ATC200717: Report of the Portfolio Committee on Higher Education, Science and Technology on the 2020/21 Special Adjustment Budget Vote 35:Science and Innovation, dated17 July 2020.

Higher Education, Science and Innovation

Report of the Portfolio Committee on Higher Education, Science and Technologyon the 2020/21 Special Adjustment Budget Vote 35:Science and Innovation, dated17 July 2020.

 

The Portfolio Committee on Higher Education, Science and Technology, having considered the 2020/21 Special AdjustmentBudget Vote 35: Science and Innovation, reports as follows:

 

1. Introduction

 

On 7 January 2020, Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2) was confirmed as the causative agent of coronavirus disease 2019 (COVID-19). On 12 March 2020, following the sustained global transmission of COVID-19, the severity of the virus, and the high levels of inaction, the World Health Organisation (WHO) declared COVID-19 a pandemic and called on every country to take urgent and aggressive action to curb its spread.

 

South Africa confirmed its first COVID-19 case on 5 March 2020. On 15 March 2020, having 61 confirmed cases of COVID-19, the COVID-19 pandemic was declared a national disaster in terms of the Disaster Management Act (Act 57 of 2002).To slow the progression of the virus, President Ramaphosainstituted a raft of provisions pertaining to the restrictions on travellers entering the country, public gatherings and schools; measures to increase surveillance, testing and the capacity of the health care system; as well as measures to support business and the indigent.On 21 April 2020, President Ramaphosa announced an extraordinary COVID-19 budget amounting to R500 billion, where R130 billion would be sourced from the reprioritisation of the existing 2020/21 budget.

 

On 24 June 2020, the Minister of Finance introduced the 2020/21 Special Adjustment Budget in the National Assembly to provide for comprehensive COVID-19 relief measuresin terms of Section 30 of the Public Finance Management Act (Act 1 of 1999) and Section 12 of theMoney Bills and Related Matters Act (Act 9 of 2009).

 

The purpose of this report is to account for the work done by the Portfolio Committee on Higher Education, Science and Technology (hereafter, the Committee) in considering the effects of the 2020/21 Special Adjustment Budget on the Department of Science and Innovation (hereafter, the Department), the Council for Scientific and Industrial Research (hereafter, the CSIR) and the National Research Foundation (hereafter, the NRF).

 

1. The Implications of the Covid-19 Pandemic on the Mandate of the Department

 

Science, technology and innovation (STI) has been a key factor supporting Government’s response to curbing the spread of COVID-19 and mitigating its effects on everyday life. The Department of Science and Innovation (hereafter, the Department), its entities and the broader National System of Innovation (NSI) have all contributed to the various initiatives underway to strengthen the public health system in terms of the development of diagnostic tools and facilities, vaccine production, surveillance strategies and predictive modelling, clinical/therapeutic research, understanding local epidemiology,the manufacture of protective equipment and sanitiser, and the design and manufacture of ventilators, among others. A key focus has also been the application of indigenous knowledge in the production of sanitisers and therapeutic/prophylactic remedies.Focus has also been directed to understanding the economic, social and emotional effects of COVID-19 and developing mitigation measures for these.

 

To date, the Department has reprioritised R324 million, representing 4% of its original 2020/21 budget allocation, to support a range of COVID-19 interventions. The specific amounts that were taken from each Programme and its intended purpose is outlined in Table 1.

 

Table 1: Budgetary allocations in support of COVID-19 interventions

Programme	Amount (R thousand)	Intervention	Impact on Programme
Administration	1 659	Employee health and safety. Provision of digital communication strategy services.	None. Funded from savings under goods and services.
Technology Innovation	102 516	Development of COVID-19 Indigenous knowledge-based remedies. Development and manufacturing of testing kits and reagents, including rapid test. Study for repurposing of drugs. Acquisition of high resolution satellite imagery for settlement layer and mapping of Spaza shops and hotspots.	Projects and programmes to be deferred. No impact in the long term on the contracted projects, partly because the implementation is delayed due to the COVID-19 outbreak.
International Cooperation and Resources	35 000	R15 million: Co-funding for a special African rapid response to COVID-19 research fund to be administrated by the NRF for cooperation with 15 other African countries – Canada, Germany and the UK have made available R75 million to the fund – meaning the South African investment leveraged foreign investment at a ratio of 1:5.   R20 million: Co-funding of South African participation in various COVID-19 research and innovation programmes funded by the European Union such as the European Developing Countries Clinical Trials Partnership and the EUREKA Life without a Vaccine programme.	Delay funding other projects.
Socio-economic Innovation Partnerships	185 000	Several interventions are at various stages of implementation. This includes the establishment of the COVID-19 data system at the CSIR, ongoing work to build a robust evidence base on human behaviours and perceptions, deployment of 3D printing technologies for various COVID-19 requirements, support for ventilator development, and targeted support to technology stations to assist SMMEs with technology support to either respond to or adapt to changing requirements as a result of COVID-19.	No impact for a portion of the funding since implementation of projects will be delayed as a result of COVID-19 (for example, the Mandela Mining Precinct) and through savings within projects of line items such as equipment and reduced travel.   Some impact on the recapitalization of technology stations and implementation of Innovation for Inclusive Development initiatives. However, the impact cannot be fully assessed, and the Department is pursuing partnership opportunities with other government departments and other social actors.
Total	324 175

