ATC191023: Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Land Reform and Rural Development: Agriculture (Vote 24), dated 16 October 2019

Agriculture, Land Reform and Rural Development

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, LAND REFORM AND RURAL DEVELOPMENT: Agriculture (vOTE 24), DATED 16 oCTOBER 2019

The Portfolio Committee on Agriculture, Land Reform and Rural Development (hereinafter referred to as the Committee), having considered the performance and expenditure of the former Department of Agriculture, Forestry and Fisheries, the Agricultural Research Council (ARC), the Onderstepoort Biological Products (OBP), the National Agricultural Marketing Council (NAMC) and the Perishable Products Export Control Board (PPECB) for the 2018/19 financial year and submission to National Treasury for the medium term period, reports as follows:

Introduction

In 2019, Parliament established a new Portfolio Committee that integrates agricultural component of the former Portfolio Committee on Agriculture, Forestry and Fisheries and the former Portfolio Committee on Rural Development and Land Reform. The new Committee, named the Portfolio Committee on Agriculture, Land Reform and Rural Development, considered annual reports of entities and the former Departments in terms of the 2018/19 configuration, hence it is tabling two separate reports, one on Land Reform and Rural Development, and this one, on Agriculture. It should be noted that the reconfiguration of Committees followed the transfer of the Forestry and Fisheries functions to the new Department of Environment, Forestry and Fisheries. Therefore, this report will only account on Agriculture as the Forestry and Fisheries functions were considered by the Portfolio Committee on Environment, Forestry and Fisheries.

The report is compiled in terms of the Money Bills Amendment Procedures and Related Matters Act, 2009 (Act No.9 of 2009). The Act requires the National Assembly to conduct annual assessment of the performance of each national department, giving particular focus to the medium-term estimates of expenditure. Section 5 of Act No. 9 of 2009 sets out a procedure for assessing the performance of each department by the National Assembly. It further requires committees of the National Assembly to prepare budgetary review and recommendation reports (BRRRs). The report is a culmination of the assessment of the former Department of Agriculture, Forestry and Fishers (hereinafter referred to as DAFF or the Department)’s service delivery performance within the available resources; the effectiveness and efficiency of the DAFF’s use and forward allocation of available resources.

This report, therefore, accounts for work carried out by the Committee during assessment of the 2018/19 performance of the DAFF and its related agricultural entities; namely, the ARC, OBP, NAMC and PPECB. The report also makes recommendations for budget review to the Minister of Finance and service delivery improvements to the Minister of Agriculture, Land Reform and Rural Development.

Mandate of the Portfolio Committee on Agriculture, Land Reform and Rural Development

The mandate of the Committee is derived from Sections 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, land reform and rural development; monitor and oversee the activities and performance of the Ministry and the former Department of Agriculture, Forestry and Fisheries (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 sector.

Core Functions of the former Department of Agriculture, Forestry and Fisheries

The aim of the former 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,

Programme 1: Administration

Programme 2: Agricultural Production, Health and Food Safety

Programme 3: Food Security and Agrarian Reform

Programme 4: Trade Promotion and Market Access

Programme 5: Forestry and Natural Resources Management

Programme 6: Fisheries Management

NB. The Forestry function of Programme 5 and the entire Programme 6 have been transferred to the Department of Environment, Forestry and Fisheries.

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 former 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).

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 2018/19:

Briefings by the Department on first two quarterly performance and expenditure reports of the Department for the 2018/19 financial year.
Oversight visit to Free State Province in August 2018 and the Western Cape Province in January 2019 to oversee the implementation of the Fetsa Tlala Food Production Initiative; support to smallholder producers and aquaculture development.
Oversight visit to the Land Bank in October 2018 to get a briefing on the Blended Funding Model and its budgetary implications; and to oversee comprehensive financial support to previously disadvantaged individuals and transformation activities through the utilisation of the AgriBEE Fund.
Held briefings and considered the medium term Strategic Plan, the Annual Performance Plan and Budget of the Department for the 2018/19 financial year, including those of its entities, viz. ARC, OBP, NAMC and PPECB.
Received inputs and briefings on the 2018/19 Annual Reports of the Department and its entities from the Auditor-General, the Financial and Fiscal Commission and the Department of Planning, Monitoring and Evaluation on the Department’s Management Performance Assessment Tool (MPAT) and MTSF Outcomes.
Subsequently, on the 8th and 9th October 2019, the Committee held briefings and considered the Annual Reports of the Department and its entities for the 2018/19 financial year.
The BRR Report also draws from other expert presentations and inputs that the Committee received throughout the 2018/19 financial year.

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 2018/19 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 that ended in March 2019, the Department’s plans were informed and aligned with government-wide planning and policy mandates. Its initiatives were 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 performance in respect of the policy foci for the 2014-19 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 revitalisation of some existing ones (e.g. Makhathini Flats in KwaZulu-Natal (KZN)). The NDP further anticipated that 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 former 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

National Food and Nutrition Security Policy

The National Food and Nutrition Security Policy, which is a collaboration between the Department and the Department of Social Development, was approved by Cabinet in September 2013. 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 former President subsequently launched the Fetsa Tlala Food Production Initiative in October 2013 to address increasing household food insecurity in the country. The aim of the Fetsa Tlala Programme was 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 been very slow.

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.

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 New Growth Path, NDP, Industrial Policy Action Plan and the MTSF. The APAP’s 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 former 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 for the agricultural sector:

Poultry/soya beans/maize integrated value chain.
Red meat value chain.
Wheat value chain.
Fruit and vegetables.
Wine industry.
Sugarcane.
Biofuels value chain.

It was planned for implementation during the 2015/16 financial year and was supposed to be updated on an annual basis thereafter. APAP interventions are also part of the 2014-19 MTSF targets and the Department was expected to report annually on implementation including the review of APAP/RAAVC plans, which it has never done. Therefore, the MTSF target on APAP was not achieved as the Department failed to report on the implementation of APAP sectoral and transversal interventions.

The responses to the 2018/19 Budget Vote Report and the 2018 BRRR were not received from the former Executive Authority. The following are some of the recommendations from the Budget Vote Report and BRRR that were made by the previous Committee for the attention of the Minister of Agriculture, Forestry and Fisheries:

Engages with the National Treasury for additional funding to address the continuing underfunding of DAFF, the impact of the budget cuts to the sector, which has been identified in the NDP and the New Growth Path as one of the key sectors through which increased employment and poverty alleviation can be achieved; as well as the limitations that are imposed by underfunding on DAFF’s Public Entities. Report on progress on the engagements to Parliament by the end of August 2018.

Submit to the Committee the applications that have been submitted to the National Treasury, motivating for additional funding for the ARC to ensure timeous completion of the FMD Facility and other research activities that are responsive to inter alia climate change, disease outbreaks, food security and sector competitiveness as well as promotion of indigenous knowledge. DAFF should submit the documents to Parliament before the end of June 2018.

Strengthen intergovernmental relations for aligned activities between DAFF, provinces and other departments such as the DRDLR, Department of Trade and Industry (the dti), the Department of Small Business Development (DSBD) and the Department of Water and Sanitation (DWS) to ensure containment of costs, avoid duplication of activities and to maximise service delivery. In this regard, the Minister should continue engagements with the relevant Ministries including the National Treasury while ensuring that the Integrated Agricultural Development Finance Policy that aims to consolidate agricultural development funding into one comprehensive fund, is finalised. A detailed progress report in this regard should be submitted and presented to joint Parliamentary Committees by the end of September 2018.

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.

The following was one of the 2018 BRRR recommendations that were made to the Minister of Finance:

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.

Response: The National Treasury is aware of the ARC’s important contribution to research and development. Over the medium term, the Department of Agriculture, Forestry and Fisheries has been allocated an additional R400 million (R130 million in 2019/20, R140 million in 2020/21 and R130 million in 2021/22), which will be transferred to the council for the construction of a foot and mouth vaccine facility at the Onderstepoort Veterinary Institute. The facility is expected to enhance the country’s vaccine research capacity and ensure there is a secure supply of the vaccine. However, government’s ability to provide additional funds to the ARC is limited due to the constrained fiscal outlook. Departments, public entities and constitutional institutions are required to reprioritise funds within their existing baselines to fund any emerging priorities. Should the fiscal outlook improve, future recommendations for additional funding may be considered.

4. OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

4.1 Overview of Vote Allocation and Departmental Expenditure (2015/16 – 2021/22)

The budget allocation to Vote 24: Agriculture, Forestry and Fisheries has largely been stagnant if not decreasing across Programmes in the previous medium term expenditure framework (MTEF) periods but saw a slight increase from the 2017/18 financial year (see Table 1 below). Notwithstanding the slight improvement in the total allocation to the Vote, a similar trend is noticed in the current medium term. The budget allocation in Table 1 is in nominal terms (not adjusted for inflation) as it is presented in the National Treasury’s Estimates of National Expenditure (ENE), hence it is showing a slight exponential increase over the medium term expenditure framework (MTEF) period. However, when the budget for the medium term (2019/20 – 2021/22) is adjusted for inflation (i.e. an increase in the overall price level of goods and services in an economy over a specific period of time), it is decreasing in real terms as compared to the rest of the economy.

Table 1. The Department’s spending trend across programmes

Programme R Million	2015/16	2016/17	2017/18	2018/19		2019/20	2020/21	2021/22
Programme R Million	Audited Outcomes	Audited Outcomes	Audited Outcomes	Adjusted Appropriation	Audited Outcomes	MTE Estimates	MTE Estimates	MTE Estimates
1. Administration	785.8	828.5	828.0	1 038.8	1 030.1	935.7	942.4	1 001.1
2. Agric Prod, Health & Food Safety	2 143.0	1 927.0	2 230.7	2 409.0	2 377.7	2 642.5	2 741.2	2 885.2
3. Food Sec & Agrarian Reform	1 906.8	1 879.0	1 925.6	2 001.8	1 992.1	2 237.0	2 331.7	2 515.7
4. Trade Promotion & Market Access	236.7	310.5	278.7	270.6	266.1	290.9	309.1	327.4
5. Forestry & NRM	862.3	1 077.7	960.5	1 522.3	1 417.9	1 039.1	1 045.6	1 109.9
6. Fisheries Management	465.9	468.1	504.7	490.4	490.3	519.7	553.2	586.3
Total	6 400.5	6 490.8	6 728.2	7 732.9	*7 574.2*	7 664.8	7 923.2	8 425.6

Source: Estimates of National Expenditure, National Treasury (2019) and DAFF Annual Report (2019).

In real terms, the Department’s budget allocation has been stagnant since 2015/16 with slight increases during 2017/18 and 2018/19. This is a concern when considering the role that agriculture is expected to play in reviving the economy through job creation and ensuring that the country is food secure. 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 R7.7 billion in the financial year under review (2018/19), a significant increase from the R6.7 billion that was appropriated in the 2017/18 financial year (see Table 1). In the year under review (2018/19), the Department spent R7.5 billion, which is 98.3 per cent of its total appropriation, which is the same as in the previous financial year. The Department’s main cost drivers are transfers to provinces (conditional grants) and entities, as well as compensation of employees. The Department’s spending has been decreasing exponentially since 2015/16, when the Department spent 99.9 per cent of its appropriated budget.

