ATC201118: The Budgetary Review and Recommendation Report of the Portfolio Committee on Higher Education, Science and Technology on the Performance of the Department of Science and Innovation for the 2019/20 Financial Year, Dated 18 November 2020

Higher Education, Science and Innovation

THE BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON HIGHER EDUCATION, SCIENCE AND TECHNOLOGY ON THE PERFORMANCE OF THE DEPARTMENT OF SCIENCE AND INNOVATION FOR THE 2019/20 FINANCIAL YEAR, DATED 18 NOVEMBER 2020

 

The Portfolio Committee on Higher Education, Science and Technology, having considered the performance of the Department of Science and Innovationfor the 2019/20 financial year, reports as follows:

 

1. Introduction

 

1. Mandate of the Portfolio Committee on Higher Education, Science and Technology

 

The Portfolio Committee on Higher Education, Science and Technology (hereafter, the Committee) is mandated by the Constitution and the Rules of Parliament to oversee the activities and performance of the Department of Science and Innovation (hereafter, the Department or DSI) and the entities that report to it. Furthermore, the Committee must consider, amend and/or initiate legislation; consider international agreements and provide a platform for the public to participate and present views on issues and/or legislation specific to the science, technology and innovation (STI) system.

 

To enhance Parliament’s oversight role, the Money Bills Amendment Procedure and Related Matters Act (9 of 2009) was promulgated to provide Parliament with a procedure to make recommendations to the Minister of Finance to amend the budget of a national department. A key provision of this Act is that Portfolio Committees must annually compile Budgetary Review and Recommendation (BRR) Reports. These BRR Reports provide an assessment of service delivery performance given available resources; evaluates the effective and efficient use of resources; and may make recommendations on the forward use of resources. The BRR Reports are also source documents for the Committees on Appropriations when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS).

 

1. Purpose of and method to develop the 2020 Budgetary Review and Recommendation Report of the Portfolio Committee on Higher Education, Science and Technology

 

The purpose of the BRR Report is to account, in accordance with National Assembly (NA) Rules 339 and 340, for work done by the Committee in considering the 2019/20 Annual Reports of the Department and entities, which were tabled in accordance with Section 40(1) of the Public Finance Management Act (1 of 1999) (PFMA) and referred by the Speaker to the Committee for consideration and report.

 

In preparation for the BRR Report, the Committeeconsidered the Department and entities’ prevailing Strategic Plans, the 2019/20budget allocations and Annual Performance Plans, the quarterly performance and expenditure trends, and conducted oversight by having briefings on specific initiatives and programmes, which included site visits.

 

The Committee invited the Auditor-General of South Africa (AGSA) to explain the 2019/20 audit outcomes of the Department and the entities, and considered the Department’s2019/20 Annual Report on 3 November 2020. The Committee decided to focus on three of the eight entities for the period under review. Hence, itconsidered the 2019/20 Annual Reports of the Academy of Science of South Africa (hereafter, ASSAf), Council for Scientific and Industrial Research (hereafter, the CSIR), and South African Council for Natural Scientific Professions (hereafter, SACNASP) on 13 November 2020.

 

1. Relevant policy documents

 

Science, technology and innovation are considered crucial for the creation of wealth and improving the quality of life in modern society. In South Africa, the 1996 White Paper on Science and Technology introduced the concept of a National System of Innovation (NSI), which is defined as a network of institutions, organisations and policies that work together to develop and implement science and technology to achieve a common set of social and economic goals and objectives.The National Development Plan (NDP) identifies the need to increase the size, coherence and effectiveness of the NSI because STI is crucial for national development. Hence, the country must enhance its investment in infrastructure, improve the skills base and ensure that it better exploits the knowledge generated from its investments in research, development and innovation (RDI).

 

In March 2019, Cabinet approved a new White Paper on Science, Technology and Innovation, which sets the current long-term policy direction for the NSI and seeks to ensure an increasing role for STI to accelerate inclusive economic growth, increase the competitiveness of the economy, and improve the livelihoods of South Africa’s citizens. A new Decadal Plan for STI will serve as an implementation plan for the 2019 White Paper.

 

1. Mandate of the Department of Science and Innovation

 

The Department is responsible for developing, co-ordinating and managing the NSI by providing policy leadership and creating an enabling environment for STI. Hence, the Department directed its efforts and resources toward the following five strategic outcome-orientated goals:

 

• Goal 1: Responsive, co-ordinated and efficient NSI – build on previous gains to create a responsive, co-ordinated and efficient NSI.
• Goal 2: Increased knowledge generation – maintain and increase the relative contribution of South African researchers to global scientific output.
• Goal 3: Human capital development – increase the number of high-level graduates and improve their representivity.
• Goal 4: Using knowledge for economic development – derive a greater share of economic growth from research and development (R&D)-based opportunities and partnerships.
• Goal 5: Knowledge utilisation for inclusive development – accelerate inclusive development through scientific knowledge, evidence and appropriate technology.

 

The 2014-2019 Medium-Term Strategic Framework (MTSF) represented the first phase of implementation of the NDP and committed Government to 14 key Outcomes. The Programmes of the Department contributed to Outcomes 2 (long and healthy life), 3 (all South Africans are and feel safe), 4 (inclusive economic growth), 5 (skilled and capable workforce), 6 (efficient, competitive and responsive economic infrastructure network), and 10 (environment and natural resources); as well as the Nine-Point Plan, adopted in 2015 to accelerate the growth of the economy and create much-needed jobs through the diversification and enhancement of economic competitiveness.The Department also provided support, through various initiatives, to Outcome 7 (sustainable rural communities) and Outcome 8 (sustainable human settlements).

 

1. RESPONSE TO previous financial recommendations of THE PORTFOLIO Committee ON HIGHER EDUCATION, SCIENCE AND TECHNOLOGY

 

The Minister of Finance responded, in National Treasury’s 2020 Budget Review, to the recommendation of the Committee’s 2019 Budgetary Review and Recommendation Report as follows:

 

Committee recommendation:

The committee recommends that mechanisms to increase the budget allocation to the Department ofScience and Innovation be explored and pursued by the Minister of Higher Education, Science andTechnology. The committee will support all efforts to secure additional funding for the science andinnovation portfolio.