 

The total net downward revision of the Department’s 2020/21 budget allocation equals R1.44 billion, with R1.05 billion (72.9%) taken from Transfers to specific projects and programmes.Of key concern, is that the Department and its entities are already sub-optimally funded in terms of the critical and diverse mandate they have to fulfil. Furthermore, the effect of COVID-19 on travel, procurement and research collaboration places additional pressure on entities that rely on external income.Hence, having to divert resources from existing, underfunded programmes due to the COVID-19 crisis and the country’s weak economic situation, adversely impacts the future sustainability of the Department and its entities.

 

1. Analysis of the Revised Budget

 

The 2020/21 Special Adjustment Budget revises the Department’s 2020/21 budget allocation from R8.79 billion to R7.36 billion. The total funds suspended for COVID-19 purposes amounts to R1.76 billion, where R324 million has been reprioritised for the Department’s COVID-19 interventions. Hence, the total net downward revision of the Department’s budget allocation equals R1.44 billion, comprising R40 million from Compensation of employees, R53.4 million from Goods and services and R1.34 billion from Transfers and subsidies (Table 2). The budget cut to Transfers and subsidies comprised R295 million from the Parliamentary grant transferred to entities and R1.05 billion from transfers to specific projects and programmes. The latter amount constitutes 72.9% of the total cut to the Department’s budget.

 

Table 2: Vote 35: Science and Innovation - Revised 2020/21 allocations

Source: National Treasury, 2020. Supplementary Budget Review

 

The apportionment of the Department’s revised 2020/21 budget allocation across its five Programmes (as well as the economic classification) remains more or less the same, and these Programmes continue the priorities of strengthening and expanding STI human capital development and ensuring that innovation and knowledge underpin the government’s growth strategy. Hence, Programmes 2 (19%), 4 (52%) and 5 (24%) that are responsible for the transfers to the Department’s entities; still receive 94% of the Department’s total budget allocation (Table 3).Within the Programmes, the largest net adjustment of R1.07 billion is effected on Programme 4: Research, Development and Support because it is allocated the largest share (52%) of the Department’s total budget; R1.8 billion of Programme 4’s budget was earmarked for infrastructure projects that will now be delayed due to COVID -19 measures; the other programmes have already redirected substantial amounts of their current budget to support COVID-19 initiatives; and most of Programme 4’s projects reported surpluses from the 2019/20 allocation. It is hoped that these surpluses will sustain these projects for the remainder of the 2020/21 financial year; however, this will be monitored and assessed mid-year.

 

The rationale employed to effect the required budget cuts included:

 

• Compensation of employees (2.8%):filling vacancies will be delayed due to COVID-19 measures;
• Good and services (3.7%): effect of COVID-19 measures on travel, physical meetings, administration, and operations;
• Transfers to entities (20.6%): 10% cut to the Parliamentary grant, which is used for salaries, administration and operations. National Treasury requested a 20% cut. However, most entities also fund projectsfrom the Parliamentary grant; hence, a 20% cut would have been unsustainable.
• Transfers to specific projects/programmes (72.9%):
  • Projects where it would not be feasible to implement due to COVID-19 measures; for example, infrastructure and science awareness projects;
  • Projects that were allocated funds during the last quarter of 2019/20 and had slim prospects of spending new money in 2020/21; and
  • Projects that could be delayed until the 2021/22 financial year.

 

However, the cuts to projects were not enough and critical areas such as human resource development (student and researcher support) had to be compromised.

 

 

 

 

Table 3: Vote 35: Science and Innovation – Schedule of adjustments to Programmes

Programmes	2020/21 Total net change to Programme allocation	Current payments		Transfers and subsidies
		Compensation of employees	Goods and services
	(R’thousand)
Programme 1: Administration	(41 982)	(18 995)	(22 987)	---
Programme 2: Technology Innovation	(129 542)	(5 769)	(9 978)	(113 795)
Programme 3: International Cooperation and Resources	(35 293)	(5 946)	(14 422)	(14 925)
Programme 4: Research, Development and Support	(1 070 616)	(4 339)	(6 055)	(1 060 222)
Programme 5: Socioeconomic Innovation Partnerships	(158 067)	(4 951)	---	(153 116)
Total	(1 435 500)	(40 000)	(53 442)	(1 342 058)

 

The specific amounts cut from the Programme’s allocations to Transfers and subsidies are:

 

• Programme 2:The R113.8 million cut from its R1.4 billion allocation to Transfers and subsidies comprises R18.2 million cut from the South African National Space Agency’s (SANSA) operations budget, R45.6 million cut from the Technology Innovation Agency’s (TIA) operations budget, and R50 million taken from various institutions involved in Innovation project research.