As a result of under-expenditure, in 2018/19, the Department surrendered a total of R170 million to the National Treasury’s Revenue Fund, which comprised of R158.7 million of the Department’s voted funds (Table 2) and R11.3 million of Departmental revenue and National Research Foundation (NRF) receipts. The surrendered total amount in 2018/19 was more than the R131.3 million the Department surrendered to National Treasury in the previous financial year. The increasing under-expenditure of particularly the voted funds during the medium term period (i.e. R8.2 million in 2015/16; R24 million in 2016/17, R118.9 million in 2017/18 and R158.7 million in 2018/19) is a serious concern for a Department that usually cites underfunding and budgetary constraints as the main reasons for not performing certain critical 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 largely attributable to unspent funds in Programme 2: Agricultural Production, Health and Food Safety and Programme 5: Forestry and Natural Resources Management.

As was the case in previous financial years, more than half of the Department’s budget goes to transfers and subsidies. In 2018/19, approximately 58.8 per cent (R4.4 billion) of the Department’s total expenditure went to transfers and subsidies, which is slightly more than the 56.9 per cent (R3.8 billion) that was spent on transfers and subsidies in 2017/18. Transfers and subsidies constitute inter alia conditional grants, transfers to Departmental entities, academic institutions and membership fees to international organisations. More than a third of the total appropriation is transferred to provinces and municipalities as conditional grants.

In 2018/19, approximately R2.8 billion (37 per cent) has been transferred to provinces as conditional grants, which is equivalent to approximately 64 per cent of the R4.4 billion that was allocated to transfers and subsidies in 2018/19. Approximately 99.9 per cent of the conditional grants allocation was reportedly spent and R2.97 million that was not spent was in respect of a LandCare grant that was withheld from Gauteng Province due to non-compliance with the Division of Revenue Act (DORA). Of the R2.8 billion that was allocated to conditional grants in 2018/19, approximately R2 billion (71 per cent of conditional grants appropriation) was allocated to the Comprehensive Agriculture Support Programme (CASP).

Irregular expenditure

The Department ended the 2018/19 financial year with total irregular expenditure of R11.6 million, of which R10.4 million of the total is recurring from the previous two financial years (2016/17 and 2017/18). The latter amount is in respect of overtime exceeding 30% and comprised of R8.5 million from 2017/18 and R1.9 million from 2016/17. The Department reported that the R10.4 million is under investigation. The recurring amount has been under investigation since the previous financial year that ended in March 2018. Therefore, the delay in the finalisation of the investigation is worrisome. For 2018/19, The Department incurred irregular expenditure of 999 000, for which it reported that disciplinary steps have been taken for some cases while some are under investigation.

Over and above the reported R11.6 million irregular expenditure, R327 000, which includes R21 000 from 2017/18, has been condoned and R1.6 million in respect of an employee contract not being signed has not been recoverable, which is a concern as R1 million of the amount is from 2017/18. The most significant amount was R16.5 million irregular expenditure that was incurred as a result of non-compliance with National Treasury Regulation 8.4 in respect of transfer payments to the Institute for Development Assistance Management (IDAM), which is a service provider. The amount that was transferred to IDAM does not form part of the reported R11.6 million irregular expenditure. In its Annual Report, the Department reported that the details of the R16.5 million will be under determination of investigation.

Most of the irregular expenditure incurred by the Department was in respect of commissioned and contract or consultancy work, which points to non-adherence to supply chain management (SCM) processes, poor monitoring and lack of consequence management that are exacerbated by weak internal controls. Deficiencies in internal controls have been previously highlighted by the AGSA and the Internal Audit Committee.

Fruitless and wasteful expenditure

By the end of the 2018/19 financial year, the Department reported fruitless and wasteful expenditure of approximately R2.4 million. Approximately R2.3 million of the amount was restated as it was an error from 2016/17 in respect of drought relief (animal feed not delivered); and R41 000 was from the year under review, which is significantly less than the 373 000 incurred in 2017/18. Underexpenditure on drought relief has been an ongoing challenge for the Department. Delayed response to natural disasters such as drought, which often leads to underexpenditure on drought relief funds needs to be addressed as it has a negative impact on farmers’ recovery after a drought spell. This is particularly true of developing farmers who have no insurance.

In addition to the above, fruitless and wasteful expenditure of R26.9 million is under investigation. Approximately R26.8 million of the amount is in respect of non-delivery of veterinary mobile clinics during the 2015/16 and 2016/17 financial years, while the rest is in respect of travel arrangements (no show) for the 2017/18 and 2018/19 financial years. Again the delayed finalisation of investigations in the Department remains a concern.

4.2 Financial Performance per Programme in 2018/19

Table 2. DAFF Programme Budget and Expenditure

Programme	2018/19				2017/18
Programme	Final appropriation R’000	Actual expenditure R’000	% spent	Under expenditure R’000	Final appropriation R’000	Actual expenditure R’000	% spent	Under expenditure R’000
1. Admin	1 038 789	1 030 070	99	8 719	920 487	827 999	90	92 488
2. Agric Prod, Health & Food Safety	2 408 966	2 377 705	98.7	31 261	2 249 520	2 230 660	99	18 860
3. Food Security	2 001 763	1 992 067	99.5	9 696	1 928 604	1 925 580	99.8	3 024
4. Trade & Market Access	270 649	266 106	98.3	4 543	279 920	287 667	99.6	1 253
5. Forestry & NRM	1 522 280	1 417 884	93	104 396	963 758	960 504	99.7	3 254
6. Fisheries Management	490 356	490 258	99.9	98	504 745	504 722	100	23
Total	7 732 803	*7 574 089*	98.3	158 714	6 847 034	*6 728 132*	98.3	118 902

Source: Annual Report (DAFF), 2019

Programme 1: Administration

The Administration Programme spent 99 per cent of its allocated budget in 2018/19, a 9 per cent increase from the previous financial. The Programme’s cost drivers in terms of expenditure have been compensation of employees and Office Accommodation (operating leases and property payments). The Programme’s spending pattern has improved from the previous financial year due to the significant decrease in underexpenditure compared with the 2017/18 financial year. However, as much as the Programme’s expenditure has significantly improved, reasons for under expenditure were attributed to the same projects as in the previous financial year. Expenditure on the Office Accommodation subprogramme in respect of capital works due to delays in the Department of Public Works processes has improved as slightly more than R1 million was not spent in the year under review, which is 50% less than in the previous year (R2.2 million). Underexpenditure for this item is a continuous trend for Programme 1.

There are challenges with lack of intergovernmental relations, poor planning and deficiencies in monitoring and evaluation. For the second consecutive year, more than 80 per cent of the unspent funds were in one of Administration’s important subprogrammes, the Policy, Planning, Monitoring and Evaluation (PPME) subprogramme. In this regard, the Department did not spend approximately R7.4 million (85% of unspent funds under Programme 1) that was earmarked for the Farmer Register, citing delays in the procurement of smart pens for data collection by Extension Officers. This is notwithstanding the fact that this is not the first time that Provincial Departments had to procure smart pens, therefore, should have better procurement processes.

Programme 2: Agricultural Production, Health and Food Safety

While this Programme has been consistently utilising almost 100 per cent of its budget allocation in prior years, expenditure started regressing from 2017/18 to 99 per cent and further declined to 98.7 per cent in the year under review. Out of the allocated R2.4 billion for the Programme in 2018/19, approximately R31.3 million was not spent by the end of the financial year. This is approximately 40 per cent more than the R18.9 million that was not spent in 2017/18. In the year under review, R19.6 million (approximately 63 per cent) of the total underexpenditure was in respect of the Primary Animal Health Care Programme for the Compulsory Community Service (CCS) programme. The allocation was not spent as the Department planned for 150 veterinary students to graduate during the 2018/19 financial year but only 125 students graduated as veterinarians (Vets). This is the second consecutive year that Programme 2 is not spending a significant amount of allocated funds for the CCS programme due to fewer than anticipated students graduating. The Committee has previously questioned the rationale for the Department increasing the target for the placement of CCS Vets from 140 to 150 in its previous APP whilst it has not been able to achieve the target of 140 in prior years. The reported underexpenditure on CCS will have an impact on the Programme’s performance and the CCS target may not be achieved in the 2019/20 financial year.

Additional underexpenditure of approximately R11.6 million was in another important subprogramme for Programme 2, i.e. Inspection and Laboratory Services subprogramme. This was in respect of compensation of employees (unfilled vacancies), machinery and equipment (upgrading of laboratories) and the Import-Export Systems. The underexpenditure was largely due to delays in supply chain management (SCM) processes, which were finalised in March 2019; and delays in signing agreements in respect of the Import-Export Systems. Underspending in machinery and equipment is continuing from the previous two financial years and the unspent amount of R4.9 million is more than 4 times the R1 million that was not spent on machinery and equipment in 2017/18. In the previous medium expenditure framework (MTEF) period, the Department received additional funding from National Treasury to strengthen biosecurity including R25 million that was received in the 2017/18 MTEF period for the Import-Export System. Therefore, it is unacceptable that the Department could not spend R11.6 million under Inspection and Laboratory Services due to delayed SCM processes as weak controls regarding biosecurity are costly to the sector and particularly alarming after the outbreak of FMD in Limpopo earlier in the year.

Programme 3: Food Security and Agrarian Reform

Expenditure in Programme 3 has slightly regressed from 99.8 per cent in 2017/18 to 99.5 per cent in the year under review. In prior years, expenditure has been fluctuating between 99.8 and 99.9 per cent. In line with the declining expenditure, the Programme’s underexpenditure has increased more than threefold to R9.7 million by the end of the 2018/19 financial year compared 2017/18’s R3 million that was not spent. In 2017/18, most of the underexpenditure was under the Food Security subprogramme in respect of infrastructure support (R2.5 million). In the year under review, again underexpenditure is largely under the Food Security subprogramme for compensation of employees in respect of monitoring and evaluation (M & E) of CASP (R6.2 million) and infrastructure support (R3.3 million). Delays in filling of vacancies, which drove the underexpenditure under Programme 3 for the year under review, has been attributed to a ceiling that has been imposed by National Treasury on filling of vacancies over the medium term. Underexpenditure on infrastructure support (buildings and other fixed structures) has been increasing over the years from R872 000 in 2016/17, R2.5 million in 2017/18 and R3.3 million for the year under review. Continuing underexpenditure on the same items and particularly on M & E of CASP, which has been planned for since 2016/17, is indicative of poor planning and inefficiency on the part of the Department.

Programme 4: Trade Promotion and Market Access

Budget expenditure also regressed under Programme 4, from 99.6 per cent in 2017/18 to 98.3% in 2018/19. As in the previous four years, most of the underspending was in the International Relations and Trade subprogramme mostly in respect of payments to foreign governments and international organisations. In 2018/19, the Department reported approximately R3.1 million that was not spent for the latter as a saving due to exchange rates fluctuations for payment of international membership fees. Approximately R1.1 million that was not spent under the same subprogramme was in respect of 5 attaché positions that became vacant during 2018/19.