 

Minister of Finance response:

There is little scope to provide additional funding at this time. The National Treasury will continue to workclosely with the Department of Science and Innovation on developing and strengthening existingmechanisms to better account for public-led research and development spending to support the policypriorities outlined in the 2019 White Paper, and the draft Science and Innovation Decadal Plan.

 

1. 2019/20financial performance OF THE DEPARTMENT OF SCIENCE AND INNOVATION

 

Over the medium-term and in line with the NDP, the Department used its budget allocation to produce new knowledge, used this knowledge to stimulate economic and social growth and development, developed human capacity, funded research and innovation, and funded the acquisition and provision of infrastructure.

 

The Department’s budget allocation increased by R192.6 million from R7.8 billion in the 2018/19 financial year to R8.1 billion in the 2019/20 financial year. This denoted, when adjusted for inflation, a real decrease of 2.6%, a trend that had persisted since 2016/17. In terms of economic classification, the apportionment of the Department’s 2019/20 budget allocation of R8.1 billion remained the same as in previous years and comprised Current payments of R635.3 million (7.8%), Transfers and subsidies of R7.5 billion (92.2%) and Payments for capital assets of R2.7 million (0.03%).

 

The Department’s budget funds five programmes; namely, Programme 1: Administration, Programme 2: Technology Innovation, Programme 3: International Cooperation and Resources, Programme 4: Research, Development and Support, and Programme 5: Socioeconomic Innovation Partnerships.Programmes 2, 4 and 5, received 93.5% of the Department’s total budget allocation. In terms of allocations to programmes, only Programmes 2 and 3 received a real (inflation-adjusted) increase in their funding. The Department received an additional allocation of R26.2 million for the Ministry budget from the Department of Higher Education and Training (DHET) through the National Macro Organisation of Government (NMOG). In addition, the Department received R12.2 million in Donor Funds.

 

The Department has eight entities; six of which receive an annual baseline allocation, also termed the parliamentary grant (PG), from the Department. The 2019/20 PG to the entities totalled R2.8 billion.

 

1. Academy of Science of South Africa (ASSAf)– R26.98 million
2. Council for Scientific and Industrial Research (CSIR) – R965.8 million
3. Human Sciences Research Council (HSRC) – R324.2 million
4. National Research Foundation (NRF) – R943.4 million
5. South African National Space Agency (SANSA) – R143.5 million
6. Technology Innovation Agency (TIA) – R440.9 million

 

The Department’s 2019/20 budget allocation decreased by R4.8 million with the October 2019 budget adjustment process due to Programme 1 declaring this amount as unspent funds on compensation of employees in its Institutional Planning and Support sub-programme. Furthermore, virements and shifts were effected within economic classifications and Programmes. These comprised:

 

• R10.3 million taken from Goods and services property payments in Programme 1 and allocated to Programme 5’s Innovation for Inclusive Development sub-programme for transfer to the Human Sciences Research Council (HSRC) for building maintenance. This increased the 2019/20 transfer to the HSRC to R324 million.

 

• Within Programme 2: R20 million was moved from Innovation Projects Research to the Space Weather Centre, increasing the 2019/20 allocation from the Economic Competitiveness and Support Package for Space Science Research to R50 million. This change reduced the total allocation to Innovation Projects Research to R15.3 million. Furthermore, the R31.7 million allocation of the South African National AIDS Council was moved to the South African Medical Research Council (Social Impact Bond on HIV, and sexual and gender-based violence against adolescent girls and young women project), increasing the allocation to Health Innovation Research to R82.8 million.

 

The Department effected virements estimated at R90 million after the October 2019 budget adjustment process, which represented 1.1% of the adjusted budget. An amount of R27.5 million was moved between major items and R66.9 million was moved between Programmes. In addition to funds moved from other items, R62.5 million was shifted within Transfers and subsidies. The funds were used for the operations of the International Centre for Genetic Engineering and Biotechnology, postgraduate bursaries, synthetic aperture radar, the mercury monitoring programme, Indigenous Knowledge-based technology transfer, medical cannabis and health infusions project management, the Higher Education, Science, Technology and Innovation Institutional Landscape (HESTIIL) Review, the DSI branding campaign, the Indigenous Knowledge Systems (IKS) Expo, and activities to raise public awareness of the IK Act.

 

The Department spent 98.5% (99.2% in 2018/19)of its 2019/20 budget, which is R8.05 billion of R8.17 billion and an underspending of R119.8 million. Table 1 shows the Department’s expenditure by Programme and Economic classification.

 

The material variances in expenditure occurring in Programme 1 was due to the transitional measures from the 5th to 6th administration, including the NMOG, which resulted in delays in the filling of positions, and the inability to spend the additional funding allocated to the Department during the NMOG process. In addition, public participation programmes, social and digital media bids, and the upscaling of the National Science, Technology and Innovation Information Portal were all postponed to 2020/21.

 

In Programme 2, the variance in expenditure was due to delays in the filling of critical positions, non-payment for the Social Impact Bond project due to slow progress, and a delay in the start of the Technology Transfer and Intellectual Property Survey.

 

In Programme 3, the variance in expenditure was due to delays in the filling of critical positions, payments for the Innovation Bridge-Science Forum South Africa event and a decrease in uptake of European Union-funded projects by South African institutions.

 

In Programme 5, there were delays in contracting a service provider for the online Research and Development Tax Incentive system due to disagreements on a limitation of liability clause.

