KZN) in November 2014 to oversee the implementation of the Fetsa Tlala Food Production Initiative; support to smallholder producers and state of readiness for the implementation of the smallscale fisheries policy.
  3. Western Cape in February 2015 to oversee operations in the Fisheries Management Branch; the status of fishing vessels and physical inspections and monitoring at landing slipways for fishing vessels.
    1. 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.  
    2. Received inputs and briefings from the Auditor-General (AG) on the Department and entities’ Strategic Plans and the 2014/15 Annual Performance Plans (APPs; as well as the 2014/15 Annual Reports.
    3. Received inputs and briefings from the Financial and Fiscal Commission (FFC) and the Department of Planning, Monitoring and Evaluation (DPME) on the Department and the entities’ Annual Performance and Expenditure for the 2014/15 financial year.
    4. Subsequently, on the 15th and 16th October 2015, the Committee held briefings and considered the Annual Reports of the Department and its entities for the 2014/15 financial year.
    5. The BRR Report also draws from other expert presentations and inputs that the Committee received throughout the year.

 

  1. Outline of the Contents of the Report

 

The Report reflects on Government key policy areas including those of the Department as they relate to the national Government Priority Outcomes; the Department’s financial and service delivery performance for the 2014/15 financial year to date; an overview of the Committee’s previous budgetary and service delivery performance findings and recommendations; and further observations and recommendations from other Committee engagements with Department including those from oversight visits.

 

  1. Overview of the key relevant policy focus areas

 

In the medium term, the Department’s plans are informed and aligned with government-wide planning and policy mandates. Its initiatives are focused at fulfilling Outcomes 4, 7 and 10, which respectively relate to job creation, rural development and food security as well as natural resources management;  New Growth Path (NGP); the National Development Plan (NDP); the Industrial Policy Action Plan (IPAP), the Medium Term Strategic Framework (MTSF) and the Agricultural Policy Action Plan (APAP). This section will provide a brief overview of these policy interventions including the Department’s key policy foci for the 2014/15 financial year and the medium term period.

 

2.1        The New Growth Path (NGP)

 

The NGP was adopted by Government in 2010 as a framework for economic policy and a driver of the country’s job strategy. The NGP identifies the agricultural value chain (agroprocessing) as one of the key job drivers through its strong upstream and downstream linkages. Upstream, the agroprocessing links to primary agriculture across a wide variety of farming models and products; and downstream, agroprocessing outputs are both intermediate products to which further value is added and final goods that are marketed through wholesale and retail chains and other food and beverage businesses.

The NGP’s 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 value chains (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 country’s 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 include amongst other interventions, increased infrastructure investments for the development of new irrigation systems (Umzimvubu River Basin in the Eastern Cape and Makhathini Flats in KwaZulu-Natal (KZN)); and a third of food trade surplus in the country should be produced by smallscale farmers or households.

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

2.3        The Industrial Policy Action Plan (IPAP): 2014/15 to 2015/16

 

The IPAP is 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 key areas of intervention in the IPAP, which is implemented by the Department of Trade and Industry (the dti) are beneficiation, infrastructure development, local procurement and supplier development, regional economic development and industrial integration, new export markets and participation in the Brazil, Russia, India, China and South Africa group (BRICS).  In terms of agriculture, forestry and fisheries, for the 2014/15 financial year, the IPAP stipulated the following deliverables in which the Department (DAFF) plays a role inter alia:

 a) Agroprocessing:

- Development of emerging broiler producers (led by the dti and DAFF is playing a supporting role). The Action required mapping of existing hatcheries and contract growers towards the development of new broiler clusters and implementation of at least one smallscale broiler project.

- Commercialisation of industrial cassava starch – conduct a feasibility study to determine the commercial viability of the cassava industry; identify smallscale farmers to participate in programme and conduct field trials for cassava production in selected areas in South Africa.

  1. Aquaculture, which it leads with the dti: Implementation and monitoring of at least 1 aquaculture project of new black entrants.
  2. Biofuels (co-leads with the dti): Link smallholder farmers to markets via a supplier development programme and sign take-off agreements with industry players in the biofuels industry in time for the arrival of the mandatory blending in 2015.

 

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

 

The MTSF is the Government’s strategic plan for the 2014 to 2019 period 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 strategic themes of the MTSF are radical economic transformation and improving service delivery. The MTSF’s aim is to ensure policy coherence, alignment and coordination across Government Plans, as well as alignment with budgeting processes. 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.

 

  The MTSF sets out the following service delivery targets that are linked to the Ministry of Agriculture, Forestry and Fisheries:

 

Outcome 4 (job creation):

  • All Agricultural Policy Action Plan (APAP) sector and crosscutting interventions to be implemented by 2019. Department to report annually on implementation including review and extension of plans.
  • 95 per cent implementation of an Agricultural, Forestry and Fisheries Trade and Marketing Strategy by 2019. Annually, the Department needs to report on the implementation of the Strategy.
  • 95 per cent implementation of the Comprehensive Africa Agriculture Development Programme (CAADP) by 2019. Annually, the Department needs to report on the implementation of the investment plans.
  • 300 000 smallholder producers producing for markets by 2019.

 

Outcome 7 (food security):

  • 1.6 million households benefitting from Food and Nutrition Security initiatives by March 2019, i.e. 4.3 million people of the 13.8 million that were food insecure in 2014.
  • 1 million hectares of underutilised land in communal areas developed and under production by March 2019.
  • Policies promoting the development and support of smallholder producers implemented by March 2019.
  • An additional 1 250 hectares of land under irrigation for smallholder production by March 2019.
  • An additional 300 000 smallholder producers receiving support for production efficiencies by March 2019.
  • By March 2013, 4 million hectares of transferred land (4 860 farms) was underutilised, therefore, approximately 3 million hectares of land transferred through land reform should be utilised by March 2019.
  • 100 per cent development and implementation of the Agricultural Policy Action Plan (APAP) by March 2019 – that is approximately 25 per cent implementation per year starting from 2015/16.
  • Develop, resource and implement Agricultural Value Chain interventions (SIP 11) by 2019.

 

Outcome 10 (natural resource management):

  • 152 500 hectares of forestry areas should be under rehabilitation and/or restoration by March 2019.
  • Status reports on resource status for abalone (31 per cent above pre-fished stock by 2019), West Coast rock lobster (26 per cent above the 2006 level by 2019) and deep-water hake (30 per cent of pre-fished biomass by 2019).
  • Climate change adaptation plans for the 3 sectors developed by 2019.
  • Climate change response to reduce risks and vulnerability in the 3 sectors by 2019.

 

2.5        The Department’s Key Policy Developments

 

In the 2014/15 financial year, the Department reviewed existing policies to realise the objectives of the key Government policy priorities and outcomes. The following are some of the key policy developments: 

 

  1. National Food and Nutrition Security Policy

 

In September 2013, Cabinet approved the National Food and Nutrition Security Policy, which is a collaboration between the Department and the Department of Social Development. The Policy seeks to ensure the availability, accessibility and affordability of safe and nutritious food at national and household levels. To further realise some of the policy objectives, the President subsequently launched the Fetsa Tlala Food Production Initiative in October 2013 to address increasing household food insecurity in the country. The aim of Fetsa Tlala is to put 1 million hectares of fallow land particularly in the former homelands, under production by 2019. The programme also seeks to link smallholder producers to government institutions for preferential procurement (market access). The Department has since developed, jointly with the Department of Social Development (DSD), the Department of Rural Development and Land Reform (DRDLR) and the United Nations (UN)’s Food and Agriculture Organisation (FAO), a Draft national Food and Nutrition Security Policy Implementation Plan, which was presented to the Committee in 2014. The Department reported for the year under review that the Plan was developed and coordinated.

 

  1. Smallscale Fisheries Policy

 

The Smallscale Fisheries (SSF) Policy was adopted by Cabinet in June 2012. It provides legal recognition to smallscale fishers and aims to provide rights to smallscale fishing communities and to ensure their equitable access to marine resources. However, the policy could not be implemented before amending the Marine Living Resources Act (MLRA), (Act No. 18 of 1998), a process that was undertaken in 2013. The resultant Marine Living Resources Amendment Bill was signed into law in 2014.  The Department has since held public consultations on the Regulations for the implementation of the SSF Policy and are in the process of finalising the Regulations. The Department assured the Committee that the Policy will be implemented by February 2016 through a new fishing rights allocation process (FRAP) that will include smallscale fishers, who were previously excluded from participating.    

 

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

 

The Agriculture, Forestry and Fisheries Strategic Framework (AFFSF) was developed in response to the Government Priority Outcomes that relate to job creation, rural development and food security, to which DAFF contributes, and to provide a long-term strategy for an integrated growth and development of South Africa’s agriculture, forestry and fisheries sectors. It was first published in 2012 as an Integrated Growth and Development Policy (IGDP) but has since been revised to align with the IPAP 2013-16, NGP and NDP; and in 2014 was renamed the AFFSF. 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.

 

  1. The Agricultural Policy Action Plan (APAP)

 

The APAP is an implementation arm of the AFFSF that was first developed in 2013 and published in November 2014. The APAP seeks to translate the high-level responses offered in the AFFSF into tangible, concrete steps to promote food production and employment. It is based on the model of the IPAP. It is a five-year plan that aligns itself with the NGP, NDP, IPAP and the MTSF. The APAP will be implemented from the 2015/16 financial year and will be updated on an annual basis. Its encompassing objectives are to promote labour absorption; broaden market participation; and strategic interventions that are aimed at increasing value-chain efficiencies and competitiveness focusing on selected subsectors and/or value chains. The APAP focuses on the following key sectoral interventions:

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

 

In addition to the above, the APAP further proposes the following transversal interventions:

  • Fetsa Tlala Food Production Initiative.
  • Research and innovation.
  • Promoting Climate Smart Agriculture (CSA).
  • Trade, agribusiness development and support.
  • Strategic Infrastructure Project (SIP 11).
  • Biosecurity.