Programme 5: Forestry and Natural Resources Management

Programme 5 constitutes the Forestry function that has been transferred to the Department of Environment, Forestry and Fisheries (DEFF); as well as Natural Resources Management subprogramme, which remains with the Department of Agriculture. The Department’s budget expenditure on Programme 5 has regressed significantly from 99.7 per cent in 2017/18 to 93 per cent in the year under review. Almost two thirds of the Department’s total underexpenditure for 2018/19 has been under this Programme, which reflected a 97% increase from R3.2 million in 2017/18 to R104.4 million in 2018/19. Approximately R103.6 million (99.3 per cent) of the total underexpenditure (i.e.) under this Programme during 2018/19 was in the Natural Resources Management subprogramme, which remains with the Department of Agriculture. The amount relates to R100 million underexpenditure in respect of Land Use and Soil Management (LUSM) projects for drought relief that was not incurred due to delays in SCM processes (processes finalised in March 2019 and delivery and payments done in April 2019); and approximately R3 million was in respect of a LandCare conditional grant that was withheld from Gauteng Province due to non-compliance with the Division of Revenue Act (DORA). Underspending funds earmarked for drought relief particularly due to SCM processes is a serious concern that needs intervention as some farmers never recover from drought impacts if they do not receive timeous assistance during and after a drought.

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

The Fisheries Management Programme was funded directly by the former DAFF for personnel costs, while its operations are funded through the Marine Living Resources Fund (MLRF). The Fisheries function, which include the Programme and the MLRF, have since been transferred to the Department of Environment, Forestry and Fisheries. Therefore, this Report does not cover Fisheries issues.

4.3 Report of the Auditor-General of South Africa

The Department’s audit outcome has regressed from prior years. During the 2018/19 financial year, the Department received a qualified audit opinion from the Auditor-General of South Africa (AGSA) with matters of emphasis and material findings. The basis for the AGSA’s qualified opinion was attributed to misstatements of financial statements in respect of unrecorded disposals of biological assets as the Department had inadequate systems to record disposals; insufficient evidence as biological assets worth R52.4 million were inaccessible and inability to determine further adjustments for biological assets worth R877.6 million. However, it should be noted that the latter transgressions, and therefore, the basis for the qualified audit outcome was in respect of the Forestry function, which has since been transferred to the Department of Environment, Forestry and Fisheries (DEFF).

In addition to the qualified audit opinion on the Department’s financial statements, the AGSA further 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. the Public Finance Management Act (PFMA) (Act No.1 of 1999) – identified material misstatements in the Department’s financial statements submitted for auditing were not adequately corrected and the supporting records could not be provided, which resulted in the financial statements receiving a qualified audit opinion.
Expenditure and revenue management (non-compliance with National Treasury Regulations):

Payments were not made within 30 days or an agreed period after receipt of an invoice, most notably in the payment of accommodation charges due to budget constraints.
Transfer of funds – lack of sufficient appropriate audit evidence that appropriate measures were maintained to ensure that transfers and subsidies to entities were applied for their intended purposes.
Consequence management on irregular expenditure – lack of sufficient audit evidence that disciplinary steps were taken against officials who incurred irregular expenditure. Proper and complete records were not being maintained as evidence to support the investigations into irregular expenditure.
1. Non-compliance with Procurement Legislation and Regulations (supply chain management):

Some of the contracts were awarded to bidders based on preference points that were not allocated and calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and Preferential Procurement Regulations; and some of the contracts were awarded to bidders that did not score the highest points in the evaluation process as required by the Act and Regulations.
1. Usefulness and reliability of reported performance information, as well as adjustment of material misstatements:

The AGSA identified material misstatements on the reported performance information for Programme 2: Agricultural Production, Health and Food Safety and Programme 3: Food Security and Agrarian Reform. These were subsequently corrected for Programme 2; and the AGSA raised material findings on the usefulness and reliability of performance information for Programmes 3 in respect of completeness and accuracy of evidence for two indicators, viz. ‘number of hectares planted for food production’ and ‘number of smallholder producers supported’.

The finding was attributed to the processes for approval of conditional grants not being aligned to performance reporting; lack of proper performance management systems and processes as well as formal standard operating procedures (SOPs) or documented system descriptions that predetermined how the achievement would be monitored and reported. In light of the above, the AGSA was unable to determine whether any adjustments were required to the achievement of 41 120 hectares planted and 7 261 smallholder producers supported, as reported in the Annual Performance Report.
1. Deficiencies in internal controls in respect of leadership/management:
Significant control deficiencies were identified in the control environment relating to oversight particularly in respect of movable tangible capital assets (biological assets) and performance reporting. These were previously reported by the AGSA and have not been addressed, hence the qualified opinion.
Inadequate oversight to ensure that internal controls are implemented for credible and reliable performance reporting to prevent material misstatements, which were mainly due to lack of adequate and effective controls on the daily and monthly processing of transactions specifically financial reporting on the movable tangible assets (biological assets) including information received from the Branches for performance reporting purposes. Effective internal controls and proper monitoring would have prevented non-compliance with legislation and regulations.
1. The AGSA also drew attention to other reports that have or could potentially have an impact on the Department’s financial statements, reported performance information and compliance with applicable legislation and other related matters, viz.

The Presidential Proclamation Number R.36 of 2019 (GG 42577 dated 12 July 2019) for the Special Investigating Unit (SIU) to investigate matters related to maladministration in the affairs of the Department in relation to the mismanagement of the Comprehensive Agriculture Support Programme (CASP).
The outcome of the SIU report was pending at the time of the AGSA’s report on 31 July 2019.

4.4 Report of the Department’s Internal Audit Committee

The Department’s Internal Audit Committee highlighted that there has been some progress in addressing the AGSA’s findings, however, progress has been very slow. The Internal Audit Committee performed an independent follow-up audit of 24 out of the 35 audit findings that were raised by the AGSA in the previous financial year (2017/18). Out of the 24 findings that the Audit Committee followed up, 12 (50%) were resolved, 5 (21%) were in the process of being resolved and 7 (29%) were not resolved. Resource constraints were cited as the main reason for not resolving audit findings. The Internal Audit Committee further highlighted that while there were repeat findings on most of the internal audit assignments performed, findings on CASP, Occupational Health and Safety, Risk Management and Forestry Operations were the most concerning. The Internal Audit Committee also conducted a performance audit of CASP and Ilima/Letsema between October and December 2018. The audit covered a sample drawn from 2013/14 to 2017/18 (5 years) during which period the total transfers for CASP and Ilima/Letsema amounted to R7.2 billion. The Audit Committee reported that the outcome was disappointing albeit not surprising. The audit identified the following shortcomings inter alia:

Internal control weaknesses and gaps in coordination and reporting.
Inadequate farmer capacity and commitment.
Gaps in monitoring and evaluation; planning and risk management.
Poor safeguard and utilisation of acquired assets.

The following key areas of concern were raised by the Internal Audit Committee to the Department’s management on the 2018/19 financial year Annual Report:

Continuing concern with the Department’s legal exposure, wherein the litigation register totalled R680 million by the end of the year under review (31 March 2019)
Significant gaps in internal controls in respect of funding processes and monitoring and evaluation of projects. The impact of CASP and Ilima/Letsema programmes is very limited and not aligned to the annual investments on the programmes.
Acknowledged the existence of risk management fundamentals but concerned with the level of maturity in the risk management processes.
Resource allocation and utilisation remains a major concern as some of the fundamental activities of the Department are under-funded and the annual budget is unable to fund all of its annual obligations. For example, funding challenges that hampered progress on extension of ICT services and strengthening of the ICT environment.

4.5 Response from the Department on issues raised by the AGSA

To address the audit findings by the AGSA on the 2018/19 annual report, the Department submitted an Audit Matrix of the audit findings and presented the following Corrective Measures (NB. Forestry related measures are excluded):

Directors/Chief Directors/Deputy Director-Generals are responsible for the implementation and content of the action plans and progress reports.
Department Branches reporting on their performance monthly to the Department’s Executive Committee (EXCO) and Performance Reviews held at the end of each Quarter (QPRMs).
The Policy, Planning, Monitoring and Evaluation (PPME) Branch facilitating engagements with the AGSA to ensure open communication between DAFF and the AGSA regarding management of predetermined objectives with the aim of eliminating any possible ambiguity and misunderstanding with the intention of obtaining positive audit outcomes.
A compliance register is in place 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.

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. Given the continuing 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 efficiently implemented or are not effective. In addition to the above corrective measures, the Department put aside an annual amount of R60 million for the MTEF period from 2016/17 to 2018/19 to ensure effective monitoring of the CASP grant. However, it reported during quarterly briefings in 2017/18 that the allocation for the monitoring of CASP was reprioritised for other activities, which included training. While the Department has been reporting that it has strengthened monitoring of CASP and Ilima/Letsema-funded projects through reassignment of additional officials to this function, in the year under review, R6.2 million to fill vacancies in order to strengthen CASP monitoring has not been spent. Notwithstanding the aforementioned corrective measures and additional funding for CASP monitoring, the AGSA and the Internal Audit Committee still highlighted repeat audit findings in the Department’s financial management and these include poor monitoring of conditional grants.

4.6 The Department’s Forward Allocation of Resources

As the Department failed to spend R100 million in Programme 5 for the Land Use and Soil Management (LUSM) projects for drought relief due to delays in SCM processes and R4.9 million in Programme 2 for the upgrading of laboratories, it submitted a rollover application to the National Treasury for the 2019/20 financial year. National Treasury only approved the R4.9 million for laboratories and did not approve the rollover for R96.4 million for LUSM. DAFF has since submitted an appeal for R96.4 million for LUSM projects and is awaiting the National Treasury’s decision. As already indicated on subsection 4.1 and illustrated on Table 1, the overall budget of the Department for the medium term expenditure framework (MTEF) period is decreasing in real terms. The National Treasury does not take underexpenditure lightly, therefore, underexpenditure is not doing the Department any favours. To address the shortfalls and some of the sectoral challenges, the Department has submitted additional funding requirements to National Treasury as illustrated on Table 3 below.

Table 3. Additional Funding Requirements submitted to National Treasury for MTEF

Policy Option	2020/21	2021/22	2022/23	Total
	R’000	R’000	R’000	R’000
Strengthen animal production & health	156 000	162 000	168 000	486 000
Strengthen plant production & health	49 300	57 700	66 100	173 100
Strengthen inspection & quarantine services	99 250	94 100	88 150	281 500
Grootfontein Agric Development Institute	47 488	53 672	70 079	171 239
Total	352 038	367 472	392 329	1 111 839

Source: DAFF (2019)

4.7 Discussion on Financial Performance

Without labouring on the basis of the qualified opinion and the transfer of the Forestry function to the DEFF, in the previous three financial years preceding the year under review, the Department received unqualified audit opinions with findings, after the AGSA allowed it to make material adjustments on its financial statements that have been submitted for audit. This has been the case in 2018/19 although it could not receive an unqualified audit opinion due to the matters referred to by AGSA on biological assets in Forestry. This implies that the Department’s audit outcomes have been stagnant as the quality of the annual performance report that was submitted for auditing has not improved from the previous financial years. The Department’s expenditure management particularly lack of consequence management and deficiencies on internal controls remains a concern as irregular, fruitless and wasteful expenditure is attributed to similar offences as in previous years.

