ATC201127: Budgetary Review And Recommendation Report of the Portfolio Committee on Agriculture, Land Reform and Rural Development: Agriculture (Vote 24), Dated 27 November 2020

Agriculture, Land Reform and Rural Development

2020 BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE,LAND REFORM AND RURAL DEVELOPMENT: Agriculture (vOTE 24), DATED 27 NOVEMBER 2020

 

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 2019/20 financial year, reports as follows:

 

1.       Introduction

 

In 2019, Parliament established a new Portfolio Committee that integrates the Agricultural component of the former Portfolio Committee on Agriculture, Forestry and Fisheries and the former Portfolio Committee on Rural Development and Land Reform. The integrated Committee is named the Portfolio Committee on Agriculture, Land Reform and Rural Development (hereinafter referred to as the Committee). The reconfiguration of Committees followed the amalgamation of Agriculture with the former Department of Rural Development and Land Reform (DRDLR) and the transfer of the Forestry and Fisheries functions of the former Department of Agriculture, Forestry and Fisheries (DAFF)to the former Department of Environmental Affairs, which is now the Department of Environment, Forestry and Fisheries.

 

Despite the amalgamation of Portfolios in Parliament, the actual merger of functions and transfer of resources of the former DAFF and DRDLR to the new Department of Agriculture, Land Reform and Rural Developmentofficially took place on 01 April 2020. For the 2019/20 financial year that ended on 31 March 2020, both former DAFF and DRDLR reported separately. Subsequent to the tabling of Annual Reports of former DAFF and relevant Entities, the Portfolio Committee on Agriculture, Land Reform and Rural Development, considered the reports in terms of the 2019/20 configuration, hence the Committeewill be tabling two separate Budgetary Review and Recommendation Reports, this one on the former DAFF and another one on the former DRDLR. This report will only account on Agriculture as the Forestry and Fisheries functions will be 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 Fisheries (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 2019/20 performance of the DAFF and its related agricultural entities; namely, the ARC, OBP, NAMC and PPECB. The report also makes recommendations for service delivery improvements to the Minister of Agriculture, Land Reform and Rural Development.  

 

The Budgetary Review and Recommendation Report (BRRR) of the former Department of Land Reform and Rural Development (DRDLR) will be tabled after consideration of the 2019/20 Annual Report of the former DRDLR and relevant Entities. The Department’s Annual Report will be tabled by 31 January 2021 as per the Minister’s request for late tabling (see ATC, 30 October 2020).

 

1. 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. With respect to the former DAFF, 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 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. 

 

1. 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.

 

For the year ending in March 2020, its activities were guided by the following four strategic goals andassociated 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 naturalresources 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 Departmentcarried 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.

 

1. Purpose of the Budgetary Review and Recommendation Report

 

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

 

1. Preparation for the BRR Report

 

In preparation for the BRR Report and in compliance with its mandate as set out in Section 5(1) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009), the Committee undertook the following activities in 2019/20:

 

1. Briefings by the Department on quarterly performance and expenditure reports of the Department for the 2019/20 financial year.
2. Oversight visit toKwaZulu-Natal (KZN) in August 2019 to oversee amongst others the implementation of farmer support by both DAFF and DRDLR; assess the impact of support interventions on productive use of land, food production and livelihoods of beneficiaries; identify areas of complementarity, overlap and duplication of the support programmes and implications for alignment under the new Department of Agriculture, Land Reform and Rural Development; as well as impact of drought relief interventions.
3. Held briefings and considered the medium term Strategic Plan, the Annual Performance Plan and Budget of the Department for the 2019/20 financial year, including those of its entities, viz. ARC, OBP, NAMC and PPECB.
4. Received inputs and a briefing on the 2019/20 Annual Reports of the Department and its entities from the Auditor-General including the Covid-19 Special Audit Report 1.
5. Subsequently, on the 13th, 17th and 20thNovember 2020, the Committee held briefings and considered the Annual Reports of the Department and its entities for the 2019/20 financial year.
6. The BRR Report also draws from other briefings and inputs that the Committee received throughout the 2019/20 financial year; and the 2020/21 financial year to date.

 

1. Outline of the Contents of the Report

 

The Report reflects on Government key policy areas including those of the Department as they relate to the national Government Priority Outcomes; the Department’s financial and service delivery performance for the 2019/20 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

 

The 2019/20 financial year has been a transitional year for the Department as it was undergoing the process of amalgamation with the former DRDLR in line with the new Administration’s reconfiguration. The Department’s plans were informed and aligned with government-wide planning and policy mandatesparticularly the National Development Plan (NDP), as well as other sectoral policies.

 

2.1        The National Development Plan (NDP)

 

The NDPrecognises that agriculture is the primary economic activity in rural areas and has set out specific objectives and milestones for the sector. The sector is expected to play a central role in ensuring an inclusive rural economyby creating one million new jobs by 2030. The direct action to achieve this include amongst other interventions, increased infrastructure investments for the development of new irrigation systems and revitalisation of some existingones. The NDP further anticipated that a third of food trade surplus in the country should be produced by smallscale farmers or households.Increased investment in new agricultural technologies, research and the development of adaptation strategies for the protection of rural livelihoods are also expected to contribute towards environmental sustainability and resilience. 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        The Department’s Key Policy Developments

 

1. National Food and Nutrition SecurityPolicy

 

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 Fetsa Tlala Food Production Initiative was launched 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 as statistical numbers show that the number of households and individuals that are food insecure is increasing, a situation that has also been aggravated by the Covid-19 pandemic.

 

1. The National Policy on Comprehensive Producer Development Support

 

The Department submitted to Cabinet the National Policy on Comprehensive Producer Development Support, which has been under development for several years. The Policy seeks to guide and regulate support that is provided to producers and is expected to play a central role in ensuring that adequate and appropriate support is provided to different farmer categories in order to realise the NDP objectives for the sector. It also seeks to strengthen institutional mechanisms to provide timely and standardised support to producers and to mainstream the participation of vulnerable groups in the agricultural value chain.

 

1. The Agriculture and Agroprocessing Master Plan

 

The Department, as part of the new Department of Agriculture, Land Reform and Rural Development has been in the process of developing an Agriculture and Agroprocessing Master Plan during the 2019/20 financial year. The Plan is described as a social compact that provides a blueprint of developing the agriculture and food sectors through public-private partnerships. Through the Plan, the Department seeks to transform and restructure the agricultural sector while ensuring the participation and inclusion of black and rural producers in the mainstream economy of the country and globally. The development of the Plan is coordinated by the National Agricultural Marketing Council, which is currently undergoing a consultation processwith relevant stakeholders.

 

 

3. OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

 

3.1        Overview of Vote Allocation and Departmental Expenditure (2016/17 – 2019/20)

 

The budget allocation to Vote 24: Agriculture, Forestry and Fisheries has largely been stagnantwhen not decreasing across Programmes in the previous medium term expenditure framework (MTEF) period but saw a slight increase in the 2018/19 financial year (see Table 1 below). 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 previous MTEF period. However, when the budget allocation 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. The slight nominal increase 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). 

 

Table 1. The Department’s spending trend across programmes 

Programme   R Million	2016/17	2017/18	2018/19	2019/20
	Audited Outcomes	Audited Outcomes	Audited Outcomes	Adjusted  Appropriation	Audited Outcomes
1. Administration	828.5	828.0	1 030.1	971.1	904.7
2. Agric Production, Health & Food Safety	1 927.0	2 230.7	2 377.7	2 651.9	2 619.1
3. Food Security& Agrarian Reform	1 879.0	1 925.6	1 992.1	2 167.4	2 152.2
4. Trade Promotion & Market Access	310.5	278.7	266.1	280.8	261.8
5. Forestry & Natural Resources Management	1 077.7	960.5	1 417.9	995.7	977.1
6. Fisheries Management	468.1	504.7	490.3	545.0	545.0
Total	6 490.8	6 728.2	7 574.2	7 612.1	7 460.0

Source: Estimates of National Expenditure, National Treasury (2019) and DAFF Annual Report (2020).

 

 

The Department was appropriated a total amount of R7.6 billion in the financial year under review (2019/20), a slight decrease from the R7.7 billion that was appropriated in the 2018/19 financial year. In the year under review (2019/20), the Department spent R7.4 billion, which is 98 per cent of its total appropriation. The Department’s main cost drivers are transfers to provinces (conditional grants) and entities, as well as compensation of employees.

As a result of underexpenditure, in 2019/20, the Department surrendered a total of R162.4 million to the National Treasury (NT)’s Revenue Fund, which comprised of R152 million of the Department’s voted funds (Table 2) and R10.4 million of Departmental revenue and National Research Foundation (NRF) receipts. The surrendered total amount is less than the R170 million that the Department surrendered to National Treasury in 2018/19. However, the continuing underexpenditure particularly of the voted funds, is a concern as it might create the impression that the Department does not need the funds. Underexpenditure is also a serious concern for a Department that usually cites underfunding and budgetary constraints as the main reasons for not filling vacancies and performing certain critical functions; and more so for a key sector that is expected to drive job creation in the country.

While the Department’s underexpenditure was across all Programmes, it was largely attributable to unspent funds in the Administration Programme (R66.4 million), followed by Programme 2: Agricultural Production, Health and Food Safety (R32.9 million), Programme 4: Trade Promotion and Market Access (R18.9 million) and Programme 5: Forestry and Natural Resources Management (R18.6 million) – see Table 2.  Programme 2and Programme 5 also realised significant underexpenditure in the previous financial year. All Programmes under-spent on compensation of employees and the main reason provided for all Programmes was in respect of vacancies that were not filled due to a moratorium on the filling of posts pending the finalisation of the National Macro Organisation of Government (NMOG) process.

 

Out of the R7.6 billion budget that was appropriated to the Department in 2019/20, approximately 55 per cent went to transfers and subsidies (R4.2 billion), which is slightly less than the R4.4 billion that went to transfers and subsidies in 2018/19. Transfers and subsidies constitute inter alia conditional grants, transfers to Departmental entities, academic institutions and membership fees to international organisations. In the year under review, R2.2 billion worth of conditional grant was transferred to provinces. The amount constitutes approximately 51 per cent of total transfers and subsidies and 28 per cent of the total vote appropriation.However, the amount is less than the R2.8 billion that was transferred to provinces as conditional grants (Comprehensive Agricultural Support Programme (CASP), Ilima/Letsema and LandCare)in 2018/19.Approximately 71 per cent of the total allocation to conditional grants went to CASP(R1.5 billion in 2019/20). Approximately 99.9 per cent of the total allocation to conditional grantswas reportedly spent and R1.1 million that was not spent was in respect of a LandCare grant that was withheld from Gauteng Province. Similarly to the previous financial year, the withholding of LandCare funds from Gauteng was due to non-compliance with the Division of Revenue Act (DORA).

