ATC181030: Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries, dated 30 October 2018

Agriculture, Forestry and Fisheries

2018 Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries
 

The Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Forestry and Fisheries, dated 30 October 2018.

 

The Portfolio Committee on Agriculture, Forestry and Fisheries (hereinafter referred to as the Committee), having considered the performance and expenditure of the Department of Agriculture, Forestry and Fisheries for the 2017/18 financial year and submission to National Treasury for the medium term period, reports as follows:

 

  1.       Introduction

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  1. Purpose of the Budgetary Review and Recommendation Report

 

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

 

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

 

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

 

  1. Preparation for the BRR Report 

 

In preparation for the BRR Report and in compliance with its mandate as set out in Section 5(1) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009), the Committee undertook the following activities in 2017/18:

 

  1. Briefings by the Department on all four quarterly performance and expenditure reports of the Department for the 2017/18 financial year. The first quarterly report for the 2018/19 financial year as published by the National Treasury and presented to the Standing Committee on Appropriations, was also considered.
  2. Oversight visit to Free State Province in August 2018 to oversee the implementation of the Fetsa Tlala Food Production Initiative; support to smallholder producers and aquaculture development.
  3. Held briefings and considered the medium term Strategic Plan, the Annual Performance Plan and Budget of the Department for the 2017/18 financial year, including those of its entities, viz. ARC, OBP, NAMC, PPECB and MLRF.    
  4. Received inputs and briefings on the 2017/18 Annual Reports of the Department and its entities from the Auditor-General and the Department of Planning, Monitoring and Evaluation on the Department’s Management Performance Assessment Tool (MPAT) and MTSF Outcomes.  
  5. Subsequently, on the 9th and 10th October 2018, the Committee held briefings and considered the Annual Reports of the Department and its entities for the 2017/18 financial year.
  6. The BRR Report also draws from other expert presentations and inputs that the Committee received throughout the 2017/18 financial 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 2017/18 financial year to date; an overview of the Committee’s previous budgetary and service delivery performance findings and recommendations; and further observations and recommendations from other Committee engagements with Department including those from oversight visits.

 

 

2.         Overview of the key relevant policy focus areas

 

In the medium term, the Department’s plans are informed and aligned with government-wide planning and policy mandates. Its initiatives are focused at fulfilling Outcomes 4, 7 and 10, which respectively relate to job creation, rural development and food security as well as natural resources management; the National Development Plan (NDP); the Medium Term Strategic Framework (MTSF) and the Agricultural Policy Action Plan (APAP), which is implemented as the revitalisation of the agriculture and agroprocessing value chain (RAAVC). This section will provide a brief overview of these policy interventions including the Department’s key policy foci for the 2017/18 financial year and the medium term period.

 

2.1        The National Development Plan (NDP)

 

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

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

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

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

 

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

 

Priority Outcome

MTSF 2014-19 Target

Outcome 4

(job creation)

  • All APAP sector and crosscutting interventions to be implemented by 2019. Department to report annually on implementation including review and extension of plans.
  • 95% 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% implementation of the Comprehensive Africa Agriculture Development Programme (CAADP) by 2019. Annually, the Department needs to report on the implementation of the investment plans.
  • Development of smallholder production – 300 000 smallholder producers producing for markets by 2019.

 

Outcome 7

(rural development & food security)

  • 1.6 million vulnerable 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 (ha) of underutilised land in communal areas developed and under production by March 2019.
  • By 2019, implementation and management of the Preservation and Development of Agricultural Land Framework Act (PDALFA)
  • Policies promoting the development and support of smallholder producers implemented by March 2019.
  • Expand land under irrigation – an additional 1 250 hectares of land under irrigation for smallholder production by March 2019.
  • Support to smallholder producers – an additional 80 000 smallholder producers receiving support to ensure production efficiencies by March 2019.

 

Outcome 10

(natural resource management)

  • Combat land degradation - 152 500 hectares of forestry areas should be under rehabilitation and/or restoration by March 2019.
  • Status reports on resource status for abalone (31% above pre-fished stock by 2019), West Coast rock lobster (26% above the 2006 level by 2019) and deep-water hake (30% of pre-fished biomass by 2019).
  • Climate change adaptation plans for Agriculture, Forestry and Fisheries developed and implemented by 2019.

 

 

 

2.3        The Department’s Key Policy Developments

 

 

  1. National Food and Nutrition Security Policy

 

In September 2013, Cabinet approved the National Food and Nutrition Security Policy, which is a collaboration between the Department and the Department of Social Development. The Policy seeks to ensure the availability, accessibility and affordability of safe and nutritious food at national and household levels. To further realise some of the policy objectives, the President subsequently launched the Fetsa Tlala Food Production Initiative in October 2013 to address increasing household food insecurity in the country. The aim of Fetsa Tlala is to put 1 million hectares of fallow land particularly in the former homelands, under production by 2019. The programme also seeks to link smallholder producers to government institutions for preferential procurement (market access). Following some impact evaluations that were done by the Presidency, towards the end of 2015, coordination of Food Security was placed under the leadership of the Deputy President. Through the Deputy Presidency’s Office, an Intergovernmental Technical Working Group was established to develop the National Food and Nutrition Security Plan that will be an implementation arm of the Policy. Progress on the implementation of the Plan has not been received. 

 

  1. Smallscale Fisheries Policy

 

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

 

However, after requests from stakeholders, the Minister granted an extension for the registration of fishing communities as smallscale fishers. As a result, the SSF Policy could not be implemented during 2015/16 but was expected to be implemented in 2016/17. However, due to additional extensions to the period for registration of fishing communities, the Plan was not implemented in 2016/17 and was expected to be implemented by the end of the financial year under review, 2017/18. The SSF Policy was again not implemented by the end of 2017/18 due to cited delays in finalising appeal processes in the coastal provinces.  

 

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

 

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

 

  1. The Agricultural Policy Action Plan (APAP)

 

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

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

 

APAP interventions are also part of the MTSF targets and the Department is expected to report annually on implementation including the review of plans, which it has not done. This is one of the MTSF targets that is not going to be achieved as the Department has been unable to report on the implementation of APAP sector and crosscutting interventions.

 

3.         OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

 

3.1        Overview of Vote Allocation and Departmental Expenditure (2014/15 – 2020/21)

 

The budget allocation to Vote 24: Agriculture, Forestry and Fisheries has been stagnant if not decreasing across Programmes in the previous medium term expenditure framework (MTEF) period ending in 2016/17 (see Table 1 below) due to Cabinet-wide reductions. Notwithstanding the slight improvement in the total allocation to the Vote, a similar trend is noticed in the current medium term.  The slight improvement to the total Vote allocation is attributed to increases in the Department’s key programmes, namely, Programme 2: Agricultural Production, Heath and Food Safety and Programme 3: Food Security and Agrarian Reform (Table 1).

 

The Department was appropriated a total amount of R6.8 billion in the financial year under review (2017/18), a slight increase from the R6.5 billion that was appropriated in the 2016/17 financial year (see Table 1). In the year under review (2017/18), the Department spent R6.7 billion, which is 98.3 per cent of its total appropriation, which is a reduction from the previous financial year’s 99.6 per cent. The Department’s spending has been decreasing exponentially since 2015/16, when the Department spent 99.9 per cent of its appropriated budget.

 

In 2017/18, the Department surrendered a total of R131.3 million to the National Treasury’s Revenue Fund, which is four times the previous financial year’s R32.4 million. The total amount returned to National Treasury comprised of R118.9 that was unspent from voted funds (i.e. under-expenditure five times the R24 million that it returned to National Treasury in 2016/17) and R12.4 million from Departmental Revenue and National Research Foundation (NRF) receipts. The increasing under-expenditure of voted funds in particular (i.e. R8.2 million in 2015/16; R24 million in 2016/17 and R118.9 million in 2017/18) is a serious concern for a Department that usually cites underfunding and budgetary constraints as the main reasons for not performing certain functions; and more so for a key sector that is expected to drive job creation in the country.  

 

The Department’s under-expenditure was across all Programmes but was attributed largely to unspent funds that were meant for an Agricultural Census (Programme 1) and Primary Animal Health Care (Programmes 2). Programme 1 has been consistently underspending allocated funds for the past four financial years, albeit for different reasons in previous years. 

 

Table 1. The Department’s spending trend across programmes 

 

Programme

 

R Million

2014/15

2015/16

 

2016/17

             2017/18

2018/19

2019/20

2020/21

Audited Outcomes

Audited Outcomes

Audited Outcomes

Adjusted  Appropriation

Audited Outcomes

MTE Estimates

MTE Estimates

MTE Estimates

1. Administration

   738.4

   785.8

   828.5

   906.8

   828.0

   923.2

   931.5

   938.0

2. Agric Prod, Health & Food Safety

2 183.7

2 143.0

1 927.0

2 236.9

2 230.7

2 367.1

2 507.7

2 596.2

3. Food Sec & Agrarian Reform

1 656.3

1 906.8

1 879.0

1 944.0

1 925.6

2 037.9

2 305.0

2 369.1

4. Trade Promotion & Market Access

   307.0

   236.7

   310.5

   261.7

   278.7

   273.9

   291.3

   309.6

5. Forestry & NRM

1 303.6

   862.3

1 077.7

1 015.7

   960.5

1 075. 1

1 046.0

1 047.4

6. Fisheries Management

   439.8

   465.9

   468.1

   481.9

   504.7

   487.8

  519.7

  553.2

Total

6 628.8

6 400.5

6 490.8

6 847.0

6 728.2

7 165.0

7 601.2

7 813.5

Source: Estimates of National Expenditure (National Treasury), 2018.