The stagnant and subsequent regression in the Department’s audit outcomes has been highlighted as an area 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 optimal service delivery and value for money. This is worrisome as the Committee recognises that inadequate funding remains a key challenge to ensure that the Department carries out all its mandated activities as highlighted in the NDP and other Government directives (e.g. SONAs, Economic Stimulus Package, etc.). 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 future budget allocation from the National Treasury, for example in the year under review, the Department had to surrender R158.7 million of voted funds back to National Treasury as a result of underexpenditure while the National Agricultural Marketing Council surrendered R53 million for a project that was commissioned by the Department. Therefore, motivation for additional funding becomes difficult when a Department is not prudent and efficient in the utilisation of allocated resources.

In light of the continuing budgetary challenges, the additional funding submission to National Treasury for the MTEF period is commended. The submission is more important as the requirements are in respect of Programme 2: Agricultural Production, Health and Food Safety, which is responsible for biosecurity, inspections, disease outbreaks and primary production. 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 could not fully account on the funds as they have been reprioritised for other activities.

Spending of conditional grants has improved compared to previous financial years but timeous 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 (M & E) 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 and the delayed filling of vacancies for CASP M&E that has been reported in the year under review is unacceptable. Value for money in terms of transferred funds cannot be guaranteed without effective M&E. The lack of service delivery, weak intergovernmental coordination and mismanagement of funds due to the Department’s failure to do proper M & E has been observed in most oversight visits to provinces.

While the Department’s qualified audit opinion has been attributed to the Forestry function, the outcome is still a concern as it materialised from previously raised audit findings that have not been addressed including material adjustments that had to be made on the Department’s financial statements that are submitted for audit. Despite previous recommendations, the Department is not effectively making use of the Internal Audit Committee including appropriately responding to issues that are raised by the Internal Audit Committee before AGSA’s audit.

4.8 Human Resources and Critical Positions

The Department’s post establishment decreased from 6 137 posts in the first quarter of 2018/19 to 6 120 posts in the last quarter of the year under review. The Department started the financial year under review with a vacancy rate of 11.5%, which considerably increased to 19.5% by the end of 2018/19 (i.e. 31 March 2019) and has since further increased to 20.9% by the end of Quarter 1 of 2019/20. The vacancy rate is a serious concern as it is more than double the 10% norm that is acceptable for the public service; and the Department attributed the high vacancy rate to a government moratorium on filling of vacancies (R6.2 million for CASP M &E under Programme 3) and reduction in budget allocations. In Programme 2, underexpenditure of R11.6 million was attributed to delays in SMS processes. As in prior years, the Department had a relatively high number of vacancies at the senior management service (SMS) level, which increased from 20.8% in the previous financial year to 22% in 2018/19. Most of the SMS vacancies in 2018/19 were at the Director level.

Critical occupations with significant vacancy rates include engineers (50%); finance, economics and related professionals (approximately 23%); legal related (71.7%) and veterinarians (29.7%). For legal related occupations, the Department has filled 2 posts out of the approved 7. This is a concern in light of the legal exposure and litigation matters that have been raised by the Internal Audit Committee and the weaknesses in terms of development of legislation as has been highlighted by the Fifth Parliament. Vacancy rate at the highly skilled supervision level also increased from 14.3% to 18% and at the skilled level from 17.4% to 22%. As in the previous financial year, most vacancies were in the Fisheries Management Programme (20%) and Forestry and Natural Resources Management (24.7%), which will both be transferred to DEFF. Therefore, the actual vacancy rate and staff complement will only be appropriately accounted for once the restructuring for the amalgamation of the Department and the former DRDLR is finalised.

As it has been the case for the past five financial years, the Department has not met the 2% equity target aimed at enhancing employment opportunities for people with disabilities, with the percentage achievement remaining stagnant at 1%. The Department was commended for the improvement in working towards 50% female representation in SMS positions over the five-year period, however, in the year under review, there has been no improvement from the previous year’s 46% representation. A concern was raised about the Department’s age profile of its personnel as 30% of staff are at the 50-59 age bracket while 28% is at the 40-49 age bracket. There is therefore, a need to absorb and develop younger professionals. To improve human resource (HR) matters and address weaknesses, the Department highlighted key areas of focus; namely, the finalisation of the development of the macro organisational structure for the new Department of Agriculture, Land Reform and Rural Development; improved HR governance environment through improved HR delegations between the Minister and DG; implementation of the early retirement without penalisation of pension benefits in terms of Section 16(6) of the Public Service Act, 1994; and Monitoring of the Workplace Skills Plans and reporting to the Public Service Sector Education and Training Authority (PSETA).

5. Overview and assessment of service delivery performance

5.1 DAFF Service Delivery Performance for 2018/19

The Department had 67 planned targets as listed in the 2018/19 Annual Performance Plan (APP) and the 2018/19 Annual Report as tabled in Parliament (these include the MLRF targets for Programme 6). Out of the 67 planned targets, the Department achieved 47 targets (70%) – not taking into account the double-counting of achievements for the target on implementation of Stakeholder Engagements. This is a slight regression from the previous financial year, when the Department achieved 45 out of a total of 62 targets (73%). The Department’s expenditure is also not linked to performance, which has also been the case in previous years. While it achieved 70% of its planned targets for the year under review, the Department spent 98.3 per cent of its allocated budget for the year.

For 2018/19, misalignment of expenditure with actual performance has been more prevalent on Programmes 1, 3 and 6 as illustrated on Table 3 below. The Department’s service delivery performance regressed across most Programmes with the exception of Programmes 2 (Agricultural Production, Health and Food Safety) and 4 (Trade Promotion and Market Access).

Table 4. Summary of Target Achievements and Expenditure for 2018/19 per Programme

	No. of Targets	Not achieved	2018/19 percentage achieved	Budget spent (% of total allocated)
1. Administration			58 per cent	R1 billion (99 per cent)	75 per cent
2. Agricultural Production, Health and Food Safety			89 per cent	R2.38 billion (98.7 per cent)	78 per cent
3. Food Security and Agrarian Reform			43 per cent	R1.99 billion (99.5 per cent)	100 per cent
4. Trade Promotion and Market Access			93 per cent	R266.1 million (98.3 per cent)	67 per cent
5. Forestry and Natural Resources Management			78 per cent	R1.4 billion (93.0 per cent)	75 per cent
6. Fisheries Management			56 per cent	R490.3 million (99.9 per cent)	73 per cent
			70 per cent	R6.49 billion (98.3 per cent)	73 per cent

5.1.1 Programme 1: Administration

Out of the planned 12 targets under Programme 1 for the 2018/19 financial year, the Department achieved 7 targets, which is a regression in terms of the percentage of planned targets that were achieved in the previous financial year’s 75% achievement. Some of the achieved targets include the implementation of the Department’s Annual Risk-based Internal Audit Plan and the Workplace Skills Plan during the year under review. However, the implementation of these plans has not led to improved governance and service delivery. The Department could not fully implement the Risk Management Strategy due to capacity constraints and reported that the process to appoint a service provider to assist in this regard is underway. It is important to note that risk management is one of the areas of concern that have been raised by the Internal Audit Committee and dependence on a service provider is a risk in itself.

The Department also failed its planned legislative targets for submitting to the Minister the Feeds and Pet Food Bill and the Fertilisers Bill citing lengthy delays in the management of socio-economic impact assessments (SEIAs) and further consultations with stakeholders. The Department has been sitting on the two Bills for the past five years as both emanate from a Bill that was introduced and later withdrawn from Parliament in 2013. Delays in the development of legislation and policies is a matter that the Fifth Parliament grappled with and the Committee highlighted the need for updates to monitor progress in this regard.

To overcome underperformance, the Department reported that the Administration Branch reviews performance management during monthly meetings in Directorates, Chief Directorates and during one-on-one meetings with staff, which all feed into Branch meetings that also monitor progress against set quarterly and annual targets. The Branch also engages with the Planning, Policy, Monitoring and Evaluation (PPME) Unit that also coordinates meetings between AGSA and the Branches to improve performance audit outcomes for the entire Department.

5.1.2 Programme 2: Agricultural Production, Health and Food Safety

The Department had 9 planned targets for this Programme in the 2018/19 financial year. Of the 9 targets, 8 were achieved (89%), which is a significant improvement from the previous two years’ 78% achievement. In previous years, the Department failed to meet the target for the deployment of veterinary graduates to rural communities for the Compulsory Community Service (CCS) programme, which had been the case since the inception of the CCS programme in 2015/16. The reasons cited varied between receiving less than planned number of applications for the CCS programme and fewer than anticipated veterinary students graduating in a particular year. However, in the year under review, the Department exceeded the target for placement of Vets in the CCS programme as it planned to place 150 and eventually placed 181 veterinary graduates, which is commendable. This was reportedly due to more students completing their studies during 2018 while some were carried over from 2016 and 2017 following passing of the South African Veterinary Council (SAVC) examination. However, the reportedly achieved target is contradictory to what has been reported in the Department’s financials. Under Programme 2, the reason that has been attributed to underexpenditure of R19.6 million was that while the Department planned for 150 veterinary graduates in the 2018/19 financial year, only 125 veterinary students graduated.

The only target that has not been achieved in the year under review, 2018/19, was in respect of non-compliance by Provinces as fewer samples (2 928 instead of 5 208) were being collected for the foot-and-mouth disease (FMD) risk surveillance and the samples were conducted later than prescribed in the FMD Manual. The Department plans to strengthen controls and discuss non-compliance with Provinces on a quarterly basis. This is of utmost importance particularly following the outbreak of FMD in a high surveillance area of Limpopo earlier in the year, which resulted in the suspension of South Africa’s FMD-free zone without vaccination status by the OIE (Office International des Epizooties – i.e. World Organisation for Animal Health). The latter has a negative impact on trade and revenue generated from exports as it leads to bans of South African exports of cloven-hoofed animals and their products. This is the second time in 8 years that South Africa loses its FMD-free status from the OIE. The last time it happened was in 2011 after an outbreak in KwaZulu-Natal and it took the country 3 years to regain the status, which was in 2014 after a lot of hard work from the Department’s Animal Health Division.

To overcome underperformance, the Department reported that the Branch’s Directorates have continuous reporting and performance monitoring including office, monthly and quarterly meetings as well as annual reporting. In addition, Chief Directorates report monthly on operational plans and APP deliverables and have quarterly performance review meetings.

5.1.3 Programme 3: Food Security and Agrarian Reform

Programme 3, which, like Programme 2, is one of the key Programmes and cost drivers in the Department, has been the worst performer during the 2018/19 financial year. For the 2018/19 financial year, the Department achieved 3 out of the planned 7 targets (43%) for Programme 3, quite a drastic decline from the previous year’s 100% achievement. Under this Programme, the Department managed to achieve 2 targets relating to compilation of reports, namely, the five-year status of the National Policy on Extension and Advisory Services and the annual report on the deployment of Extension Practitioners to commodity organisations. The third target achieved was the placement of 255 graduates, which is a minimal number given the thousands of unemployed agricultural graduates, some with postgraduate qualifications. Despite the poor performance, 99.5 per cent of the budget allocated to the Programme was spent (see Table 3).