 

Irregularexpenditure

 

During the 2019/20 financial year, the Department incurred total irregular expenditure amounting to R17.4 million, an increase from the previous financial year’s total irregular expenditure of R11.6 million. Approximately R11.6 million of the total irregular expenditure for 2019/20 was from prior years. Of the total irregular expenditure of R17.4 million incurred in 2019/20, R921 thousand was due to non-compliance with supply chain management (SCM) procedures and is under investigation; while approximately R16.4 million was due to non-compliance with Treasury Regulation 8.14 in respect of transfer payments.

In the previous financial year (2018/19), the Department also reported irregular expenditure of R16.4 million that was incurred as a result of non-compliance with National Treasury Regulation 8.14 in respect of transfer payments to a service provider, the Institute for Development Assistance Management (IDAM). It further reported that the R16.4 million that was transferred to IDAM did not form part of the reported R11.6 million irregular expenditure that was incurred in 2018/19but its details would be under determination of investigation. In the year under review, however, the Department reported that R16.4 million, which forms part of the total irregular expenditure of R17.4 million for 2019/20, is awaiting approval for condonation. 

 

Fruitless and wasteful expenditure

 

The Department incurred fruitless and wasteful expenditure of approximately R31.3 million during the 2019/20 financial year. The amount is almost 14 times more than the fruitless and wasteful expenditure of approximately R2.4 million that was incurred in the previous financial year. The total fruitless and wasteful expenditure includes R26.8 million from prior years. The R26.8 million is in respect of non-delivery of veterinary mobile clinics during the 2015/16 and 2016/17 financial years. The amount was not included in the previous year’s total fruitless and wasteful expenditure. At the time the Department reported that it was under investigation. In the year under review, it reported that the fruitless and wasteful expenditure of R26.8 million is a legal matter while the rest, which was mainly no shows in respect of training and travel arrangements in 2017/18 and 2018/19, is under investigation. The delayed finalisation of investigations in the Department remains a concern.

 

3.2        Financial Performance per Programme in the 2019/20 Financial Year

 

Table 2. DAFF Programme Budget and Expenditure

Programme	2019/20				2018/19
	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	971 121	904 715	93.2	66 406	1 038 789	1 030 070	99	8 719
2. Agric Prod, Health & Food Safety	2 651 969	2 619 069	98.8	32 900	2 408 966	2 377 705	98.7	31 261
3. Food Security	2 167 410	2 152 218	99.3	15 192	2 001 763	1 992 067	99.5	9 696
4. Trade & Market Access	280 797	261 814	93.2	18 893	270 649	266 106	98.3	4 543
5. Forestry & NRM	995 694	977 115	98.1	18 579	1 522 280	1 417 884	93	104 396
6. Fisheries Management	545 098	545 069	99.9	29	490 356	490 258	99.9	98
Total	7 612 089	7 460 000	98.0	152 089	7 732 803	7 574 089	98.3	158 714

Source: Annual Report (DAFF), 2020

 

3.2.1 Programme 1: Administration

The Administration Programme spent 93 per cent of its allocated budget in 2019, a 6 per cent decrease from the previous financial year. The Programme’s main cost drivers in terms of expenditure were compensation of employees and Office Accommodation (operating leases and property payments). Due the decline in its expenditure, Administration contributed the highest (44 per cent) to the Department’s total underexpenditure for 2019/20. The R66.4 million that was not spent in the Administration Programme was in respect of earmarked allocations for the Agricultural Census project (R14.4 million) in respect of the development of the Farmer Register and compensation of employees (R51.8 million).

 

In terms of subprogrammes, for the third consecutive year, a significant amount of the total underexpenditure for Administration was in the Policy, Planning, Monitoring and Evaluation (PPME) subprogramme. The subprogramme is essential in addressing the Department’s challenges regarding intergovernmental relations, poor planning and deficiencies in monitoring and evaluation (M&E). The R20.7 million that was not spent on goods and services under PPME is almost three times the R7.4 million that the same subprogramme did not spend in 2018/19. In 2018/19, the unspent amount was in respect of funds that were earmarked for the development of the Farmer Register. The Departmentattributed the underexpenditureon the Farmer Register in 2018/19 to delays in the procurement of smart pens for data collection by Extension Officers. This was notwithstanding the fact that provinces have been procuring smart pens for years since the introduction of the Extension Recovery Programme (ERP), therefore, should have well established procurement processes for smart pens. Despite its importance, in 2019/20, the amount that has not been spent on the development of the Farmer Register has almost doubled (R14.4 million).The Department reported that the Farmer Register is in the last stages of conclusion and will be launched during the current financial year (2020/21). 

 

3.2.2 Programme 2: Agricultural Production, Health and Food Safety

Programme 2 spent almost 99% of its R2.65 billion budget.  The expenditure in the Programme was largely driven by the transfer to the ARC (approximately 47% of the programme’s total budget); and allocations to the Plant Production and Health subprogramme and Inspection and Laboratory Services subprogramme. The total underexpenditure of R32.9 million, which is second to the Administration Programme, was in respect of compensation of employees (R5 million) and in the Inspection and Laboratory Services subprogramme on allocations for strengthening inspection services in ports of entry and inland as well as improvements on plant and animal quarantine services (R3.3 million); upgrading of laboratory infrastructure and equipment in Pretoria and Western Cape (R554 thousand) and Import-Export Systems (R23.8 million).

 

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 R27.8 million under Inspection and Laboratory Services subprogramme particularly on the Import-Export Systems as weak controls regarding biosecurity are costly to the sector and particularly alarming after the outbreak of FMD and most recently, Brucellosis. The underexpenditure is more than double the R11.6 million that was not spent under the same subprogramme and for the same activities in the previous year.

 

3.2.3 Programme 3: Food Security and Agrarian Reform

The Department spent 99.3 per cent of the allocated budget for Programme 3, which is slightly less than 99.5 per cent that was spent in the 2018/19 financial year. The Food Security subprogramme was the main cost driver accounting for 72% (R1.5 billion) of the total allocation for Programme 3. The subprogramme also contributed significantly to underexpenditure.  The majority of Programme 3’s expenditure (R1.8 billion), which is approximately 87% of the total allocation to the Programme, constitutes transfers to provinces (conditional grants) and entities such as the Land Bank for the Blended Finance Model (BFM), which has since been suspended. For the past three years, transfers to the Land Bank for the BFM, which was to be an instrument to implement the Black Producers Commercialisation Programme were as follows: R100 million in 2017/18, R120 million in 2018/19 and R360 million in 2019/20. The Department has not accounted for the transfers.

In terms of underexpenditure on the Food Security and Agrarian Reform Programme, the R15.2 million that was not spent during 2019/20 was in respect of compensation of employees (R10 million), administration fee that was not paid to the Land Bank (R3.7 million) for the BFM that has been suspended, Agricultural College bursaries (R881 thousand) and Female Entrepreneur Awards prize money (R250 thousand) that were not disbursed. Approximately 80% of the funds (R12 million) that were not spent in this Programme were for the Food Security subprogramme, which is a recurring trend from the past two financial years. In the 2018/19 financial year, underexpenditure in the Food Security subprogramme was in respect of monitoring and evaluation of CASP (R6.2 million) and infrastructure support (R3.3 million).

 

3.2.4 Programme 4: Trade Promotion and Market Access

Budget expenditure regressed under Programme 4, from 98.3 per cent in the 2018/19 financial year to 93.2 per cent in 2019/20. Most of the Programme’s budget, which is approximately 44 per cent of the total allocation to the Programme, was spent on the International Relations and Trade subprogramme, mostly in respect of payments to foreign governments and international organisations. The Department’s transfer to the NAMC is made through this Programme. As Programme 4 is responsible for sector transformation activities, it also makes transfers to the Land Bank, which is responsible for the administration of the AgriBEE Fund. An amount of R43.8 million was transferred to the Land Bank for the AgriBEE Fund in 2019/20. Just like the Blended Finance Model, the AgriBEE Programme has been suspended by the Department and it has not accounted for the transfer of funds to the Land Bank for the Programme.

 

The Programme’s total underexpenditure in 2019/20 was R18.9 million and R13.2 million (70 per cent) of this was in the International Relations and Trade subprogramme. Of the R13.2 million that was not spent in the subprogramme, approximately R9.6 million was a saving in respect of membership fees to international organisations due to exchange rates fluctuations while R1.1 million was in respect of the administration fee that was not paid to the Land Bank for the AgriBEE Programme.

 

3.2.5 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 budget allocation to the Programme decreased from R1.5 billion in the 2018/19 financial year to R995.7 million in the financial year under review. The reduction in allocation may be attributed to the significant underexpenditure of R104 million in the previous financial year, 99 per cent of which was in the Natural Resources Management subprogramme. The Programme’s budget expenditure for 2019/20 improved from 93 per cent in 2018/19 to 98.1 per cent. Transfers to provinces for the LandCare grant are made through this Programme.

In the financial year under review, approximately R18.6 million was not spent under this Programme. Of the total amount that was not spent, R10 million was for Forestry Operations and R7.5 million was in the Natural Resources Management (NRM) subprogramme, which is the main focus as it remains with the Department. Overall, most of the underexpenditure (R16.9 million) in the Programme in 2019/20, which include both Forestry and Agriculture functions, was in respect of compensation of employees. For the NRM subprogramme, the Department further reported that an amount of R1.1 million in respect of the LandCare grant was withheld from Gauteng Province. In the previous year, approximately R3 million in respect of LandCare grant was withheld from Gauteng Province due to non-compliance with the Division of Revenue Act (DORA).

 

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

The Fisheries function, which include the Programme and the Marine Living Resources Fund(MLRF), has been transferred to the Department of Environment, Forestry and Fisheries. Therefore, this Report does not cover Fisheries issues.