 

Approximately 56.9 per cent (R3.8 billion) of the Department’s total expenditure for 2017/18 went to transfers and subsidies, which is slightly more than the R3.5 billion (54 per cent) that was spent under transfers and subsidies in 2016/17. Transfers and subsidies constitute inter alia conditional grants, transfers to Departmental entities, academic institutions and membership fees to international organisations. As was the case in the previous financial year, approximately R2.2 billion of the Department’s total budget for 2017/18 (33 per cent) was allocated to conditional grants and 100 per cent of the conditional grants allocation was reportedly spent. Of the R2.2 billion for grants, R1.64 billion (73 per cent of conditional grants appropriation) was allocated to the Comprehensive Agricultural Support Programme (CASP).

 

Irregular expenditure

 

In the year under review, 2017/18, the Department incurred irregular expenditure of R5.4 million of which R4.1 million was condoned and the Department was left with irregular expenditure of R1.3 million. The irregular expenditure for 2017/18 is almost double the irregular expenditure for 2016/17, which was R2.8 million, of which R2 million was condoned.

Most of the irregular expenditure was in respect of commissioned and contract or consultancy work i.e. non-adherence to supply chain management as in previous years.

 

While no details were specified, it was reported that in most cases, disciplinary actions were taken against implicated officials while some are under investigation. The most significant irregular expenditure, which forms part of the condoned amount, is R3.9 million for Manstrat Agricultural Intelligence Solution, for which no disciplinary action was reportedly required.

 

In addition to the irregular expenditure of R5.4 million, there is also an irregular expenditure worth R10.4 million that is under investigation for both 2016/17 (R1.9 million) and 2017/18 (R8.5 million) in respect of overtime that exceeded 30 per cent.  

 

Fruitless and wasteful expenditure

 

In 2017/18, the Department incurred fruitless and wasteful expenditure of 373 000 of which R366 000 was resolved and the Department ended up with fruitless and wasteful expenditure of R7 000, which is significantly less than R379 000 from 2016/17. As in the prior year, the fruitless and wasteful expenditure was due to interest paid on overdue accounts (R306 000 compared to previous year’s R17 000); cancellation of Department of Public Works projects (R42 000 compared to previous year’s R363 000) and no-show incidents for travelling arrangements made in advance (R25 000).  

 

In addition to the above, fruitless and wasteful expenditure of R3.36 million is under investigation for no-show incidences for travelling arrangements made in advance and calculation errors on overtime claims.

 

3.2        Financial Performance per Programme in 2017/18

 

Table 2. DAFF Programme Budget and Expenditure

Programme

2017/18

2016/17

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

920 487

827 999

92 488

843 571

828 485

15 086

2. Agricultural Prod, Health & Food Safety

2 249 520

2 230 660

18 860

1 927 266

1 927 031

  235

3. Food Security & Agrarian Reform

1 928 604

1 925 580

3 024

1 881 198

1 879 016

2 182

4. Trade Promotion & Market Access

279 920

278 667

1 253

310 700

310 464

236

5. Forestry & NRM

963 758

960 504

3 254

1 084 122

1 077 741

6 381

6. Fisheries Management

504 745

504 722

23

468 108

468 090

   18

Total

6 847 034

6 728 132

118 902

6 514 965

6 490 827

24 138

Source: Annual Report (DAFF), 2018

 

Programme 1: Administration

The Administration Programme spent approximately 90 per cent of its allocated budget for 2017/18, which is far less than the 98.2 per cent expenditure for the 2016/17 financial year. Spending patterns in this Programme have regressed as it encountered a significant increase in under-expenditure for the 2017/18 financial year. The main challenge is poor planning and lack of monitoring and evaluation which have been repeatedly raised by both the Committee and the Auditor-General of South Africa. For three consecutive years up to 2016/17, underspending in Programme 1 has been attributed to unspent funds for capital works in respect of the Stellenbosch Plant Quarantine Station due to delays in the Department of Public Works processes.

 

In the year under review, 97 per cent of unspent funds were in one of Administration’s important subprogrammes, the Policy, Planning, Monitoring and Evaluation (PPME) subprogramme. The under-expenditure of R90 million in the PPME subprogramme was attributed to a Memorandum of Understanding (MOU) with Statistics South Africa that could not be signed during 2017/18 but was signed in April 2018. The funds were for an Agricultural Census that the Committee has been asking for including the development of a Farmer Register for the country. Approximately R2.2 million of the remaining under-expenditure was for office accommodation.   

 

Programme 2: Agricultural Production, Health and Food Safety

In this Programme, the Department spent 99 per cent of its allocation, which is a slight regression from prior years. This is the Programme in the Department that has been consistently utilising almost 100 per cent of its budget allocation (99.6 per cent in 2014/15 and 100 per cent in the previous financial years (i.e. 2015/16 and 2016/17). Out of the allocated R2.2 billion for the Programme in 2017/18, approximately R18.9 million was not spent by the end of the financial year. This is a significantly large amount compared to the R235 000 that was not spent in 2016/17. Out of the total under-expenditure for 2017/18, R17.8 million was for the Primary Animal Health Care Programme that was not spent as the Department placed fewer than planned Veterinarians for the Compulsory Community Service (CCS) programme. Most of what was left of the under-expenditure under Programme 2 was, as in the previous financial year, in the Inspection and Laboratory Services subprogramme (R1 million), mostly in respect of machinery and equipment. 

 

Programme 3: Food Security and Agrarian Reform

Expenditure trends in this Programme have been fluctuating but always close to 100 per cent. In the year under review, 99.8 per cent was spent compared to 99.9 per cent in 2016/17 and 99.8 per cent in 2015/16. Approximately R3 million was not spent in Programme 3 during 2017/18, which is R1 million more than under-expenditure incurred in 2016/17. While in the previous financial year more than 50 per cent of the under-expenditure was in the Sector Capacity Development subprogramme, in the year under review, 81 per cent (R2.5 million) of the unspent funds are in the Food Security subprogramme mostly in respect of capital assets (buildings and other fixed structures).  The under-expenditure of R2.5 million in the Food Security subprogramme is almost three times the R872 000 that was not spent under the subprogramme in 2016/17.

 

Programme 4: Trade Promotion and Market Access

 In Programme 4, the Department’s spending regressed slightly from 99.9 per cent in 2016/17 to 99.6 per cent in the financial year under review. In comparison to 2016/17 when the Department underspent R236 000 in this Programme, for the year under review, under expenditure increased fivefold to R1.2 million (Table 2).  As in the previous three years, most of the underspending was in the International Relations and Trade subprogramme mostly in respect of payments to foreign governments and international organisations (R1 million), as well as to non-profit organisations (R130 000). Notwithstanding that this programme has been without a Deputy Director-General for quite some time, under-expenditure on the same items is indicative of poor planning and inefficiency on the part of the Department.   

 

Programme 5: Forestry and Natural Resources Management

In Programme 5, the Department spent 99.7 per cent of its allocated budget, a slight improvement from the previous financial year’s 99.4 per cent expenditure. This is the only Programme whose expenditure has slightly improved during the 2017/18 financial year, with the Department not spending R3.2 million compared to the previous year’s R6.4 million (Table 2).  In the previous year, approximately 95 per cent of the unspent funds were under the Natural Resources Management (NRM) subprogramme (R6 million), mostly in respect of CASP Indirect Grant for drought relief. In 2017/18, the subprogramme underspent R126 000 mostly under goods and services.

 

In the year under review, approximately 80 per cent (R2.6 million) of the under-expenditure for Programme 5 is in the Forestry Operations subprogramme, mostly for compensation of employees due to vacancies. This is a serious concern given the sectoral challenges that have been observed by the Committee that include among others, lack of support and recognition of small forestry growers and their inclusion in the forestry industry value chain to promote equitable sector growth; lack of beneficiation and economic benefits for communities surrounding forestry plantations and inadequate oversight by the Department on the forestry industry, the majority of whom are leasing plantations from the state.    

 

Programme 6: Fisheries Management (including the Marine Living Resources Fund)

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 operations budget for the past six financial years including the year under review (2017/18) in which it spent 100 per cent of the allocated budget to the MLRF. The Programme underspent R23 000 in the year under review, which is slightly more than R18 000 that was not spent in 2016/17. The underspending, as in previous years, was in respect of personnel related costs i.e. compensation of employees to a large extent (R17 000), and to a lesser extent, transfers to households (Working for Fisheries Programme).  

 

The MLRF incurred irregular expenditure of R172 million in 2017/18; R40 million of which was due to non-compliance with legislation and Treasury Regulations and R28.6 million was in respect of payments to SAMSA for Maritime Special Projects that did not follow competitive bidding process and deviations that were not approved by the Accounting Officer. Fruitless and wasteful expenditure amounted to R2.3 million and was mostly attributed to appointment of external service providers that could have been avoided.

 

3.3        Report of the Auditor-General of South Africa

 

3.3.1 Department of Agriculture, Forestry and Fisheries

 

In terms of financial statements, the Department received an unqualified audit opinion from the Auditor-General of South Africa (AGSA or AG) with matters of emphasis and material findings for the 2017/18 financial year. For the past two financial years including the year under review, 2017/18, the Department has been regressing as there were material findings that necessitated corrections on its financial statements. In this regard, the Department’s audit outcomes have been stagnant as the quality of the annual performance report that was submitted for auditing remained unchanged from the previous financial years. The Department’s expenditure management particularly lack of consequence management remains a concern as similar offences as in previous years are attributed to irregular, fruitless and wasteful expenditure.