The main activities that are at the core of Programme 3 and also contribute to the MTSF Outcomes, were not achieved. These include two activities towards the implementation of the National Food and Nutrition Security Policy viz. quarterly reports on food and nutrition security interventions and the Food and Nutrition Security baseline assessments that were not conducted. The other two targets were the tabling in Cabinet of the National Policy on Comprehensive Producer Development Support (NPCPDS) and the approval by the Department’s Executive Committee (EXCO) of an annual report on the Black Commercialisation Programme.

The reasons provided for non-achievement ranged from delays in Department approval processes, Memorandum of Understanding (MoU) signed in the last quarter of the financial year and in respect of the Policy, the Department was still doing consultations by the end of the financial year on recommendation from the National Economic Development and Labour Council (NEDLAC) and the Economic Sectors, Employment and Infrastructure Development (ESEID) Cluster. This may point to capacity challenges in the Department as the said Policy was conceptualised in 2013 and first drafted in 2016. The Policy has been flagged as the overall policy for the sector that will regulate and guide support services that are provided to various producer categories. In light of the impending amalgamation of the Department and DRDLR, the Policy may be further delayed as currently there seem to be no proper coordination and collaboration between the two former Departments with respect to producer support.

The report on the Black Commercialisation Programme (BCP) was not approved and the establishment of a task team was recommended to review the implementation of the programme. Despite lack of progress in the implementation of the BCP, the Department continues to report about funding transfers to the Land Bank for the Blended Funding Model that was conceptualised as a funding instrument for the BCP. In its last engagement with the Committee on the matter, the Department reported that it is developing a Policy for both BCP and the Blended Funding Model although it could not explain the transfer of funds to Land Bank for a programme that does not exist or is not operational. In the 2017/18 Annual Report, the Department reported that the Departmental Executive Committee (EXCO) decided that the Draft Integrated Development Finance Policy should be incorporated as a chapter in the National Policy on Comprehensive Producer Development Support (NPCPDS). Both policies have been recurring non-achieved targets since 2015 and the Integrated Development Finance Policy was supposed to have been implemented by 2016/17.

As Agriculture is a concurrent function, conditional grant funding (CASP and Ilima/Letsema) is transferred to Provinces for implementation. In this regard, the Department also reports on the performance of transversal indicators for the work that is carried out by Provinces that contributes to Programme 3’s mandate. For the year under review, these were: the number of households supported; number of hectares planted for food production; number of smallholder producers supported; and number of Extension Support Practitioners deployed to commodity organisations. The latter was the only target that was achieved as already reported under the main Programme. The main reasons that were cited for non-achievement was drought and insufficient auditable evidence.

The insufficient auditable evidence, particularly for 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 is a recurring challenge that is attributable in part, to lack of M&E, weak intergovernmental relations and poor planning and coordination. The AGSA also found material misstatements in respect of completeness and accuracy of evidence for two indicators, viz. ‘number of hectares planted for food production’ and ‘number of smallholder producers supported’. This is a serious concern as these targets are expected to play a central role in the achievement of Outcome 7 (rural development and food security) of the MTSF and NDP sector priorities. 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. The declaration of drought as a national disaster was lifted in June 2018 with some regions in the Eastern Cape (EC), Northern Cape (NC) and Western Cape (WC) provinces still affected at the time. The NC is still experiencing serious drought and the Deputy President has recently committed R30 million for drought relief in the Province.

The Food Security and Agrarian Reform Branch (Programme 3) previously reported that a National Food and Nutrition Security Coordinating Committee and strategies were established to oversee the implementation and reporting of activities. In the year under review, to overcome underperformance, the PPME Unit assisted the Branch by forging a working relationship with the Internal Audit Directorate to re-assess its Audit plan to include auditing of provincial non-financial performance especially the transversal indicators. In addition, the Department developed a framework to manage non-financial performance of provinces, which at the time of the Annual Report was undergoing consultations with stakeholders. Once approved, it will be used as a guide to manage non-financial information by National and Provincial departments of Agriculture especially on transversal indicators.

5.1.4 Programme 4: Trade Promotion and Market Access

The Department achieved 93% of the planned targets for Programme 4 during 2018/19 financial year, which is a significant improvement from the previous year’s 67% achievement. The Department is commended as in the two preceding years, the Programme received a qualified opinion from the AGSA in respect of usefulness and reliability of performance information as some of its targets were not measurable. The Programme was audited again in the year under review and there were no findings on the usefulness and reliability of its performance information.

Most of the Programme’s achieved targets were reports on trade, bilateral and multilateral as well as other strategic engagements. After two years of non-achievement, the target for publishing of the AgriBEE Enforcement Guidelines has been achieved in 2018/19. In addition, the Programme also achieved its targets on the training of agroprocessing entrepreneurs on norms and standards, establishment of commodity-based cooperatives and training of cooperatives. As the Programme’s mandate is trade and market access, it might be prudent for the Committee to seek detailed information on the Programme’s activities in future engagements to ensure that the established and trained cooperatives and entrepreneurs are operational and have access to markets.

The only target that was not achieved was the implementation of the India, Brazil and South Africa (IBSA) action plan. The Department reported that some of the IBSA’s agricultural sector activities were dealt with through the Brazil, Russia, India, China and South Africa (BRICS) action plan. The target on IBSA action plan has since been reviewed and from 2019/20, the Department will be focusing on the implementation of the BRICS action plan. To address underperformance, the Department reported that the Branch (Trade and Market Access Programme) holds quarterly management meetings to discuss performance and agree on corrective actions; and the PPME Unit is invited in all Programme and subprogramme meetings.

5.1.5 Programme 5: Forestry and Natural Resources Management

Programme 5 performance improved slightly from the previous year. Out of 9 planned targets that were planned for 2018/19, the Department achieved 7 targets (78%), a 3% improvement from the previous year’s 75%. Of the 9 planned targets, 5 relate to Agriculture and 4 of these have been achieved. The achieved targets include the submission of the Preservation and Development of Agricultural Land (PDAL) Bill to the Office of the State Law Advisor for pre-certification, which was done in October 2018; implementation of 1 revitalisation project at Vaalharts Irrigation Scheme in NC; development of the Climate Change Mitigation and Adaptation Implementation Guidelines; and an annual performance monitoring report on agricultural land rehabilitation interventions, which is a transversal indicator that is implemented by Provinces. The target on Climate Smart Agriculture (CSA) was not achieved as the CSA Strategic Framework was not approved by the end of the financial year due to delays in Departmental approval structures. However, the Department reported that the Framework has since been approved.

To address underperformance in the Branch, the Chief Directorate for Natural Resources Management hosted quarterly Working Groups to address challenges and to ensure integrity of evidence from all Provinces. The Department overachieved the transversal indicator in respect of the number of hectares of land that has been rehabilitated. The target, which contributes to MTSF Outcome 10, was 16 000 hectares for 2018/19 and 45 479.32 hectares were rehabilitated due to additional funding in some provinces for drought resilience interventions.

5.2 Report on MTSF 2014-19 Outcomes

5.2.1 The Department of Planning, Monitoring and Evaluation (DPME)

The DPME presentation focused on Government progress in terms of achieving Medium Term Strategic Framework (MTSF) 2014-19 targets for Outcome 7 (rural development and food security), which is led by the DRDLR. It should be noted that when reporting achievement on MTSF targets, the DPME reports on the overall Government performance but not specific contribution by each Department. In addition, in terms of the MTSF progress and/or achievements, the information should be considered in the context of the AGSA’s findings on the reliability and accuracy of performance information, which in the past five years, has been compounded by weak intergovernmental relations and lack of effective monitoring and evaluation (M&E) on the part of DAFF and in the case of the MTSF, DPME. It has been highlighted that DPME was merely reporting what Departments have reported to it. As a Department responsible for monitoring and evaluation, it was expected to provide a critical analysis including the impact of each achieved target as envisaged in the NDP; highlight weaknesses and challenges identified over the past MTSF (2014-19); and previously proposed recommendations or interventions where targets were not achieved and/or not reported.

Outcome 7, sub-outcome 3 (food security): DAFF leads sub-outcome 3 (food security) of Outcome 7. Other Departments such as the Department of Social Development and Department of Basic Education also contribute to the food security sub-outcome. In 2018, DPME reported that the target on support provided to smallholder producers to ensure production efficiencies (80 000) and for bringing into production 1 million hectares of underutilised land in communal areas has already been overachieved. However, the DPME has now reported that the target has not been achieved as 763 715 hectares (76% of the 1 million target) have been achieved. Contributing Departments to this target were DAFF, DRDLR, Department of Water and Sanitation and provincial Departments of Agriculture.

The target on smallholder producers receiving support has been overachieved as 251 352 producers reportedly received support over the MTSF period. Another target that was overachieved was on 1.6 million vulnerable households benefiting from Food and Nutrition Security initiatives (i.e. 4.3 million people of the 13.8 million people that were food insecure in 2014). It was reported that 2 563 703 households benefited from Food and Nutrition Security initiatives (i.e. 6 723 209 people). In 2018, Statistics South Africa (StatsSA)’s General Household Survey (GHS) reported that the percentage of vulnerable households decreased from 11.3% in 2013 to 9.7% by 2018. While the reduction is significant, the percentage is not likely to have been less than 9.5% by March 2019 as anticipated by the MTSF due to increasing unemployment and food prices, as well as continuing drought in some provinces.

Although it has reported that the target on additional 1 250 hectares (ha) under irrigation for smallholder production was overachieved (22 589 ha), the DPME previously reported to the Committee in 2017 that the Department was not likely to meet the target to put an additional 1 250 ha of land under irrigation for smallholder production and therefore, the target has since been revised to the number of projects instead of hectares. In this regard, the target was revised to ‘181 projects implemented to support revitalisation of irrigation schemes’. Both the DPME and DAFF did not report on this MTSF target as revised although DAFF has since revised its APPs to reflect the number of projects instead of hectares. The DPME also did not report or comment on the targets that were not achieved by the Department for Outcome 7, namely, the implementation and management of the Preservation and Development of Agricultural Land Framework Act (PDALFA) and policies promoting the development and support of smallholder producers. It also did not report on Outcomes 4 and 10.

In terms of the Management Performance Assessment Tool (MPAT), the Department’s overall management performance has been stagnant and below compliance since 2017/18 across all key performance areas (KPAs). For the 2018/19 financial year, the Department’s average score was 2.7. For the Strategic Management KPA, DAFF performed at compliance level for Monitoring and below compliance level for Evaluation. 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 and Human Resources (HR), the Department has been consistently scoring below compliance since 2014. For Governance and Accountability, this has been attributed to deficiencies in Professional Ethics, Anti-corruption (fraud prevention) and since 2017, Financial Disclosures; and for HR, due to deficiencies in Performance Management Development Systems for Heads of Departments. This points to gaps in terms of the establishment of systems and processes to ensure professional ethics and discourage unethical behaviour and corruption.

While it has consistently maintained the compliance level score (3 or above) on Financial Management, the Payment of Suppliers has been an issue since 2015. The Department’s downgraded MPAT scores have previously been attributed to 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).