 

3.3     Report of the Department’s Audit Committee

 

The Department has an independent Audit Committee that provides independent oversight over the Department’s financial management and reporting, governance, risk management, internal control, compliance, performance information management, internal and external audits, and information and communications technology (ICT) functions. The Audit Committee is supported by the Internal Audit Unit, which undertakes risk based audit assignments to evaluate the adequacy and effectiveness of the internal controls and the control environment. The Audit Committee meets on a quarterly basis to receive and review reports from Management, make recommendations and review progress on actions to address findings of both the Auditor-General of South Africa (AGSA) and Internal Audit Unit.

 

The internal control reviews undertaken by the Department’s Internal Audit Unit revealed gaps in many operational environments and the root causes for most of the identified control weaknesses relate to ineffective procedures, lack of detailed planning, competency gaps and resource shortages. Capacity constraints and inadequate consequence management were found to be major contributors to the ineffective control environment.The following key areas of concern were raised by the Audit Committee to the Department’s management on the 2019/20 financial year Annual Report: 

• Risk management – the Audit Committee acknowledged the existence of risk management fundamentals but remain concerned with the level of maturity in the risk management processes, which is an issue that has also been raised in the previous year.  There were persistent delays in the conclusion of the annual review of both the strategic and operational risk assessments resulting in the development, execution and monitoring of the risk mitigation action plans not effectively taking place.  The resourcing of the risk and investigations unit is a concern as the current capacity is not aligned to the mandate and functions of this unit.
• Significant gaps in internal controlswhere the system of planning, approval, disbursement, execution, and monitoring of conditional grants was fraught with planning and control weaknesses. The Audit Committee noted efforts by the national Department but highlighted buy-in and commitment from Provinces as critical. Ineffective coordination, particularly planning and reporting arrangements with Provinces were observed and had an adverse impact on the achievement of the Department’s objectives.
• Conditional grants are continuously allocated to Provinces while some Department’s capacity to “follow the money” has not been adequately developed, which increases exposure to fraud, corruption and wasteful expenditure.
• Consequence management - instability challenges experienced in the prior year had an adverse impact on the reporting period as three DDG positions have been vacant for more than 12 months while some have been filled by acting incumbents on a rotational basis. Therefore, the instability at senior management level has not been conducive for consequence management.
• Resource allocation, improper prioritisation, poor planning and resource wastage remain a major concern as they impact the Department’s ability to adequately pursue development opportunities within its mandate. For an example, the Department’s inability to speedily and sometimes effectively implement risk mitigation/prevention measures when faced with an outbreak of animal, plant or food related diseases due to funding challenges.
• Achievement of objectives – challenges with lack of long range planning; priorities not always being scientifically backed; organisational design not aligned with priorities; operational planning not detailed enough; risk management not operationalised;monitoring and evaluation not systematically resourced; internal controls not adequate or effective; ICT systems not adequately geared to support core business; and ineffective coordination, particularly planning and reporting arrangements with provinces, were observed and had an adverse impact on the achievement of the Department’s objectives.
• Concern with progress made by Management in the investigation, processing and closure of irregular, fruitless and wasteful expenditure as the implementation of the necessary actions to address the reported irregular, fruitless and wasteful expenditure are very slow.
• Concern with reliability of reported performance information for the transversal targets included in the APP as significant gaps were observed in many Provinces relating to the relevance and completeness of reported information with regard to project business plans and portfolio of evidence. Poor controls in the filing and reconciliation of supporting documents necessary to validate the completeness, accuracy and validity of reported performance were evident in many provinces.
• The implementation of the Land Care and Drought Relief Programmes for which funds were availed in the last quarter of the 2018 calendar year was of great concern to the Audit Committee as fraud risk indicators have been highlighted by the reviews undertaken by both the internal and external audit functions.
• The Department’s progress in addressing the Auditor-General of South Africa (AGSA)’s findings has been slow. A review of the progress on the execution of the corrective measures by Internal Audit revealed that a significant number of action plans had not been finalised.

 

3.4     The Report of the Auditor-General of South Africa

 

The Department’s audit outcome has been regressing since the previous financial year when it received a qualified audit opinion from the Auditor-General of South Africa (AGSA) with matters of emphasis and material findings. For the year under review, a similar audit outcome has been received for the same reasons as in the previous financial year (accuracy of biological assets). However, it should be noted that the transgressions that led to the basis for the qualified audit outcome were in respect of the Forestry function, which hassince been transferred to the Department of Environment, Forestry and Fisheries (DEFF). Notwithstanding the basis for the qualification on the Department’s financial statements, the AGSA further drew attention to material findings and matters of emphasis on the Department’s Annual Report. The findings, which were mostly repeat findings, were as follows:

3.4.1 Non-compliance with legislation i.e. the Public Finance Management Act (PFMA) (Act No.1 of 1999) in respect of Financial Statements:

• The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by Section 40(1)(a) and (b) of the PFMA.
• Material misstatements identified by auditors 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.

3.4.2 Non-compliance with the PFMA and National Treasury Regulations in respect of Expenditure and Procurement:

• Expenditure management

• effective and appropriate steps were not taken to prevent irregular expenditure amounting to R17.4 million as required by Section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1.
• effective and appropriate steps were not taken to prevent fruitless and wasteful expenditure amounting to R31.3 million as required by Section 51(1)(b)(ii) of the PFMA.

• Payments were not made within 30 days or an agreed period after receipt of an invoice as required by Treasury Regulation 8.2.3. 
• Procurement and contract management – some of the contracts were not awarded in an economical manner and/or prices of goods or services were not reasonable as required by Sections 38(1)(b)(ii) and 45(b) of the PFMA.
• Consequence management – lack of sufficient audit evidence that disciplinary steps were taken against officials who incurred irregular expenditure, fruitless and wasteful expenditures as required by Section 38(1)(h)(iii) of the PFMA. This was due to proper and complete records not being maintained as evidence to support the investigations into irregular expenditure.

 

3.4.3 Usefulness and reliability of reported performance information, as well as adjustment of material misstatements:

• The AGSA identified material misstatements on the reported annual performance information submitted for auditing for Programme 3: Food Security and Agrarian Reform. The management subsequently corrected only some of the misstatements, therefore, AGSA raised material findings on the usefulness and reliability of the reported performance information for Programmes 3’s two performance indicators, viz. ‘number of hectares planted for food production’ and ‘number of smallholder producers supported’. The AGSA found that achievements reported in the Annual Performance Report materially differed from the supporting evidence provided for the two indicators.

• The findings, which are a repeat of the previous financial year for the same indicators, was previously 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 hectares planted and smallholder producers supported, as reported in the Annual Performance Report. 

 

3.4.4 Deficiencies in internal controls

• 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 had not been addressed, hence the second consecutive 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) and information received from the Branches for performance reporting purposes (Programme 3: Food Security and Agrarian Reform).
• The Department’s system to monitor compliance with applicable legislation was not always effective. Effective internal controls and proper monitoring would have prevented non-compliance with legislation and regulations had compliance been properly monitored and reviewed.

 

The AGSA recommended that vacancies in key positions should be filled timeously andin relation to the merger of the two Departments (former DAFF and former DRDLR), which took effect on 01 April 2020, the Executive Authority and the Accounting Officer(s) should ensure that proper risk assessment is performed and action plans to address risks identified are developed and implemented. The risk assessment should include the merger of ICT infrastructure, record keeping, legal implications of existing contractsand processes for the preparation of financial statements and annual performance report.

 

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 Agricultural Support Programme (CASP). The outcome of the SIU report was pending at the time of the AGSA’s Report on 30 September 2020.  

 

3.5        Discussion on Financial Performance

 

The Department’s audit outcomes have been stagnant and in the past two financial years, regressing, as the quality of the financial information and the annual performance report that were submitted for auditing have not improved from the previous financial years. Without labouring on the basis of the qualified opinion, which is attributed to the Forestry function, which has since been transferred to the DEFF, it should be noted that in the previous financial years preceding 2018/19 and 2019/20, the Department received unqualified audit opinions 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 and 2019/20, however, in both years it received qualified audit opinions due to the matters referred to by AGSA on biological assets in Forestry.  The Department’s expenditure management particularly poor risk management and lack of consequence management and deficiencies on internal controls remain a concern as irregular, fruitless and wasteful expenditure, which had increased significantly during 2019/20,was attributed to similar offences as in previous years.

 

Thestagnant and subsequent regression in the Department’s audit outcomes has been highlighted as an area of serious concernby 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 NDPand other Government directives such as the State of the Nation Address (SONA) and the Economic Stimulus Package. 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. In the year under review, the Department had to surrender R152 million of voted funds back to National Treasury as a result of underexpenditure. Therefore, motivation for additional funding becomes difficult when a Department is not prudent and efficient in the utilisation of allocated resources. 

 

The main challenges regarding budgetary use have been highlighted by both the Department’s Internal Audit and the AGSA. These include among others, proper planning;compliance with legislative prescripts and regulations; poor risk management; expenditure management;monitoring and evaluation (M&E) of transferred funds and leadership accountability (inadequate consequence management).Monitoring and evaluation (M&E) not being systemically resourced has been highlighted as one of the key areas of concern by the Department’s Internal Audit; and underexpenditure of R20.7 million in the Administration’s Policy, Planning, Monitoring and Evaluation (PPME) subprogrammepoints to the weaknesses. The subprogramme is essential in addressing the Department’s challenges regarding intergovernmental relations, poor planning and deficiencies in M&E. Therefore, continuing underexpenditure for this function particularly in respect of the Farmer Register is a concern as the Farmer Register is central to the implementation of the Department’s farmer support policies and interventions.

 

As much as spending of conditional grants has improvedover the years, including in 2019/20, where 99.9 per cent was utilised, timeous verification and reliability of reported information is still a major concern. This makes it a challenge to measure value for the money that has been invested against service delivery. 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 ofthe Audit Committee and does not appropriately respond to issues that are raised byits Internal Audit Unit before the submission of reports to AGSA for audit.

 

3.6     The AGSA Special Audit Report 1 on Covid-19 Fund Implementation

 

The Covid-19 Disaster Agricultural Support Fund was announced by the Minister of Agriculture, Land Reform and Rural Development on 06 April 2020 as the Department’s intervention to mitigate the impact of the Covid-19 pandemic on farmers. The new Department of Agriculture, Land Reform and Rural Development (DALRRD) had ring-fenced R1.3 billion for assistance to mainly target financially distressed smallscale farmers. In its presentation to the Committee in May 2020, the DALRRD reported that the R1.3 billion that was set aside for the Covid-19 Disaster AgriculturalSupport Fund was going to be utilised as follows:

• R100 million transferred to Land Bank to assist distressed farmers;
• R400 million towards production support on PLAS farms;
• R775 million towards production support for all other smallholder and communal farmers;
• R20 million for hygiene products and personal protective equipment (PPE);
• R4.1 million for optical character recognition/reader (OCR) software for scanning of applications; and
• R1 million for communication.