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

  • Non-compliance with legislation i.e. National Treasury Regulations and Public Finance Management Act (PFMA) (Act No.1 of 1999) – the Department’s financial statements submitted for auditing were not prepared according to prescribed Financial Reporting Framework as required by Section 40(1)(b) of the PFMA. Material misstatements of commitments, accruals and payables identified by the auditors in the submitted financial statements were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.

 

  • Usefulness and reliability of reported performance information, as well as adjustment of material misstatements – The AG identified material misstatements in the Annual Performance Report submitted for auditing on the reported performance for Programme 2: Agricultural Production, Health and Food Safety; Programme 3: Food Security and Agrarian Reform and Programme 4: Trade Promotion and Market Access. With the exception of Programme 2, it should be noted that these are repeat findings dating as far back as 2015/16 for Programmes 3 and 4. As in previous years, the Department’s management subsequently corrected the misstatements for Programme 3; and AG raised material findings on the usefulness and reliability of information for Programmes 2 and 4 for 2017/18 financial year.
  • For Programme 2: Agricultural Production, Health and Food Safety, the AG raised material misstatements in respect of completeness and accuracy of evidence for the indicator, ‘number of regulatory compliance and monitoring interventions implemented’; and
  • For Programme 4: Trade Promotion and Market Access, the AG noted that the targets for the indicator, ‘international relations strategy implemented’ were not specific in clearly identifying the nature and required level of performance during the planning process as required by the Framework for Managing Programme Performance Information.  It should be noted that the latter is a repeat finding for the third consecutive year that the Department failed to correct for Programme 4. 

 

  • Expenditure and revenue management – the Department did not take effective and appropriate steps to prevent irregular expenditure of R5.48 million as required by Section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1. The majority of the expenditure was related to non-compliance to supply chain management (SCM) requirements.

In addition, appropriate processes were not implemented to provide for the collection of and reconciliation of revenue as required by Treasury Regulation 7.2.1.

 

  • Deficiencies in internal controls in respect of Leadership
    • The management did not exercise adequate oversight to ensure that internal controls are implemented and also in the areas of performance planning and compliance with the National Treasury’s Framework for Managing Programme Performance Information (FMPPI) to ensure that performance targets were specific in clearly identifying the nature and required level of performance (e.g. Programme 4: Trade Promotion and Market Access). 
    • The instability in leadership roles and vacancies in critical positions contributed to the ineffective monitoring of action plans.   

 

  • Financial and performance management – lack of adequate controls on the daily and monthly processing of transactions including information received from the Branches for reporting purposes, resulted in findings on the Performance Report and Financial Statements, which were subjected to material corrections after having been submitted for auditing.

Non-compliance with legislation could have been prevented had compliance been properly reviewed and monitored.

 

3.3.2 The Marine Living Resources Fund (MLRF)

 

In the year under review, the MLRF regressed in terms of audit outcomes. It received a qualified audit opinion with matters of emphasis from the Auditor-General of South Africa (AGSA or AG). The qualified opinion was based on the fact that the MLRF did not recognise all items of plant and equipment in accordance with the South African Generally Recognised Accounting Practice (GRAP) 17: Property, Plant and Equipment, which resulted in plant and equipment not being recorded. Therefore, it became impractical for the AG to determine the impact on the net carrying amount of plant and equipment and related depreciation, accumulated depreciation and retained earnings. As the AG could not confirm physical assets that are disclosed in Note 2 of the MLRF Annual Report, the cost and accumulated depreciation was overstated with R7 599 644 (approximately R7.6 million).  

 

The AG highlighted that the entity did not address major audit issues that were raised in previous years and did not follow-up on recommendations made. The AG further reported that there has been slow response by management to improving key controls and addressing risk areas including implementation of recommendations by oversight bodies such as parliamentary Committees and the Standing Committee on Public Finance (SCOPA).

 

The MLRF did not investigate reported unauthorised, irregular and fruitless expenditure. The AG further reported that there is lack of skills and required competencies within the MLRF in the supply chain management (SCM) unit and poor management of procurement and contracts is a recurring matter. The AG drew attention to the following findings in respect of the MLRF:

  • Non-compliance with legislation i.e. National Treasury Regulations and Public Finance Management Act (PFMA) (Act No.1 of 1999)
  • The financial statements submitted for auditing were not prepared in accordance with the prescribed Financial Reporting Framework and supported by full and proper records as required by Section 55(1)(a) and (b) of the PFMA. Some of the material misstatements that were identified by the auditors were subsequently corrected but some were not corrected and supporting records not provided, hence the qualified audit opinion. 
  • The Quarterly Reports were not submitted to the Executive Authority (Minister) as required by Treasury Regulation 30.2.1

 

  • Usefulness and reliability of reported performance information – the planned target for the indicator, ‘Smallscale Fisheries Policy implemented’, was not specific in clearly identifying the nature and required level of performance and thus also not measurable.

 

  • Expenditure management – effective and appropriate steps were not taken to prevent irregular expenditure amounting to R40.3 million; as well as fruitless and wasteful expenditure amounting to R1.1 million. In both cases, leadership did not provide adequate oversight and management did not perform sufficient monitoring over compliance with laws and regulations when procuring goods and services, which resulted in payments made for services that could have been avoided.

 

  • Consequence management – there was no sufficient appropriate evidence that disciplinary steps were taken against officials who had incurred irregular and fruitless and wasteful expenditure as required by Section 51(1)(e)(iii) of the PFMA. This was due to lack of maintenance of proper and complete records for use as evidence to support investigations or investigations that have not been instituted.

 

  • Procurement and contract management – as in the previous year,
  • Goods and services of a transaction value above R500 000 were procured without inviting competitive bids and deviations were approved by the Accounting Officer, but it was practical to invite competitive bids as required by Treasury Regulations 16A6.1 and 16A6.4. 
  • Goods and services of a transaction value below R500 000 were procured without obtaining the required price quotations as required by Treasury Regulation 16A6.1.

 

  • Internal control deficiencies in respect of:
  • Leadership – significant lapses in the Accounting Authority’s oversight responsibility over financial reporting, predetermined objectives, legislative compliance and related internal controls.
  • Financial and performance management – management did not implement adequate processes to ensure that credible financial statements were prepared in compliance with the Reporting Framework as internal review procedures were inadequate to identify and correct material misstatements in the financial statements and underlying records. In addition, adequate compliance monitoring processes were not implemented resulting in material misstatements for SCM.

 

3.4        Report of the Department’s Internal Audit Committee

 

The Department’s Internal Audit Committee raised the following key areas of concern:

  • Governance and management arrangements regarding the Fisheries Management Branch (see the MLRF in subsection 3.3.2); and negative media reports regarding alleged irregularities in the Branch.
  • Expenditure management in the Department.
  • Reduction in the budget allocation, which has been cut by close to R1 billion in the current MTEF period (2014/15 to 2017/18). The budget cut has impacted on the Department’s operations for regulatory and developmental programmes. These include information and communication technology (ICT); border control for goods, plants and animals; forestry operations; food security and monitoring function. Review of ICT was limited due to lack of ICT audit capacity within the Internal Audit function/unit.
  • Risk management was not prioritised within the Department; and senior management did not attend the Risk Management Committee meetings resulting in meetings being cancelled or deferred.
  • Management review controls were not always effective in preventing and detecting non-compliance matters.
  • Management did not timeously monitor and review adherence to the Department’s Audit Action Plan.  

 

The Internal Audit Committee highlighted that although there has been some improvement in governance and in the achievement of MTSF targets over the last five years, there is still a concern with the Department’s monitoring and evaluation system/unit. The latter function’s ineffectiveness is noted in the utilisation of conditional grants, particularly CASP and the Department’s overall performance.

 

 3.5       Response from the Department on issues raised by the AGSA

 

To address the audit findings by the AGSA on the 2017/18 annual report, the Department presented an Audit Matrix of the audit findings and corrective measures. The Corrective Measures are:

  • Compulsory attendance of Audit Steering Committee meetings by Deputy Director-Generals (DDGs).
  • Department Branches reporting on their performance monthly to the Department’s Executive Committee (EXCO) and Performance Reviews held at the end of each Quarter.
  • The Policy, Planning, Monitoring and Evaluation (PPME) Branch facilitating engagements with the AGSA to ensure open communication between DAFF and AGSA regarding management of predetermined objectives with the aim of eliminating any possible ambiguity and misunderstanding with the intention of obtaining positive audit outcomes.  
  • Introduction of a compliance register to monitor compliance to monthly reporting for continuous tracking of performance information.  
  • Strategic and Operational Planning Guidelines, as well as Monitoring, Evaluation and Reporting Guidelines are in place. Monitoring and Evaluation Standard Operating Procedures (SOP) was developed to strengthen internal control systems.
  • Performance review meetings are held to assess the status of performance and to adopt remedial action where necessary.
  • Departmental non-financial performance reports are approved by the DG quarterly before submission to the Department of Planning, Monitoring and Evaluation (DPME).

 

The Corrective Measures as outlined above are the same measures that the Department has been presenting to the Committee since the 2015/16 Annual Report briefings and these were also presented during 2016/17 briefings. Given the continued repeat audit findings and the key areas of concern that have also been raised by the Internal Audit Committee, the Department’s corrective measures are either not implemented or are not effective. As far back as 2015/16 and in response to root causes of audit findings, the Department’s Executive Authority committed the following inter alia:

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

 

In addition to the above corrective measures, the Department put aside an annual amount of R20 million (R60 million for the MTEF period from 2016/17 to 2018/19) to ensure effective monitoring of the CASP grant. However, notwithstanding the aforementioned measures that were supposed to be implemented as far back as 2016/17, including funding for CASP monitoring, the AGSA still highlighted repeat audit findings in the Department’s financial management and these include poor monitoring of conditional grants. The Department reported during quarterly briefings in 2017/18 that the allocation for the monitoring of CASP was reprioritised for other activities, which included training.  