 

• Programme 3:The R14.9 million cut from its R74.6 million allocation to Transfers and subsidies comprises R5.4 million cut from the NRF who manages Bilateral cooperation for global science development on behalf of the Department, and R9.6 million cut from the Transfers to various institutions involved in International science multilateral agreements.

 

• Programme 4: The R1.06 billion cut from its R4.8 billion allocation to Transfers and subsidies comprises:

• R2.8 million cut from the Academy of Science of South Africa’s (ASSAf) operations budget;
• R96.6 million cut from the NRF’s operations budget;
• R200 million cut from the NRF’s human resources development for science and engineering initiative;
• R60 million cut from the NRF’s South African Research Chairs Initiative (SARChI);
• R358.7 million cut from the Square Kilometre Array’s capital contribution to research allocation;
• R50 million taken from various institutions involved in research and development (R&D) infrastructure projects;
• R52 million cut from various institutions involved in Science awareness, research and initiatives to encourage youth participation in science;
• R40.1 million cut from various institutions involved in strategic R&D science platforms; and
• R200 million taken from the CSIR’s Cyber-Infrastructure R&D programme.

 

• Programme 5: The R153.1 million cut from its R1.83 billion allocation to Transfers and subsidies comprises:

• R32.5 million cut from the Human Sciences Research Council’s (HSRC) operations budget;
• R4.8 million cut from various institutions involved in Innovative R&D;
• R18 million cut from the Economic Competitiveness and Support Package allocation to various institutions involved in research and innovation for the cold chain technologies project;
• R99.8 million cut from the CSIR’s operations budget;
• R20.4 million cut from the CSIR’s Mining R&D allocation;
• R3.9 million cut from various institutions involved in the implementation of the Advanced Manufacturing Technology Strategy; and
• R8.2 million cut from various institutions involved in Resource-based industries R&D.

Programme 5 receives R34.5 million for various institutions involved in Information communication technology initiatives.

 

Considering the impact on its budget and operations, the Department will have to revise its performance indicators for 2020/21.

 

1. Entities of the Department of Science and Innovation

 

1. Council for Scientific and Industrial Research

 

The CSIR fosters, through directed and multidisciplinary research and technological innovation, industrial and scientific development. As such, the CSIR researches, develops, localises and diffuses technologies to accelerate socioeconomic prosperity in South Africa.

 

The CSIR projected that its total operating income for 2020/21 would be R3 billion, comprising R2.1 billion earned from contract R&D and a R917 million Parliamentary grant. It also projected a break even position once its expenses were accounted for. However, with the Special Adjustment Budget, its income is now projected to be R2.7 billion and once expenses are accounted for, the CSIR now projects a loss of R83 million for the 2020/21 financial year. The impact of the 10% cut to the CSIR’s Parliamentary grant includes:

 

• R15 million cut on strategic research infrastructure;
• R37.5 million cut from a range of strategic research capability development initiatives, with initiatives for the development of capability in precision health, mining and agro-processing now suspended due to being underfunded by R10.5 million;
• R8 million cut on technology development and commercialisation initiatives; and
• R2.2 million cut from the CSIR’s Project Synapse, which is the further development and implementation of its new strategy.

 

The impact of the COVID-19 lockdown on the programmes and business operations of the CSIR includes:

 

• Reduced level of productivity as some staff are not working;
• Inability to earn income on contracts due to delays in the procurement of goodsrequired to support projects;
• Reduction in income as a result of adverse economic conditions;
• Inability to deliver on commitments to international clients due to limited mobility; and
• Additional costs to comply with the Department of Employment and Labour’s return to work regulations.

 

Considering the impact on its income and operations, the CSIR will have to revise its performance indicators for 2020/21.

 

1. National Research Foundation

 

The NRF contributes to national development by:

1. Supporting, promoting and advancing research and human capacity development, through funding and the provision of the necessary research infrastructure, in order to facilitate the creation of knowledge, innovation and development in all fields of science and technology, including humanities, social sciences and indigenous knowledge;
2. Developing, supporting and maintaining national research facilities;
3. Supporting and promoting public awareness of, and engagement with, science; and
4. Promoting the development and maintenance of the national science system and support of Government priorities.