 

The AGSA limited its auditing for the First Report of the utilisation of the Fund to R700 million, which constitute R680 million voucher support to smallholder and communal farmers and R20 million for hygiene products and PPE.  The AGSA raised findings on:

• Compliance to National Treasury Procurement Regulations in respect of inadequate supplier selection and lack of reporting:

• Suppliers that expressed interest in the Programme were not evaluated or verified for tax compliance, fair pricing, conflict of interest, etc.
• The invitation for bidders was only advertised in the Department’s website, which disadvantaged potential suppliers especially in rural areas or disadvantaged communities that may not have access to the internet.

The AGSA reported that the Accounting Officer committed to refer the matter for further investigation.

• Approval of vouchers for applicants with invalid or duplicate identity numbers (IDs):

• The AGSA found 673 approved applicants whose ID numbers were invalid. The Accounting Officer disagreed with the finding and stated that IDs were manually captured, which was prone to human error, therefore, the Department implemented risk mitigation measures to address errors and scanned IDs in the Survey 123 system.

• Approval of applicants who did not meet the selection criteria:

• The AGSA identified 861 applicants who did not meet the minimum criteria but were approved and for 847 of these, there was no evidence of farming activity. It also identified 521 applicants who met the minimum scoring criteria but were rejected.

The Accounting officer undertook to subject the identified matters to further analysis and investigation.

• Inadequate list of distributed vouchers:

• The Department could not properly track and control the vouchers in the system because there were no adequate listings, and because there was no reconciliation of vouchers distributed and redeemed. As a result, the Department may not be able to implement internal controls to adequately monitor and report on voucher distribution and redemption, or on the farmers supported during Covid-19. Reconciliations and supporting documents are also important for detecting and preventing fraud and error.

The Accounting Officer committed to ensuring that reconciliations will be reviewed and theprocess governing record management will be revised with the purpose of enhancing controls over the recording and tracking of the vouchers.

• Vouchers paid were not marked redeemed:

• Vouchers that were processed for payment were not marked Processed or Paid to prevent duplicate payments being made on the same voucher. Vouchers are redeemed manually rather than electronically, and the supplier then submits the physical documents to the Department’s regional offices for payment.  Because it can take days before the Department knows that a voucher has been used, the Department could pay more than once for the same voucher and exceed the budget allocated for farmer support.

The Department undertook to review and revise (where necessary) the payment process governing the voucher scheme to improve controls; and suppliers will also be informed that they are required to cancel the vouchers they have redeemed.

 

The AGSA observed that the manual distribution of the Covid-19 farmer support process has a high risk of fraud and error and therefore, control interventions must be intensified. It recommended preventative controls that should be implemented; and that the Internal Audit should assess the adequacy of these controls. The Department was also reminded to take into consideration the impact of seasonal changes will have on the process as agricultural operations are season-dependent.

The AGSA is busy with the Second Audit Report that will focus on testing transactions; follow the money to ensure farmers did receive the production inputs and used these in their farming activities; and also follow-up on the implementation of commitments that were made to address the findings of the First Audit Report. The Committee appreciated the audit work that has been done by AGSA on the Covid-19 Fund as its findings also relate to the concerns that the Committee raised with the Department regarding the implementation of the Covid-19 Disaster Agricultural Support Fund.

 

3.7     Human Resources

 

The Department reported that the National Macro Organisation of Government (NMOG) project required the abolishment of all vacant unfunded positions prior to the merger of the Agriculture function with the former Department of Land Reform and Rural Development, and the transfer of the Forestry and Fisheries functions to the Department of Environmental Affairs.The vacant unfunded positions were finally abolished through the PERSAL clean-up process by 31 March 2020, which greatly reduced the Department’s post establishment from 6 120 in the beginning of the financial year under review to 5 235 by 31 March 2020. The vacancy rate also decreased from 19.5% to 11.2%; and most vacancies were in Programme 4 (19.2%) and Programme 2 (16%).

 

As it has been the case for the past six 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%. There has been no improvement in female representation at senior management service (SMS) level, which has been at 46% since 2017/18. The Department again attributed lack of progress in employment equity targets to the continued suspension of the filling of vacancies due to inadequate budget for compensation of employees. The actual vacancy rate and staff complement will only be appropriately accounted for once the fit-for-purpose structure of the new Department of Agriculture, Land Reform and Rural Development has been finalised and approved.However, vacancies at SMS level remain a concern as the Audit Committee highlighted that this had an adverse impact on consequence management during the 2019/20 financial year when the Department had 3 vacant Deputy Director-General (DDG) positions. 

 

 

4.         Overview and assessment of service delivery performance

 

4.1     DAFF Service Delivery Performance for the 2019/20Financial Year

 

The Department’s overall performance with respect to planned targets has not improved and has been regressing for the past three years. While in the previous financial year it achieved 47 out of a total of 67 planned annual targets (70%), for the 2019/20 financial year, the Department achieved 46 targets out of a total of 67 (69%) as illustrated in Table 3 below. There has been a significant regression in the performance of the Administration Programme and Programme 2 (Agricultural Production, Health and Food Safety) while there has been a commendable improvement in Programme 3 (Food Security and Agrarian Reform).  For the financial year under review, misalignment of expenditure with actual performance has been more prevalent on Programmes 1, 2 and 6 as illustrated on Table 3 below. 

 

Table 3. Summary of Performance Target Achievements and Expenditure for 2019/20 per Programme

 

	No. of Targets		Not achieved	2019/20 percentage achieved	Budget spent (% of total allocated)
1. Administration				47 per cent	R904.7 million (93.2 per cent)	58 per cent
2. Agricultural Production, Health and Food Safety				63 per cent	R2.6 billion (98.8 per cent)	89 per cent
3. Food Security and Agrarian Reform				75 per cent	R2.1 billion (99.3 per cent)	43 per cent
4. Trade Promotion and Market Access				93 per cent	R261.8 million (93.2 per cent)	93 per cent
5. Forestry and Natural Resources Management				75 per cent	R977.1 million (98.1 per cent)	78 per cent
6. Fisheries Management				64 per cent	R545 million (99.9 per cent)	56 per cent
				69 per cent	R7.46 billion per cent)	70 per cent

 

*For consolidated performance (i.e. targets implemented by Provinces), only 1 target out of 4 was achieved (25 per cent).

**The 1 target for consolidated performance from Provinces was achieved and target exceeded.

 

4.1.1 Programme 1:Administration

The Department achieved less than half of the planned targets for Administration, which was the worst performing programme for the 2019/20 financial year. The notable achievements are the implementation of the Annual Risk-based Internal Audit Plan and 95% achievement for payment of invoices within 30 days, which is commended as the target was 80% for payment of invoices within 30 days. Among the targets that were not achieved was an unqualified audit on its annual financial statements, instead the Department received a qualified audit opinion for the same reasons as in the previous financial year in respect of biological assets under Programme 5; full implementation of the Risk Management Strategy and an ICT Plan for invoice tracking system. The Department reported that the Risk Management Strategy and the ICT invoice tracking system were not implemented during 2019/20 as it was focusing on the merger of the two Departments. The Risk Management Strategy for the newly reconfigured Department of Agriculture, Land Reform and Rural Development (DALRRD) has since been started and will be finalised during 2020/21 and the integrated ICT tracking system of the former DRDLR has been adopted for use by DALRRD from 01 April 2020.

The Department’s challenges with the development and timeous finalisation of legislation is an ongoing one, for the past five years, the Department has failed to meet legislation related targets.  For the 2019/10 financial year, it planned to submit to the Minister, the Marketing of Agricultural Products (MAP) Amendment Bill and the Preservation and Development of Agricultural Land (PDAL) Bill. It reported, without providing reasons, that the MAP Amendment Bill was not developed and will be reprioritised for 2020/21. The PDAL Bill was reportedly still undergoing consultations by the end of the financial year (March 2020). The PDAL Bill has been under development for the past five years and it was a target for the last Medium Term Strategic Framework (MTSF) period that ended in March 2019. By that time, the Bill was supposed to have been already signed into an Act and implemented by March 2019. It is a serious concern that the Bill, which is very crucial for addressing degradation and loss of agricultural land, is still undergoing consultations.

The reasons that have been provided for non-achievement of some of the mostly report-based targets, is that the Department’s Executive Committee (DEXCO) could not sit due to the national lockdown. This has become a common and unacceptable excuse to the Committee that was also cited by some of the entities as the national lockdown was announced and subsequently came into effect 5 days before the end of the financial year, on 26 March 2020. In this regard, poor planning on the part of the Department was highlighted by the Committee.

 

4.1.2 Programme 2: Agricultural Production, Health and Food Safety

While historically this has been a well performing Programme, in the financial year under review, its performance regressed. Despite spending almost 99 per cent of its budget, the Programme achieved 5 of the planned 8 targets (63%) for the 2019/20 financial year. These include amongst others the implementation of animal improvement schemes, namely, Kaonafatso ya Dikgomo (KyD) and a poultry scheme; the development of a Brucellosis Policy to support the implementation of the Veterinary Strategy.

 

The Department did not achieve the target for disease risk surveillance for 55% of sampled locations for foot-and-mouth disease (FMD) and 41% for Peste des petits ruminants (PPR). This is a serious concern particularly for FMD, whose outbreak that was reported in early 2019 in Limpopo cost the country its status of a FMD-free zone without vaccination from the World Organisation for Animal Health (OIE - Office International des Epizooties). The outbreak also has an adverse impact ontrade and revenue generated from the country’s export of cloven-hoofed animals and/or their products.

Despite assertions from the Department when it briefed the Committee on FMD that the outbreak in Limpopo was under control, in March 2020, FMD was detected in the Bushbuckridge area of Mpumalanga. The target related to FMD surveillance was also not met in the previous financial year and the Department attributed underachievement to non-compliance by Provinces as samples were conducted later than prescribed in the FMD Manual. The Department reported last year that it planned to strengthen controls and discuss non-compliance with Provinces on a quarterly basis, seemingly its controls have not been effective.