5.2.2 DAFF Contribution to MTSF 2014-19 Outcomes

In the 2018/19 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 MTSF targets for the Ministry as indicated on sub-section 2.2 of this document. In this regard, the Department ignored the previous Committee’s assertion to report on the Priority Outcomes as indicated and required in the MTSF.

For Outcome 4, the Department did not report on the specific targets for this Outcome, which were expected to contribute to the creation of the 1 million sustainable jobs that the NDP envisage will be created by the sector particularly through agroprocessing, by 2030. The specific targets include annual reports on APAP/RAAVC; implementation of the Trade and Marketing Strategy; implementation of and Comprehensive Africa Agriculture Development Programme (CAADP) investment plans and development of 300 000 smallholder producers for market access. It should be noted that the latter target is different from the additional 80 000 smallholder producers that have been supported under Outcome 7 for production efficiencies. It should be noted that the 622 946 MTSF jobs that DAFF reported in its presentation on the Annual Report, have nothing to do with Outcome 4 but are a contribution by all relevant Departments to the reduction in rural employment rate (from 49% in 2013 to less than 40% in March 2019) under Outcome 7, which is led by DRDLR. In this regard, the target of 924 140 rural jobs was not met.

For Outcome 7, the Department presented the overall achievement and the same information that has been presented by the DPME without specifying its own contribution. The Department did not meet most of its annual targets for 2018/19 that contribute to the MTSF Outcome as has been alluded to under Programme 3. These include the tabling of the National Policy on Comprehensive Producer Development Support to Cabinet and food security related targets that are implemented by Provinces.

As already indicated in sub-section 5.2.1 above, the Department also previously indicated in its presentation to the Committee on the 2019/20 Annual Performance Plan (APP) in July 2019 that the target of putting 1 million hectares of unproductive land in communal areas under production was overachieved. In this regard, the Department reported that 2 859 357 hectares of unutilised land in communal areas has been put under production. As already alluded to under Programme 3, DAFF has not achieved its related 2018/19 annual target of 104 701 hectares due to drought. The Department did not report on the revised target for the number of projects to support revitalisation of irrigation schemes.

For Outcome 10, the Department reported only on the target it has met (for Agriculture as Forestry and Fisheries functions have been transferred). The target was 152 500 hectares that should be under rehabilitation or restoration by March 2019 and this was overachieved as 224 693.32 ha of agricultural land were reportedly rehabilitated. The 2018/19 annual target of 16 000 ha was also overachieved due to additional funding in some provinces for drought resilience interventions as reported under Programme 5. Although the Department has developed the Climate Change Adaptation Plan for the sector, this has not been implemented as Climate Change Mitigation and Adaptation Implementation Guidelines were only developed by the end of 2018/19.

5.3 Discussion on Service Delivery Performance and MTSF Outcomes

Non-alignment of resource use with performance remains a concern as the Department spent almost 98.3 per cent of its budget but achieved less than 75% of its planned annual targets. Even for the targets that have been achieved, impact on service delivery is not evident. Persistent challenges with reliability of reported performance information particularly for activities that are implemented by Provinces through conditional grants, the monitoring and evaluation (M&E) of such activities and grants utilisation were highlighted for the Department’s attention. The effectiveness of the Department’s M&E system was questioned as there were findings on the usefulness and reliability of performance information for one of its key Programmes, the Food Security and Agrarian Reform Programme, which only achieved 43% of its planned targets for the year.

The poor performance of the Department on service delivery is also linked to weak governance and accountability including HR management as has been indicated in its MPAT scores from the DPME. In the year under review, most of the underexpenditure and consequently, non-achievement of performance targets, were largely due to delays in, supply chain management (SCM) processes, signing of agreements or approval processes and filling of vacancies. The Department ended the year with a significantly high vacancy rate of 19.5%, which had an impact on service delivery and M&E of CASP grant in particular. In light of the minimal impact of CASP despite the amount of resources invested, the SIU investigation into the grant is welcome. One of the non-achieved targets relates to the development of a Farmer Register for smallholder and subsistence producers, which has been in the pipeline since 2007. Currently, the exact number of these producers, where they are, their main activities and resources including land access, is not known, the conservative figure of approximately 250 000 smallholder producers that has been cited for the past 10 years is an estimation that has not been updated. Therefore, inability to achieve any target relating to the Farmer Register is a matter of concern as the Register will provide a reliable database of these producers and subsequently, future Censuses to measure impact of interventions. Without a reliable baseline, impact of interventions on smallholder producers cannot be fully measured.

As much as both DPME and DAFF have reported overachievement on MTSF targets relating to the number of smallholder producers supported and number of households benefiting from Food and Nutrition Security initiatives, evidence from StatsSA’s General Household Survey (GHS) indicates that reduction in households vulnerable to hunger may not necessarily be due to the Departments’ interventions. The 2018 GHS showed that 45% of households were dependent on social grants while 16.6% were dependent on remittances. Dependence on social grants was more prevalent in the rural provinces of the Eastern Cape (59.9%), Northern Cape (58.3%) and Limpopo (57.9%). In this regard, the reduction in the number of households that are vulnerable to hunger may be due to households’ access to social grants and remittances, which enabled purchasing of food rather than food production initiatives as only 14.8% of South African households were involved in agricultural production at the time of the survey. The latter is a regression from 16.9% of households that were involved in agriculture in 2016.

Of the 14.8% households that were involved in some agricultural activity during the period of the GHS, only 10% of the households reported getting agricultural-related support from Government during the year preceding the survey. As the MTSF target to ensure that 1 million hectares of underutilised land are put under production in communal areas by 2019 has not been met, the DPME previously reported that newly acquired land by previously disadvantaged individuals (PDIs) remain fallow, thus implying that farmer support programmes are either inadequate and/or not yielding the desired impact. Considering that both DAFF and DRDLR have support programmes that are not linked or complement each other, fast-tracking the amalgamation of the two Departments and finalisation of the National Policy on Comprehensive Producer Development Support (NPCPDS) are of utmost importance to address poor coordination and inadequate producer support to ensure value for invested funds.

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. Yet, the Department could not report on specific interventions that have been implemented over the last five years to ensure that 300 000 smallholder producers have access to markets. 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 90% of the households surveyed by StatsSA in the 2018 GHS that were involved in agricultural activities, were producing in backyard gardens to meet household food demand. 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.

The slow pace at which crucial polices are developed and subsequently implemented in the Department remains a contentious issue that has been highlighted by the Fifth Parliament. Areas of concern in this regard include the finalisation of the NPCPDS and the slow pace at which the National Food and Nutrition Security Plan is being implemented in light of the challenge of food insecurity that is also increasing in urban areas, and the rise in food prices.

6. AN OVERVIEW OF THE PERFORMANCE OF THE DEPARTMENT’S ENTITIES

With the exception of the PPECB, the audit outcomes of the Department’s entities either regressed (NAMC) or remained stagnant (ARC and OBP) despite previous assertions for achievement of better outcomes. 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 twelve financial years.

6.1 Agricultural Research Council (ARC)

For the 2018/19 financial year, the ARC had a total budget of R1.3 billion. The budget comprised of the Parliamentary Grant (PG) from DAFF and transfers from the Department of Science and Technology totalling R929 million and self-generated revenue amounting to R385 million. The total budget was more or less the same as in the previous financial year. The entity’s self-generated revenue decreased from R410 million in 2017/18 to R385 million in 2018/19. Although the ARC receives the largest share of the Department’s 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 R1.34 billion and ended the 2018/19 financial year with a deficit of R22 million. This is the fourth 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. The main driver of expenditure is personnel costs at 61% and operational (e.g. water and electricity) and administrative costs at 28%.

The ARC received a qualified audit opinion from the AGSA for the third consecutive year. The AGSA raised numerous findings, which are mostly repeat findings, on non-compliance with legislation (PFMA) and Accounting Practices (Generally Recognised Accounting Practice –GRAP); deficiencies in internal controls as well as financial performance and management. The findings were inter alia:

PFMA contravention – annual financial statements submitted for auditing not prepared according to the PFMA; expenditure incurred in excess of the approved budget; and effective and appropriate steps not taken to collect all monies due to the entity. Some of its bad debtors are Government departments including DAFF, which has paid some but not all of its debt to the ARC. The entity has reported that DAFF has now been handed over to debt collectors.
Expenditure management – effective steps not taken to prevent irregular expenditure amounting to R2.5 million (more than double R106.2 million that was incurred in 2017/18).
Asset management (property plant and equipment as well as inventories) – 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.
Internal control deficiencies in respect of leadership – management has not provided adequate direction and oversight of the control environment, financial management and compliance with laws and regulations; and 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; and compliance monitoring controls implemented by the ARC not adequate to prevent material non-compliance with key legislation.

In the two financial years preceding the first qualified audit opinion in 2016/17, the AGSA highlighted that there is significant doubt that operations in the ARC can continue in future as the entity is technically insolvent (unfavourable financial viability). The same was highlighted in the year under review as current liabilities of R403 million exceeded current assets by R139 million and the entity reported a cash shortfall of R245 million. The AGSA highlighted that the continuing deficit was driving the entity’s irregular expenditure.

In the year under review for example, the contribution to the R2.5 million irregular expenditure include funds that were specifically and exclusively for the FMD Facility that the ARC did not ring-fence. Despite its unfavourable financial viability, it reported that it will fund future work on the FMD project through available cash reserves, notwithstanding that it ended 2018/19 with a shortfall of R245 million. It should be noted that it was through a BRRR recommendation of the Committee that National Treasury made an additional allocation to the ARC specifically for the FMD Facility given the threat that FMD poses to the economic viability of the livestock sector especially export revenue. Therefore, mismanagement of such funds should be taken seriously as the country currently does not have an FMD vaccine manufacturing facility but imports the vaccine from Botswana.

Targets achieved: The ARC’s overall performance in the 2018/19 financial year regressed from the previous year’s performance 69% achievement of targets. In the year under review, the entity achieved 32 targets out of a total of 55 targets (58%) – previous year’s achievement was 36 out of 52 targets. As in the previous financial years, the ARC achieved and in some cases over-achieved, all its planned targets for Programmes 2 (Animal Health, Production and Improvement) but poorly achieved in Natural Resources Management (40%); Smallholder Agriculture Development (50%) and in Administration and Corporate Affairs (52%) Programmes.

Performance in the Smallholder Agriculture Development Programme was negatively impacted by non-payment from DAFF for the Kaonafatso ya Dikgomo (KyD) programme as the ARC could not appoint technicians. For the Administration and Corporate Affairs Programme, the ARC did not achieve amongst others, the target for a percentage increase in employment equity ratios for blacks, females and people with disabilities in core business. This target was also not achieved in the previous financial year; and as a result, female representation is at 42% while people with disabilities constitute less than 1% of core business.