 

  1.       Summary of previous key financial and performance

recommendations of Committee

 

  1.     2013/14 BRRR Recommendations

 

The Portfolio Committee previously highlighted the continuing challenges that constrain the Department’s performance and also have a negative impact on the sector. In this regard, the following are some of the recommendations that were made by the Committee for the attention of the Minister of Agriculture, Forestry and Fisheries:

 

  1. Engage with the Minister of Environmental Affairs to 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 smallscale fisheries; and further from NEMA, regulations that require veterinarians to obtain permits for rendering services to Threatened or Protected Species (TOPS) such as rhinos.

 

  1. Ensure the development of a comprehensive plan that consolidates the conditional grants into a comprehensive one-stop-shop funding facility for presentation to the National Treasury as has previously been recommended by the Committee and the Financial and Fiscal Commission (FFC). The plan must include support for subsistence and smallholder producers in Forestry and Fisheries.

The Department reported continued engagements with National Treasury and the development of an Integrated Funding Model with the Department of Rural Development and Land Reform (DRDLR) and the Land Bank.

 

  1. Ensure that that entities under his administration develop restraint of trade policies specifically with respect to the ARC, OBP and Fisheries research, to protect intellectual property and prevent loss of critical expertise.

 

  1. Submit 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.

A spatial analysis of Forestry resources was presented to the Committee in November 2014. The Department reported that in 2014/15 a Preservation and Development of Agricultural Land Framework (PDALF) Bill was developed and will be consulted with stakeholders in 2015/16.

 

  1. Submit a comprehensive progress report on the revitalisation of irrigation schemes

and Agricultural Colleges to the Committee by February 2015.

The Department reported recently that an Irrigation Strategy was developed and approved in 2014/15; and progress report was presented on Taung/Vaalharts and Makhathini Irrigation Schemes.

 

The following are some of the recommendations that were made by the Committee for the attention of the Minister of Finance:

 

  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, a further increase in the budget allocation for the OBP’s infrastructure upgrades will be required from the 2015/16 financial year. 

The National Treasury responded that it will engage with DAFF in order to identify sources of potential saving which might be used to fund an increased allocation to the OBP. It further noted that the constrained fiscal environment has imposed a limitation on the scope to provide additional funding.

 

  1. 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 allocation for operational activities was proposed from 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. 

The recommendation is addressed in the response on 3.1.6.

 

  1. The Committee endorsed and supported the FFC recommendation to consider the consolidation of budget allocations for the Department’s conditional grants into one comprehensive fund that 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.

In response, the National Treasury reported that it has initiated a process with DAFF and the Department of Rural Development and Land Reform (DRDLR) to reform agricultural grants, to achieve better outcomes and improve cost-effectiveness.

 

  1. 2015/16 Committee Strategic Plan and Budget Vote Report

 

During the 2015/16 consideration of strategic plans and budget process, the Committee made the following recommendations to the Minister of Agriculture, Forestry and Fisheries:

 

  1. Ensure that while a proper plan to consolidate conditional grants into a one-stop shop as was previously recommended is being developed, the Department should strengthen monitoring of the grants to avoid wasteful expenditure and underspending. In this regard, a detailed report should be submitted to the Committee on how DAFF plans to monitor the use of conditional grants in provinces, also indicating shortfalls in areas where CASP and Ilima/Letsema grants will be redirected to Fetsa Tlala. Report expected by the end of June 2015.

 

  1. Ensure that the Department presents to the Committee by August 2015, a plan on how it addresses the issues that were raised by the National Treasury and the Auditor-General regarding its budgetary use, setting of targets and unreliable data or lack of source documents. 

 

  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, the DRDLR has an Animal and Veld Management Programme (with a budget of R772 million), which is a function of DAFF but does not feature in the Department’s plans. By the end of July 2015, the Department should provide a detailed report on the particular programme including other activities that are carried out by other departments or even entities as mentioned by the Committee on livestock development programmes without collaboration with DAFF; and also explain its response to such cross-cutting matters including budget implications.

 

  1. Ensure that the Committee’s continuous concerns regarding the alignment of services and activities between the Department, entities, provinces and other departments such as the Department of Rural Development and Land Reform (DRDLR) are addressed as this can also assist the Department with cost-containment measures given the budget cuts; and to maximise service delivery. In this regard, the Minister should ensure that the Integrated Funding Model, which was reported to have been developed by DAFF, DRDLR and the Land Bank is finalised and a detailed report with financial implications for each Department, is submitted and presented to joint Committees by September 2015.

 

The Department made a presentation to the Committee regarding the 2014 BRRR recommendations highlighting that a Monitoring Framework for CASP was developed but did not submit the requested report on the DRDLR’s Animal and Veld Management Programme and its linkage to the Department’s LandCare and other livestock-related programmes.  A previously planned briefing on the Integrated Funding Model was postponed by the Committee.

 

  1.       OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

 

4.1 Overview of Vote Allocation and Spending (2011/12 - 2017/18) 

 

Table 1. The Department’s spending trend per programme (Estimates of National Expenditure, 2015)

 

Programme

 

R Million

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

Audited Outcomes

Audited Outcomes

Audited Outcomes

Adjusted  Appropriation

Audited Outcomes

MTE Estimates

MTE Estimates

MTE Estimates

1. Administration

582.0

644.9

681.6

718.9

738.4

729.9

765.3

802.3

2. Agricultural Production, Health & Food Safety

1 644.9

1 874.8

2 000.9

2 187.1

2 183.7

2 134.8

1 921.8

2 153.8

3. Food Security & Agrarian Reform

1 251.6

1 405.2

1 590.1

1 711.7

1 656.3

1 930.3

1 942.8

2 081.5

4. Economic Development, Trade & Marketing

190.2

212.2

256.3

298.3

307.0

238.2

295.6

263.9

5. Forestry & Natural Resources Management

884.7

1 191.8

1 144.7

1 348.7

1 303.6

906.6

954.0

987.4

6. Fisheries Management

352.0

484.3

437.7

427.8

439.8

443.3

462.9

488.5

Total

4 905.4

5 8132.2

6 111.3

6 692.5

6 628.8

6 383.1

6 342.4

6 777.4

 

The Department’s budget allocation has been increasing exponentially across programmes in the previous medium term expenditure framework (MTEF) period from 2011/12 to 2014/15 (see Table 1 above). However, a slower growth is observed in the current MTEF period with the budget allocation slightly decreasing for Programmes 2 and 5 between 2015/16 and 2016/17. Approximately R2.4 billion of the Department’s total budget for 2014/15 was allocated to conditional grants (37 per cent of total budget) and R1.8 billion of this was allocated to CASP (78 per cent of total conditional grants) in 2014/15.    

 

CASP transfers are made through Programmes 3 and 5. Programme 3 is also responsible for transfers to Ncera, Agricultural Colleges and a skills development and training fund to the PPECB. Programme 5 is responsible for the distribution of LandCare grants and also receives a CASP allocation for the Disaster Relief Fund. Programme 2, which received a third of the total budget of the Department is the Programme through which allocations to the ARC, Ilima/letsema and the OBP’s funding for the refurbishment and modernisation of vaccine manufacturing infrastructure for increased biosafety, are made. The allocation to the OBP is for the medium term ending in 2015/16, hence the observed decrease in Programme 2 allocation from 2016/17 (Table 1).

 

The total budget allocation to the Department will decline by approximately R568 million in the MTEF period (i.e. R158 in 2015/16, R210 million in 2016/17 and R200 million in 2017/18). The reductions will be on compensation of employees, goods and services and conditional grants allocations to provinces. This is due to Cabinet-approved reductions as a result of persistent underspending in previous years on the same items and projects; and build-up of cash reserves and surpluses. It was reported to National Treasury that to mitigate effects on service delivery, the Department has embarked on a strategy to fill only the most critical service delivery vacancies until the end of the MTEF period (2017/18).

 

As in previous years and consistent with the key intervention areas of the Department and Government Policy mandates, the largest allocation from the Department’s budget is shared amongst three programmes, namely, Programme 2: Agricultural Production, Health and Food Safety, Programme 3: Food Security and Agrarian Reform and Programme 5: Forestry and Natural Resources Management – see Table 1 above. During the 2014/15 financial year, approximately 78 per cent of the Department’s budget was spent among the three programmes, which is similar to the previous financial year’s Programme spending. In addition to transfers to some of the Departmental entities and conditional grants to provinces, the Programmes 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).

 

4.2 Financial Performance in 2014/15

 

The Department of Agriculture, Forestry and Fisheries (DAFF) was appropriated a total amount of R6.69 billion in the 2014/15 financial year, a slight increase (1.3 per cent in real terms) from the R6.18 billion that was appropriated in the 2013/14 financial year (see Table 2). In the reporting year, the Department spent 99.1 per cent of its total appropriation. Approximately 61 per cent of the Department’s total expenditure for 2014/15 went to transfers and subsidies, which consist of conditional grants and transfers to entities. Underexpenditure in the reporting year (2014/15) is R63.5 million, which is slightly less than in 2013/14 (see Table 2) but significant nonetheless. While in the previous financial year most of the unspent funds were in goods and services, in the 2014/15, most of the underspending was on transfers and subsidies (Programme 3) and payment for capital assets (Programme 1). The Department incurred irregular expenditure of R2.7 million and fruitless or wasteful expenditure of R199 000, which were identified through various control measures. It was reported that in some cases disciplinary action has been taken while some cases are being investigated.   

 

Programme 1: The Administration Programme spent 97.3 per cent of its allocated budget for 2014/15, which is slightly more than the 96.7 per cent that it spent in 2014/15. Approximately R20.5 million was unspent under this Programme, which is the second largest underspending after Programme 3 (R33 million unspent). The underspending in Programme 1 was attributed to expenditure that was not realised for the upgrading and maintenance of the Stellenbosch Plant Quarantine Station due to cumbersome processes of the Department of Public Works (DPW); and a non-payment to the Public Service Sector Education and Training Authority (PSETA) as an invoice and Section 38 (1)(J) Certificate were submitted in March but the Department could not verify the banking details on safety web before the end of the financial year.  