Another target that was not achieved by the Department is the deployment of 189 veterinarians as part of the Compulsory Community Service (CCS) Programme for veterinarians (Vets). It managed to place 168 Vets and reports that 21 international graduates could not be placed due to resource constraints (insufficient budget). This points to poor planning on the part of the Department and is a concern in light of the shortage of Vets and the great need for veterinary services particularly in rural areas, where the CCS Programme is expected to make an impact. Since the inception of the CCS Programme in 2015/16, for varying reasons which had nothing to do with the budget but fewer numbers of graduates that were eligible for placement, the Department struggled to meet the target for deployment of Vets except in 2018/19, when the target was exceeded.

 

4.1.3 Programme 3: Food Security and Agrarian Reform

In addition to Programme 2, this is one of the key and cost-driving Programmes for the Department as it is responsible for providing frameworks for promoting food security through the development and support of subsistence and smallholder producers to improve their productivity and to enable participation in the sector; capacity building of extension and advisory services; as well as the development and transformation of Agricultural Colleges. Therefore, the Programme is central to service delivery.  Under this Programme, the Department achieved 75% of the planned targets (6 out of 8), a significant improvement from the previous year’s 43% achievement. However, all the achieved targets were development of reports including the tabling of the National Policy on Comprehensive Producer Development Support (NPCPDS) to Cabinet, which was done on 04 March 2020.

The two targets that were not achieved, which are relatively important in light of the Programme’s mandate, are the national survey on Food and Nutrition Securityand an annual progress report on black producers commercialised. The Department reported that the agreement with the Human Sciences Research Council (HSRC) to conduct the Food and Nutrition Security survey was concluded at the end of March 2020 citing a longer process to contract the service provider and to centralise all provincial funds for the survey. For the report on the commercialisation of black producers, the Department reported that the Department EXCO could not sit to approve the Black Producers Commercialisation Programme (BPCP) report due to the nationwide lockdown but the report was approved by the Accounting Officer.

In the previous financial year, 2018/19, the Department reported that the report on the Black Producers Commercialisation Programme (BPCP) 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 BPCP, the Department continued since 2018, to transfer funds to the Land Bank for the Blended Finance Model that was conceptualised as a funding instrument for the BPCP. In further engagements with the Committee on the matter, the Department reported that the Blended Finance Model was suspended and it was developing a Policy for both the BPCP and the Blended Finance Model. However, it could not explain the continued transfer of funds to the Land Bank for a programme that was not operational or how it was implementing the BPCP.

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. The performance indicators were:

1. the number of households supported with food production initiatives;
2. number of hectares planted for food production;
3. number of smallholder producers supported; and
4. number of Extension Support Practitioners deployed to commodity organisations.

 

During 2019/20, only the deployment of Extension Practitioners to commodity organisations was achieved while the first three performance indicators were not achieved, which was the case in the previous financial year. Previously the main reasons that were cited for non-achievement was drought and insufficient auditable evidence. For 2019/20, non-achievement is attributed to Covid-19 imposed national lockdown, which resulted in the inability to perform physical monitoring visits to implementation points. Concerns with the national lockdown being the reason cited for not achieving targets have already been highlighted particularly in a sector that has been classified as an essential service, the reason for non-performance was not acceptable.

 

4.1.4 Programme 4:  Trade Promotion and Market Access

For this Programme, the Department maintained the 93% achievement of targets. However, most of the targets were reports on trade, bilateral, multilateral and other strategic engagements; establishment of commodity-based cooperatives and training of cooperatives as well as training of agroprocessing entrepreneurs on norms and standards. As the Programme’s mandate is promotion of economic development, trade and market access, it was highlighted that the Department should submit detailed reports on the Programme’s activities to ensure that the established and trained cooperatives and agropreneurs are operational. The Department needs to also report on how it ensures that the trainees gain access to markets through the Programme, a function that is also implemented by the National Agricultural Marketing Council (NAMC). 

The only target that was not achieved was the Report on the implementation of AgriBEE Enforcement Guidelines, which are important in enforcing transformation targets in the sector. The non-achievement of the target was attributed to incomplete report due to outstanding required information from some of the regulators. The Department seems to have a challenge with the implementation of the Enforcement Guidelines as in prior years, it took three years for the Department to get the AgriBEE Enforcement Guidelines published, which eventually happened in 2018/19. For the 2019/20 financial year, the Department reported that follow-ups are being made with the regulators in order to complete the report. The Committee needs to regularly follow-up on the implementation of the Guidelines. 

 

 

 

4.1.5 Programme 5: Forestry and Natural Resources Management

As already indicated in the Introduction, the Forestry function is with the Department of Environment, Forestry and Fisheries, therefore, the focus under this Programme will be on Natural Resource Management (NRM). Out of a total of 8 planned targets for 2019/20, the Department achieved 6 (75%). Five of the achieved targets are Agriculture related and the two targets that have not been achieved are for the Forestry function.  The achieved targets include amongst others the piloting of an Agroforestry Project Plan in Limpopo and Mpumalanga; implementation of 1 project at Vaalharts Irrigation Scheme (NC) to support revitalisation of irrigation schemes; monitoring report on agricultural land rehabilitation interventions; and annual reports on the implementation of the Climate Change Adaptation and Mitigation Plan (CCAMP) and the Climate Smart Agriculture (CSA) Framework Strategy.

The Department achieved and exceeded the planned annual target for the transversal indicator on the number of hectares of agricultural land that has been rehabilitated, which is implemented through the LandCare conditional grant. The annual target was 27 957 hectares (ha), and 35 185.56 ha were reportedly achieved. The overachievement was attributed to approved roll-overs allocated for the equitable share and the Expanded Public Works Programme (EPWP) incentive; the distribution of no-till planters to provinces and the Eastern Cape (EC) changing payment method from daily rate to task payment, which encouraged workers to finish tasks quicker.

 

4.2        Discussion on the Department’s Service Delivery Performance

 

Lack of alignment between use of financial resources and performance remains a concern as the Department spent 98per cent of its budget but achieved less than 70% of its planned annual targets. Even for the targets that have been achieved, for example in Programmes 3 and 4, impact on service delivery is not evident. Persistent challenges with usefulness and 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 utilisationwere highlighted for the Department’s attention. The effectiveness of the Department’s planning, setting of performance indicators and M&E system was questioned as for the second consecutive year, there were findings on the usefulness and reliability of performance information for one of its key Programmes, the Food Security and Agrarian Reform Programme.

 

The reported inability to carry out physical verification of provincial performance information due to the national lockdown was unacceptable to the Committee as the lockdown was announced and became effective in the last week of the financial year. In this regard, the Department needs to strengthen its planning and ensure that it has adequate and skilled M&E practitioners that are capacitated and well-resourced to carry out regular physical monitoring of all funded projects. Value for money in terms of transferred funds cannot be guaranteed without proper planning and effective M&E. Weak intergovernmental coordination, inadequate extension support and mismanagement of funds due to the Department’s failure to do proper M&E are some of the challenges that have been observed by the Committee in its oversight work including the oversight visitto KZN.

 

In light of the minimal impact of CASP despite the amount of resources invested, the ongoing SIU investigation into the conditional grant is welcome. For the second consecutive year, the Department has underspent on activities related to the development of the Farmer Registerfor smallholder and subsistence producers. The capacity of the Department to develop and finalise the Farmer Register is questionable as the development of the Farmer Register has been in the pipeline since 2007. Currently, the exact number of these producers, where they are, their main activities, resource availability or needs including land access, is not known. In July 2020, the Department reported that 89 615 farmers have been registered in the Farmer Register, which is far less than the 300 000 smallholder farmers that the NDP, through the last Medium Term Strategic Framework (MTSF), expected the Department to support with market access.

 

One of the objectives of the National Policy on Comprehensive Producer Development Support (NPCPDS) is to establish a comprehensive Electronic Register of Producers, which will serve as a prerequisite for accessing Government support. Without an updated and complete Farmer Register, the implementation of the Policy might be a challenge, which has been the case with the Covid-19 Disaster Agricultural Support Fund. Therefore, inability to achieve any target relating to the Farmer Register, particularly when funding is available, is a serious concern as the Register will provide a reliable database of these farmers and is crucial for future and inclusive AgriculturalCensuses. Impact of interventions on smallholder farmers cannot be fully assessed and measured without reliable baselines. Therefore, the assurance that the Farmer Register with be finalised and launched during this financial year was welcome.

 

 

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

 

With the exception of the Perishable Products Export Control Board (PPECB), the audit outcomes of the Department’s entities remained stagnant despite previous assertions for achievement of better outcomes. 

 

5.1     Agricultural Research Council (ARC)

 

For the 2019/20 financial year, the ARC had a total budget of R1.3 billion, which comprised of the Parliamentary Grant (PG) from the former Department of Agriculture, Forestry and Fisheries (DAFF) and transfers from the Department of Science and Technology totalling R978 million and self-generated revenue amounting to approximately R341 million. The entity’s self-generated revenue has been decreasing over the years, from R410 million in 2017/18, R385 million in 2018/19 and R341 million in 2019/20. In the year under review (2019/20), the ARC spent approximately 93 per cent of its budget of R1.36 billion. Approximately 62 per cent of the expenditure went to personnel costs (1 per cent higher than 2018/19), 28 per cent went to operations and administrative costs and the rest went to maintenance and depreciation.

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

• PFMA contravention – annual financial statements submitted for auditing not prepared according to the PFMA;
• Effective and appropriate steps not taken to collect all monies due to the entity as a result, material impairments of R53.7 million were incurred due to long-standing debtors. Some of its bad debtors are Government departments including former DAFF, which has since paid its debt to the ARC. 
• Expenditure management – effective steps were not taken to prevent irregular expenditure amounting to R22.6 million, which is almost 10 times more than the previous financial year’s irregular expenditure of R2.5 million.
• 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.

In addition, theAGSA also highlighted that Action Plans that were implemented by the ARC did not adequately address root causes of previously raised audit findings.

• 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.