6.2 Onderstepoort Biological Products (OBP)

As a Schedule 3B entity (i.e. national government business enterprise), the OBP, which is also a National Key Point, does not receive a Government grant but funds all its operations from self-generated revenue (mostly from sale of animal vaccines and related products). The entity’s net revenue decreased from R173 million in 2017/18 to R150 million in the year under review, thus not achieving its target to increase sales revenue to R320 million in 2018/19. The previous financial year’s revenue increase was attributed to changes in the OBP’s distribution model and increased export markets particularly to Europe. However, during 2018/19, the OBP lost a share of the market due to production inefficiencies. Despite the decrease in revenue, the OBP still realised a profit of R41 million after tax although it was a slight decrease from the R48 million profit that was made in the previous financial year; and its equity increased from R231 million in 2017/18 to R272 million in 2018/19.

As in the previous financial year, the OBP received an unqualified audit opinion with material findings from the AGSA for 2018/19. However, compared to 2017/18 and in addition to repeat audit findings, the entity had more findings and also incurred irregular expenditure during 2018/19. For the 2018/19 financial year, the AGSA raised the following 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. Additionally, the OBP’s system to monitor compliance with applicable legislation was not always effective as now-compliance with legislation and SCM processes could have been prevented. Therefore, oversight is required from leadership regarding implementation of internal controls.
Procurement and contract management – insufficient appropriate audit evidence that goods, works and services were procured through a procurement process which is fair, equitable, transparent and competitive as required by Section 51(1)(a)(iii) of the PFMA. This was identified in the procurement processes of the Good Manufacturing Practice (GMP) project.
Expenditure management – effective and appropriate steps were not taken to prevent irregular expenditure amounting to R42.3 million as required by Section 51(1)(b)(ii) of the PFMA; as well as fruitless and wasteful expenditure amounting to R852 887, the majority of which was caused by a penalty charged on a payment to the South African Revenue Services (SARS).

Targets Achieved: The OBP’s performance significantly regressed during 2018/19 compared to 2017/18 as it only achieved 5 out of 16 planned targets in the year under review (31% versus 67% achieved in 2017/18). The OBP mainly achieved HR related targets and failed to achieve those targets that are related to its operations (production efficiency), increasing market share and sales revenue, as well as decreasing batch failure rate, which is a consistent challenge. Most of the challenges were 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. Skills capacity and technological advances were also identified as challenges as the GMP project was not moving at the pace that the OBP would have liked.

6.3 National Agricultural Marketing Council (NAMC)

In 2018/19, the NAMC received a Parliamentary Grant (PG) of R43.2 million, which was a slight increase from the previous year’s Grant of R41.9 million. The entity’s revenue, which includes the PG, interest generated and other income and sponsorships, decreased from R93 million in 2017/18 to R90 million in the year under review. The entity’s expenditure in the year under review was R89.3 million, which left the NAMC with a surplus of R1.2 million, which is less than the R3.3 million that was surplus in the previous financial year. The NAMC also incurred irregular, fruitless, wasteful, and unauthorised expenditure amounting to R72.2 million in total during 2018/19. An amount of R53 million from external funding that was meant for the Agricultural Information Management System was returned to the National Treasury in the year under review.

After clean audit outcomes (i.e. unqualified audit opinion with no findings) for three consecutive years, the NAMC’s audit outcome regressed during 2018/19 as it received an unqualified opinion with findings from the AGSA on financial statements and an adverse opinion on performance information. The specific audit findings by AGSA on the NAMC were in respect of:

Non-compliance with legislation in respect of financial statements – the financial statements were not prepared in accordance with the PFMA; and material misstatements of the property, plant and equipment and the cash flow statement identified by the auditors were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion.
Usefulness and reliability of performance information – lack of a clear and logical link between performance indicators and targets and the strategic objectives to which they relate for the entity’s Programme 2 (Market Access to all Participants), Programme 3 (Efficiency of the Marketing of Agricultural Products) and Programme 5 (Viability of the Agricultural Sector). In all three Programmes, the methods of calculation for the achievement of the indicators were also not clearly defined.
Procurement and contract management – some of the construction contracts were awarded to contractors that were no registered with the Construction Industry Development Board (CIDB) and did not qualify for the contract in accordance with Section 18(1) of the CIDB Act and CIDB Regulations 17 and 25(7A). In addition, sufficient appropriate audit evidence could not be obtained that all extension or modifications to contracts were approved by a properly delegated official as required by National Treasury Instruction Note 3 of 2016/17.
Internal control deficiencies – ineffective oversight on performance and compliance reporting; and inadequate controls for monitoring compliance on SCM and strategic management.

Targets Achieved: For the third consecutive year, the NAMC has achieved all its planned performance targets, notwithstanding that most targets are reports on activities; and the issues that have been raised by the AGSA on the usefulness and reliability of performance information for Programmes 2, 3 and 5. The NAMC’s performance is highly commendable 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. The Agricultural Information Management System (AIMS) that was commissioned to the NAMC by DAFF was not implemented as National Treasury requested that an amount of R53 million that was meant for the programme be returned to the Revenue Fund because the Service Level Agreements (SLAs) that were signed by DAFF and the NAMC have expired. Therefore, the funds were not utilised since 2017/18, which is a serious concern in light of the value that could be added to the sector by the AIMS project.

6.4 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 specifically for a joint venture for transformation and development (R500 000 annually from 2014 to 2020) and Agri-export Technologist (AET) training (R585 000). Funding for the latter activities emanated from a budgetary recommendation of the Committee during the Fourth Parliament. The PPECB ended the 2018/19 financial year with a total revenue of R423 million, 3% increase from the R370 million it generated in 2017/18. Due to the nature of the entity’s work, more than two thirds of the entity’s revenue went to personnel expenditure during 2018/19 while the rest went to operational and administrative expenses and what was left was invested. Employee costs are usually the largest percentage as the PPECB 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.

In the year under review, the entity incurred wasteful expenditure of R387 851 in respect of inaccurate employee records, which was detected through its Internal Audit processes. No irregular expenditure was incurred during 2018/19 and irregular expenditure amounting to R544 652 from the previous financial year in respect of deviation from procurement services was condoned on 31 May 2018. Two transgressions that led to the 2017/18 irregular expenditure were detected by the entity’s Internal Audit in the previous financial year and disciplinary actions were effected on involved employees. After expenditure, the entity ended the 2018/19 financial year with a surplus of R25 million, a slight increase from the previous financial year’s R21 million.

For the year under review, the AGSA opted out of auditing the PPECB and the entity was audited by private external auditors, namely, SizweNtsalubaGobodo Grant Thornton Inc. The PPECB again maintained its clean audit outcome and is the only entity of DAFF that has been receiving and maintaining a clean audit outcome for more than 10 successive years. The PPECB was applauded by the Committee for consistently maintaining clean audits and adequate internal controls to ensure that transgressions are detected and addressed.

Targets achieved: There was a significant decline in the PPECB’s performance in the 2018/19 financial year, achieving 10 out of 14 targets (71%) compared to the previous year’s 13 out of 14 targets (93%). Some of the achieved targets were exceeded by varying margins while the PPECB did not achieve the planned cumulative target to capture 70% of cartons on main products (citrus, grapes, pome, stone and avocados) on the TITAN 1.0 electronic system and only managed to capture 63% of cartons. In this regard, it acknowledged that 70% capture was a bit ambitious as it started the year at 43% (from previous year) and vendors refused to change systems for TITAN 1.0 as the PPECB was implementing TITAN 2.0 in a few months’ time. The entity also did not achieve some of its targets on Programme 1: Corporate Services and Programme 4: Transformation and Development Service (1 unachieved target in each case) due to resignations and, in the case of Programme 1, also dismissals in respect of misconduct. For the second consecutive year, the entity overachieved its annual targets for Programme 3: Food Safety Services.

6.5 Discussion on the Performance of the Department’s Entities

The overall regression in the entities’ audit outcomes (with the exception of the PPECB), has had an impact on their operational activities and consequently, service delivery performance e.g. the ARC and OBP. In both cases, regression in performance was attributed to financial constraints and skills capacity; and in the case of the OBP, also infrastructure challenges. The PPECB and its Board were applauded for the consistently clean audit outcomes, which the entity maintained even when it was in financial distress a few year ago. However, employment equity and gender representation in the entity’s SMS level and in its new Board (the term of the current Board expires in November 2019) were highlighted as areas that need attention.

The ARC was flagged as a major concern that requires intervention in light of the qualified audit opinions for three consecutive years with numerous repeat findings from the AGSA that have not been appropriately addressed. In addition, the entity has been running at a loss for four consecutive years while its irregular expenditure has been increasing. While the entity attributed most of its challenges to the declining Parliamentary Grant, it seemed the challenges largely stem from deficiencies in key internal controls particularly in respect of leadership effectiveness in providing adequate direction and oversight of the control environment, financial management and compliance with laws and regulations; as well as adequate implementation of consequence management to address poor performance and transgressions e.g. inability to collect revenue from debtors and increasing irregular expenditure, which in the year under review, amounted to R2.5 million. The latter amount included funds that were specifically and exclusively for the FMD Facility that the ARC did not ring-fence. In light of these challenges, there is uncertainty about the ARC’s financial viability and its ability to continue operating optimally at its current capacity as a going concern. However, further engagements with the ARC are deemed necessary to get a better understanding of its challenges and Turnaround Strategy: Vision 2050.

Although the OBP’s audit outcomes remained stagnant the increase in the number of audit findings and irregular, fruitless and wasteful expenditure that were incurred during the 2018/19 financial year were highlighted as areas for intervention. The appointment of the CEO earlier this year was appreciated and it is hoped that he will ensure that there is an improvement in outcomes. The marked decline in the OBP’s performance was a matter of concern although it was understood in the context of infrastructure challenges as the entity is busy with the modernisation project for its vaccine manufacturing plant to ensure and uphold Good Manufacturing Practices (GMP). Another main challenge that led to loss of market share is competitive bidding as OBP has to compete in an open market with other private companies include multinational companies. Some of the companies do not necessarily manufacture vaccines but import them and can therefore, offer cheaper prices as they do not incur production costs. The Committee was of the view that the OBP should be getting additional Government funding to address infrastructure challenges and to enable it to finalise the modernisation of its aging vaccine manufacturing facility.

Notwithstanding 100% achievement of targets, concerns were also raised about the regression in the NAMC’s audit outcome from clean audit opinions in the preceding three financial years to an unqualified audit opinion with findings on its financials and predetermined objectives. There was also a concern about the R72.2 million irregular, fruitless, wasteful and unauthorised expenditure that was incurred in 2018/19 while the entity incurred no irregular expenditure in the previous financial year. In light of non-availability of reliable countrywide data on the sector, a further concern was raised about the R53 million that was meant for the Agricultural Information Management System (AIMS), which was returned to the National Treasury as the SLAs that were signed by DAFF and the NAMC had expired. The investigation on allegations of misconduct against the NAMC’s Chief Executive Officer, who is on precautionary suspension, was welcomed.

7. COMMITTEE findings and OBSERVATIONS

Governance and Operational Matters

The Department’s high vacancy rate particularly at the senior management service (SMS) level and on critical positions, negatively impacted the Department’s operations and service delivery performance including some of its Entities such as the ARC. This is notwithstanding the imposed ceilings by National Treasury on the budget for compensation of employees as some of the positions are critical and some were not necessarily new but existing and funded posts.