 

Table 1:       Department of Science and Innovation’s 2019/20Expenditure by Programme and Economic Classification

Programme	Final appropriation	Actual expenditure	Variance	Expenditure as % of final appropriation
R’thousand
1. Administration	372 313	323 170	49 143	86.8%
2. Technology Innovation	1 280 292	1 236 673	43 619	96.6%
3. International Cooperation and Resources	149 131	136 027	13 104	91.2%
4. Research, Development and Support	4 583 676	4 578 431	5 245	99.9%
5. Socioeconomic Innovation Partnerships	1 786 892	1 778 196	8 696	99.5%
TOTAL	8 172 304	8 052 497	119 807	98.5%
Economic Classification
Current payments	611 988	530 935	81 053	86.8%
Transfers and subsidies	7 551 282	7 513 932	37 350	99.5%
Payments for capital assets	8 900	7 541	1 359	84.7%
TOTAL	8 172 304	8 052 497	119 807	98.5%

 

As at 31 March 2020, only 85% of the approved Departmental organisational structure was funded. This was owing to National Treasury’s decision to reduce the baseline of the allocation for compensation of employees, which resulted in all vacant positions being declared unfunded. The process of reviewing the organisational structure was suspended during the transition from the 5th to the 6th administration. With 15% of the approved structure unfunded, staff in funded positions carry out the functions of unfunded positions, leaving many employees overburdened and overstretched.

 

The Department incurred R194 000 (R684 000 in 2018/19) in irregular expenditure due to non-compliance with Public Service Regulations. An investigation is being conducted as to whether disciplinary steps or criminal proceedings should be instituted. The Department did not incur any fruitless and wasteful expenditure.

 

1. Auditor-General’s report on the financial statements of the Department of Science and Innovation

 

The AGSAawarded the Department an unqualified audit opinion with no findings; hence, a clean audit for the third consecutive year. The AGSA further stated that no material findings on compliance with key legislation and that no significant deficiencies in internal control were identified.However, the Department’s Internal Audit Committee raised Information Technology (IT) areas pertaining to programme change management and business continuity as areas of concern needing management intervention.

 

1. 2019/20performance OF THE DEPARTMENT OF SCIENCE AND INNOVATION

 

For the 2019/20 financial year, the Department had 23 strategic objectives that were translated into 46 performance indicators.The Department’s Programme performance for the 2019/20 financial year is shown in Table 2. The Department achieved an overall performance of 87%, achieving 40 of its 46 performance indicators.

 

Table 2:            Department of Science and Innovation’s 2019/20 Performance by Programme

Programme	Number of Targets	Achieved	Not achieved
1. Administration	5	5	0
2. Technology Innovation	10	10	0
3. International Cooperation and Resources	10	9	1
4. Research, Development and Support	9	6	3
5. Socioeconomic Innovation Partnerships	12	10	2
TOTAL	46	40 (87%)	6

 

The six performance targets that were not achieved are:

 

Programme 3: International Cooperation and Resources

 

• The target for the number of South African postgraduate students participatingin international training programmes (642 students participating versus a target of 680)was not achieved. The Department stated that several students that participated in international training programmes could not be verified; as international partner organisations’ privacy policies prevented these partners from providing the Department with auditable evidence.

 

The Department classified this non-achievement as a process delay where non-achievement is due to factors outside the control of the Department and dependent on external stakeholders.

 

Programme 4: Research, Development and Support

 

• 2 991 PhD students were awarded bursaries against a minimum target of 3 100. The Department stated that the target was not achieved because of a reduction in the National Skills Fund budget for PhD support. Bursaries for PhD students were awarded at the highest per capita value possible (instead of within a range). Hence, instead of PhD bursaries being between R90 000 and R120 000, all PhD bursary awards were R120 000.

 

• 8 632 pipeline postgraduate (honours, BTech and masters) students were awarded bursaries against a minimum target of 10 800. The Department stated that the target was not achieved because of a reduction in the National Skills Fund budget for pipeline postgraduate support. Bursaries for honours and master’s degrees were awarded at the highest per capita value possible (instead of within a range). Hence, instead of honours bursaries being between R45 000 and R65 000, all honours bursary awards were R60 000.

 

The Department classified this non-achievement as due to the ineffectiveness of its implementers.In future, the Department will need to ensure that its targets are aligned to those of its entities (implementers).

 

• 3 205 researchers were awarded research grants against a minimum target of 4 500. The Department stated that the drastic reduction in researchers supported was due to the revision of the National Research Foundation’s Competitive Rated Researchers Funding Model. Previously, the programme awarded grants annually to all rated researchers for the duration of their rating period. With the revised model, only P-rated2 researchers receive annual grants, and researchers in other rating categories receive once-off grants in the year in which they get their rating.

 

The Department classified this non-achievement asa target formulation deficiency due to variables that were not foreseen during the target formulation phase. These deficiencies will be addressed during the next strategic planning process.

 

Programme 5: Socioeconomic Innovation Partnerships

 

• 231 master’s and doctoral students were fully funded or co-funded in designated niche areas against a minimum target of 252. The Department stated that due to a reduction in student funding allocations and material problems with establishing new university RDI partnerships funded by the Mandela Mining Precinct (MMP) and Joint Research Centre, no MMP students were funded in 2019/20.

 

• Due to the cumulative effect of vacancies on staff capacity, the target for the time taken for pre-approval decisions for the R&D Tax Incentive was once again not met. For the period 1 January 2019 to 31 December 2019, preapproval decisions within 90 days from receipt of the application were only provided for 11% of the 106 applications received, against a target of 80% of applications.

 

The Department classified this non-achievement as a process delay where non-achievement is due to factors outside the control of the Department and dependent on external stakeholders.

 

1. Auditor-General’s report on the performance report of the Department of Science and Innovation

 

The AGSA does not express an opinion or conclusion on the reported performance information. However, the AGSA does test the usefulness and reliability of performance information for selected Programmes. In this case, Programme 2 was selected. During the audit process the AGSA did not raise any material findings on the usefulness and reliability of the reported information for this Programme.

 

1. ENTITIES OF THE DEPARTMENT OF SCIENCE AND INNOVATION

 

For the current reporting period, the Committee considered the 2019/20 Annual Reports of ASSAf, CSIR and SACNASP. The Department’s entities are funded through an annual baseline allocation (with the exception of the National Advisory Council on Innovation (NACI) and SACNASP), specific project and/or contract funds; or from income that is generated from research and commissioned projects, or from income that is generated from royalty, publishing, membership, registration and/or facility fees.