 

While the ARC maintains that the number of audit findings have decreased, it is very disturbing that the entity continuously receives a qualified audit opinion on its financial statements due to repeat findings. In 2019/20, despite the ARC’s assertions, there was also a new audit finding on commitments, where R17.6 million was materially misstated. According to the AGSA, the said amount included cancelled contracts and payments made on confirmed orders, which were incorrectly recognised as additions.  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 previous financial year and in the year under review as the entity has indicated that due to the Covid-19 pandemic, 40 per cent of its external revenue is at risk and highly unlikely to be achieved; and there is an estimated loss of R197 million for the 2021 and R247 million for the 2022 financial years.

 

Targets achieved:For the 2019/20 financial year, the ARC achieved 30 planned targets out of a total of 52 targets. In the previous year, it achieved 32 targets out of a total of 55 planned targets. For both financial years (2018/19 and 2019/20), the percentage achievement is 58%. However, despite the stagnant progress, the following are some key performance highlights that were achieved in 2019/20:

• The registration of 3 new wheat cultivars that are expected to increase the production and productivity of wheat in the country. The varieties were tested in, and are suitable for, dryland (Steenbok cultivar), eastern and southern production regions (Tredoux) and Umzumbe (cooler irrigation regions). As South Africa is a net wheat importer, the ARC’s research on wheat cultivar development is highly commended to ensure food self-sufficiency.
• The appointment of the ARC’s National Beef Improvement Scheme as the accreditation authority for the Beef Genomics Programme, for private test stations that rendered services to the Programme.
• The launch of the ARC Commercial Wine Cellar Complex at ARC Infruitec-Nietvoorbij in Stellenbosch, which includes an experimental and commercial winemaking facilities; a tasting room; storage facilities; and a sensory evaluation laboratory.
• The transfer of 38 technologies to the agricultural sector for commercialisation; and collection of R27.3 million on royalty collections for Intellectual Property (IP) that is licensed to different entities.
• The ARC signed a license agreement with Plant Health Products (Pty) Ltd for the commercialisation of biological control products for crop protection and crop growth enhancement, following 19 years of collaborative research. The product is suitable for pastures, fields crops, vegetables, vineyards, timber plantations and smallscale agriculture.

 

As has been the case in the previous two financial years, the ARC had fewer (247) than planned (400) farmers participating in animal improvement schemes and underperformance was attributed to adverse weather conditions such as the persistent drought and the economic climate; and it also had fewer farmers that participated in the Kaonafatso ya Dikgomo (KyD) programme (only 4 625 out of a planned 9 200). The ARC attributed the under-achievement in the KyD target to budgetary constraints including lack of financial support to run the programme by the Department.

For the Administration and Corporate Affairs Programme, the ARC did not achieve amongst others, the target for a percentage increasein employment equity ratios for blacks, females and people with disabilities in core business. The ARC also did not achieve employment equity targets in the last two previous financial years.

 

5.2        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). Although it did not meet the target, the OBP’s revenue from sales increased by 6% from R163 million in 2018/19 to R177 million in the year under review. The entity attributed the revenue increase to consistency inproduction outputs of finished products comparedto the prior years. In light of the constraints for the timely completion of the GMP Project, the OBP acknowledges the importance of cash flow management as it ended the 2019/20 financial year with R286 million, which is R108 million less than R394 million from 2018/19.

The OBP received an unqualified audit opinion with material findings from the AGSA for the 2019/20 financial year, which was also the case in the previous year, 2018/19. There has been little improvement in the OBP’s audit outcomes as some of the findings for the year under review are repeat findings. For the 2019/20 financial year, the AGSA highlighted 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 property, plant and equipment, inventories, deferred tax, accruals, commitments and retained earnings identified by the auditors 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 non-compliance with legislation and SCM processes could have been prevented. Therefore, oversight is required from leadership regarding implementation of internal controls.
• Expenditure management – effective and appropriate steps were not taken to prevent irregular expenditure amounting to R1.99 million as required by Section 51(1)(b)(ii) of the PFMA; as well as fruitless and wasteful expenditure amounting to R7.4 million, which was mostly for inventory ordered and paid for but not received.

 

The OBP reported that an investigation has been instituted on the fruitless and wasteful expenditure and an outcome is expected in the 2020/21 financial year.

 

Targets Achieved: The OBP’s performance remained unsatisfactory in the 2019/20 financial year, with the entity achieving 5 out of a total of 14 planned targets (36%). In 2018/19, the entity achieved 5 out of 16 planned targets (31%). One of the notable achievements was the OBP exceeded the target for the production efficiency index as the index doubled from the planned 7.8 to 16, which significantly reduced the batch failure rate; and the vaccine batch success rate increased from 79% in 2018/19 to 85% in 2019/20. The improvement in production efficiency is commendable as the OBP previously had a serious challenge with high vaccine batch failure rates. It also recorded an improvement in the customer satisfaction index, which is also commendable as there were previously more complaints from OBP clients.

 

The OBP did not meet the targets in respect of operating profit, increasing gross revenue from sales and 90% implementation of the modernisation plan for the Good Manufacturing Practice (GMP) facility. This was also the case in the previous financial year. For 2019/20, it attributed the failure to increase revenue and profit due to inability to honour international contracts due to lockdown regulations. For the modernisation project, it cited lockdown restrictions and budget constraints as more funding is required for the project. The entity also did not achieve a clean audit as planned but received an unqualified audit opinion with findings.

 

5.3        National Agricultural Marketing Council (NAMC)

 

The budget of the NAMC for the 2019/20 financial year was R47.1 million, which comprised of the Parliamentary Grant (PG) of R45.3million and R1.8 million worth of interest received. The NAMC’s total revenue for the financial year was R81.8 million due to an additional R34.7 million worth of other income and sponsorships, which is less than R90 million it had in the2018/19 financial year. The entity’s expenditure in the year under review was R84.9 million, which left the NAMC with a deficit of R1.9 million. This is a regression in the entity’s financial status as it ended the two previous financial years with surpluses of R3.3 million (2017/18) and R1.2 million (2018/19).  The NAMC also incurred irregular, fruitless, wasteful and unauthorised expenditure totalling R125.7 million, significantly more than the previous financial year’s R72.2 million. Most of the entity’s irregular, fruitless and wasteful expenditure was in respect of the National Red Meat Development Programme.

 

The NAMC received an unqualified opinion with findings from the AGSA on financial statements for 2019/20, which was also the case in 2018/19; and an adverse opinion on the report on predetermined objectives relating to performance information, which is also a repeat finding. The specific audit findings by AGSA on the NAMC’s 2019/20 Annual Report were as follows:

• Non-compliance with legislation in respect of:

• Procurement and contract management: some goods and services with a transaction value below R500 000 were procured without obtaining the required price quotations, as required by Treasury Regulation 16A.1. And some goods and services with a transaction value above R500 000 were procured without inviting competitive bids as required by Treasury Regulation 16A6 – non-compliance was identified in the National Red Meat Development Programme (NRMDP). 
• Consequence management: disciplinary hearings were not held for confirmed cases of financial misconduct committed by some officials, as required by Treasury Regulation 33.1.1
• Expenditure management: effective and appropriate steps were not taken to prevent irregular expenditure amounting to R80.7 million as required by Section 51(1)(b)(ii) of the Public Finance Management Act (PFMA). Most of the irregular expenditure was caused by a contract that was not approved by the appropriate delegation.

• Usefulness and reliability of performance information – in this case, management subsequently corrected only some of the misstatements that were identified by AGSA, hence the material findings as expressed below:

• Lack of a clear and logical link between the performance indicators and targets and the strategic objective of the entity’s Programme 3: Efficiency of the Marketing of Agricultural Products.
• The AGSA found that the method of calculation for measuring the planned indicators was not clearly defined.
• The planned indicator was expressed as a percentage but the reported achievement and the target was 30 statutory measures investigations received and responded to, expressed as a numerical.

In the previous financial year (2018/19), AGSA raised similar findings on the usefulness and reliability of performance information for Programme 2 (Market Access to all Participants), Programme 3 (Efficiency of the Marketing of Agricultural Products) and Programme 5 (Viability of the Agricultural Sector).

• Internal control deficiencies– the following repeat findings were identified:

• Ineffective oversight on performance and compliance reporting to ensure that performance reporting was credible and compliance matters were adhered to.
• Inadequate controls for monitoring compliance in the areas of supply chain management (SCM) and performance information, which resulted in non-compliance not being detected.

 

Targets Achieved: For the fourth consecutive year, the NAMC has achieved all its planned performance targets (52 in all for 2019/20). However, it should be noted that most of the NAMC’s targets are reports; and in the financial year under review (2019/20), 90% of the achieved targets are reports. This poses a challenge in terms of assessing whether the NAMC has actually achieved what it sets out to do under each Programme. The AGSA has also raised findings on the entity’s usefulness and reliability of performance information in both the previous and the financial year under review (2019/20).

 

Some of the NAMC’s highlighted performance achievements are publications of Agripreneur Magazine, which provides a platform for information sharing between agripreneurs and farmers; Food Basket Price Monthly, Input Cost Monitors and a South African Food Cost Review; development ofa baseline on the Smallholder Market Access Tracker (SMAT) for the broiler industry; training on market access and Good Agricultural Practice (GAP); research partnerships with Grain SA and Raisins SA; crop training for 20 vegetable farmers at HaMphaila Irrigation Scheme in collaboration with the Limpopo Provincial Department of Agriculture; and also coordinated the development of the Agriculture and Agroprocessing Master Plan (AAMP).

 

5.4        Perishable Products Export Control Board (PPECB)

 

The PPECB is a national public entity that is listed under Schedule 3A of the PFMA. Unlike the ARC and NAMC, the PPECB does not receive a Parliamentary Grant but generates its own revenue through fees and levies charged for inspections done on perishable products that are due for export, issuance of export certificates and laboratory services. During 2019/20, it received atransfer of R500 000 from the former Department of Agriculture, Forestry and Fisheries (DAFF) specifically for Transformation and Development. Until 2018/19, the PPECB also received approximately R585 000 from DAFF for the Agricultural Export Technologist Learnership Programme (AETP). The AETP has been reportedly beneficial to the PPECB as a feeder programme for new employees. For the 2019/20financial year, the PPECB’s total generated revenue was R431.5 million, a 2% increase from the previous year’s R423 million.