 

Table 2. Programme Budget and Expenditure

 

Programme

2014/15

2013/14

Final appropriation R’000

Actual expenditure R’000

Under expenditure R’000

Final appropriation R’000

Actual expenditure R’000

Under expenditure R’000

1. Administration

758 973

738 441

20 532

704 671

681 583

23 088

2. Agricultural Production, Health & Food Safety

2 192 977

2 183 702

9 275

2 010 320

2 000 946

9 374

3. Food Security & Agrarian Reform

1 689 344

1 656 320

33 024

1 604 592

1 590 101

14 491

4. Economic Development,  Trade & Marketing

307 319

307 000

319

256 452

256 334

118

5. Forestry & Natural Resources Management

1 303 983

1 303 645

338

1 168 579

1 144 699

23 880

6. Fisheries Management

439 787

439 765

22

437 668

437 650

18

Total

6 692 383

6 628 873

63 510

6 182 282

6 111 313

70 969

Source: Annual Report (DAFF), 2015

 

Programme 2: This is the Programme in the Department that has been consistently utilising almost 100 per cent of its budget allocation (99.5 per cent in 2013/14 and 99.6per cent in 2014/15) and has met all the set targets in the reporting year. As in the previous year, most of the underspending occurred in the Animal Production and Health sub-programme. While in 2013/14 underspending was in goods and services (R9.1 million), in 2014/15 it is on machinery and equipment (R8.9 million). It is attributed to equipment for the Primary Animal Health Care Programme that was imported from overseas and could not be delivered before the end of the financial year, therefore, the payment could not be made. The Primary Animal Health Care Programme ensures that biosecurity capability is extended to the remotely located livestock farmers in rural areas. Under this Programme, South Africa has regained its foot-and-mouth disease (FMD) free status and received confirmation from the World Animal Health Organisation (OIE), thus enabling continued access to export markets for cloven-hoofed animal products.

 

Programme 3: The programme is responsible for producer support through conditional grants and equitable share and contributes to Outcomes 4, 7, and 10. In this Programme, the Department spent 98 per cent of its allocated budget (1 per cent less than in the two previous financial years). An amount of R33 million was not spent in this Programme with most of it occurring in the Food Security subprogramme (R26.9 million). The latter is attributed to CASP funding that was withheld during the 4th quarter of the 2014/15 financial year as a result of underspending by the Mpumalanga Department of Agriculture, which has since provided the Department with proof of commitments on the withheld funds. The rest of the unspent funds (R6 million) are attributed to a memorandum of understanding (MOU) with the University of Fort Hare that was not finalised and expected payments to Agricultural Colleges for books and tuition that could not be made due to less demand (for Colleges, only R788 000 of the appropriated R2.66 million was transferred).

 

Programme 4: In Programme 4, the Department spent 99.9 per cent of its allocated budget, which is slightly lower than the previous year’s 100 per cent spend. The Programme underspent R319 000, mostly in the International Relations and Trade subprogramme in respect of payments to foreign governments and international organisations.

 

Programme 5: The Forestry and Natural Resources Programme spent almost all of its allocated budget (99.99 per cent), an improvement from the previous financial year’s 98 per cent spend. The R338 000 that was not spent was in the Forestry Operations subprogramme in respect of mostly, goods and services.

 

Programme 6: The Fisheries Management Programme is funded directly by DAFF for personnel costs, while its operations are funded through the Marine Living Resources Fund (MLRF). The Programme has consistently spent almost 100 per cent of its budget for the past three financial years including the year under review (2014/15), in which it spent 100 per cent of the allocated budget to the MLRF. The Programme underspent R22 000 in respect of personnel related costs (compensation of employees to a large extent, and to a lesser extent, transfers to households).  

 

The MLRF received a clean audit in the year under review. During the 2014/15 financial year, the Audit Committee at the MLRF raised a concern regarding frequent changes in leadership at the entity (DDG positions at Fisheries Branch), which impacted on the Audit Committee’s work to follow-up recommendations made.  For its internal audit function, the entity used consultants and paid an amount of R1.3 million for the service in 2014/15. The MLRF spent approximately R449 million of its R442.9 million total revenue during the 2014/15 financial year, thus ending the financial year on a R6.1 million deficit. The deficit was attributed to deferred monies as a result of under-expenditure amounting to R118 million (was R163. 9 in 2013/14) from conditional grants. The under-expenditure of conditional grants was in respect of R35.5 million from vessel operational costs, R60.8 million from Working for Fisheries projects, and R21 million from Scientific Observer Programme and the aquaculture centre in Free State Province.

 

4.3 Quarterly Performance

 

In terms of quarterly performance, the Department generally falls short of spending all of the 25 per cent that is expected to spend in a quarter, particularly in the first quarter. This is the case even though some Programmes may overspend in the first quarter due to once-off transfers to entities. The only constant achievement (25 per cent spend) in terms of quarterly expenditure is that of compensation of employees. The general underspending, particularly in quarter 1, which then peaks in the following quarters, is attributed to delays in signing of memoranda of understanding and compliance certificates in respect of conditional grant transfers.

 

There has been no change in the overall spending pattern between the first quarter of 2014/15 and the first quarter of 2015/16 (current year). In both years, the Department spent 24.8 per cent of the expected 25 per cent. The spending within quarters is hardly aligned with service delivery, i.e. achievement of targets, as it is largely driven by transfers to entities (first quarter) and compensation of employees. While for both years the Department spent almost 25 per cent in the first quarter, in 2014/15 only 52 per cent of planned targets was achieved during the quarter and in the current year, 2015/16, there was an improvement with 70 per cent of targets being achieved in quarter 1.  

 

Most of the targets that were not achieved in the first quarter were reported to be in progress while some were transferred to the following quarter(s). The Department gave an assurance to the Committee during 2014/15 that the underspending in quarter 1 will not impact the achievement of targets by the end of the financial year. However, the two Programmes in which the Department is challenged in terms of service delivery performance, i.e. Programmes 3 and 5 (Food Security and Forestry, respectively), which underperformed in the Annual Report under review, also underperformed from the first quarter of the 2014/15 financial year. These are Programmes through which conditional grants are transferred to provinces and are also key Programmes in the achievements of Outcomes 4, 7 and 10. The challenges and shortfalls in the Programmes in respect of conditional grants have been consistently highlighted by both the Committee and the Auditor-General (AG).  

 

When considering quarterly reports, the Committee observed that the Eastern Cape and the North West provinces were consistently underspending on grants and this was also reflected in the 2014/15 final outcome of the Annual Report on Conditional Grants. While there has been an improvement in performance in quarter 1 of this year (2015/16), it should be noted that yet again, both Programmes 3 and 5 underperformed, achieving 40 per cent and 67 per cent of targets, respectively. Given the Annual Report of the 2014/15 financial year on conditional grants and notwithstanding factors beyond the Department’s control (e.g. drought), this could be a reflection of the year-end performance unless the Department addresses the AG and the Committee’s concerns. These observations from the two first quarterly reports show that in terms of service delivery, there is a strong link between the Department’s quarterly performance and the final outcome. 

 

 

4.4 Report of the Auditor-General and the Financial and Fiscal Commission

 

4.4.1 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 2014/15 financial year. The AG commended the Department for not having material adjustments on financial information but raised a concern with material adjustments on performance information. The efforts of the previous Accounting Officer in addressing AG findings were acknowledged. Without qualifying the opinion, the AG drew attention to the following matters of emphasis, which mostly emanate from repeat findings that were raised in previous years:

 

  • Ineffective internal auditing and risk management – key officials lacked appropriate competencies and internal audit was not operating effectively for the reporting year due to insufficient guidance given by the acting Chief Audit Executive.  A Chief Audit Executive has since been appointed in July 2015.

 

  • Deficiencies in internal controls – effective steps not taken to prevent irregular expenditure, slow response by management in addressing the root causes of poor audit outcomes and lack of consequence management.

– Lack of monitoring of DORA funds due to human resource capacity and absence of a central database or formal system to keep track of projects being monitored (CASP funds).

– Poor procurement and contract management.

– Line directorates did not ensure that sufficient controls were implemented and monitored to facilitate proper coordination between national and provincial Department officials.

 

  • Usefulness (Programme 5) and reliability (Programmes 3 and 5) of reported performance information

– Important targets in relation to the overall mandate of the Department were not reliable when compared to source information or evidence provided. This was attributed to inadequate monitoring of the completeness of source documents received from provinces in support of actual achievements; and lack of frequent review of the validity of reported achievement against source documents.  

– Concern with indicators that are not well-defined and targets that are not specific and measurable, as well as quality of submitted performance reports.

– AG could not measure required performance for 20 per cent of targets; and 40 per cent of indicators were not well-defined (Programme 5).

 

  • Non-compliance with legislation i.e. National Treasury Regulations and Public Finance Management Act (PFMA) (Act No.1 of 1999) reporting requirements with respect to:

– Strategic planning and performance management – procedures for quarterly reporting to the Minister and facilitation of effective performance monitoring, evaluation and corrective action were not established as required by Treasury Regulations. 

– Internal audit capacity; expenditure management and transfer of CASP funds.

 

  • Key controls – issues of concern with leadership and governance with respect to instability in key positions and senior management. In the latter case, the AG emphasised that the Department needs to fill key vacancies timeously with competent and experienced personnel.

 

Notwithstanding the matters of emphasis, the AG commended the Department’s 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 Department’s previous Accounting Officer and the Chief Financial Officer interacted with the AG on a regular basis; and have also solicited the assistance of the National Treasury for some of the finance related matters. Such efforts saw the Department having relatively fewer audit findings compared to prior years.

 

The Department managed to establish an Internal Audit Committee and a Risk Management Committee by the end of the previous financial year (March 2014). However, the position of a Chief Internal Audit Executive was only filled in July 2015 and it is expected that the appointment will result in a progressive change regarding the Department’s internal audit function. In October 2014, during the annual report briefings, the Department also presented corrective measures to address the AG’s findings. Although there has been commendable progress in addressing some previous findings, compliance with legislation (PFMA and Treasury Regulations), monitoring of DORA funds and reliability and management of performance information remain key challenges that need to be addressed in the Department’s Improvement Plan.