 

1. Academy of Science of South Africa

 

The Academy of Science of South Africa was established through the ASSAf Act (Act 67 of 2001) and is South Africa’s official national academy of science, representing the country in the international community of science academies. The Academy has a dual mandate; namely, to promote outstanding achievement in all fields of scientific enquiry and to honour distinguished scholars through election to Membership of the Academy; and to undertake studies on matters of public interest to provide evidence-based scientific advice to government and other stakeholders. Hence, ASSAf’s strategic outcome-orientated goals are:

 

• Recognition and reward of excellence;
• Promotion of innovation and scholarly activity;
• Promotion of effective, evidence-based scientific advice;
• Promotion of public interest in and awareness of science and science education; and
• Promotion of national, regional and international linkages.

 

The Academy is a Membership-based organisation governed by a Council comprising 13 members and supported by a Secretariat, which currently consists of 42 staff. The 13-member Council comprises 12 elected members and one member appointed by the Minister as a representative of NACI. The NACI representativeresigned in June 2019 and no replacement has been appointedby the Minister of Higher Education, Science and Technology to date.

 

At the end of the 2019/20 financial year, ASSAf’s Membership had increased by 23 new members to 572 (27% women and 31% black) individuals. ASSAf also hosts the South African Academy of Engineering (SAAE) and the International Science Council Regional Office for Africa (ISC ROA).

 

1. ASSAf’s Programme Performance

 

The Academy’s activities are grouped into four Programmes. These are: Governance and Administration, which achieved both performance indicators; Scholarly Publishing Programme (SPP), which achieved five of its six performance indicators; Liaison Programme (LP), which achieved six of its eight performance indicators, and Science Advisory Programme (SAP), which achieved both its performance indicators. Hence, for 2019/20, ASSAf achieved 15 of its 18 (89.5%) performance indicators. In 2018/19, ASSAf achieved 17 of its 18 (94.4%) performance indicators.

 

The performance targets that were not achieved are:

 

Scholarly Publishing Programme

 

• Three, instead of seven, new journal titles were published on the Scientific Electronic Library Online – South Africa (SciELO SA) open access platform. The Academy stated that the variance was due to the fact that SciELO SA works in collaboration with SciELO Brazil. Hence, due to the volumes of titles to be added in the network as a whole and the expertise required to do the work, ASSAf is dependent on the workflow and priorities of the Network. Furthermore, acquiring additional journals for this platform is hampered by ASSAf’s financial constraints. Hence, ASSAf stated that a review is needed, which should also consider finding alternative funding for this platform.

 

Liaison Programme

 

• One, instead of two, Science-for-Society gold medals awarded. The variance is due to the Selection Committee reaching a general consensus not to award a second award.
• No (one planned) Distinguished Visiting Scholars was hosted. Based on the recommendation made by the Council appointed sub-committee for the 2019/20 Distinguished Visiting Scholar (DVS), a second DVS would have been invited to visit South Africa before the end of March 2020.

 

1. ASSAf’s Financial Performance

 

The Department’s baseline allocation to ASSAf was R26.98 million (R25.6 million in 2018/19) and its contract funding allocation was R10.1 million (R12.3 million in 2018/19). Total revenue (funds from the Department and other state entities, fees earned, and local and foreign grants/donations) for 2019/20 was R52.61 million (R56.4 million in 2018/19) and ASSAf’s total expenditure amounted to R52.57 million, resulting in a surplus of R43 206. ASSAf reported a R1.9 million deficit in the 2018/19 financial year. Employee-related costs in 2019/20 amounted to R28.3 million and Project expenditure to R18.6 million. The baseline allocation constituted 51.3% of ASSAf’s total revenue.

 

ASSAf did not incur any irregular and fruitless and wasteful expenditure during the year under review.

 

1. 2019/20 Audit Outcome

 

SizweNtsalubaGobodo (SNG) Grant Thornton served as the independent auditor of ASSAf for the 2019/20 financial year and found that the financial statements presented fairly, in all material respects, the financial position of ASSAf as at 31 March 2020, and its financial performance and cash flows for the year then ended in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the ASSAf Act, 2001. Hence, a clean audit, which is an improvement on the former years’ (from 2015/16) unqualified audit opinion, with findings relating to ASSAf not fully complying with the provisions of the PFMA.

 

Furthermore, the independent auditor states in its report that ASSAf is not required to prepare a report on its performance against predetermined objectives as it does not fall within the ambit of the PFMA and such reporting is also not required in terms of the entity's specific legislation. The independent auditor also did not identify material non-compliance with specific matters in key legislation or any significant deficiencies in internal control.

 

1. Council for Scientific and Industrial Research

 

The CSIR’s mandate is to foster industrial and scientific development in the national interest through multidisciplinary research and technological innovation. The 2019/20 financial year was the first year of implementation of the CSIR’s new strategy; namely, Project Synapse, which seeks to strengthen the CSIR’s industrial research activities and create closer ties with industry. Project Synapse seeks to ensure a balance between scientific and industrial research so that the CSIR’s support for, and development of, South African industry is enhanced.

 

Annually, the CSIR enters into a Shareholder’s Compact with the Department, which lists the specific Key Performance Indicators (KPIs) against which its performance will be measured. The CSIR’s KPIs are structured around five strategic objectives; namely:

 

• Conduct RDI of transformative technologies and accelerate their diffusion;
• Collaboratively improve the competitiveness of high-impact industries to support South Africa’s re-industrialisation;
• Drive socioeconomic transformation through RDI that supports the development of a capable state;
• Build and transform human capital and infrastructure; and
• Diversify income, and maintain financial sustainability and good governance.

 

1. CSIR’s Performance

 

• Conduct RDI, localise transformative technologies and accelerate their diffusion

 

The CSIR met three of the six indicators in this category. It did not achieve the targets sets for new technology demonstrators, technology licence agreements signed and technologies localised. The underperformance is attributed to the time taken to refocus the RDI strategies and the loss of some key staff.