 

3.6        Discussion on Financial Performance

 

The stagnant audit outcomes in respect of the Department and the regression in some of the entities’ financial performance compared to prior years were highlighted as areas of serious concern by the Committee. It was further recognised that the Department still has a challenge with effectively and efficiently spending its budget as planned and on planned targets, to ensure service delivery and value for money. This is a concern for the Committee as it is acknowledged that inadequate funding remains a challenge to ensure that the Department carries out all its mandated activities as highlighted in the NDP, MTSF and other Government directives (e.g. SONA).

 

The main challenges regarding budgetary use is proper planning, expenditure management, monitoring and evaluation (M & E) of transferred funds and leadership accountability (inadequate consequence management). Despite funds being put aside for the monitoring of CASP projects in particular, for the MTEF period, 2016/17 to 2018/19, little has been achieved in this regard since 2016/17. Instead, the Department reprioritised the funds for other activities such as training as was reported to the Committee during quarterly briefings in 2017/18. As much as the Department and some of its entities are underfunded, inability to efficiently utilise committed funds as planned, may negatively impact the Department’s budget allocation from National Treasury.  

 

In previous financial years, underspending and non-achievement of targets were largely through conditional grants to Provinces, where service delivery needs to take place. It has been noted that spending in this regard has also improved but on-time verification and reliability of reported information is still a major concern, which makes it a challenge to measure service delivery and value for money. Physical monitoring in respect of conditional grants, which is a repeat concern, was emphasised to ensure efficient and results-driven monitoring and evaluation of the implementation of policies and plans. In this regard, financial resources need to be available to ensure that the Department has skilled M & E practitioners that 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. The lack of service delivery and mismanagement of funds due to the Department’s failure to do proper M & E has been observed in most oversight visits to provinces.

 

The Department’s unqualified audit opinion received from the AGSA was acknowledged but there was a concern that the outcome was attained after the AGSA has given the Department an opportunity to make material adjustments on its financial statements, which was also the case in the previous two financial years. The Committee noted that despite its attempts to ensure that the Department timeously addresses repeat findings from prior years by presenting its Audit Action Plan during quarterly briefings, the Department could not ensure effective implementation of its Audit Action Plan to prevent further findings. Despite recommendations from the Committee and AGSA, the Department is not making use of, or responsive to issues that are raised by the Internal Audit Committee. Had the Department been addressing the key areas of concern that are raised by the Internal Audit Committee (Subsection 3.4 above), which include inter alia expenditure and risk management, its financial management and audit outcomes would be improving significantly.

 

3.7        Human Resources and Vacancy Rate

 

The Department’s post establishment decreased from 6 152 to 6 120 by the end of March 2018; and it started the financial year with a vacancy rate of 10.5%, which considerably increased to 14.9% by the end of 2017/18 (i.e. March 2018). The vacancy rate is higher than the 10 per cent norm for the public service; and the Department attributed the high vacancy rate to budgetary constraints. As in prior years, the Department had a relatively high number of vacancies at the senior management service (SMS) level (20.8%), highly skilled supervision level (14.3%) and skilled level (17.4%). Most vacancies were in the Fisheries Management Programme (20.8%) and Forestry and Natural Resources Management (18%).

 

As was the case in the previous financial year, the Department has not met the 2% equity target aimed at enhancing employment opportunities for people with disabilities and is still below 50% in terms of female representation in SMS positions. To mitigate any effects on service delivery as a result of Cabinet-approved budget reductions, the Department reported that it has embarked on a strategy to fill the most critical service delivery vacancies and is prioritising its HR as a strategic partner to enable it to achieve its strategic objectives.   

 

4.         Overview and assessment of service delivery performance

 

4.1        DAFF Service Delivery Performance for 2017/18

 

The Department had 62 planned targets as listed in the 2017/18 Annual Performance Plan including the MLRF for Programme 6. Out of the 62, the Department achieved 45 targets (73%), which is a significant regression from the previous three financial years i.e. 60 out of a total of 75 targets (80%) in 2016/17; 58 out of a total of 71 targets (81.7%) in 2015/16 and 45 out of the total of 55 targets (81.8%) in 2014/15. While it achieved 73% of its planned targets for the year under review, the Department spent 98.3 per cent of its allocated budget for the year. The Department’s service delivery performance regressed across most Programmes with the exception of Programme 3.  

 

DAFF Programme Performance

 

Table 3. Summary of Target Achievements and Expenditure for 2017/18 per Programme

 

  •  

 

No. of Targets

  •  

Not achieved

Proportion achieved

 

Budget spent

 

1. Administration

 

  1.  
  1.  
  1.  

75 per cent

R828 million

(90 per cent)

 

2. Agricultural Production, Health and Food Safety

 

  1.  
  1.  
  1.  

78 per cent

R2.2 billion

(99 per cent)

 

3. Food Security and Agrarian Reform

 

  1.  
  1.  
  1.  

100 per cent

R1.9 billion

(99.8 per cent)

 

4. Trade Promotion and Market Access

 

  1.  
  1.  
  1.  

67 per cent

R278.7 million

(99.6 per cent)

5. Forestry and Natural Resources Management

 

  1.  
  1.  
  1.  

75 per cent

R960.5 million

(99.7 per cent)

 

6. Fisheries Management

 

  1.  
  1.  
  1.  

58 per cent

R504.7 million

(100 per cent)

 

  1.  

 

  1.  
  1.  
  1.  

73 per cent

R6.49 billion

(98.3 per cent)

*Total number of targets in the Department’s Annual Report differs from those in the MLRF Annual Report

** See Auditor-General’s findings in sub-section 3.3.1 

 

Programme 1: Administration

 

Out of the planned 16 targets under Programme 1 for the 2017/18 financial year, the Department achieved 12 targets, which is a slight regression in terms of proportion from the previous financial year’s 76% achievement. Although the Department has implemented the Risk Management Implementation Plan, the Annual Risk-based Internal Audit Plan and the Work Place Skills Plan during the year under review, these have not led to improved governance and service delivery. 

 

The Department failed to develop and discuss at the Departmental Executive Committee (EXCO), the Draft Integrated Development Finance Policy, which has been a recurring planned target since 2015/16 that was supposed to be implemented in the previous financial year, 2016/17. When the target was not achieved in the last financial year, the Department cited non-approval of recommendations on funding modalities. For the year under review, the reason for non-achievement of the target has been attributed to the EXCO decision to incorporate the Draft Policy as a chapter in the Policy on Comprehensive Producer Development Support, which is also under development.

 

The Department’s lack of effective planning also comes into scrutiny as it also failed to achieve 100% adherence to Performance Management and Development System (PMDS). The transgressions did not only apply to junior and entry-level employees but the senior management services (SMS) level as well. The reason that was cited was that employees on leave or suspension are ineligible to sign the performance agreements.

 

Employee performance, particularly of senior personnel (SMS level) is not prioritised by the Department and this is evident in the overall performance with respect to implementation of planned targets and development of policies. In light of the Department’s performance in previous years, the Committee has been raising concerns with the awarding of performance rewards. The Committee’s concern is further compounded by the acknowledgement from the Department, that no performance assessments have been done on senior employees for the past 4 years.

 

Programme 2: Agricultural Production, Health and Food Safety

 

Out of a total of 9 targets that were planned for this Programme in 2017/18, 7 targets were achieved (78%), a 2% regression from the previous year’s 80% target achievement. Under this Programme, the Department has again, been unable to meet its set target for the deployment of veterinary graduates to rural communities for the Compulsory Community Service (CCS) programme. It should be noted that this has been the case since the inception of the CCS programme in 2015/16. In this regard, and despite the critical shortage of veterinarians particularly in rural areas, the Department does not seem to be doing enough to appropriately address the challenges associated with the recruitment of veterinary graduates for the CCS programme.

 

To address the shortage of veterinary graduates in the country, the Department has reported that it plans to recruit veterinary graduates for the CCS programme from other countries although it also highlighted challenges with getting work permits for foreign graduates.

 

Another target that could not be recognised as an achievement relates to the number of regulatory compliance and monitoring interventions implemented. The AG raised concerns with material misstatements in respect of completeness and accuracy of evidence for the indicator; and has highlighted the inability to confirm the reported achievement by alternative means. Therefore, in this regard, the target has not been counted as an achievement.

 

 

Programme 3: Food Security and Agrarian Reform

 

For the 2017/18 financial year, the Department achieved all 5 planned targets for Programme 3. This is the only Programme whose performance with respect to achievement of targets has improved. In the last financial year, the Programme achieved 71% of its planned targets.

However, despite its achievement, the Programme’s interventions do not seem to be making a positive impact particularly in reducing the number of people that are vulnerable to hunger. The main challenge, which is recurring from previous years, is timeous validation of information that is received from Provinces in respect of the number of hectares of underutilised communal land that has been put under production; the number of households that were supported with agricultural food production and the number of smallholder producers supported. This is a serious concern as these targets are supposed to play a central role in the achievement of Outcome 7 (rural development and food security). In the case of communal land that was put under production, the Department has been struggling to meet the planned annual target since 2015/16 and drought has been cited as the main reason for underachievement in some provinces. For the 2017/18 financial year, the drought-affected provinces were Eastern Cape (EC), KwaZulu-Natal (KZN), Northern Cape (NC) and Western Cape (WC).