 

  1. The Financial and Fiscal Commission (FFC) 

 

The FFC analysed the Department’s 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 that spending on conditional grants improved in 2014/15 compared to previous years but quality of spending is still a major concern. Some of the highlighted challenges regarding conditional grants include poor planning, contractor challenges, late changes to business plans and weak and ineffective procurement processes. The FFC overemphasised effective intergovernmental coordination to ensure the achievement of optimal conditional grant performance. The FFC highlighted that the Department is doing relatively well in utilising its budget but is not doing well in ensuring that all budgeted targets are met.

 

The FFC was concerned with the magnitude of reduction in payment for capital assets for 2015/16 (31 per cent) and 2016/17 (4 per cent) and the impact the reductions will have on maintaining the sustainability and growth of the sector (job creation and contribution to economy). In addition, the Department had no clear plan on disaster financing arrangements given that climate change-induced disasters such as droughts, veld fires, floods, etc. are on the increase. These have a huge impact on agricultural productivity and subsequently, employment in the sector. In its response, the Department alluded to the current legislative prescription on disaster management; and also reported about a joint study that is being undertaken with the National Treasury and the FFC to find alternative funding models for disaster recovery.

 

 

4.4.3     Departmental Response to Matters raised by the AG

 

In response to the AG’s findings, the Department responded to the specific matters of emphasis as highlighted by the AG and again presented corrective measures to the Committee that have been and will be implemented during the current financial year. The corrective measures are the same as the corrective actions that were presented in the previous financial year, 2013/14, and include inter alia:

  • Compilation of the audit matrix for the 2014/15 audit findings to ensure compliance before the AG’s interim audit in November 2015, which will be monitored by Departmental Management and the Audit Committee.          
  • Made it compulsory for all Deputy-Director Generals (DDGs) to attend the Audit Steering Committee meetings for the 2014/15 audit period and to sign-off on all findings.
  • With effect from the 2014/15 Second Quarter, Departmental Branches to report to the Executive Committee (EXCO) on a monthly basis and Departmental performance reviews are held at the end of each quarter.
  • Revised templates for Quarterly Performance introduced to strengthen accountability and address audit findings.
  • Existing Strategic and Operational Planning as well as Monitoring, Evaluation and Reporting Guidelines are reviewed on an annual basis to ensure responsiveness.
  • Departmental performance reports approved by the DG on a quarterly basis.
  • Performance reporting has become an EXCO standing agenda.

 

The Chairperson of the Audit Committee gave the Committee assurance that the Audit Committee’s oversight role has started to show improvements. The Department further reported that interviews for the position of Chief Director: Internal Audit were held in July and the appointment was approved by the Minister on 30 September 2015. In addition, they requested the AG to host a Workshop for all internal auditors on how to audit performance information, and that was held during August 2015.

 

4.4.4 Vacancy Rate  

 

The Department started the financial year with 10 per cent vacancy rate, which considerably increased to 13 per cent by the end of 2014/15. The vacancy rate is higher than the 10 per cent norm for the public service. In the reporting year, the Department had more terminations and relatively fewer appointments. As in prior years, the Department had a relatively high number of vacancies at the SMS level (18.6 per cent, which is higher than 2013/14’s 12.5 per cent) and the highly skilled supervision level (16.1 per cent). The Department has not met the 2 per cent equity target aimed at enhancing employment opportunities for people with disabilities and is still below 50 per cent in terms of female representation in SMS positions. In this regard, the Department reported that its Executive Management Development Programme favours young females and SMS job advertisements stipulate that females and people with disabilities are encouraged to apply. 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 further reported that it is engaging with SAQA to address the latter.  

 

To mitigate any effects on service delivery as a result of Cabinet-approved budget reductions, the Department reported earlier this year that it has embarked on a strategy to fill the most critical service delivery vacancies until the end of 2017/18. Currently, the Department has a vacancy for the DG and 3 vacancies for DDGs for Programmes 2, 5 and 6. Programme 5 (Forestry) position has been vacant since July 2014, which was raised as a concern by the Committee last year as the Forestry Branch was previously underperforming and utilised consultants due to skills shortages. In its response to the AG’s report, the Department reported that interviews for the position of DG and DDG for Programme 2 were completed and in process for Programme 5; and appointments are expected to be made before the end of the financial year. It was further reported that for the DDG position for Programme 6 (Fisheries) and Chief Director positions for Financial Management and Food Security, advertisements have been closed and shortlisting will be commence soon. The Department also reported that it is in a process to reconfigure its structure to align it to the current mandates, which will also enable the integration of Agriculture, Forestry and Fisheries.

 

4.5 Discussion on Financial Performance

 

There has been a significant improvement in financial performance compared to prior years. However, the Department still has a challenge with effectively and efficiently spending its budget as planned and on planned targets, to ensure service delivery. The main challenges regarding budgetary use is proper planning and monitoring and evaluation of transferred funds. 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 AG and FFC. Although valid reasons were provided for underspending, the R63.5 million that will be returned to the National Treasury is a significant amount (equivalent to 40 per cent of the Department’s budgetary reductions for the 2015/16 financial year and 11 per cent of the MTEF reductions). The Department is however, 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.

 

The AG highlighted lack of physical monitoring in respect of conditional grants, which is a repeat concern, therefore, the Department needs to review its M & E Plan to ensure efficient and results-driven monitoring and evaluation of the implementation of policies and plans. In this regard, financial resources need to be available to ensure that M & E practitioners are capacitated and well-resourced to carry out physical monitoring of all funded projects. Value for money in terms of transferred funds cannot be guaranteed without effective monitoring and evaluation. In addition, given the budget reductions for the MTEF, the Department’s expected allocations for the MTEF may not sufficiently address its commitments, which include inter alia, the implementation of the APAP, the compulsory community service for veterinarians and climate-change induced disasters whose frequency is imminent. 

 

In response to the 2014 BRRR recommendations, the National Treasury reported that it has initiated a process with DAFF and the Department of Rural Development and Land Reform (DRDLR) to reform agricultural grants, to achieve better outcomes and improve cost-effectiveness. This is a welcome intervention as the DPME has also reported that the DRDLR’s Recapitalisation and Development Programme is not having the desired impact in terms of farmer development and growth. The three Departments need to brief the relevant Committees on the process, the progress thus far and clarify whether the process is linked to the Integrated Development Finance Framework (that includes MAFISA, CASP, AgriBEE, Ilima/Letsema, and LandCare), which has been approved for implementation in the 2014/15 financial year.

 

The Cabinet-approved budget reductions in the MTEF can be addressed through strengthened intergovernmental relations (IGR) and coordination of activities with other Departments such as DRDLR and the dti. Good examples in this regard include activities on aquaculture development between the dti and the Department’s Fisheries Management Branch through the Aquaculture Development and Enhancement Programme (ADEP).     

 

  1.   Overview and assessment of service delivery performance

 

5.1        Service Delivery Performance for 2014/15

 

In its 2014/15 Annual Performance Plan (APP), the Department set itself 55 targets on which the budget was to be spent for the year. It managed to spend R6.63 billion of the appropriated R6.69 billion (i.e. 99.1 per cent of the budget) but achieved 45 targets (approximately 82 per cent) out of the 55. It should be noted that number of targets achieved is a conservative figure given the matters that were raised by the AG regarding reliability of information for Programmes 3 and 5 and indicators that were not verifiable for Programme 5. Notwithstanding the latter, there has been an improvement from the 2013/14 financial year both in terms of budget spending and achievement of targets (previously 98.9 per cent spent and 75 per cent targets achieved). 

 

There is a notable improvement in the layout of the Department’s Annual Report including on the information provided and the presentation of Programme information, which is aligned with the information on its APP for 2014/15. However, 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 the Annual Report. In addition, whilst the Department’s activities are informed by the key Government Policy instruments such as the NDP, IPAP and the MTSF, when reporting, the Department does not directly align achievements in Programmes with expected progress as informed by for example, the NDP and the MTSF but report on these separately. While the information required may be contained in the Annual Report, it takes some effort to directly link it to priority outcomes in terms of progress.

 

5.2 Programme Performance

 

Programme 1: Administration

 

Out of 15 targets that were planned under this programme, 11 targets (73 per cent) were achieved, which is similar to the 2013/14 financial year. Within Programme 1, two sub-programmes underperformed during the 2014/15 financial year, namely, the Policy, Planning, Monitoring and Evaluation (PPME), as well as Stakeholder Relations, Communication and Legal Services. Notwithstanding the importance of, the Committee, AG and FFC emphasis on M & E regarding challenges with the spending of conditional grants, the Department’s allocation to the Policy Planning, Monitoring and Evaluation sub-programme has been decreasing in the last MTEF, from R96 million in 2011/12 to R72 million in 2014/15. The initial appropriation for 2014/15 was R83 million but was educed through shifting of funds and virements. Underperformance in the PPME is a concern as most of the Department’s service delivery challenges are centred on lack of monitoring and evaluation, which eventually has an impact on its audit outcomes as is evident in the AG’s report on Programmes 3 and 5. Physical monitoring and evaluation, as has been emphasised by the AG, rather than reliance only on reports from provinces, is an area that needs attention.

 

Under this Programme, the Legal Directorate only tabled 3 out of 14 pieces of legislation that were planned to be tabled. DAFF reported that the legislation project was put on hold from June 2013 until May 2014, therefore, delayed processing of legislation. DAFF only updated baseline information on aquaculture (not marine fisheries) and did not update information on agricultural smallholder producers as planned, and reported that the Department is reviewing the plan to collect data on smallholder producers but did not mention the forestry sector. Lack of baselines and databases is another area of concern with the Committee as without a baseline or database the Department cannot measure progress and impact. This was also revealed by the DPME’s Impact Evaluation of MAFISA and was raised by the AG as a matter of emphasis for the monitoring CASP funds.

 

The Department’s Intergovernmental Relations Directorate under Programme 1 also under achieved as the Intergovernmental Strategy was approved but not implemented as planned; and the Public Entities Governance and Reporting Framework was not endorsed by EXCO as planned and further engagements are still planned.