 

• Collaboratively improve the competitiveness of high-impact industries to support South Africa’s re-industrialisation

 

The CSIR met one of the two indicators in this category. It did not meet the target for the number of joint technology development agreements being implemented for industry. The CSIR states that, “renewal of relationship-building with industry still requires traction and, in this regard, more effort will be put in 2020/21. The CSIR’s capacity to drive Business Development and Commercialisation (BD&C) was only established later during the 2019/20 and this function still requires strengthening in divisions.

 

• Drive socioeconomic transformation through RDI that supports the development of a capable state

 

The CSIR met two of the three indicators in this category. It did not meet the target for the number of standards delivered or contributed in support of the state. The underperformance is attributed to longer than expected times to attain approvals by decision-makers or acceptance of these inputs, despite the research being completed and delivered.

 

• Build and transform human capital and infrastructure

 

The CSIR met eight of the 12 indicators in this category. The CSIR total staff headcount at the end of 2019/20 was 2 104, compared to 2 342 at 31 March 2019, a decline of 238 (-10.16%). The CSIR headcount included 1 367 (64.97%) scientific staff and 734 (34.07%) support staff. Losses of scientific leadership as shown by the decline in the number of chief researchers from 14 in 2018/19 to 11 in 2019/20, and principal researchers from 190 in 2018/19 to 149 in 2019/20, proved to be a concern. The lower than targeted number of scientific staff was as a result of vacancies not being filled due to financial constraints and which necessitated a moratorium on recruitment. Intense competition for scientific skills in the market also contributed to the CSIR not meeting the target. The budget constraints were a result of the parliamentary grant reduction and delays in finalising contract R&D agreements. Furthermore, the support staff restructuring had an adverse impact on human resource activities such as talent acquisition and retention, as well as a loss of productive capacity and delays in the recruitment of new staff.

 

The CSIR spent R85.5 million of the R95 million allocated to property, plant and equipment. This was attributed to delays in planning and procurement.

 

Investing in infrastructure is a key intervention to achieve the objectives of the CSIR Strategy. For 2019/20, 25 projects were planned with an allocated investment budget of R76.2 million, where R10.4 million was allocated to R&D infrastructure, R49.3 million was allocated to Facilities and general infrastructure, and R16.5 million was allocated to information and communication technology infrastructure. At the end of the financial year, one project was still in the planning phase, two were in design, nine were in procurement, four were in construction, and nine were completed. Overall expenditure amounted to approximately R50 million.

 

• Diversify income, maintain financial sustainability and good governance

 

The CSIR met five of the eight indicators in this category. For 2019/20, the CSIR’s total income amounted to R2 764 million against a budget of R2 859 million. The net profit of R55 million exceeded the budget by R46 million and the prior year’s actuals by R47.4 million. Contract income amounted to R1.8 billion, which was R263.2 million below the budget. The gap is mainly attributed to the inability to secure and finalise a number of planned contracts. Furthermore, the CSIR reports that R450 million in income from the public sector was not realised due to restrictions by National Treasury on collaborations between the CSIR, government departments and state-owned entities. Total expenditure amounted to R2 757 million and this was 4.6% below budget. The CSIR managed to compensate for the gap in revenue by savings in running costs, remuneration, overheads and depreciation. The largest portion of the CSIR’s income, at 56%, is contract R&D from the public sector, and this is followed by the parliamentary grant at 27%. Private sector and international incomes were at 5% each. The CSIR regressed with regard to its B-BBEE rating level, from level 3 to level 4.

 

The CSIR incurred irregular expenditure of R1.36 million (R5.7 million in 2018/19) due to non-compliance with supply chain management regulations. Irregular expenditure relating to prior years but identified in 2019/20 amounted to R1.85 million. The 2019/20 irregular expenditure was due to four transgressions where disciplinary action was taken against officials who committed two of the four offences, while no action was taken for two instances because the employees had left the employ of the CSIR and no loss was suffered by the public entity. The CSIR did not incur any fruitless and wasteful expenditure.

 

In summary, the CSIR’s 2019/20 Annual Report states that it met or exceeded 17 of its 31 indicators and a further two indicators were within the allowed 10% deviation range. However, when the thresholds for achievement as set out in the CSIR’s 2019/20 Shareholder’s Compact are considered, the overall performance equates to 19 targets achieved, one target partially achieved and 11 targets not achieved. Hence, excluding the partially achieved indicator, the overall performance of the CSIR for 2019/20 is 61.3% (68% in 2018/19).

 

1. 2019/20 Audit Outcome

 

The AGSA, for the 12th consecutive year, awarded the CSIR an unqualified audit opinion with no findings regarding the CSIR’s financial statements. Hence, a clean audit. The AGSA; however, did identify material misstatements in the annual performance report submitted for auditing. These material misstatements were in the reported performance information for the strategic objective: Conduct RDI, localise transformative technologies and accelerate their diffusion. Since the CSIR corrected the misstatements, the AGSA did not raise any material findings on the usefulness and reliability of the reported performance information.

 

1. South African Council for Natural Scientific Professions

 

The Natural Scientific Professions Act (Act 27 of 2003) provides for the establishment of the South African Council for Natural Scientific Professions and legislates the registration of professional natural scientists and technologists, and scientists- and technologists-in-training. The key reasons for registering natural scientists are:

 

• These professionals provide a service to the public, and the public have a right to be protected from malpractice; and
• The profession should be protected by ensuring that acceptable standards of training, and proper conduct, are maintained.

 

Within the provisions of the 2003 Natural Scientific Professions Act, some of SACNASP’s key functions are to:

 

• Register natural scientists and voluntary associations, and formulate the necessary administrative systems (applications process, maintain register, determine fees) attendant to this function;
• Institute systems to protect the public and ensure the improvement of the standards of services provided by registered natural scientists;
• Advise Cabinet on any matter relating to the natural scientific professions;
• In consultation with the Council on Higher Education (CHE) and the South African Qualifications Authority (SAQA), ensure maintenance of acceptable standards of training;
• Undertake and encourage research related to natural scientific professions; and
• Ensure safe and responsible practice (towards the public and the environment) by registered natural scientists.