The Branch previously planned to address the challenges by undertaking weekly special meetings chaired by the DDG of Programme 3, over and above the Quarterly Management meetings for discussing performance status. In the year under review, the Department reported that a National Food and Nutrition Security Coordinating Committee and strategies were established to oversee the implementation and reporting of activities. The Committee has consistently raised concerns about poor monitoring and evaluation (M & E) of provincial activities by the Department. Therefore, the Committee needs to oversee progress in this regard and the effectiveness of such interventions should be evident when the Department briefs the Committee on Quarterly Performance.  

 

Programme 4:  Trade Promotion and Market Access

 

The Department had 12 planned targets under this Programme for 2017/18. Of the 12 planned targets, 8 targets were achieved (67%).  In 2016/17, this Programme received a qualified opinion from the AG in respect of usefulness and reliability of performance information as 33% of its targets were not measurable. Again in the year under review, 2017/18, the Department failed to address the same findings that were raised by the AG in the previous financial year regarding reliability and measurability of performance information for targets in respect of the implementation of International Relations Strategy performance indicator. What makes this matter even more of a concern is the fact that the AG, DPME and the Committee have also raised issues on some of the Department’s performance indicators and targets not being SMART (specific, measurable, achievable, reliable and time-bound) during the planning briefings.

 

As was the case in the previous financial year (2016/17), the Department did not achieve the target relating to AgriBEE Enforcement Regulations. In the previous financial year, the development of AgriBEE Enforcement Regulations was not done due to non-conclusion of consultations. In the year under review, the Draft AgriBEE Enforcement Regulations could not be published in the Government Gazette as the Office of the State Law Advisor (OSLA) recommended that the document should be referred to as Guidelines rather than Regulations. This again casts doubt on the effectiveness and reliability of the Department’s planning and consultation processes as they have been working on the document for almost three years, only for the OSLA to make recommendations at the tail end.  The Department reported that the Branch holds quarterly management meetings to discuss performance and agree on corrective actions; and the Policy, Planning and Monitoring and Evaluation (PPME) Unit is invited in such meetings.   

 

Programme 5: Forestry and Natural Resources Management

 

Out of 8 targets that were planned for 2017/18 under Programme 5, the Department achieved 6 targets (75%). This Programme’s performance has regressed when compared to the previous financial year, when the Department achieved 11 out of 12 targets (92%).

 

The Department did not meet the planned target for the number of hectares planted in temporary unplanted areas (TUPs) and the reason that has been provided is that expenditure that was carried over from the previous financial year was deducted from the 2017/18 financial year budget. Another target that was not achieved was the establishment of 3 legal entities in the Western Cape. The reason that has been provided is that the Department realised that communities already have 2 existing legal structures that were adopted for re-commissioning while the third existing legal entity could not be adopted for re-commissioning as the Trust has a third party who is not a member of the community. This raises serious concerns with the manner in which the Department determines and/or develops performance indicators and targets.  In the previous financial year, the Department reported that a Land Rights Enquiry was conducted and a report was developed in respect of the recommissioning of WC state forest plantations. It is assumed that such an Enquiry Report, depending on when it was finalised, should have revealed that there were existing community legal entities. 

 

Programme 6: Fisheries Management (includes Marine Living Resources Fund)

 

The Fisheries Management Programme had 12 planned targets for 2017/18 and of the total that was planned, the Department achieved 7 targets (58%). This is a regression from the previous financial year’s 70% achievement (7 out of 10 planned targets) and in 2017/18, Fisheries Management Programme was the worst performer.  Two of the targets that the Department did not meet under this Programme are recurring and have also not been met in the two previous financial years (i.e. 2015/16 and 2016/17).

 

The Department could not submit the Aquaculture Development Bill to Cabinet by the end of the financial year (March 2018), again citing the need for further consultation. It also did not implement the Smallscale Fisheries (SSF) Policy by allocating smallscale fishing rights to communities due to delays in the appeals assessment process in the coastal provinces (EC, KZN, NC and WC). The Department reported that both targets will be carried over to 2018/19.

 

Additionally, the Department did not allocate rights in the abalone sector as planned due to concerns about the long-term sustainability of the abalone fishery but made allocations to the West Coast rock lobster (WCRL) sector.

 

It could not finalise appeals in the 8 newly allocated fishing sectors but only managed to finalise appeals in 3, namely, Hake Inshore, Large Pelagic and Patagonian Toothfish.  Appeals in Net Fish, Horse Mackerel, Seaweed, KZN Beachseine and WCRL were not finalised.  The reason for non-achievement of the latter was attributed to litigations in the Inshore Trawl sector and changes to the composition of the Appeals Team that delayed finalisation of appeals for other sectors.

 

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

 

The DPME presentation focused on Government progress in terms of achieving MTSF 2014-19 targets for Outcome 7 (rural development and food security), which is led by the Department of Rural Development and Land Reform (DRDLR) and where relevant, Outcome 4 (job creation); as well as DAFF’s results on the Management Performance Assessment Tool (MPAT). DAFF leads sub-outcome 3 of Outcome 7, which focuses on food security.

 

It was reported that the targets on support provided to smallholder producers to ensure production efficiencies and bringing into production 1 million hectares of under-utilised land in communal areas have already been overachieved.  Notwithstanding these achievements, the DPME advocated for additional funding for primary agriculture as there is a need to intensify food security interventions to reduce the proportion of households that are vulnerable to hunger. Statistics South Africa (StatsSA)’s General Household Survey (GHS 2017) showed that the proportion of food insecure households decreased from 11.7% in 2016 to 10.4% in 2017.

 

However, given the recently reported decrease in agricultural productivity, the MTSF target to reduce the proportion of households vulnerable to hunger to less than 9.5% by 2019 may not be achieved by March 2019. This was attributed by StatsSA to most poor households being dependent on social grants for purchasing food rather than food production initiatives. The DPME’s previous analysis showed that newly acquired land by previously disadvantaged individuals (PDIs) remain fallow, which implies that farmer support programmes are either inadequate or not yielding the desired impact; and some Government support packages tend to cause dependency. 

 

Regarding job creation (Outcome 4), DPME reported that, as in the previous financial year, little progress has been made in the reduction of rural unemployment. While there was a significant number of jobs that were created through the CASP grant in 2016/17, during 2017/18, only 56% of planned targets were achieved in terms of job creation (i.e. 11 155 jobs created against the planned 19 723). The shortfall was attributed to a number of projects that had to be deferred and poor reporting by provinces. As in the previous financial year, more jobs were reportedly created in KwaZulu-Natal (KZN), which was followed by Limpopo in the year under review. In 2016/17, KZN was followed by the Western Cape Province, which did not perform as well in the year under review due to drought. Of the jobs that were created, 34% were permanent and the rest were temporary (seasonal). The overall employment numbers did not meet employment equity as more males (52%) than females (48%) were employed while youth only comprised only 6% of the total number of jobs that were created.

 

In terms of the Management Performance Assessment Tool (MPAT), there has been a regression in the average score (2.6) of overall management performance assessment of the Department for 2017/18 compared to the previous financial years across all key performance areas (KPAs).  For Strategic Management, DAFF performed at compliance level for Strategic and Annual Performance Planning; and below compliance level for both Monitoring and Evaluation, which have previously improved in 2015/16. The inconsistency in performance particularly for the M & E standards is a reflection that systems, processes and procedures for M & E are not yet institutionalised or mature.  

 

For Governance and Accountability, the Department scored below compliance level since 2015/16 with respect to Professional Ethics, Anti-corruption (fraud prevention) and Internal Audit. This points to gaps in terms of the establishment of systems and processes to ensure professional ethics and discourage unethical behaviour and corruption. The Department also performed below compliance level across planning standards for Human Resource (HR) Management with respect to HR planning, organisational design, management structures and recruitment and retention.

 

The overall performance for Human Resources Management has been below compliance level since the 2015/16 financial year. In terms of Financial Management, the Department regressed in terms of expenditure management (irregular expenditure), payment of suppliers (since 2016/17) and demand management. As in previous financial years, some of the reasons for the Department’s downgraded scores were absence or lack of evidence and late submission or feedback to policy departments (e.g. Department of Public Service and Administration (DPSA), DPME, National Treasury). 

 

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

 

With the exception of the PPECB, NAMC and Ncera, whose financial statements received clean audit opinions (unqualified without findings), and the OBP, which received a financially unqualified audit report with findings for the 2017/18 financial year, the audit outcomes for two of the Department’s entities, regressed. The two are the MLRF, whose activities are reported under Programme 6 (Fisheries Management) and the ARC, which receives the largest proportion of the Department’s transfers to entities. They both received financially qualified audit opinions from the AGSA for the 2017/18 financial year. The PPECB, which is self-funded through service fees and levies, once again received a clean audit as it has been the case for the past eleven financial years. Regarding Ncera Farms (Pty) Ltd, which is in the process of being transferred to the ARC, the AGSA noted that it received an unqualified audit only because the entity has been using consultants to do its financial statements as it does not have an Internal Audit Function and an Audit Committee.

 

4.3.1 Agricultural Research Council (ARC)

 

For the year under review (2017/18 financial year), the ARC had a total budget of approximately R1.3 billion, a slight increase from the previous year’s R1.1 billion. The budget comprised of the Parliamentary Grant (PG) from DAFF and transfers from the Department of Science and Technology (R895 million) and self-generated revenue (R410 million). Although the ARC receives the largest share of the Department transfers to entities, the Parliamentary Grant has not been increasing with inflation and is barely sufficient to even cover the entities’ employee costs.  

 

The ARC incurred expenditure of approximately R1.37 billion and ended the 2017/18 financial year with a deficit of R63 million. This is the third consecutive year that the ARC has been running at a loss, with expenditure more than available budget due in part, to cuts in the Parliamentary Grant, which has been decreasing since 2015/16. The entity reported that budgetary constraints and deficits also have a negative impact on the entity’s ability to raise external revenue. Increase in expenditure was mainly in operational costs e.g. water and electricity and the ARC has also been affected by cable theft in some of its institutes. 