The filling of the Chief Executive Officer (CEO) position for the OBP was welcomed particularly in light of the regression in the performance of the entity in the year under review; and the precautionary suspension with full pay, of the CEO of the NAMC pending an investigation into allegations of misconduct has been noted.

The Department’s regressing Management Performance Assessment Tool (MPAT) results especially the lower than average scores on Governance and Accountability and Human Resources (HR) Management manifested in some of the repeat audit findings; numerous targets that were not achieved due to delayed SCM processes; protracted disciplinary processes and lack of consequence management.

Weak intergovernmental relations (IGR), poor coordination and alignment of activities between the Department, provinces and its entities; among entities and between the Department and the DRDLR were identified as areas that need attention as they compromised service delivery and sector development due to silo approaches or duplicating each other particularly in terms of farmer support and training activities. This is also illustrated by non-achievement of most transversal indicator targets that are implemented by Provinces despite improvement on expenditure.

Inadequate progress in addressing the NDP priorities and lack of progress in the implementation of the Black Commercialisation programme despite funding allocations due to protracted development and finalisation of policies and legislation that are essential for sector growth and effective execution of the Department’s and the entities’ mandates e.g. the National Policy on Comprehensive Producer Development Support (NPCPDS), Preservation and Development of Agricultural Land Framework (PDALF) Bill, as well as review of legislation that established entities.

Financial Matters

The Audit Improvement Plans of the Department and affected entities (i.e. ARC, OBP and NAMC) were ineffective as audit outcomes regressed due to root causes of audit queries that were not addressed. The highlighted overall root causes were all repeat findings, namely, slow management response in addressing risks and improving internal controls; non-adherence to supply chain management (SCM) policies; inadequate processes and procedures to ensure that financial statements submitted for audit are valid, accurate and complete; and lack of consequence management. In respect of consequence management for example, with the exception of OBP and NAMC, staff were not held accountable for poor performance and transgressions by the Department and the ARC.

The financial instability of the ARC and impact on its future operations as a going concern in light of the entity operating on a deficit for a number of years.

The utilisation of funds that were specifically and exclusively for the FMD Facility for other activities by the ARC in light of its deficit. This has contributed to the entity’s increasing irregular expenditure.

The Department’s late payment of invoices including its 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, which further exacerbated the ARC’s financial constraints.

The need for additional funding for the OBP for completion of the Good Manufacturing Practice (GMP) Project to modernise its aging vaccine manufacturing facility, which negatively impacts production and consequently, vaccine sales.

Service Delivery Performance

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 General Household Surveys.

The Department’s monitoring and evaluation (M&E) processes were not effective as there were repeat findings on the usefulness and reliability of performance information particularly in key Programmes such as Food Security and Agrarian Reform, which only achieved 43% of its planned targets for the year; and only 25% of transversal indicators that are implemented by provinces.

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 and implemented by Provinces. This has also affected the Committee’s ability to conduct effective oversight over quarterly performance of the Department, as halfway into the financial year, the Department is still validating performance information for the First Quarter that ended in June.

Slow progress in the development of the Farmer Register, for which R7.4 million was not spent in the procurement of smart pens due to delays in SCM processes. The Register is essential for the provision of baseline information for the subsistence and smallholder producers.

Loss of the FMD-free zone without vaccination status and the subsequent ban of South Africa’s exports of cloven-hoofed animals and their products by some countries.

The ARC was commended for its contribution to the country’s knowledge economy and science skills pool through its Professional Development Programme that produces young Masters and Doctoral graduates.

8. COMMITTEE Recommendations

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

Agriculture has been highlighted by the President in his Economic Stimulus Package including the National Treasury’s discussion paper on Economic transformation, inclusive growth and competitiveness: Towards an economic Strategy for South Africa as one of the sectors with massive job creation potential. However, the sector is constrained by challenges which include inter alia climate change in the form of frequent and prolonged droughts, floods and veld fires; disease outbreaks; technological advances; and international trade standards and regulations. To give effect to the Department’s mandate and some of the proposals in the Treasury Discussion Document including the plans mentioned to reprioritise funding towards investments in Agriculture, a significant increase in the budget allocation to the Department of Agriculture, Land Reform and Rural Development for the medium term, is proposed.

Notwithstanding the once-off allocation of R492 million that was made to the OBP in 2012/13 for the refurbishment and modernisation of the vaccine manufacturing facility, and acknowledging that over the years, the entity managed to raise additional funding to continue with the refurbishment project whose costs were estimated at R1.2 billion. The OBP plays a vital role in the prevention and management of livestock diseases and therefore, food and human safety. An additional funding allocation for operational activities is proposed from 2020/21 going forward for the establishment of a vaccine reserve to ensure the availability of vaccines in sufficient quantities to address animal disease outbreaks (e.g. Anthrax, African Horse Sickness, Rift Valley fever, Brucellosis, etc.) and for manufacturing public good vaccines (orphan vaccines), which are unprofitable for the OBP to produce but are of national importance in animal disease prevention and management. While the modernisation project is in progress, the aging infrastructure that does not meet GMP standards is limiting the OBP’s production efficiency and competitiveness.

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

The Committee further makes the following recommendations to the National Assembly for the attention of the Minister of Agriculture, Land Reform and Rural Development:

Engage the Minister of Finance on the immediate and medium term funding needs of the Department, notwithstanding the additional R1.1 billion that has been requested for the 2020/21 MTEF period. The discussions should emphasise additional funding for activities relating to the country regaining its FMD-free zone without vaccination status; the need for a specific and special fund for sectoral disasters especially drought relief; funding for infrastructure in respect of irrigation development and the Strategic Integrated Project for agro-logistics (SIP11), which is key for the implementation of the APAP/RAAVC; as well as funding for the implementation of new legislation and policies.

Hold discussions with the Minister of Finance to explore the possibility of temporarily exempting the OBP from Treasury Regulation 16 on procurement specifically for vaccine sales and in this regard, allow Provincial Departments of Agriculture deviations from procurement legislation and regulations to enable and promote sourcing of vaccines from OBP.

Prioritise the filling of critical and funded vacant positions particularly at SMS level to prevent instability, poor performance and dependence on consultants (e.g. for risk management and legal functions), while also taking into account the planned amalgamation of the former Department of Agriculture, Forestry and Fisheries (DAFF) and the former Department of Rural Development and Land Reform (DRDLR).

In light of Agriculture being a concurrent function, strengthen intergovernmental relations (IGR) and coordination between the national Departments, Entities and Provincial Departments in respect of conditional grants, farmer development and support programmes through integrated planning and alignment of activities. As part of the amalgamation, this should include reviewing and streamlining various farmer support programmes of DAFF and DRDLR with similar objectives, e.g. CASP, Ilima/Letsema and 1Hectare-1Household; LandCare, Animal and Veld Management Programme and River Valley Catalytic Programme; Black Commercialisation Programme and Land Development Support Programme.

Fast-track the processing of legislation and policies that are essential for the efficient execution of the Department’s mandate and some of its responsibilities to address weaknesses in the regulatory environment and to strengthen programme implementation. In this regard, submit quarterly progress to Parliament on the processing of the PDALF Bill; the National Policy on Comprehensive Producer Development Support; and updates on the review of the Black Commercialisation Programme, Blended Finance Model and the AgriBEE Fund.

Ensure that the Department publicises the AgriBEE Fund and expand its reach to all provinces up to district level as most developing farmers and previously disadvantaged agribusinesses are not exposed to the Fund including its qualifying criteria.

Ensure that the Department, ARC, OBP and NAMC seek the assistance of the respective Internal Audit Committees and AGSA to review their Audit Improvement Plans. The Plans should include consequence management to ensure that the proposed corrective measures are effective and responsive to root causes of audit findings particularly on irregular, fruitless and wasteful expenditure due to poor supply chain management processes. The Department and the three Entities should report on the implementation of the Audit Improvement Plans during quarterly performance briefings.

Engage the Presidency (DPME) on the Department’s regressing and less than compliance level MPAT scores particularly on Governance and Accountability and Human Resources Management to address weaknesses in the Department’s risk management, internal audit and legal functions; as well as protracted disciplinary processes.

Ensure that management urgently addresses late payment of suppliers particularly the cash-strapped entities such as the ARC as non-payment negatively affects the sustainability of some suppliers (e.g. SMMEs) and in the case of the ARC, also its achievement of planned performance targets. In this regard, submit an update on the Department’s long-standing creditors including debt amounts and reason for non-payment or late payment.

Engage the Board of the ARC and consider its suitability in its role as an accounting authority in light of the ongoing challenges in the entity that include financial instability, regressing audit outcomes and loss of intellectual capacity in an entity that plays a very critical role in the country and the region’s agricultural research and innovation.

The Policy, Planning, Monitoring and Evaluation (PPME) Unit of the Department should be capacitated for effective monitoring of the utilisation of conditional grants and other Departmental funds as well as addressing challenges associated with poor planning, policy development and timeous validation of performance information. The Department should submit an update on the implementation of recommendations of the Work Study Investigation Report on repositioning and capacitating the PPME Unit and also report to Parliament on monitoring activities during each quarterly performance briefing.

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 facilitating market access for all producers; and the alignment of activities between the NAMC, DAFF, DRDLR and the ARC in terms of the National Red Meat Development Programme (NRMDP), which is largely funded by the DRDLR; as well as the NAMC, DAFF and PPECB on the Vineyard Development Scheme.

In collaboration with relevant Ministries, submit to Parliament a joint progress report on the National Food and Nutrition Security Implementation Plan including responsibilities and contributions of the different departments that constitute the Intergovernmental Technical Working Group that was developed by the Deputy President’s Office to advance food security initiatives through the Implementation Plan.

Ensure that disaster funding for the sector is ring-fenced within interdepartmental structures in order to speed-up disaster relief and compensation process, while also ensuring that the Department’s early-warning systems are accessible and adequately respond to natural disasters in light of climate-change induced droughts, veld fires and floods.

Ensure that the ARC ring-fences funding for the FMD Facility so that it is specifically utilised for the purpose; and ensure that the entity develops a plan to improve debt collection particularly from Government departments. This should form part of its Audit Improvement Plan.

Ensure that a preferential procurement policy for local agricultural products including OBP products and 30% procurement from small medium and micro enterprises (SMMEs) is developed to encourage Provinces and local governments to procure such products locally and vaccines from OBP.

Review the Department’s international trade agreements and protocols and submit a report to Parliament on the status of these agreements and protocols including benefits, implementation challenges and contentious issues.

Submit an update on the following policies: Animal Identification and Traceability Policy; the Agricultural Insurance Policy; the Policy for Sustainable Management of Range (Veld) and Forage Resources in South Africa; and the Biosafety Policy.

As droughts are becoming a common phenomenon in the country due to climate change and in the absence of a national rangeland (veld) management programme, consider the development of a national fodder bank to enable timeous and affordable assistance to livestock farmers during periods of forage shortages.

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

Report to be considered.

Documents

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ATC191023: Budgetary Review and Recommendation Report of the Portfolio Committee on Agriculture, Land Reform and Rural Development: Agriculture (Vote 24), dated 16 October 2019

Agriculture, Land Reform and Rural Development

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