 

SACNASP is self-sustaining, generating revenue from the registration fees it administers. It does not receive an annual budgetary allocation from the Department. However, SACNASP, for the first time, secured funding (R12.6 million) from the Department for the period 2016/17 to 2018/19. These funds were used to:

 

• Improve SACNASP’s Information Technology infrastructure;
• Increase stakeholder engagement and improve visibility; and
• Roll out Continuing Professional Development (CPD) and implement a structured Candidate Mentoring Phase (CMP) for young scientists.

 

1. SACNASP’s Performance

 

SACNASP’s strategic outcome-orientated goals for the reporting period were:

 

• To advise government and relevant stakeholders proactively on the contributions and role of the Natural Scientific Professions in South Africa.

 

The target to develop a brief on the delivery of core scientific skills to South Africa in terms of adequacy of delivery of scientists was 80% achieved. The variance was due to delays in finalising the data collection instrument.

 

• To register and regulate natural science professionals.

 

SACNASP met two of the three targets. It did not meet the target to have 18 000 active registered scientists on its database. SACNASP now has 12 794 active registered scientists in its database, which is 997 less active registered scientists than in 2018/19. This is due to the poor national economic situation resulting in fewer new applications and cancellations of registration due to the inability to pay annual registration fees.

 

• To promote SACNASP and the natural scientific professions in South Africa.

 

SACNASP met one of the two targets. It convened four workshops, instead of 5, that sought to increase understanding of the role and importance of the natural science professions at both thesystemic and institutional levels. One workshop had to be cancelled due to COVID-19.

 

• To promote professional development and transformation of the natural science sector in South Africa.

 

SACNASP met two of the three targets. A pilot CMP for natural scientists will be implemented in quarter 1 of 2020/21, instead of having implemented 60% of the CMP by end-2019/20.

 

• To foster a culture of good corporate governance in relation to the Council.

 

SACNASP met all four targets.

 

Overall, SACNASP achieved nine of its 13 targets, which equates to 69% performance for the 2019/20 financial year.

 

1. SACNASP’s Financial Performance

 

SACNASP’s total revenue for 2019/20 amounted to R20 million, which included R14.3 million earned in registration fees (principle revenue source) and project funds of R5.4 million from the Department to continue work on improving SACNASP’s Information Technology infrastructure, increasing stakeholder engagement and improving visibility, rolling-out CPD and implementing a structured CMP for young scientists, and establishing and implementing the regulatory framework for the Natural Scientific ProfessionsAct. The duration of this project extends over a three-year period (2019 - 2022) and SACNASP will receive R14.9 million over this period. SACNASP ended the 2019/20 financial year with a surplus of R903 227.

 

SACNASP did not incur irregular and fruitless and wasteful expenditure.

 

1. 2019/20 Audit outcome

 

SACNASP was audited by Morar Incorporated Chartered Accountants (SA) Registered and was awarded an unqualified audit opinion, with no findings. Hence, a clean audit for the 5th consecutive year.

 

1. Finance and Service delivery performance assessment

 

The 2019/20 financial year was the last year of implementation of the Department’s and entities’ 2015-2020 Strategic Plansand the 2014-2019 MTSF. The latter served as the first phase of implementation of the NDP and committed Government to 14 key outcomes. Achievement against these Outcomes was mixed and true transformation of the economy, the environment and society continues to elude South Africa, who still faces the challenges of poverty, inequality and unemployment. The Department’s performance against these Outcomes was:

 

• Outcome 3: All South Africans are safe and feel safe

 

Under Sub-outcome 4: Secure cyberspace, the required action was to develop a R&D Centre of Competence supported by a Cybersecurity Research, Development and Innovation (RDI) Roadmap.

The Department reported that a draft Cybersecurity RDI Roadmap, covering the South African cybersecurity landscape.

 

• Outcome 4: Decent employment through inclusive economic growth

 

Under Sub-outcome 10: RDI investment supports inclusive growth, the required actions sought to (1) increase the investment by government and the private sector in R&D partnerships; (2) increase the commercial uptake of locally made products; (3) improve the administration of the R&D Tax Incentive; (4) align strategies for emerging/new industries with the Industrial Policy Action Plan (IPAP) for long-term growth and competitiveness, job creation and export potential; (5) establish an institutional mechanism for the co-ordination of public funding for RDI; and (6) increase the proportion of gross expenditure on R&D (GERD) to GDP to 1.5% by 2019.

Actions 1, 3 and 6 were not achieved. Performance against action 2 could not be measured due to the lack of data. Under action 4, five candidate initiatives (Aeroswift, titanium beneficiation, Fluorochemicals Expansion Initiative, Hydrogen South Africa, and Mining RDI) are in various stages of implementation; however, the performance targets did not adhere to SMART principles, and; hence, progress could not be adequately measured. Under action 5, a budget coordination mechanism was approved by Cabinet in 2017 for implementation from 2018 over a three-year period; however, the decision was never implemented.

 

• Outcome 5: A skilled and capable workforce to support an inclusive growth path

 

Under Sub-outcome 3: Increase access to high-level occupational directed programmes in needed areas, the required actions sought to (1) expand access to communication technology via the South African National Research Network (SANReN); (2) provide support to postgraduate students and postdoctoral fellows through the awarding of bursaries, (3) award research infrastructure grants to higher education institutions, science councils and national facilities; (4) increase the number of research outputs by researchers funded by the National Research Foundation (NRF); and (5) increase the number of research grants awarded to researchers.

All the targets set for these actions were achieved; however, in 2018 due to budget cuts, the number of students who receive bursaries, the number of students who receive work preparation (interns), and the number of infrastructure grants awarded all had to be reduced.