 

The ARC received a qualified audit opinion from the AGSA for the second consecutive year, with findings on non-compliance with legislation and deficiencies in internal controls in respect of leadership and financial performance and management. The AG raised a concern about the financial viability of the ARC as it has been running at a loss for the past three years.

 

The findings, most of which were repeat findings, were in respect of inter alia:

  • PFMA contravention – annual financial statements submitted for auditing not prepared according to the PFMA; expenditure was incurred in excess of the approved budget; and effective and appropriate steps not taken to collect all monies due to the entity.
  • Expenditure management – effective steps were not taken to prevent irregular expenditure amounting to R106.2 million and no investigations were reported by the entity on irregular, fruitless and wasteful expenditure.
  • Asset management – proper control systems to safeguard and maintain assets were not adequate as required by the PFMA.
  • Procurement and contract management – sufficient audit evidence could not be obtained that all contracts were awarded and quotations were accepted in accordance with legislative requirements.  
  • Leadership – management has not provided adequate direction and oversight of the control environment, financial management and compliance with laws and regulations. - Key controls were not adequate resulting in inaccurate and incomplete financial statements being submitted for audit and non-compliance with applicable legislation. 

- Due to vacancies in key positions (e.g. Chief Financial Officer), Audit Action plans were not effectively implemented to adequately address root causes of previously raised audit findings.

- Management did not adequately implement consequence management to address poor performance and transgressions.

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

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

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

 

In the two financial years preceding the qualified audit opinion in 2016/17, the AGSA did raise serious concerns about the financial health of the ARC as the entity had to do material adjustments to its financial statements to receive an unqualified audit outcome. The AGSA also highlighted that there is significant doubt that operations in the ARC can continue in future as the entity is technically insolvent (unfavourable financial viability). As in the previous financial year, the ARC also presented a High Level Audit Improvement Plan that focused on root causes of repeat audit findings. The Plan included inter alia:

  • Declaration by Executive and Senior Management on their responsibilities.
  • Review of finance structure including roles and responsibilities.
  • Request for condonation of irregular expenditure incurred from 2015/16 to 2017/18.
  • Develop finance policies and procedures.
  • Monthly monitoring of compliance to the ARC policies and procedures whilst consequence management actions are effected.

 

Targets achieved: The ARC’s overall performance in the 2017/18 financial year regressed from the previous year’s performance. Out of a total of 52 targets, the ARC achieved 36 (69%) while in the previous financial it achieved 38 targets out of the total of 52 targets (73%). As in the previous financial year, the ARC achieved and in some cases over-achieved, all its planned targets for Programmes 2 (Animal Health, Production and Improvement), 4 (Mechanisation and Engineering), 6 (Agriculture Economics and Commercialisation) and 7 (Smallholder Agriculture Development).

 

The ARC did not meet a number of targets under Administration and Corporate Affairs (Programme 9).  These include inter alia appointment of fewer than planned employees to increase employment equity ratios for black females and people with disabilities in core business by the end of March 2018; and inability to increase rental income.   As in the previous two financial years, the target for the number of registered cultivars with Plant Breeders’ Rights (increase in intellectual property – IP) was not met due to the Registrar for Plant Breeders Rights requiring further observations on cultivar performance in the field.  

 

4.3.2 Onderstepoort Biological Products (OBP)

 

The OBP does not receive a Government grant but funds all its operations from self-generated revenue (mostly from sale of vaccines). Despite an increase in vaccine sales, the entity’s revenue for 2017/18 was R173 million, R1 million less than in the previous financial year. This is still commendable as the entity’s revenue has been less than R95 million for the period, 2013/14 to 2015/16. The increased revenue, which started in 2016/17 (R174 million) was attributed to changes in the OBP’s distribution model and increased export markets particularly to Europe. The entity also maintained its profit at R48 million as in 2016/17, which was a significant increase from a R9 million deficit in 2013/14 and a R12 million profit in 2015/16.  Due to the profitability of the OBP, its equity also increased from R182 million in 2016/17 to R231 million in 2017/18. The OBP is reportedly in the process of appointing a Chief Executive Officer (CEO); interviews were concluded and the preferred candidate’s name has been submitted to the Minister for approval.

 

In the year under review, the OBP received an unqualified audit opinion with findings from the AGSA. An improvement from the previous year is that there were fewer findings and the entity did not incur any irregular expenditure during 2017/18. For the 2017/18 financial year, the AGSA raised the following repeat findings:

  • Non-compliance with key legislation – financial statements submitted for auditing were not prepared in accordance with the prescribed Financial Reporting Framework as required by Section 55(1) (b) of the PFMA.  Material misstatements of operating expenditure and accruals identified by the auditors in the financial statements submitted were subsequently corrected resulting in the financial statements receiving an unqualified audit opinion.
  • Internal control deficiencies in respect of financial management – management did not ensure adequate preventative and detective controls to ensure completeness and accuracy of annual financial statements; and did not ensure that annual financial statements are prepared in accordance with applicable reporting framework; and the entity complied with applicable laws and regulations throughout the year. Therefore, oversight is required from leadership regarding implementation of internal controls.

 

Targets Achieved: The OBP’s performance in 2017/18 improved compared to the 2016/17 financial year. In 2017/18, the OBP achieved 18 out of the total of 27 planned targets (67%) and in 2016/17, the OBP achieved 22 of its planned targets out of a total of 36 targets (61%). Some of the achieved targets include maintaining the staff turnover rate at 8%; increasing revenue from vaccine sales and development of new markets.

 

The OBP however, could not develop the Communications Strategy as planned; it did not meet targets relating to the Good Manufacturing Practice (GMP) Facility and also could not reduce the overall batch failure rate as the batch failure rate increased instead. The latter was attributed to decaying and aging infrastructure and equipment, which will be addressed with the modernisation and upgrading of the GMP Facility that is under construction.

 

4.3.3 National Agricultural Marketing Council (NAMC)

 

The NAMC received a Parliamentary Grant of R41.9 million in 2017/18 through the Department of Agriculture, Forestry and Fisheries (Vote 24), which was a slight increase from the previous year’s Grant of R35 million. The entity’s revenue increased to R95 million in the year under review due to other income and sponsorships (R47 million) and interest that was generated (R6 million). The total revenue of R95 million was significantly higher than the R78.4 million that was raised in the 2016/17 financial year.

The entity’s expenditure in the year under review was R90.5 million, which left the NAMC with a surplus of R5.2 million, which is a commendable increase and improvement from the R61 000 deficit it incurred by the end of 2016/17 and a surplus of approximately R1.7 million in 2015/16. The NAMC again incurred no wasteful, fruitless or irregular expenditure in the year under review. Of the total expenditure, 39% was spent on personnel, 45% on operations and the rest accounted for administration and depreciation.

For the third consecutive year, the NAMC received a clean audit on both the financial statements and the report on predetermined objectives.  The NAMC was again commended for maintaining the clean audit status.

 

Targets Achieved:  For the second consecutive year, the NAMC has achieved all its planned performance targets, which is a highly commendable achievement considering how the Department to which it reports (including some of the other entities) struggle to achieve some of their planned targets. The amount of money collected in statutory levies has been increasing exponentially over the years.

 

During the period under review, the NAMC collected approximately R517 million in statutory levies, which is 5.6% higher than the R489.8 million that was collected in 2016/17. Approximately R505 million of the collected total from levies was used for industry functions for research (approximately 35.9%), transformation projects (18.6%), export promotion/market access (12.6%) and on information (10.3%). The rest was used for administration, quality control and production development and improvement.

 

4.3.4 Perishable Products Export Control Board (PPECB)

 

The PPECB is a national public entity that is listed under Schedule 3A of the PFMA. It does not receive a Government grant but a transfer from DAFF for a joint venture for transformation and development (R500 000) and Agri-export Technologist (AET) training (R600 000).  The PPECB ended the year under review with a total revenue of R370 million in 2017/18, which is an increase from R298 million that was made in the 2016/17 financial year.

Due to the nature of the entity’s work, approximately 68% of the entity’s revenue went to personnel expenditure in 2017/18 while the rest went to operational and administrative expenses and what was left was invested. Employee costs are usually the largest proportion as the entity always expects growth in export volumes, therefore, needs more people for inspections. However, even when volumes drop, the entity cannot release staff as export volumes fluctuate, which puts pressure on expenditure.

After expenditure, the entity ended the 2017/18 financial year with a surplus of R21 million, a significant increase from the previous year’s R1.8 million. The PPECB received a clean audit report from AG for 2017/18 and is the only entity of DAFF that has been receiving and maintaining a clean audit outcome for more than 8 successive years. The PPECB was commended and applauded by the Committee for consistently maintaining clean audits.

In the year under review, it incurred irregular, fruitless and wasteful expenditure of R512 402 relating to procurement of services from a bidder who declared 75% of local content instead of the required 100% for bids relating to textile, clothing, leather and footwear; and the bidder did not submit an exemption letter. In addition, accommodation for a training session was procured for R32 250 without obtaining 3 quotes and without prior approval from the CEO. These transgressions were detected by the entity’s Internal Audit and disciplinary actions were effected on involved employees.

Targets achieved: For the 2017/18 financial year, out of the planned total of 14 targets, the PPECB achieved 13 targets (93%), which is a significant improvement from the 86% that was achieved in the 2016/17 financial year.  The majority of the achieved targets were exceeded by varying margins. The PPECB did not achieve the planned target to capture 50% of cartons on main products (citrus, grapes, pome, stone and avocados) on the Titan System, instead 43% were captured on Titan. The entity noted that 50% was ambitious as the financial year was started at 32% with strong uptakes for deciduous fruit while citrus fruit was lagging.  The PPECB overachieved its annual targets for Programme 3: Food Safety Services.