 

Table 1. Summary of Target Achievements and Expenditure for 2014/15 per Programme

 

  •  

 

No. of Targets

  •  

Not achieved

Proportion achieved

 

Budget spent

 

1. Administration

 

  1.  
  1.  
  1.  

 73 per cent

R738.4 million

(97.3 per cent)

 

2. Agricultural Production, Health and Food Safety

 

  1.  
  1.  
  •  

100 per cent

R2.18 billion

(99.6 per cent)

 

3. Food Security and Agrarian Reform

 

  1.  
  1.  
  1.  

67 per cent

R1.66 billion

(98 per cent) 

 

4. Economic Development, Trade and Marketing

 

  1.  
  1.  
  1.  

82 per cent

R307 million

(99.9 per cent)

5. Forestry and Natural Resources Management

 

  1.  
  1.  
  1.  

80 per cent

R1.3 billion

(100 per cent)

 

6. Fisheries Management

 

  1.  
  1.  
  1.  

88 per cent

R439.7 million

(100 per cent)

 

  1.  

 

  1.  
  1.  
  1.  

82 per cent

R6.63 billion

(99.1 per cent)

 

Programme 2: Agricultural Production, Health and Food Safety

 

Programme 2 is the only programme that achieved all its planned targets and is the only programme where expenditure matched service delivery the performance. Its performance has improved from the previous year’s 83 per cent (5 out of 6 targets achieved) to 100 per cent. Some of the reported achievements under this Programme include 30 mobile veterinary clinics worth R22.5 million that were delivered to 6 provinces and the Compulsory Community Service Regulations for veterinarians that were approved and published. The first group of veterinarians is expected to commence service in 2016.

Under this Programme, the Department managed in the 2014/15 financial year, to repatriate 5 landrace crops (watermelon, cowpeas, Bambara, pumpkin and sorghum) in Mpumalanga; conducted risk surveillance for exotic fruit fly and conducted 4 regulatory compliance and monitoring interventions at ports of entry to minimise pests and diseases entering the country. Another key achievement of the Department, through the activities of Programme 2 is that, in February 2015, the country’s food-and-mouth disease (FMD)-free status was reconfirmed by the World Organisation for Animal Health, commonly known as the OIE (Office International des Epizooties).

Programme 3: Food Security and Agrarian Reform

 

The Programme spent 98 per cent of its allocated budget (1 per cent less than in the two previous financial years) but only achieved 67 per cent of the planned targets, a significant regression from the 75 per cent it achieved in 2013/14.  

 

Achievements under this Programme include the development and coordination of the National Food and Nutrition Security Implementation Plan; development of Norms and Standards on Comprehensive Producer Support that were also approved by EXCO; review and approval by EXCO of the National Agricultural Education and Training Strategy; and implementation of the National Extension and Advisory Policy through the establishment of Provincial Extension Forums in all provinces.

 

 The Department planned to cultivate 200 000 hectares (ha) for food production in communal areas and land reform farms. While 129 773 ha were reportedly planted by provinces, only 3 262 ha (2.5 per cent) in the North West Province was validated as being cultivated (with maize and beans) according to the agreed standard. This is a serious concern given increasing household food insecurity particularly in rural areas. The Department further planned to provide support to 16 000 smallholder producers in 2014/15 but 14 907 smallholder producers were verified as supported through agricultural advisories, training through the Comprehensive Agriculture Support Programme (CASP) and forestry advisories and training. In the previous year, 2013/14, the Department planned to support 130 000 subsistence farmers with production inputs, training and advisory services but only managed to assist 40 000 subsistence farmers as verification documents for 90 000 were disqualified.

 

Provision of reliable and verifiable information with respect to deliverables on conditional grants, which is also linked to underspending of the grants, is a continuing challenge for the Programme. To address the challenges, DAFF reported that the Branch (Food Security and Agrarian Reform - FSAR) engages on a regular basis with officials from the Department of Planning, Monitoring and Evaluation (DPME) who are allocated to assist it on performance challenges and implementation of corrective measures. In addition, DAFF further reported that the Branch deployed officials in provinces to verify information and serve as a link between provinces and the Branch; and provide information to Branch Managers timeously and provide feedback to provinces.

 

 

Programme 4: Economic Development, Trade and Marketing

 

This Programme achieved 82 per cent of its planned targets but spent almost all of its budget. While the targets achieved are not aligned to the budget spend, the 82 per cent is a significant improvement from the previous year’s 50 per cent achievement. Notable achievements for Programme 4 include the fruit industry value chain network that was institutionalised and working groups established; 71 producers that were linked to markets following the upscaling of certification through SA Good Agricultural Practices (SA GAP); 107 cooperatives that were supported with training mainly on business planning; and conclusion of Agricultural Trade Protocols for the export of maize and apples to China in December 2014.

Under this Programme, DAFF could not submit a finalised report on the status of transformation in the agricultural sector citing that only the report on data from Government undertakings was finalised but industry stakeholders did not submit the BEE certificates. This is a concern given the slow progress in the transformation of the sector notwithstanding the work of the Charter Council that is responsible for industry compliance with AgriBEE Codes. The Department needs to further strengthen its instruments to measure and assess sector transformation besides using BEE certificates. In this regard, the NAMC’s development of a Transformation Review Committee is commended.  To ensure the realisation of radical transformation of the sector, this should be one of the focus areas under this Programme.

 

The Department further reported that they could not finalise the Comprehensive Africa Agriculture Development Programme (CAADP) Country Compact for signing as they were unable to secure meetings with Cluster Committees who are supposed to recommend the CAADP Compact before presentation to Cabinet. As part of preparations for the CAADP Compact, the Department reported that an FAO-funded Draft Final Report on Agriculture Public Expenditure Review has been finalised and submitted to DAFF for comment. In the previous year, 2013/14, the Department did not achieve the CAADP related target but reported that they managed to finalise consultations with provinces and other stakeholders, a process through which a draft CAADP Country Compact was developed. It has been reported that most African countries that have implemented CAADP have seen a significant improvement in the contribution of agriculture to the country’s economies. Therefore, the Department needs to speed up finalisation and signing of the CADDP Compact, through which the Government will develop investment plans, which are also highlighted in the MTSF. The MTSF requires that 95 per cent of CAADP should be implemented by 2019 and the Department should report on the implementation of investment plans on an annual basis.

 

Programme 5: Forestry and Natural Resources Management

 

The Forestry and Natural Resources Management Programme achieved 80 per cent of its planned targets and has spent almost all of its allocated budget. Some of the notable achievements in this Programme include the preparations for the hosting of the 14th World Forestry Congress that was held in Durban from the 7 – 11 September 2015 and attracted close to 4 000 delegates including international participants, implementation of climate change research programme on crop suitability in Free State, Limpopo and Mpumalanga provinces; the development and approval for implementation of the Irrigation Strategy; 33 756.4 ha of agricultural land and 591.23 ha of indigenous forests that were rehabilitated.  

Under this Programme, the Department could not plant 2 300 ha in temporary unplanted areas (TUPs) as planned due to drought, and only managed to plant 2 098.94 ha. It was further reported that revitalisation of the Taung/Vaalharts Irrigation Schemes was ongoing, which is commendable. However, the Department has not revealed any plans to increase infrastructure investment for the development of new irrigation systems in the Umzimvubu River Basin in the Eastern Cape as indicated in the NDP. The area is characterised by high levels of poverty but has high potential for agricultural production. It is acknowledged that irrigation development is dependent on availability of water sources, allocation and available financial resources, which are currently a limiting factor.

 

Programme 6: Fisheries Management

 

This Programme achieved 88 per cent of the planned targets. Although some targets on compliance and enforcements and creation of job opportunities were exceeded, 88 per cent is a regression from the previous financial year’s 100 per cent achievement.

 

The Fisheries programme overachieved in the implementation of compliance and enforcements measures in 4 prioritised fisheries sectors, i.e. is hake, abalone, rock lobster and linefish. It achieved 5 541 sea- and land-based inspections instead of the planned 4 598 due to an unforeseen occurrence of the red tide that led to the institution of a rescue plan where vessels were allowed to concentrate on harvesting East Coast rock lobster in the Elands Bay area. The Fisheries Programme overachieved in creating job opportunities through the Working for Fisheries Programme, achieving 1 385 jobs against the planned 1 250. In addition, it also overachieved in the support of aquaculture fish farms and research on aquaculture.

 

The Branch also achieved the finalisation of the Draft Fishing Rights Allocation Framework and the recovery plans for hake, abalone and West Coast rock lobster. Only 1 target was not achieved relating to finalisation and promulgation of the Regulations for the Smallscale Fisheries (SSF) Policy. The consultation process on the SSF Policy Regulations had to be extended beyond the financial year due to requests from stakeholders including the Committee.

 

Last year the Department reported about a review of various laws that govern aquaculture but are not under the Ministry of Agriculture, Forestry and Fisheries; and revealed a plan to develop a single aquaculture legislation. By the end of the reporting year, the Department reported that a Draft Aquaculture Bill has been approved and is currently undergoing consultations. It is expected to be tabled in Parliament in 2016/17. This is commendable as aquaculture development is an important element of the Oceans Economy Strategy (Operation Phakisa) and is central to the realisation of key Government Policy Initiatives and Outcomes (job creation and food security). In addition, the Department has indicated that Aquaculture, which unlike Fisheries, is a concurrent function but, it is not clear where it should be located in provinces. In some provinces it is driven by provincial departments responsible for Economic Development. Therefore, development of legislation for the sector is important to provide clarity and guidance.  

 

 

 

5.3 Performance of Conditional Grants in 2014/15

 

The Department’s budget allocation provides for pro-poor interventions, including the participation, recognition and celebration of youth and women. In this regard, the Department holds month-long programmes on declared months such as June for Youth and August for Women, which also include the Young and Female Agricultural Entrepreneur Awards, respectively.