 

• Outcome 6: An efficient, competitive and responsive economic infrastructure network

 

Under Sub-outcome 5: Expansion, modernisation, access and affordability of information and communications infrastructure ensured, the required action was to build the MeerKAT / Square Kilometre Array (SKA) Radio Telescope, which is also the Strategic Infrastructure Project number 16.

Sixty-four (64) MeerKAT Antennas were installed by 31 March 2018, as planned.

 

• Outcome 10: Protect and enhance South Africa’s environmental assets and natural resources

 

Under Sub-outcome 2: An effective climate change mitigation and adaptation response, the required actions were to establish a functional climate change research network; and produce biennial reports for Cabinet on the state of climate change science and technology.

The climate change research network was established, and both biennial reports were produced; however, the second report was not approved by Cabinet due to its schedule being affected by the change in administration in 2019.

 

Under Sub-outcome 3: An environmentally sustainable, low-carbon economy resulting from a well-managed just transition, the required action was to ensure a 300% increase in the 2011 RDI rand value of investment to support the transition to a green economy.

This action was not achieved. Firstly, the 300% increase was set without knowing the baseline investment in 2011. The baseline RDI investment in the green economy was then determined by the 2016/17 R&D Survey to be 26%, making the 300% increase unattainable.

 

With respect to the Department’s achievement against its 2015-2020 strategic goals, the Department achieved an average performance of 86.6%,had an average expenditure of 99.2% and obtained clean audits in the 2017/18, 2018/19 and 2019/20 financial years (Table 3). Hence, the Department has consistently demonstrated that it can spend, to a significant degree, its budget allocation according to spending targets, and that it has taken the necessary steps to ensure that the same progress is made with achieving its performance targets. However, a recurring issue for the Department is that due to ongoing capacity constraints (i.e. technical expertise and numbers of staff) it continues to not meet the targets set for administering the R&D Tax Incentive.

 

Table 3:            2015/16 to 2019/20 Performance and Expenditure Summary of the Department of Science and Innovation

Financial year	Main Allocation(R’million)	Real % change (inflation adjusted) from previous year’s allocation	Performance Achieved(%)	Expenditure(%)	Audit opinion
2015/16	7 482.1	10.3	84%	99.6%	Unqualified, with findings related to non-compliance with legislative prescripts to pay service providers within the required periods.
2016/17	7 429.0	-6.9%	89%	99.4%	Unqualified, with findings related to misstatements in the performance information of Programmes 2, 4 and 5.
2017/18	7 557.2	-4.3%	84%	99.1%	Unqualified, with no material findings – clean audit.
2018/19	7 790.5	-2.3%	89%	99.2%	Unqualified, with no material findings – clean audit.
2019/20	8 151.0	-2.6%	87%	98.5%	Unqualified, with no material findings – clean audit.

 

Notable performance achievements during the 2015-2020 period include the:

 

• Adoption, by Cabinet in 2019, of a new White Paper for Science, Technology and Innovation;
• Significant increase in knowledge generation;
• Marked success of initiatives aimed at growing and transforming STI human capacity;
• Increase in doctoral graduation rates;
• Increased funding support for research and research infrastructure;
• Demonstrable advancesto the research enterprise and R&D-based industry development emanating from key investments in biotechnology, advanced manufacturing, astronomy, and environmental sciences, among others;
• Increased technology support to small, medium and micro enterprises (SMMEs);
• Development of decision-support tools that are underpinned by innovative technology solutions, to enhance service-delivery; and
• Significant increase in STI foreign investment and collaboration for both South Africa and the continent.

 

Notwithstanding these achievements, the Department and its entities have been subjected to successive years of below-inflation increases to the Vote allocation, as well as mid-year budget cuts. The sub-optimal funding of the Department and entities has restrainedmany of the initiatives aimed at increasing the size, coherence and effectiveness of the NSI, as required by the NDP, since the implementation of these initiatives is defined by the available budget and not by the need it seeks to address. Hence, the Department and its entities are increasingly compelled to find additional forms of funding. However, due to the weak state of the economy, the external funding the entities rely on to execute their functions has also declined. Furthermore, public procurement regulations require public entities to tender and compete with the private sector for government contracts to ensure their financial sustainability. In this regard, the CSIR reported that it could not realize contract income from the public sectoramounting to R450 million in the 2019/20 financial year. In 2018/19, this amounted to R382 million and in 2017/18 it was R300 million.

 

The COVID-19-related budget cut has further negatively affected the programmes of the Department and its entities. However, it is precisely the past investments in STI capability and infrastructure that have allowed South Africa to prepare for, manage and mitigate the very dire consequences of COVID-19. It is also these STI capabilities that are being depended upon to drive and/or support South Africa’s economic recovery.

 

The 2020 NACI STI Indicators Report shows that public and business expenditure on R&D is declining; in a system that has never reached its gross expenditure on R&D target of 1.5% of GDP. South Africa is also declining in global competitive and innovation indices. Existing data show that when faced with an economic crisis, countries that invested more in STI to respond to the crisis, recovered faster and were in an economically stronger position than those countries that either maintained or reduced their existing level of STI investment.

 

1. Governance

 

The AGSA indicated that the Department, ASSAf, CSIR, HSRC, NRFand TIA were all awarded clean audits for the 2019/20 financial year; whereas, SANSA regressed from its previous clean audit to an unqualified audit opinion with findings on compliancewith legislation because there were material misstatements identified in the financial statements submitted for auditpurposes. Furthermore, across the portfolio, irregular expenditure declined from R12.5 million to R3.6 million, fruitless and wasteful expenditure declined from R800 000 to R100 000, and all these incidences were investigated.The AGSA further indicated that, across the portfolio, the accounting authorities and senior management should be recognised for the adherence to best practice in corporate and financial governance.

 

Hence, the performance reported in the 2019/20 Annual Reports of the Department and its entities show significant effort and achievement with regard to realising the potential of STI in addressing national priorities and supporting sustainable socio-economic development. Overall, the Department with its entities have shown that they can spend their allocated budget and achieve a significant percentage of their performance targets, as well as ensuring the responsible, efficient and effective use of public funds.