 

4.3.5 Ncera Farms (Pty) Ltd

 

The Committee previously recommended that Ncera Farms (Pty) Ltd should be deregistered as it was not fulfilling its mandate. Therefore, the Department, as the caretaker of the entity, which does not have a Board of Directors, was asked to present a progress report on the deregistration of Ncera Farms (Pty) Ltd (aka Ncera) and its transfer to the ARC. In addition, a report was sought on the disciplinary actions that have been taken against implicated officials in the matter involving the CEO of the entity, who in 2015/16, received a 51% salary increase for an entity that also had a deficit of R667 297 during that year. 

 

Ncera Farms (Pty) Ltd constitutes two areas, namely, the Centre and the farms surrounding the Centre. The Department reported that the Centre at Ncera Farms (Pty) Ltd was transferred to the ARC in April 2018 following a Memorandum of Association (MOA) that was signed between the Department (DAFF) and the ARC on 16 March 2018. Ncera personnel were transferred to the ARC on 28 March 2018 except the CEO and the CFO; and the budget of R6.6 million for Ncera was transferred to the ARC on 16 April 2018.

 

It was further reported that the 10 farms surrounding the Centre, who are occupied through permissions to occupy (PTOs), are in the process of being transferred to the Department of Rural Development and Land reform (DRDLR); and a Memorandum of Understanding (MOU) has been prepared and sent to the DRDLR and the Department of Public Works (DPW) for inputs and comments on 23 April 2018. The Department reported that the introduction of a new agency by DPW called the Property Management and Trade Agency was delaying the process.

 

After a visit to Ncera, the Deputy President, the Minister for DAFF, Deputy Minister for Labour and the Mayor of Buffalo City Metropolitan Municipality proposed an establishment of a National Task Team to assist Ncera farms and the Ncera Macadamia Project. The National Task Team was initiated on 04 September 2018 after a fact finding mission at Ncera Macadamia Project. 

 

With respect to the irregular salary increase to the CEO of Ncera that took place in 2015/16, and two years after the identification of such transgression by the Committee, the Department responded that investigations have been concluded and implicated employees have made representations. It was further reported that services of a State Attorney have been sought due to capacity constraints within the Directorate: Employee Relations. The date of the hearings is still to be determined; and the DG has advised that the matter be concluded by the end of October 2018.  

 

4.4 DAFF Contribution to MTSF 2014-19 Outcomes

 

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

 

In the 2017/18 Annual Report, the Department reported on its contribution to Government Priority Outcomes i.e. Outcomes 4, 7 and 10. However, as in the previous year, the report was not specific and was not aligned to the actual MTSF targets as indicated on sub-section 2.4 of this document, it provided summaries but not specific information. In this regard, the Department ignored the Committee’s assertion to report on the Priority Outcomes as indicated and required in the MTSF.  

 

For Outcome 4, the Department reported on jobs created but did not specifically report on MTSF-specific targets relating to APAP and Comprehensive Africa Agriculture Development Programme (CAADP); development and implementation of an Agricultural, Forestry and Fisheries Trade and Marketing Strategy and development of smallholder producers for market access. Instead of reporting on the development of smallholder producers for market access, the Department reported on the number of jobs created. However, from what the DPME has presented, the majority of the jobs were temporary or seasonal.

 

For Outcome 7, most of the targets have already been achieved and some will be overachieved by March 2019. These include the number of hectares of unutilised land that have been put under production in communal areas, additional smallholder producers that have been supported for production efficiencies, and the development of policies that promote the development and support of smallholder producers. Regarding the latter, it was reported that the National Policy on Comprehensive Producer Development Support has been approved for tabling to Cabinet.  

 

The Department again did not meet the annual target to table in Parliament, the PDALF Bill, which was developed in 2015/16. In this regard, the Department is not likely to meet the MTSF target of ensuring that by March 2019, PDALF is a signed Act (not a Bill) that has already been implemented and being managed. It reported that the target will be achieved in the current financial year (2018/19).  

 

For Outcome 10, the Department did not present a report as per the MTSF. However, it met the targets in respect of forests and agricultural land that has been rehabilitated and research reports on prioritised fish stock levels. With regard to the implementation of Climate Change Adaptation Plans, the Department implemented a climate change adaptation project for the agricultural sector but not forestry and fisheries sectors.

 

4.5        Discussion on Service Delivery Performance and MTSF Outcomes

 

The Department and its entities were commended for their efforts in aligning their Programmes with the MTSF Outcomes in order to respond to the NDP mandate although more still needs to be done in aligning the contribution of the Department and entities. Persistent challenges with vague indicators and/or targets, reliability of reported performance information particularly on conditional grants including the monitoring and evaluation (M & E) of grants were highlighted for the Department’s attention.  Concerns were raised on the non-alignment of resource use with actual service delivery as the Department spent almost 100 per cent of its budget but achieved less than 75% of its planned annual targets.

 

Given the statistics from StatsSA on agricultural activity and household food insecurity, and notwithstanding the commendable progress that has been reportedly made in achieving some of the MTSF targets, there was a concern regarding the impact of the achieved targets and those that the Department did not report on, and will not likely achieve by the end of March 2019. These include inter alia the PDALF Bill, smallholder access to markets and targets related to CAADP.

 

Notwithstanding the Department’s limited funding, smallholder producers are the central focus of the NDP for the sector and the Committee is particularly concerned that the Department is not making significant progress in developing these producers whilst the NDP expects that a third of food surplus in the country should come from these producers by 2030. In addition, when reporting on smallholder support, the Department tends to combine interventions for Outcome 4 and Outcome 7 of the MTSF as one achievement.

 

The 2014-19 MTSF is clear with respect to support for smallholder development, Outcome 4 relates to market access (which has a direct impact on employment) and Outcome 7 is about production efficiencies to ensure food security (including at household level). Despite the Department’s reported interventions in the development of the smallholder sector as mandated by the NDP, there is no clear impact of such interventions as most of the households surveyed by StatsSA were producing in backyard gardens to meet household food demand but not for markets. Access to formal markets remains a challenge to smallholder producers and also limits their growth. This has also been observed by the Committee during oversight visits.

 

There was a concern that the National Food and Nutrition Security Implementation Plan, which is coordinated in the office of the Deputy President, is still not cohesively implemented. Given the challenge of food insecurity, which is also increasing in urban areas, and the rise in food prices, the Committee is of the opinion that the implementation of the Plan is a matter of urgency. The slow pace at which crucial polices are implemented remains a contentious issue. While some work has been done to give effect to the Smallscale Fisheries Policy, which was finalised in 2012, the policy is yet to be implemented to ensure that previously disadvantaged smallscale fishers benefit from marine resources.

 

 

 

 

 

 

5.         COMMITTEE findings and OBSERVATIONS

 

Governance and Operational Matters

 

  1. Instability and vacancies at the senior management service (SMS) level across the portfolio negatively impacted the Department’s performance including some of its Entities (e.g. suspension of the DG in the year under review, vacant DDG and Chief Director positions as well as vacant critical positions in some of the Entities). This is notwithstanding the often cited imposed ceilings by National Treasury on the budget for compensation of employees as most of the positions were not new but existing and funded posts. The filling of the CEO position for the NAMC was commended.

 

  1. The Department’s management performance was regressing as the Department’s MPAT scores were lower than average on Governance and Accountability and Human Resources Management while its performance also regressed on Financial Management. The MPAT scores were also indicative of the AGSA’s audit findings, most of which were repeat findings including lack of oversight by DAFF over its entities as displayed by increasing irregular expenditure and the qualified audit outcomes for the MLRF and the ARC.  

 

  1. Lack of progress in the reconfiguration of the MLRF and the Fisheries Management Branch to determine the feasibility of the latter being a fully-fledged public entity that will be incorporated into the MLRF. There is still concern about the Branch’s governance and accountability; as well as duplication of certain functions with the Department. Although the DDG for Fisheries Management was instructed by the Executive Authority to approach the National Treasury for assistance in this regard, there has been no progress report.  

 

  1. Lack of prioritisation of key legislation and the slow pace at which key and essential legislation is processed by the Department particularly the Preservation and Development of Agricultural Land Framework (PDALF) Bill, which is one of the MTSF targets. The review of various outdated legislation including those through which its Entities are established and operate, e.g. the NAMC, the PPECB and the ARC in particular; as well as the Marine Living Resources Act (MLRA). Only the legislation that established the PPECB is being processed and the processing of the Bill, which was initiated 3 years ago, has not yet been finalised.  

 

  1. Uncertainty regarding the Department’s capacity to develop essential legislation and policies to address sectoral challenges while promoting sector growth.  As an example, after three years of working on the PDALF Bill, the Department has now appointed a legal firm to redraft the Bill. In terms of policies, it took the Department more than three years to develop a Draft Policy on Comprehensive Producer Development Support and even more years to develop Draft Policies on Integrated Funding and Mechanisation Support, which are now being incorporated into the former policy.

 

  1. Employment equity targets particularly in respect of appointment of females and people with disabilities at SMS level remains an unachievable target for the Department and some of its entities.

 

Financial Matters

 

  1. The Department, including the two entities that regressed (ARC and MLRF) have done little to ensure that appropriate personnel and systems are in place to effectively address root causes of audit queries. The Committee was dissatisfied with the fact that the top three root causes that were highlighted by the AGSA, namely, slow management response in the M&E of quarterly reporting; non-adherence to supply chain management (SCM) policies and inadequate processes and procedures to ensure that financial statements submitted for audit are valid, accurate and complete, were also repeat findings.  