 

A total of R2.4 billion was appropriated for all conditional grants in the year under review; and 99 per cent of the amount was spent. There is still room for improvement regarding consistency in reporting and the alignment of the conditional 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 or under-counting. As an example, CASP budget allocation is disbursed through Programme 2 (Agricultural Production, Health and Food Safety), Programme 3 (Food Security) and Programme 5 (Forestry), thus contributing to all 3 Priority Outcomes that the Department contributes to. In addition, as will be illustrated below, the Extension Recovery Plan (ERP) has its own specific allocation yet, there are ERP activities that are carried out through CASP.

 

CASP: In the year under review, the conditional grant received approximately R1.8 billion and the Department received rollovers from National Treasury amounting to R21.86 million, thus increasing available budget to R1.9 billion. All the money was transferred to provinces and 99.6 per cent of this amount was spent with only R26.9 million unspent in respect of Mpumalanga Province as explained in Programme 3. The funding was spent on infrastructure support (31 per cent); infrastructure repair due to floods and support to affected farmers (27 per cent); Fetsa Tlala (16 per cent); farmer training and capacity building (4 per cent); revitalisation of Agricultural Colleges (3 per cent) and ERP (19 per cent).

 

A total of 37 445 farmers were reportedly supported though CASP in 2014/15 (smallholder: 19 883; subsistence: 16 093 and black commercial 1 469). The total number of jobs that was created in the year under review was 5 673; 1 485 of which were permanent and 4 188 were temporary or seasonal. The total number of jobs created through CASP from 20019/10 to 2014/15 is 54 101 and the figure includes both permanent and seasonal jobs.

 

Ilima/letsema: A total amount of R461 million was transferred to provinces for this programme and an additional R27.52 million was approved in rollovers resulting in a total budget of R488.15 million. Provinces spent R484 million (99.2 per cent of the allocation, an improvement from previous year’s 93 per cent expenditure) and R4 million was held for Mpumalanga Province. Under this grant, 72 254 farmers were supported and 44 193 of these were subsistence (61 per cent), 27 548 smallholders (38 per cent) and 513 black commercial (0.7 per cent, a significant decrease from the 6 per cent that was supported in 2013/14). A total of 22 335 jobs were reportedly created through Ilima/letsema; 14 768 (66 per cent) of these were permanent and 7 567 (34 per cent) were temporary or seasonal. Out of 1 295 planned projects under this grant, 1 213 (94 per cent) were completed while 56 were dropped and 2 were carried over to 2015/16. For those that were dropped, 36 were Eastern Cape farmers who failed to pay their contribution, 17 was due to delayed implementation in Mpumalanga and 2 were due to conflicts among beneficiaries. From 2009/10 to 2014/15 the total number of jobs created through Ilima/letsema was 69 604 (inclusive of both permanent and temporary/seasonal.

 

LandCare: R67.84 million was allocated to the grant in 2014/15, which is quite a significant reduction from the previous year’s R108 million. The programme spent R66 485 million (98 per cent) and all 103 planned projects were implemented by provinces. A total of 13 882 (less than 42 163 from 2013/14) beneficiaries from the LandCare programme, and 13 761 of these were youth (99 per cent). LandCare created 2 602 work opportunities (equivalent to 1 067.6 fulltime equivalents – FTEs) on soil, rangelands and wetlands rehabilitation/protection; and alien invasive plant control. An area of 33 756.4 ha was protected/rehabilitated in the 2014/15 through LandCare.

 

Extension Recovery Plan ERP): The plan was initiated in 2008/09 with all the provincial departments as lead implementers. A total of R383.3 million was transferred to province for the programme, of which 80 per cent was spent. Spending pattern and allocation is similar to the previous year with significant allocations under this programme going to recruitment (38 per cent) followed by provision of ICT infrastructure (23 per cent) and visibility and accountability (21 per cent). There has been an improvement in recruitment compared to the previous year where provinces only managed to appoint 84 extension officers out of the targeted 324. For 2014/15,111 extension officers were appointed against the targeted 208.   The North West Province, which recruited 49 extension officers in 2013/14, did not recruit in 2014/15 along with KZN and Limpopo. When the ERP was initiated, there were 2 210 extension officers and currently in the system there are 3 200 extension officers. In addition, it was reported that the extension officer- farmer ratio improved from 1: 1 200 to 1: 978 by the end of the year under review. This is still much higher than the requirement of the Norms and Standards, which requires a ratio of 1:250 to 500, depending on the commodity. The total number of extension officers recruited increased from 350 in 2008/09 to 1 462 in 2014/15. The total target for recruitment of extension practitioners from 2008/09 to 2014/15 was 2 219 and provinces managed to recruit 1 462 practitioners (66 per cent of target).

 

Micro Agricultural Financial Institutions of South Africa (MAFISA): R30 million was disbursed through MAFISA to 3 128 beneficiaries during the year under review. Through the programme, 7 500 jobs were created where 1 743 were permanent and 5 075 were seasonal.

 

Discussion on Grants

 

The Department has previously indicated that CASP was specifically for smallholder producers and Ilima/letsema for subsistence producers, yet, from its reports and the figures above, there is little difference between the two grants as both catered for all three farmer categories. The NDP and MTSF focus, and subsequently the APAP, is on smallholder producers, therefore, there is a need to clearly define a smallholder. Given the disparities in how the grants were used and possible duplication of activities (e.g. ERP, which also gets an allocation under CASP) amongst the first two grants, there is a need for an improvement in the coordination of the conditional grants while speeding up the engagements with National Treasury and other Departments regarding the consolidation of 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 a 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.

 

With the exception of Ilima/letsema, for all the conditional grants that contribute to employment creation, approximately a quarter of total employment is permanent and the majority is temporary or seasonal jobs.  Fetsa Tlala is a Presidential programme with a specific target as premised in the MTSF (1 million hectares of fallow land under production by 2019) Outcome 7) to address household food insecurity. However, in the 2014/15 financial year, the Department allocated 16 per cent of the CASP budget to Fetsa Tlala while ERP, which also has its own allocation, was allocated 19 per cent.

 

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

 

The DPME presentation focused on Outcome 7 (rural development and food security), which is led by the Department of Rural Development and Land Reform (DRDLR). DPME commented that DAFF and DRDLR should have been given an equal weighting in addressing Outcome 7 given the technical expertise that is needed that resides with DAFF. The DPME reported that the DRDLR’s Recapitalisation and Development Programme (RDAP) has provided support to 259 farms from April 2014 until June 2015. The RDAP was found to be ineffective in ensuring that the new entrants (smallholders) develop to become sustainable commercial enterprises. A need was highlighted for legislative reform and introduction of relevant legislation to drive agrarian transformation and development. The approved Norms and Standards and Comprehensive Producer Development Support Policy that are being developed should enable the Department to close the policy gaps.

 

DAFF leads sub-outcome 3 of Outcome 7, which focuses on food security. The MTSF expects that approximately 1.6 million households (4.3 million vulnerable people) should benefit from food and nutrition security initiatives by 2019. According to Statistics South Africa, in 2011, 11.5 per cent of households were vulnerable to hunger and in 2014, the figure was marginally reduced to 11.4 per cent. Government has committed to reducing the proportion of households vulnerable to hunger to 9.5 per cent by 2019. The performance data that was presented by DPME showed that the target is not likely to be achieved. This is also by the confirmed by the data submitted by the Department on conditional grants.

 

The DPME’s management performance assessment tool (MPAT) for 2014/15 was consistent with the AG’s findings. In terms of the MPAT Scorecard for the Department, the Department did well and improved on financial management but scored poorly in addressing matters associated with strategic management (APP and Strategic Plan regressed but with some improvement on M & E); governance and accountability (internal audit, Audit Committee, risk management and fraud prevention); and human resources management (recruitment, employee wellness and handling of disciplinary cases). Some of the reasons for the Department’s downgraded scores were absence of evidence and late submission or feedback to policy departments (e.g. DPSA, DPME). The Committee was advised to request for the Department’s improvement plan regarding its MPAT scores for 2014/15.

 

The Department did not score well on citizen-based monitoring through the Presidential Hotline. In all activities monitored, it scored far below the benchmarks. The worst performance was on resolving complaints from the public, where the average time for the Department is 210 days (approximately 7 months) instead of the 25-day norm. In this regard, the Department needs to address its communication channels and how they address complaints and stakeholder management by strengthening its Stakeholder Relations and Communication subprogramme under Administration, which has underperformed in 2014/15. The Department’s intervention programmes were found not to have a significant impact on food security and rural development; sector transformation through new entrants and reducing rural unemployment but latest interventions are in the right direction.

 

The DPME reported that an Integrated Plan for Food and Nutrition Security based on the National Food and Nutrition Security Policy is being developed through the Office of the Deputy President. Some of the underlying factors that need to be addressed were high vacancy rates 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), most of the employment in agriculture was seasonal and reports from conditional grants were found to be contradictory. Contrary to the increase in job creation in that was reported in Quarter 1, the overall year-on-year figures fluctuate. However, CASP was commended for contributing to youth employment, who represented 74 per cent of those employed through the grant. 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. The need for an agricultural census that is inclusive of all categories was highlighted to assist in identifying underlying causes of the relatively unsatisfactory performance of the sector.

 

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

 

With the exception of the PPECB and the MLRF, which both received clean audits, the Department’s entities received financially unqualified audit reports with findings from the AG for the 2014/15 financial year.

 

5.5.1 Agricultural Research Council (ARC)

 

The ARC set itself 31 targets to achieve during the 2014/15 financial year and achieved 23 targets (approximately 74 per cent), which is a regression from the 2013/14 achievement of 78 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 including training of extension officers. 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.

 

One of the key achievements for the year under review include the development of a drought-tolerant maize cultivar named DroughtTEGO with several role players in the Water Efficient Maize for Africa (WEMA) Project. The WEMA consortium includes the ARC; the African Agricultural Technology Foundation based in Kenya; the International Maize and Wheat Improvement Centre; national research institutions in Kenya, Mozambique, Tanzania and Uganda; as well as Monsanto, the multinational seed company. It was reported that the WEMA consortium will be providing the cultivar duty-free to ensure accessibility to all farmers. The ARC reported that 10 000 seed packs were distributed to farmers and extension officers during its launch in the country in 2014, with thousands more being distributed to smallholder farmers in all provinces. It was further reported that 65 jobs were created through the DroughtTEGO maize cultivar roll out to provinces.