 

The NRF’s 2020/21 budget is revised down by R753 million from R3.8 billion to R3.04 billion. The R753 million cut comprises R96.6 million cut from the Parliamentary grant and R656.6 million cut from contracts implemented on behalf of the Department. The largest cuts to contracts include R324 million from the Square Kilometre Array and R253.7 million from Human Resource Development. With regard to Human Resource Development, the NRF decided that it would not implement budget cuts on active graduate internships,postgraduate student bursaries, postdoctoral fellowships and early career and emerging researchers. However, cuts will be applied to active grant awards to established researchers, such as Centres of Excellence (CoE) and SARChI Chairs. Savings will also be realised on bursary awards that were not taken up.

 

The impact of the COVID-19 lockdown and the budget cuts on the plannedperformance of the NRF includes:

 

• Students: cuts in the current year will not impact the proportions but will result in fewer students being funded;
• Researchers: reduction in the numbers of research grants awarded to researchers will impact on the transformation profile of the NRF-funded researchers as 55% of these grants would have been awarded to blacks and women;
• Research Productivity: will be negatively impacted due to reduced allocations to researchers to absorb the cuts, especially in the established domains (CoEs and SARChI);
• Science Engagement:the investment target of 3.5% will not be met;
• Transformed leadership and management:the temporary moratorium on filling vacancies will hamper this initiative; and
• Overheads: are largely fixed but will be contained through austerity measures and managing staff costs.

 

Considering the impact on its budget and operations, the NRF will have to revise its performance indicators for 2020/21.

 

1. Committee Observations

 

In concluding its deliberations on the 2020/21 Special Adjustment Budget Vote 35: Science and Innovation, the Committee commended the Department and the entities for the excellent work they do to support and enhance the national development agenda, and for formulating coherent plans in response to the budget cuts being implemented.Furthermore, the Committee noted the following:

 

1. In light of the very valuable contribution the Department and its entities make to socioeconomic upliftment and the technological advancement of the country, the Committee expressed the view that the Department should have been declared an essential service and that it should not have been subjected to any budget cuts.
2. The Committee expressed serious concern as to the impact of the budget cuts on the sustainability of the Department and its entities, considering the Department is already severely underfunded, has a mandate to deliver on crucial national priorities, has been central to the national effort to curb COVID-19 and is also expected to ensure that the country recovers from the impact of COVID-19 on the economy.
3. Furthermore, the Committee is worriedabout the long-term effects of these budget cuts on the ability of the Department and its entities to implement and drive an agenda that aims to ensure that South Africa remains on par with global developments in science, technology and innovation.
4. Key to the transformation of the human capacity in the science, technology and innovation sector, is the creation and continued growth of a pipeline of students pursuing careers in science, mathematics and engineering. Hence, the Committee is not pleased that fewer students will be given bursary support, and that the established/senior researchers, who supervise these students, will also be subjected to budget cuts.
5. In addition, the Committee is concerned that further budget cuts may result in future staff retrenchments at the entities and that this would further exacerbate the knowledge enterprise.
6. During its deliberations on the original 2020/21 vote allocation, the Committee expressed concern that the work undertaken by the Department and its entities is not well communicated and in many instances completely unknown. Furthermore, efforts to increase the levels of public science awareness and engagement were inadequate and needed to be enhanced. Due to the COVID-19 lockdown, most initiatives have been cancelled and some are now being conducted via the internet.
7. Impressed by the level and scope of work of the Department and its entities, the Committee would like to see the Department and its entities assume a more prominent and leading role in ensuring that science and innovation transforms and drives economic growth and is implemented widely to serve the needs of South Africans.

 

1. Committee Recommendations

 

The Portfolio Committee on Higher Education, Science and Technology, having considered the 2020/21 Special Adjustment Budget Vote 35: Science and Innovation, recommends that:

 

1. The Department and its entities, who are already severely underfunded, not be subjected to further budget cuts.
2. Consideration be given to declaring the Department an essential service. The Committee will pursue this view within its 2020/21 annual programme.
3. The Department and its entities provide a detailed account to the Committee on the revised 2020/21 performance indicators and targets. This should be presented when the Committee considers the 2020/21 quarterly financial and performance report.
4. The Department, as soon as it is available, submit a detailed report on the total number of students that will be provided with bursary support once the budget cuts have been effected.
5. The Department and its entities use innovative ways, amid the budgetary restrictions, to improve and broaden their science communication and engagement interventions. The Committee will schedule a briefing for the Department and the South African Agency for Science and Technology Advancement to explain how, amid the COVID-19 lockdown, science engagement and the programmes to strengthen science communication and the public understanding of science, technology and innovation are being implemented.

 

The Democratic Alliance reserves their right to an opinion on the Special Adjustment Budget Vote 35: Science and Innovation.

 

 

Report to be considered.