 

  1. The Department’s Audit Action Plan was ineffective as expenditure management in the Department and in some of the entities remains a challenge that is not being appropriately addressed. The Committee highlighted the following areas inter alia from the AGSA’s findings that still needs to be fully addressed within the Department and some of its entities: leadership with respect to consequence management and prevention of unauthorised, irregular, fruitless and wasteful expenditure.

 

  1. Underfunding of the Department and its negative impact on transfers to entities, particularly the ARC, remains a major constraint to sectoral development and a concern to the Committee.  This also includes the Department’s failure to pay entities for commissioned work e.g. non-payment of the ARC for work that has been done for the Department on the Kaonafatso ya Dikgomo (KyD) programme.

 

  1. The proposed Blended Funding Model in collaboration with the Land and Agricultural Development Bank of South Africa (Land Bank) and the Department of Rural Development and Land Reform (DRDLR) falls short of meeting expectations with respect to financial support for previously disadvantaged and developing farmers. The Model as proposed, was still based on commercial financial institutions’ interests and is likely to benefit established commercial farmers and agribusinesses instead of developing farmers. 

 

  1. Incapacity of the Department’s M & E Unit to carry out its mandate including monitoring of the utilisation of conditional grants that are transferred to provinces; as well as AgriBEE Funds that have been transferred to the Land Bank on an annual basis to promote transformation in the sector.  The lack of effective M & E result in repeat findings, continuing under expenditure on key functions/activities and poor service delivery.

 

Service Delivery Performance

 

  1. The achievement of some of the MTSF targets particularly in respect of Outcome 7 (rural development and food security) is commended.  However, the Committee highlighted that the numbers do not seem to translate to actual service delivery as little impact has been observed during oversight visits to provinces. The latter fact is also supported by StatsSA’s Household Surveys regarding the number of people that are still food insecure.  

 

  1. The progress that has been made in respect of Operation Phakisa, both for the Oceans Economy and for Agriculture, Land Reform and Rural Development in which the Department and its entities are also participating, was appreciated although the pace on the latter was regarded as slow.  

 

  1. Despite corrective measures that were presented to the Committee in the previous year including assertions that conditional grants-funded projects are physically visited by the PPME Unit, timeous validation of performance information remains a challenge that negatively impacts the Department’s performance and service delivery in respect of programmes and/or projects that are funded through the conditional grants.

 

6.         COMMITTEE Recommendations

 

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

 

  1. Notwithstanding the constrained fiscal outlook that limits additional funding as was highlighted by National Treasury in response to previous Budgetary Review and Recommendation Reports, Agriculture has been highlighted by the President in his Economic Recovery Plan as one of the sectors with massive job creation potential and plans were mentioned to reprioritise funding towards investments in Agriculture. Noting that in the current MTEF period, Agriculture was allocated additional funding of R120 million instead of the R2.79 billion that was requested for critical services, a significant increase in the budget allocation to the Department of Agriculture, Forestry and Fisheries (DAFF) is proposed to give effect to the President’s Economic Recovery Plan while promoting equitable sector growth.  

 

  1. An intervention is sought from the Minister of Finance for additional funding for the Agricultural Research Council (ARC), which is the Government’s premier agricultural research institution in the country that is currently on the verge of collapse due to underfunding. With the challenges that the sector is currently contending with, the collapse of the entity will be costly and risky to agricultural development, innovation and growth as South Africa will be forced to depend on privately-funded and international agricultural research innovations. Additional funding for the ARC is a necessity to give effect to the Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods, that was signed by African Heads of States including South Africa and the Government of the African Union in Malabo, Equatorial Guinea in June 2014.

 

  1. Further inclusive discussions with all relevant stakeholders should be held on the Blended Funding Model that has been proposed by the Land Bank in collaboration with DAFF and DRDLR as other relevant departments and development finance institutions such as the Industrial Development Corporation (IDC) have not been part of the discussions. The proposed Model as it was presented to the Committee lacked detail on how it will be funded and the Committee is concerned about the use of Departmental funding to support commercial banks and established agribusinesses while there are previously disadvantaged and developing farmers that are in need of financial support.      

 

  1.  Ensure that funds that are transferred by DAFF to the Land Bank for agricultural development (e.g. commercialisation of black farmers) and transformation (AgriBEE Fund) are ring-fenced for that purpose.

 

  1. A review of the mandate of the Land and Agricultural Development Bank of South Africa to ensure that it addresses challenges of the agricultural sector including its dual nature while promoting the development of previously disadvantaged farmers.

 

Response to the above recommendations should be submitted to the National Assembly (NA) not later than 3 months after the adoption of this report by the NA.

 

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

 

Governance and Operational Matters

 

  1. Ensure that critical and funded vacant positions at SMS level within the Department and its entities are filled as soon as possible to prevent instability and poor performance; and further ensure that employment equity targets are prioritised and adhered to.

 

  1. Ensure that performance contracts are signed by all employees and performance assessments are done on an annual basis as required to improve performance and accountability in the Department. Additionally, where transgressions occur, consequence management should be applied to ensure that management performance challenges as reported by the DPME are addressed and the Department’s MPAT report is improved.

 

  1. The Department should develop a policy to strengthen labour relations and its Code of Conduct to promote labour peace, democracy and social justice; and to prevent unnecessary conflicts as these have a negative impact on service delivery and the sector at large. 

 

  1. Report on progress on the proposed reconfiguration of the MLRF and the Fisheries Management Branch including legislative and financial implications as the Branch in its current form is a governance risk.

 

  1. During each quarterly performance briefing for the 2018/19 financial year, provide progress reports on the processing of legislation such as PDALF, Draft Policy on Comprehensive Producer Support, PPEC Bill, etc. In addition, submit a Legislative Review Programme that highlights key legislation that the Department is processing for the MTEF period.   

 

  1. The Department’s SMS level should be capacitated to ensure effective development and review of policies and legislation rather than relying on consultants as this has a negative impact on the finances, timelines and implementation of such policies and legislation.

 

Financial Matters

 

  1. The Department should review its Audit Action Plan and include consequence management to ensure that the proposed corrective measures, which the Department has been implementing for the past three years, are effective and responsive to root causes of audit findings particularly on irregular, fruitless and wasteful expenditure in respect of poor supply chain management as highlighted by the AGSA.
  • A similar process should also apply to the ARC and the MLRF; and all three should report on the implementation of the Audit Action Plans during every quarterly briefing.  

 

  1. Ensure that the Department develops Guidelines and a Monitoring and Reporting Framework for funds that have been transferred to the Land Bank for developing farmers and transformation to ensure that the Land Bank reports on the utilisation of such funds including the AgriBEE Fund, on a regular basis. In this regard, the PPME Unit of the Department should be capacitated to enable effective monitoring of the utilisation of Departmental funds including conditional grants and the AgriBEE Fund. The Department should report to Parliament on monitoring activities during each quarterly briefing.  

 

Service Delivery Performance

 

  1. The Department should do an assessment of its interventions in respect of its contribution to the MTSF targets (those achieved and those not achieved/not reported) including challenges, for submission to Parliament.   

 

  1. Develop a Framework for submission to Parliament that illustrates the alignment of the activities of the Department with all its entities to prevent and/or minimise duplication including funding arrangements for effective budgetary use. As an example, the alignment of DAFF’s Programme 4 and NAMC’s activities in respect of market access for all producers; and the alignment of activities between the NAMC, DAFF and the ARC in terms of the National Red Meat Development Programme (NRMDP) and the Vineyard Development Scheme.   

 

  1. Ensure that DAFF in collaboration with the DRDLR and DPME submit progress to Parliament on the implementation including funding arrangements, of Operation Phakisa for Agriculture, Land Reform and Rural Development.

 

  1. The Policy, Planning, Monitoring and Evaluation (PPME) Unit of the Department should be restructured for effective functioning and to fulfil its mandate to ensure that challenges associated with planning, policy development and validation of performance information are timeously addressed.  

 

  1. In collaboration with relevant departments, submit to Parliament a joint progress report on the National Food and Nutrition Security Implementation Plan including responsibilities and contribution of the different departments that constitute the Intergovernmental Technical Working Group that was developed by the Deputy President’s office.   

 

  1. During each quarterly briefing, submit for presentation to Parliament, progress report on the implementation of the Smallscale Fisheries Policy to ensure that previously disadvantaged coastal communities and smallscale fishers benefit from the country’s marine resources.

 

  1. The Department should develop an Action Plan to address fronting in the Fisheries sector; to strengthen engagements with smallscale fishers and to ensure their equitable inclusion when determining total allowable catches for marine fisheries species.

 

  1. Development of a policy and an implementation plan for the establishment of backyard aquaculture fish ponds to address food insecurity; and to also ensure that focus is given to the development of aquaculture economic opportunities around existing storage dams and rivers.    

 

  1. Development of a Strategy on urban and peri-urban agriculture to address increasing urban and peri-urban food insecurity.

 

  1. Submit to Parliament a progress report on the transfer of the 10 farms at Ncera to the DRDLR; the signing of the memorandum of understanding (MOU) between DAFF, DRDLR and the Department of Public Works; and the activities of the National Task Team that was developed to assist the farms.  

 

  1. Submit to Parliament a report on the finalisation of the disciplinary hearings and action taken against officials that are implicated in the irregular salary increase of the CEO of Ncera Farms (Pty) Ltd that took place in 2015/16.

 

Unless otherwise indicated, responses to the above recommendations should be submitted to Parliament not later than 3 months after the adoption of this report by the National Assembly.

 

 

 

Report to be considered.   

 

 

Documents

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