 

Additional achievements, among others, were the development of a new synthetic vaccine for African Horse Sickness and designing of Agri-Parks, which include nurseries, agroprocessing and mini-marketing facilities in Limpopo, Mpumalanga, KwaZulu-Natal (KZN) and Eastern Cape for the DRDLR. The ARC received R127.996 million from DRDLR for the latter project on Agri-Parks. Some of the targets that were not achieved by the ARC in 2014/15 include increasing the number of intellectual Property Rights registered; and the number of employees in the Science, Engineering, and Technology (SET) base or the number of employees with Master’s degrees employed in the SET base.  

 

The ARC receives the largest share of the transfers to entities. The ARC had a budget of approximately R1.36 billion, which comprised the Parliamentary Grant of R919 million from DAFF (Parliamentary Grant for 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 R407 million from self-generated revenue, which has slightly decreased from the previous year’s R466 million due to economic challenges experienced by potential clients. In the year under review, the ARC used approximately 97.6 per cent of its budget and had a surplus of R34 million, a R103 million decrease from 2013/14.

 

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. The AG highlighted that the ARC would have received a qualified audit opinion but was given an opportunity to make material adjustments to financial statements. The AG was concerned about the matter as similar adjustments have been made in the previous financial year for the entity to receive an unqualified audit opinion. The AG further raised concerns on key controls with respect to leadership and financial performance and management, which have regressed from the previous year; as well as lack of consequence management. In response to the AG, the ARC highlighted that the root cause of audit findings was the result of updating the entity’s ICT system. The CEO explained that before 1994, the different ARC institutes each had their own different ICT systems and the entity is migrating all these systems into one system, a process that was previously done manually. 

 

5.5.2 Onderstepoort Biological Products (OBP)

 

In 2014/15, the OBP planned for 30 targets (down from 102 in the 2013/14 financial year) but only achieved 9 of the planned targets, which is equivalent to 30 per cent of the total, a significant drop from the previous year’s 51 per cent achievement. Some of the OBP’s targets and indicators were not specific or measurable, and in some cases, targets are not aligned with achievements, and hence, it was difficult to quantify actual achievement. In many instances, the reasons for the variance and non-achievement were attributed to financial and capacity constraints, operational inefficiencies due to ongoing refurbishments and equipment breakdown. This is a concern and highlight weaknesses in the entity’s planning as some of the reasons were also cited in the previous year. Instead of addressing the challenges to realise an improvement in its performance, the entity has regressed further even though the targets have been significantly reduced. As the OBP has been consistently attributing inability to produce required vaccine quantities to the ongoing refurbishments, most of which are expected to be finalised by the end of 2015/16, the Committee has requested the entity to provide a detailed project management plan that includes various stages of the refurbishment, progress to date, costs for each project stage including budget shortfalls and how the OBP plans to address those.

 

Some of the OBP’s achievements for 2014/15 include the Rand value of vaccines sold to smallholder farmers, which was overachieved as the target was R2 million and the entity received approximately R2.5 million; it also managed to keep the monthly number of batch failures below 24 and implemented the Talent Management Framework. The entity could not identify herd doses sold per annum citing lack of budget; and also fell short of total value of export by R1 million (target was R35 million and it received R34 million).

 

The OBP is commended for being the only entity that meets most employment equity targets, performing even better than the Department in this regard. The entity’s staff turnover decreased from 18 per cent in 2013/14 to 10 per cent in the reporting year. The major reasons for staff leaving the entity are resignations and retirement. Most employment terminations are in the skilled and semi-skilled levels, which is a concern given that OBP cites staff availability as some of the reasons for not meeting targets. However, the OBP has reported that it has put in place succession plans to address retirement and it is hoped that the Talent Management Framework will address resignations.

 

The OBP received R127.5 million in 2014/15 towards the refurbishment of the vaccine manufacturing facilities. The OBP does not receive a Government grant but funds all its operations from its self-generated revenue (mostly from sale of vaccines). The OBP started the year with a revenue of R81.7 million (less than 2013/14’s R87 million) and ended the year with an even higher loss of R15 million compared with the previous year’s R8.6 million.  The entity again experienced a drop in overall sales, although there has been a slight increase in the export markets; and has lost market share both within the total animal health market and the vaccine market segment. In this regard, the Committee has asked during the budget process earlier in the year, for a comprehensive plan to recapture the markets that the OBP has lost including new ones, to ensure a sustainable revenue stream, The production capacity and revenue challenges in the entity are a concern for the well-being of the national herd and subsequently, human health as certain vaccines that are associated with the prevention of diseases of economic importance are only manufactured by OBP locally. These include inter alia vaccines for Rift Valley Fever (RVF), Bluetongue, Brucellosis Strain 19 and African Horse Sickness.

 

The OBP received an unqualified audit opinion with repeat findings from the AG. In terms of key focus areas, the repeat findings that required intervention were in the quality of submitted performance reports regarding usefulness and reliability of submitted performance information where material misstatements had to be corrected during the audit process; and regression on compliance with legislation (Treasury Guidelines and PFMA) with respect to management of strategic planning and performance, as well as internal auditing. For the year under review, the OBP showed some improvement in financial health, human resource management and information technology (existing and operational). However, in terms of internal controls, the entity regressed in terms of leadership’s oversight responsibility and IT governance and management of IT systems control (security). This has been previously raised as a concern given that OBP operations are based on intellectual property and in recent years, the entity has been losing key personnel.

 

In response to the AG, the OBP reported that for the 2015/16 financial year, its internal audit function has been outsourced to a new firm as the previous service provider, Price, Waterhouse Coopers (pwc) did not finish all the audits, hence the findings. It reported that outsourcing of the function to Nkonki for 2015/16 was approved by the Audit Committee.  It further reported that the management of the entity will continue to engage with the AG and the National Treasury regarding its financial and performance management challenges.

 

5.5.3 National Agricultural Marketing Council (NAMC)

 

Out of 63 planned targets for the 2014/15 financial year, the NAMC achieved 61 targets (97 per cent), which is a marked and commendable improvement from the previous year’s 67 per cent achievement.  In the 2014/15 financial year, the NAMC received a Government grant of R36 million (R3 million more than in 2013/14) and an additional income from external sources and/or sponsorships worth R40.796 million, which is significantly more than the R26 million that was received from external sources in 2013/14; and R1.94 million from interest. The entity had a total revenue of R78.74 million in 2014/15. The total expenditure for the year was R77.48 million and the NAMC realised a surplus of R1.27 million in the reporting year (slightly less than R1.4 from the previous year). The entity incurred irregular expenditure worth R219 000 in the current financial year, which when combined with the previous year’s R73 000, amounted to R292 000. The R73 000 from 2013/14 was sent to National Treasury for condonement but was not condoned. After the NAMC has conducted investigations no one was held liable as there was no financial loss to the entity. The R292 000 was condoned by the Council (NAMC Board) as per National Treasury Guidelines on irregular expenditure.

 

In the year under review, the NAMC has established a Transformation Review Committee and also reviewed the 20 per cent threshold for Industry Trusts. The entity conducted research on climate change impact on the agriculture sector with particular focus on the grain industry. The NAMC is also the Programme Management Unit for SIP 11 and for Fetsa Tlala Food Production Initiative (coordinating function). For SIP 11, the NAMC is managing the process of developing infrastructure plans and monitoring project implementation for DAFF, while mobilising for funding for anchor projects as DAFF is not getting funding for SIP11. In this regard, the NAMC has secured R3 billion funding, which it confirmed, is very minimal. In the last financial year, the NAMC reported that it drafted a business plan for the Fetsa Tlala Initiative outlining land to be targeted, hectares to be planted and the costs. The Department need to report on this and provide progress on a quarterly basis.  

 

The NAMC received an unqualified audit opinion and the AG highlighted that the NAMC, just like the ARC would have received a qualified audit opinion but was given an opportunity to make material adjustments to financial statements. The AG was concerned about the regression in the entity’s performance, which has been doing fairly well in previous financial years until it started regressing in 2013/14, from a clean audit in 2012/13 to an unqualified audit with findings in 2013/14 and the reporting year. In response, the NAMC reported that it is interacting with AG to improve its audit outcome and has implemented the AG’s recommendations, which will be implemented effective from 2015/16. It acknowledged that the findings emanated from deferred revenue from DRDLR on a new project that was recognised without meeting contract conditions regarding project assets. The NAMC in this regard has developed an audit matrix for both internal and external audit findings, which are presented to the Audit Committee on a quarterly basis.

 

The NAMC also presented some comments on food prices and impact of food inflation on consumers. The NAMC reported that food price inflation increased by 4.3 per cent in South Africa in August 2015 (linked to fuel and electricity costs) and is expected to increase again by the third quarter of 2015/16. The NAMC highlighted that in August 2015, staple food items such as maize meal and sugar were more expensive in rural areas than in urban areas, while bread and sunflower oil were cheaper in rural areas. The report also showed that the impact of food inflation on consumers in the past financial year (April 2014 – April 2015) was more on fruit (13 per cent), dairy (11.6 per cent), coffee and tea (7.3 per cent) and animal protein (5.8 per cent). When comparing July to July, basic daily food items for poor consumers also revealed higher inflation (6.5 per cent and above), suggesting a severe impact on poor consumers. To address the imminent challenge and negative impact of rising food cost, the NAMC recommended accelerated but well-coordinated implementation of the National Food and Nutrition Security Policy; consider bold steps to link smallholder farmers with institutional markets (e.g. Brazil); and implementation of priority programmes in the APAP, which will require mobilisation of funds to finance SIP 11 whose aim is to provide economic infrastructure in rural areas.

 

5.6        Discussion on Service Delivery Performance

 

The Department’s performance in the 2014/15 financial year improved when compared to the previous years.  However, there are still persistent challenges regarding effective spending of conditional grants for Programmes 3 and 5. With the strengthening of the Department’s Internal Audit Function and the assurance that has been given by the Chairperson of the Audit Committee, it is hoped that things can only get better in coming years.