As the entity focused on improving business process efficiencies, information quality through digital transformation and risk awareness, the total expenditure for 2019/20 was R436.2 million (13% increase from previous year), which resulted in a deficit of R4.7 million by the end of the year. The main contributors to the expenditure were the appointment of contract employees for TITAN 2.0®project, which was previously conducted by external service providers; appointment of additional expertise required to initiate the Enterprise Resource Planning (ERP) project; increased training costs which included an unplanned Accelerated Skills Transfer Intervention (ASTI) for vegetables and additional computer costs of R7.7 million compared to the previous year. Due to the nature of the PPECB’s work, more than two thirds of its revenue went to personnel expenditure while the rest went to operational and administrative expenses. 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 financial year under review, the PPECB incurred irregular expenditure amounting to R1.53 million which comprised of approximately R33 595 from the year under review in respect of HR services, garden services and accommodation for an urgent training that were all procured without following the 3-quote procurement process and prior approval from the Chief Executive Officer (CEO) was not obtained. The R1.5 million is an amount from March 2019 that was used to purchase second-hand technical equipment for the laboratory without following the competitive tender bid process. The PPECB submitted a request to National Treasury for condonation in April 2019 but in September 2019, the National Treasury advised the entity that the irregular expenditure was not condoned. The PPECB also incurred a wasteful expenditure of R2 thousand as a result of an employee who absconded and did not return the entity’s laptop. The entity managed to deduct R5 432 from his available leave pay and the balance of R2 thousand was not recoverable.

 

Since the 2018/19 financial year, the AGSA opted out of auditing the PPECB and the entity has since been audited by independent external auditors. Since then, the PPECB has been audited by SizweNtsalubaGobodo Grant Thornton Inc. The PPECB again maintained its clean audit outcome and is the only entity of the former DAFF that has maintained clean audit outcomes for more than 12 successive years.

 

Targets achieved:The overall performance of the PPECB improved from 71% that was achieved in the 2018/19 financial year to 79% in the financial year under review (achieved 11 out of planned 14 targets). The entity is commended for achieving all its targets for Programme 4: Transformation and Development Services; and some of the achieved targets were exceeded by varying margins across all Programmes.

 

Key performance highlights included amongst others successful delivery on the South African False Codling Moth Risk Management mandate for the second year and meeting responsibilities for the South African Citrus Black Spot Risk Management System for the third year; maintaining ISO accreditations; the PPECB laboratory successfully passing the Department’s audit to maintain its accreditation and testing for all markets; achieving 85% customers satisfaction rating; launching TITAN 2.0® in October 2019 and collaborating with the International Cool Chain Association Board of Directors to host the next Global Perishable Conference in South Africa.

Some of the targets that were not achieved include 80% capture of cartons on main products (citrus, grapes, pome, stone and avocados) on the TITAN electronic system. The entity only managed to capture 56% by the end of the financial year, which is less than the 63% that was captured in 2018/19. It attributed the failure to achieve the planned 80% capture to the switch from TITAN to TITAN 2.0®, which was also the case in the previous year.

 

5.5        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 in the case of the OBP, also infrastructure challenges.

 

The ARCwas flagged as a major concern that requires intervention in light of the qualified audit opinions for four 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. In the financial year under review, irregular expenditure increased tenfold from R2.5 million in 2018/19 to R22.6 million by the end of March 2020.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 on 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.

 

While the ARC has been commended for some of its performance achievements and its contribution to the sector through research, it’s financial viability remains a concern as it indicated that 40 per cent of its external revenue is at risk with estimated losses of R197 million and R247 million for 2021 and 2022, respectively.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 implementation of its Turnaround Strategy: Vision 2050. It is hoped that the oversight activities of the new Board will assist the entity in addressing its challenges as the AGSA has pointed out that the ARC has the capability but lacks urgency in responding to matters.

 

The OBP’s audit outcomes did not improve as planned but remained stagnant with expenditure management remaining a concern. While irregular expenditure has decreased significantly from R42 million in 2018/19 to approximately R2 million in 2019/20, the significant increase in fruitless and wasteful expenditure, which increased from R852 887 in the previous financial year to R7.4 million in 2019/20 was a major concern. These were highlighted as areas for interventionfrom the entity’s management particularly in light of budgetary constraints to finish the modernisation project for the vaccine manufacturing facility. The OBP’s performance was a matter of concern particularly in ensuring its financial viability and business excellence, which 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).

 

TheNAMC also did not improve the audit outcome on financial statements, which remained stagnant. The Committee was particularly concerned about the significant increase in the NAMC’s irregular, fruitless, wasteful and unauthorised expenditure from R72.2 million that was incurred in 2018/19 to R125.7 million in 2019/20. Additionally, the adverse opinion the NAMC received on the usefulness and reliability of performance information for Programme 3: Efficiency of the Marketing of Agricultural Products, which is a repeat finding for the Programme, was also flagged for the entity’s attention. The appointment of the CEO for the entity was welcomed and it is expected that the appointment will lead to an improvement in the entity’s future audit outcomes; and addressing planning challenges in respect of predetermined objectives.

 

1.  

 

6.1 Minister of Finance

Recommendation	Response
Agriculture has been highlighted by the President in his economic stimulus package, including the National Treasury’s discussion paper entitled “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 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 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.	The National Treasury agrees with the committee’s recommendation. Over the 2020 MTEF period, an allocation of R495.1 million has been reprioritised within the existing budget baseline to boost agriculture production; improve health and food safety programmes; develop capacity to respond to biosecurity threats; revitalise laboratories; revitalise quarantine stations and strengthen inspection services at ports of entry; and strengthen animal and plant health, inspection and laboratory services. Over the medium term, a further R500 million will be allocated to the sector to fast-track the process of restoring land rights, supporting inclusive economic transformation as envisaged in the National Treasury’s discussion paper.
Onderstepoort Biological Products (OBP) plays a vital role in the prevention and management of livestock diseases and, therefore, food and human safety. Notwithstanding the once-off allocation of R492 million that was made to OBP in 2012/13 for the refurbishment and modernisation of the vaccine manufacturing facility, and that over the years, the entity managed to raise additional funding to continue with the refurbishment project, which cost an estimated R1.2 billion, an additional funding allocation for operational activities is proposed from 2020/21 onwards. The funds will be used to establish a vaccine reserve to ensure that vaccines are available in sufficient quantities to address animal disease outbreaks (e.g. Anthrax, African Horse Sickness, Rift Valley Fever, Brucellosis, etc.), and to manufacture public good vaccines (orphan vaccines), which are unprofitable for 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 good manufacturing practice standards is limiting OBP’s production efficiency and competitiveness.	The National Treasury agrees with the committee’s recommendation. Over the medium term, the reprioritised allocation of R495.1 million to the Department of Agriculture, Land Reform and Rural Development for the Agricultural Production, Health, Food Safety, Natural Resources and Disaster Management Programme will indirectly reduce OBP’s burden of producing and distributing vaccines. The budget allocated to the department includes a component for preventing and managing animal and livestock disease. There is little scope for additional allocations. The department will have to collaborate with OBP to prevent and manage livestock diseases. The National Treasury will continue to engage with the department and OBP to ensure that funding is available.

 

6.2 Minister of Agriculture, Land Reform and Rural Development

Recommendation	Progress	Implementation Plan	Status
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.	The Department has been given R25 million for the financial year 20/21 - for surveillance (R10 million) Fence (R5 million) and FMD vaccine (R10 million);     Allocation for the 21/22 financial year is R29 million - surveillance (R15 million) Fence (R4 million) and FMD vaccine (R10 million); and   Allocation for the 22/23 financial year is R40 million - surveillance (R25 million); Fence (R5 million) and FMD vaccine (R10 million)     Engagement with the National Treasury is on-going. NT has indicated that there is no new money and the department has to reprioritize within.	Country-wide surveillance will only be initiated once all the 19 reported outbreaks (in Molemole District) have been closed with the OIE.     The fence separating the protection zone and the free zone in all 3 provinces is under discussion with the respective provinces.     Vaccine procurement is ongoing.	Surveillance: not started yet. Fence: ongoing Vaccine: ongoing
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.	Engagement has started with the DG, Mr Shabane. As a start, in relation to the COVID-19 Intervention Programme by the DALRRD, OBP will be a preferred supplier of vaccines to provinces. A contract will be finalised wherein distributors and farmers will buy and use OBP products.   In the medium to long-term the Department and OBP will arrange a meeting to discuss plans going forward including engaging National Treasury – Office of the Chief Procurement Officer (OCPO) to seek advice on how best can OBP benefit within Regulation 16	DG and Minister engagement – May 2020     Outline medium to long-term plan with the department – Jun/Jul 2020       Contract with DALRRD will be signed in June 2020     OBP to pursue preferential sourcing of its products by provinces with DALRRD by August 2020.	Done       In progress             Draft contract currently under discussion       Ongoing
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.	In order to strengthen IGR and to ensure that there is integrated planning between the National department and Provinces, the Department has established and is also in the process of strengthening what is referred to as Working Committees which are Inter-Governmental Structures formed around key responsibility areas and are led by DDGs from the National Department.
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.     AgriBEE Fund	The National Policy on Comprehensive Producer Development Support was tabled at the Cabinet Committee on the 04th of March 2020. The committee noted the policy and request the department to address the following: (a) approves that an amended memorandum be submitted to the Cabinet Committee for the Economic Sectors, Investment, Employment and Infrastructure Development (ESIEID) in due course.                   A concept document in respect of the review of the Fund has been developed;   The Terms of reference for the committee to drive the Review process has been developed;   Names of officials to serve on the review committee have been identified and recommended for approval and appointment by the Director-General and the submission to this effect is on route to the Office of the Director-General	The comments from Cabinet Committee were addressed and a report prepared although other recommendation will be addressed over a longer period of time (e.g. submission of a comprehensive 25 years Review Report (1994 to 2019) of producer development support) This has been included in the operation plan for the unit.                           Once approval is granted, the committee shall commence with the review process   Once approval is granted, review process will commence, followed by stakeholder consultations.	The policy will be re-tabled at the Cabinet Committee for the Economic Sectors, Investment, Employment and Infrastructure Development (ESIEID) for recommendation to Cabinet for approval.                                       Awaiting approval by the Director-General to constitute a review committee and initiate the process.   Process of approval to initiate review process has been started.
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.	Although in the new DALRRD start up structure as an outcome of NMOG, the Branch: PPME does no longer exist, the need to strengthen the monitoring and evaluation capacity of the Department remains.   This is the reason why additional temporary employees have been appointed. The opportunity of creating a fit-for-purpose organisational structure for DARRLD will give the Department an opportunity to strengthen this function.
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.	The disaster funds are within the Department of Corporate Governance and Traditional Affairs (National Disaster Management Section) and in most cases funds are sourced from COGTA after disaster has been declared and these funds are included in the Adjusted Estimate of Expenditure.