 

1. COMMITTEE OBSERVATIONS

 

The Committee commended the Department and the entities for their efforts in delivering on some of the key areas for social and economic development in line with the goals of the NDP and against stringent financial constraints. Furthermore, the Committee extends its congratulations to the Director-General, Dr Phil Mjwara, for winning the Batho Pele Excellence Awards for Best Director-General in the National Sphere of Government for 2020 award, and to the Department for winning the Best Functioning National Department for 2020 award.

 

The Committee’s observations highlight some of the key areas emanating from the interactions with the Department, entities and relevant stakeholders, which require further attention and discussion. Hence, the Committee:

 

1. Department of Science and Innovation

 

1. Commended the Department’s performance and for being awarded its third consecutive clean audit. However, the Committee expressed concern as to the reasons for the Department incurring irregular expenditure.
2. Noted that a draft STI Decadal Plan will be available by January 2021, yet expressed its concern as to the delay in finalising the new STI Decadal Plan, which will be the first implementation plan of the 2019 STI White Paper.
3. Questioned whether the STI mandate, which seeks to facilitate economic growth and socio-economic development, is fully implemented at the current levels of funding, where South Africa’s investment in R&D as a percentage of Gross Domestic Product (GDP) stands at around 0.8% and has been stagnant over the last few years. Especially since it has been conclusively shown that during fiscal strain, economies that significantly increase their investment in STI are able to respond faster and more comprehensively to fiscal improvement than economies that decrease their spending, or allow it only to increase at the existing rate of growth.
4. Positively acknowledged the Department’s procurement policy that seeks to ensure that a certain percentage of goods and services are procured from women- and youth-owned businesses. However, the Committee noted that companies owned by disabled persons were not adequately accommodated in the policy.
5. Encouraged the Department to expedite the filling of vacant posts, especially those of the Deputy Directors-General for Programme 4: Research, Development and Support, and Institutional Planning and Support.
6. 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 are inadequate and need to be enhanced.
7. Expressed concern regarding the increasing number of unemployed graduates and the inability of the system, due to size and financial constraints, to ensure employment/placement for all graduates.
8. Enquired what interventions were being implemented to ensure the increased participation of women and black persons in STI, and whether these interventions were adequate.

 

1. Academy of Science of South Africa

 

1. Commended ASSAf’s performance and for being awarded a clean audit.
2. Questioned how ASSAf contributes to the implementation of the IK Act.
3. Enquired to what extent the recommendations in ASSAf’s various advisory studies were used by government to inform policy.
4. Noted the skills challenges of the ASSAf Secretariat, and enquired how these would be mitigated.
5. Requires that presentations provide detailed demographic information about the entity and the programmes its implements. Furthermore, with regard to the latter, detailed information about the geographical spread and gender responsiveness of interventions is also required.

 

1. Council for Scientific and Industrial Research

 

1. Commended the CSIR’s performance and for being awarded its 12th consecutive clean audit.
2. Noted the impact of procurement regulations on the CSIR’s ability to secure contract income from the public sector, and enquired as to the reasons provided by National Treasury for not granting the CSIR the requested exemptions.
3. Noted the CSIR’s objective of supporting industrial development. Hence, the Committee supports the CSIR’s efforts to secure increased public sector contract income as this will enhance South Africa’s developmental objectives and innovation enterprise.
4. Questioned how the CSIR contributes to the implementation of the IK Act.
5. Enquired what measure was used to set the targets for the employment of female and black scientists, engineers and technologists.
6. Requires that presentations provide detailed demographic information about the entity and the programmes its implements. Furthermore, with regard to the latter, detailed information about the geographical spread and gender responsiveness of interventions is also required.

 

1. South African Council for Natural Scientific Professions

 

1. Commended SACNASP’s performance and for being awarded a clean audit.
2. Noted with keen interest the study to track unemployed, employed and under-employed graduates, the outcomes of which will be used to inform policy around the learning pathways for scientists.
3. Noted that, for the first time, SACNASP registered more female than male scientists in the 2019/20 financial year.
4. Questioned how SACNASP contributes to the implementation of the IK Act.
5. Noted with concern the reported year-on-year increase in bad debt due to the non-payment of registration fees, and that SACNASP has had to revoke the registration of scientists unable to pay their fees.
6. Noted the skills challenges of SACNASP, and enquired how these would be mitigated.

 

1. RECOMMENDATIONS

 

The Portfolio Committee on Higher Education, Science and Technology recommends the following:

 

1. Mechanisms to increase the budget allocation to the Department of Science and Innovation be explored and pursued by the Minister of Higher Education, Science and Innovation and that the Committee would support all efforts to secure additional funding for the science and innovation portfolio.
2. The Minister of Higher Education, Science and Innovation further advises against proposed funding reductions by the National Treasury, based on the key motive that economic transformation and growth are strategically linked to our investment in science, technology and innovation.
3. The Minister of Higher Education, Science and Innovation explore mechanisms to facilitate the granting by National Treasury of the procurement exemptions being applied for by entities to secure public sector contract income, especially in areas where the contract requirements specifically relate to the mandate of the public entity.This in light of the commitment by National Treasury to work closely with the Department to develop and strengthen existingmechanisms to better account for public-led research and development spending to support the policypriorities outlined in the 2019 White Paper, and the draftScience and Innovation Decadal Plan.
4. The Department provide a detailed report, which includes timeframes, on the process needed to finalise the new STI Decadal Plan. The Committee will schedule a briefing on the Decadal Plan within the 1st term of 2021.
5. The Department revises its procurement policy to ensure that a certain percentage of goods and services are procured from companies owned by disabled persons. The Committee will monitor this intervention during the Department’s quarterly performance briefings.
6. The Department prioritise the inclusion and participation of disabled persons in all areas of the STI sector.
7. The Department and its entities use innovative ways, amid the budgetary restrictions, to improve and broaden their science communication and engagement interventions.

 

 

 

Report to be considered.