 

During the 2014 State of the Nation Address (SONA), President Zuma emphasised the implementation of the NDP through the MTSF. 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 by 2019, the MTSF expects that 1 million hectares of underutilised land in communal areas should be developed and under production and 1.6 million households should be benefitting from Food and Nutrition Security initiatives. The recent report by DPME, based on data that they have, showed that the targets are not likely to be achieved. However, the targets are not insurmountable, with effective IGR and coordination and pooling of personnel and financial resources, including proper reporting, some of the MTSF targets can be achieved even before 2019. While the Department’s 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 APAP is commended and its implementation from 2015/16 is of utmost importance. 

 

The APAP is a good policy instrument that can easily address all the MTSF and subsequently, the NDP targets provided all its priorities are funded and it is effectively implemented. The APAP is by design an intergovernmental and multi-stakeholder plan as it requires different expertise and sources of funding, but, the Department has not been able to illustrate to the Committee how it is going to be implemented and which stakeholders, who are crucial to its success particularly in terms of funding, have made commitments to the Plan. The existing National Food and Nutrition Security Implementation Plan, which the DPME has reported that it will be driven by the Deputy-President, is also an intergovernmental instrument in which DAFF needs to play a lead and coordinating role.

 

In its presentation, the FFC raised a concern that agriculture in the country is highly mechanised to be a job driver for low-skilled people as outlined in the NDP (1 million jobs by 2030). However, jobs in agriculture are not expected solely from agricultural production but from the entire value chain particularly in agroprocessing as is outlined in the NGP and the IPAP. Coincidentally, agroprocessing is the area that the Department has previously not given the attention that it deserves particularly for the smallholder producers. However, during the 2014/15 financial year, the Department commendably developed an Agroprocessing Strategy for Small Processors, which should be implemented from the next financial year.

 

The food processing sub-sector is reportedly one of the largest domestic manufacturing sectors by employment and continues to show resilience even during economic meltdowns. Statistics South Africa showed that an estimated 207 893 jobs were created by the agroprocessing sector in the 3rd quarter of 2013 (18 per cent of the manufacturing jobs) and from 2012 to 2015, the value of food and beverages sub-sector to manufacturing, was approximately 24 per cent. Given the potential contribution of the agroprocessing sector to employment, and the implementation of the Strategy, it is expected that the Department’s performance trends and interventions will show progress towards the achievement of Outcome 4, to which agroprocessing responds.

Some progress has been achieved through the Department’s Programmes for Outcomes 7 and 10. However, unsatisfactory and little progress in some cases has been achieved in Outcome 4 (job creation) as most of the jobs created through conditional grants were seasonal. 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. With effective implementation and sourcing of the required financing, the APAP has a great role to play in the realisation of Outcome 4 and in ensuring 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 of access 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 ongoing revitalisation of the Taung (North West)/Vaalharts (Northern Cape) and Makhathini Flats (KZN) Irrigation Schemes are welcome interventions. The Department however, needs to upscale the development of irrigation schemes to other areas while ensuring that previous challenges associated with the Schemes management and maintenance, as well as water licensing are addressed. The Irrigation Strategy that has been developed in the year under review is expected to drive irrigation development and address some of the challenges.  

 

To ensure IGR and to further address challenges associated with provincial utilisation of the grants, the Department has developed an Intergovernmental Strategy which was approved during 2014/15 but not implemented. In addition, the Minister has reported to the Committee that he holds regular consultations with provincial MECs and Departmental Heads to ensure accelerated and effective service delivery particularly regarding the use of conditional grants.  

 

  1.       COMMITTEE findings and OBSERVATIONS

 

Governance and operational issues

 

  1. Although DAFF has made improvements, the following areas of the AG findings remain to be fully addressed, prevention of unauthorised, irregular, fruitless and wasteful expenditure.

 

  1.  The Committee has observed the stability that has been brought into the fisheries industry following the public outcry on allegations of mismanagement in the 2013 fishing rights allocation process (FRAP 2013). Two external investigations were conducted and measures were implemented to take corrective actions on the rights allocations going forward.

 

  1. The Committee has noted with appreciation the progress made on the management and operation of the Department’s fishing vessels. Although the Africana research vessel has not been restored to sea-worthiness, all other vessels are operational under the management of the South African Maritime Safety Agency. 

 

  1. The slow pace of the full integration of the Fisheries Management Branch into the Department particularly the MLRF, in order to minimise duplication of roles, reduce administrative costs and ensure accountability as the Branch in some respects, operates as a separate entity and not a Department Programme.

 

  1. 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 Performance Observations/Findings

 

  1. The implementation of the Smallscale Fisheries Policy, which started with the publication of the Regulations for consultation. This Policy will empower poor coastal communities in deriving livelihoods from fisheries resources in the surrounding coast.

 

  1. The progress on the implementation of Aquaculture plans that have been developed under Operation Phakisa to increase opportunities for both coastal and inland aquaculture. However, the rate of interdepartmental coordination on various legal instruments need to be accelerated.

 

  1. The Committee again identified intergovernmental collaboration and integration of activities between the Department and its entities, amongst the entities and between the Department and the DRDLR and lastly, between the Department and Provincial Departments as areas that need attention as they negatively impact service delivery in general. These intergovernmental relations affect the impact of conditional grants that are concurrently implemented from achieving the Government Outcomes. The Department has alluded to initiatives for better cooperation but these have not been fully institutionalised.

 

  1. Despite Government’s best efforts to develop smallholder farmers, policy coherence, baseline information and coordination in the implementation of interventions is required. The Norms and Standards for Comprehensive Producer Support and the Integrated Funding Framework that has been developed between DAFF and DRDLR provide hope but the plan to establish the farmer register needs acceleration. 

 

  1. The Department’s system of monitoring the impact of provincial projects that it funds, including those that are funded from conditional grants is inadequate to provide information on the impact of the project investment on the livelihoods of the beneficiaries.

 

  1. The constraints experienced by developing producers and new entrants into the Agricultural, Forestry 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 contract farmers 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. 

 

  1. The Department’s repeat findings from the AG due to the poor monitoring and evaluation and internal auditing functions, which were also attributed to lack of skills capacity within the Department. The Committee however, recognises that the Department has made improvements and has a functioning Internal Audit Unit and Audit Committee and is addressing other audit matters.

 

  1. The Department has made a commitment to address and follow through the commitments made to the AG and the Committee, which include youth mobilisation, improved governance and performance management. The Committee shall monitor progress on these commitments.

 

  1. FFC has observed that there is some progress in the envisaged role of agriculture by the NDP in terms of job creation and economic growth although at a slow pace. 

 

 

  1.       COMMITTEE Recommendations

 

The Committee recommends to the National Assembly that the Minister of Agriculture, Forestry and Fisheries should consider the following recommendations:

 

 

7.1  In consultation with the Minister of Finance, finalise the funding needs of the Department taking into account the key priorities identified in the APAP in order to ensure the revitalisation of the agriculture, forestry and fisheries value chains as interventions in these programmes play a central role in providing the much needed economic growth through smallholder producer development as envisaged in the NDP. Funding for SIP 11 is key as infrastructure development is essential for the implementation of the APAP; including funding for research, biosecurity and promotion of market access for smallholder producers. Provide a Report to Parliament by March 2016.

 

7.2 Fast-track the establishment of baseline information and farmer register for the   smallholder sector including the facilitation of a full Agricultural Census and an import and export system. The databases are essential in order to effectively guide and manage interventions for the development and transformation of the sector; and to measure impact of Government interventions. Report on progress to Parliament by the end of July 2016.

 

  1. Consider recommendations of the Committee in the 2015 Budget Vote Report as outlined in Section 3.2 of this report on the strengthening of institutional arrangements and intergovernmental relations and provide progress report on these to Parliament by the end of February 2016. The report should incorporate the CASP Impact Evaluation Report recommendations and the establishment of reliable baseline information for the sector.  

 

  1. Address interdepartmental arrangements to ensure that the design and application of policies and legislation enable conservation and development to coexist. Further ensure that an Interdepartmental Committee is established to identify policy instruments that have contradictions and develop a resolution mechanism for contradictory policies.

 

  1. By the end of January 2016, submit to Parliament 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.

 

  1. Ensure that entities under the DAFF’s administration develop restraint of trade policies specifically with respect to the ARC, OBP and Fisheries research, to protect intellectual property and prevent loss of critical expertise. A draft progress report in this regard should be submitted to Parliament by April 2016.

 

  1. Provide a status update on the implementation of the Agriculture and Forestry     Transformation Charters by February 2016 and the development of the Fisheries Transformation Charter by July 2016.

 

7.8 Fast track the process to fully integrate some of the administrative functions of the     

Fisheries Branch into the National Department and the review of legislation regarding the MLRF. Report to Parliament by the end of the 2015/16 financial year.

 

7.9 Develop a preferential procurement plan for local agricultural products and encourage provinces and local governments to procure such products from developing farmers. The plan should be submitted to Parliament by April 2016.

 

7.10 Submit a comprehensive progress report on the revitalisation of irrigation schemes including the Irrigation Strategy as reported in Programme 5; and revitalisation of Agricultural Colleges and report on their transfer to the Department of Higher Education and Training (DHET). Report to Parliament by July 2016.

 

7.11 Fast-track legislative and policy review programmes to ensure economic    

          transformation in the agriculture, forestry and fisheries sectors and increased contribution to job creation and poverty eradication. Report on progress to Parliament by March 2016.

 

7.12 Submit to the Committee a Progress Report on the consolidated contribution

(including all 3 sectors) of the Department to Government Priority Outcomes 4, 7 and 10 targets as stipulated in the MTSF 2014-2019. The Report should be    submitted to Parliament by the end of August 2016.

 

      7.13 Ensure that the Department’s early-warning systems adequately respond to

natural disasters in light of climate-change induced droughts, veld fires and floods. The Department should also ring-fence disaster funding for the sector in order to

               speed-up the disaster relief and compensation process. Report on progress to

               Parliament by February 2016.

 

 

 

Report to be considered.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Documents

No related documents