 

 

7.         COMMITTEE findings and OBSERVATIONS

 

Former Department of Agriculture, Forestry and Fisheries

 

1. Lack of proper planning, which manifested in the Department’s inability to achieve some targets due to a national lockdown that came into effect in the last week of the financial year. This meant that the Department planned to carry out most of its annual activities during the last quarter and specifically, the last week, of the financial year.

 

1. Delays in the development and finalisation of important legislation that was meant to be processed and finalised in the year under review namely, the Marketing of Agricultural Products Amendment (MAPA) Bill and the Preservation and Development of Agricultural Land (PDAL) Bill.

 

1. Weak intergovernmental relations (IGR), poor coordination and lack of alignment of activities between the Department and provinces remain concerns that require attention as they compromised service delivery. This is also illustrated by continuous repeat findings by the AGSA on the reliability of performance information and non-achievement of most transversal indicator targets that are implemented by Provinces despite improvement on conditional grantsexpenditure.

 

1. The repeat audit findings on the usefulness and reliability of performance informationon the Food Security and Agrarian Reform Programme and the challenge with timeous validation of performance information are an indication that the Department’s monitoring and evaluation (M&E) processes were not effective and need further review and strengthening.

 

1. Poor governance and accountability which may have been compounded by instability at senior management service (SMS) level during the financial year under review as the Department had3 vacant DDG positions for more than 12 months while some were filled by acting incumbents on a rotational basis. This has impacted the Department’s capacity to address non-compliance and implement consequence management.

 

1. Lack of urgency in the investigation, processing and closure of irregular, fruitless and wasteful expenditure, which have been increasing over the years as actions to address the reported irregular, fruitless and wasteful expenditure were very slow, often with no consequence management. For example, irregular expenditure of R16.4 million in respect of non-compliance with National Treasury Regulation 8.14 in respect of transfer payments to a service providerthat was reportedly under investigation in 2018/19 that was reportedly awaiting condonation;and fruitless and wasteful expenditure of R26.8 million in respect of non-delivery of veterinary mobile clinics during the 2015/16 and 2016/17 financial years, which is now a legal matter.

 

1. The Audit Improvement Action Plan is either ineffective or not being properly implemented;and the Department is not paying attention to issues that are raised by the Internal Audit and the Audit Committee during the year as its audit outcomes continue to regress as a result of repeat audit findings from AGSA that are not being addresseddue to deficiencies in internal controls.

 

1. Ineffective Risk Management, which remains a serious concern considering that the Department failed to implement the Risk Management Strategy citing the impending amalgamation with DRDLR although risk management has been repeatedly flagged as a concern by the Audit Committee, which further cited concern with the resourcing of the Risk Management and Investigations Unit as current capacity is not aligned to the Unit’s mandate and function.

 

1. Despite budgetary constraints, the Department continues to underspend on important services and surrender funds to the National Revenue. Most notably, and for the second consecutive year, underexpenditure on the development of the Farmer Register (R14.4 million in 2019/20); Food Security (R12 million in 2019/20); Import-Export Systems (R23.8 million in 2019/20) and the strengthening of inspection services in ports of entry and inland as well as improvements on plant and animal quarantine services (R3.3 million in 2019/20).

 

1. Lack of progress in the implementation of the Black Producer Commercialisation Programme (BPCP); as well as lack of accountability in respect of funds that have been transferred to the Land Bank for the Blended Finance Model (total of R580 million for 3 years) to implement the BPCP and for the AgriBEE Fund (reported balance of R258 million) for sector transformation.

 

1. Poor implementation of the Covid-19 Disaster Agricultural Support Fund including non-compliance to National Treasury Procurement Regulations, which were highlighted by the AGSA’s First Audit Report; and the Department’s failure to fully account and provide the detailed information that has been requested by the Committee on the implementation of the Covid-19 Disaster Agricultural Support Fund.

 

Agricultural Research Council (ARC)

 

1. TheARC’s Audit Action Plans were not adequately addressing root causes of previously raised audit findings. This led to the continuing qualifications and overall regression in its audit outcomes 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 policies; inadequate processes and procedures to ensure that financial statements submitted for audit are valid, accurate and complete; and lack of consequence management.

 

1. As the ARC has budgetary constraints that impacted its performance, the significant increase in the irregular expenditure of R22.6 million that was incurred in the year under review was noted with serious concern.

 

1. The financial instability of the ARC and impact on its future operations as a going concern in light of the reported 40% of its external revenue that is at risk due to the Covid-19 pandemic and estimated external revenue losses for the next two years.

 

1. The appointment of the new Board was welcome and is expected to assist the entity in the implementation of its Turnaround Plan and in effectively addressing the repeat audit findings.

 

Onderstepoort Biological Products (OBP)

 

1. The new Board of the entity was welcomed and is also expected to assist the OBP in addressing some of its repeat audit findings particularly internal control deficiencies in respect of financial management, which were highlighted by the AGSA.

 

1. Dissatisfaction with the performance of the OBP on planned targets. However, the increase in revenue from vaccine sales and the improvement in production efficiencies were commended in light of the continuing refurbishment of the vaccine manufacturing facility.

 

1. The need for the OBP to intensify revenue generating activities as additional funding is required forthe completion of the Good Manufacturing Practice (GMP) Project, which will strengthen its competitiveness as the aging vaccine manufacturing facility negatively impacts its production capacity and consequently, vaccine sales.
2. In light of the financial needs of the OBP, there was a concern with the significant increase in fruitless and wasteful expenditure that was incurred during 2019/20 (R7.4 million); and the instituted investigation into the expenditure was welcome and its outcome is awaited.

 

1. The Department’s intervention to ensure that Provinces procure vaccines and other relevant products from OBP was appreciated.

 

National Agricultural Marketing Council

 

1. The achievement of all planned performance targets (100%) albeit mostly were reports, was commended; and the need for the entity to link actual deliverables to targets when reporting was highlighted.

 

1. There was a serious concern with the combined total of R125.7 million of irregular, fruitless, wasteful and unauthorised expenditure that the NAMC incurred during the year under review, which was mostly in respect of the National Red Meat Development Programme.

 

1. Repeat findings on the usefulness and reliability of performance information on the Efficiency of the Marketing of Agricultural Products Programme due to ineffective oversight on performance reporting (internal control deficiencies).

 

1. The appointment of the CEO was welcome as instability at senior management level has had a negative impact on the entity’s audit outcomes particularly non-compliance with legislation in respect of procurement and contract management as well as revenue management.

 

Perishable Products Export Control Board (PPECB)

 

1. The PPECB’s track record of maintaining clean audits for over a decade was acknowledged and the entity and its Board were applauded. The PPECB was also applauded for good governanceas well as identification and timeous consequence management on irregular and wasteful expenditure.   

 

8.         COMMITTEE Recommendations

 

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

 

1. In light of the constrained national fiscus, continue engaging with the Minister of Finance for reprioritisation of unused funds within the Department of Agriculture, Land Reform and Rural Development (hereinafter referred to as the Department) to address sectoral disasters such as droughts and disease outbreaks rather than surrendering the funds to the National Revenue. 

 

1. Fast track the finalisation of the fit-for-purpose organisational structure of the Department to strengthen the Planning, Monitoring and Evaluation functions as weaknesses in these functions contributed significantly to unsatisfactory performance, delays in the verification of provincial information and repeat audit findings particularly on usefulness and reliability of performance information.  

 

1. Prioritise the filling of vacancies at senior management service (SMS) level particularly DDGs and further engage the Presidency on the filling of the Director-General (Accounting Officer) position in the Department as uncertainty contributes to the Department’s inability to effectively and timeously address root causes of audit findings.

 

1. Ensure that the Accounting Officer reports regularly on the activities of the Intergovernmental Working Committees that are led by the Department’s DDGs and are expected to strengthen intergovernmental relations and integrated planning between the Department and Provinces.

 

1. Ensure that the Department engages with the Internal Audit Unit and the Chairperson of the Audit Committee in reviewing the Department’s Audit Improvement Action Plan and report to Parliament on a quarterly basis on the implementation of actions to address specific audit findings including investigations and action on identified irregular, fruitless and wasteful expenditure.  

 

1. Ensure that proper risk assessment has been performed during the merger of the former DAFF and DRDLR; and action plans to address the risks identified have been developed and implemented. Further ensure the finalisation of the integrated Risk Management Strategy for the Department including resourcing with competent personnel to effectively and timeously address identified risks. 

 

1. Submit to Parliament a detailed report on the implementation of the Black Producers CommercialisationProgrammeand financial breakdown since its inception; the review of the (BPCP) and the Blended Finance Model that was reportedly conducted by the Department; and a detailed account of all funds that have been transferred to the Land Bank for the Blended Finance Model.

 

1. Submit to Parliament a report on the review of the AgriBEE Fund and an update on the implementation of Micro Financial Institutions of South Africa (MAFISA) including detailed account of all funds that have been transferred to the Land Bank for AgriBEE and MAFISA including transfers to, and disbursements byintermediaries.

 

1. Submit to Parliament a detailed report on the implementation of the Covid-19 Disaster Agricultural Support Fund including a complete breakdown on the utilisation of funds that were allocated for different purposes/beneficiary categories; the M&E Plan for the implementation of the Fund; the reviewed application criteria that the Department was developing to ensure that all potential beneficiaries have access; challenges experienced and how these were or are addressed.  

 

1. Engage with the Boards of entities, namely, ARC, OBP and NAMC to ensure that assistance of the respective Internal Audit functions and Audit Committees is sought to review and effectively implement their Audit Improvement Action 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 entities should report to Parliament every quarteron the implementation of the Audit Improvement Action Plans including investigations and actions on specific irregular, fruitless and wasteful expenditure.

 

1. Provide detailed project activity reports on the implementation of the Climate Change Adaptation and Mitigation Plan (CCAMP) and the Climate Smart Agriculture (CSA) Framework Strategy.

 

1. Ensure that the Department and the NAMC set SMART (specific, measurable, achievable, reliable/realistic and time-bound) performance indicators and targets to address the repeat findings on usefulness and reliability of performance information; and deliverables should be clearly aligned to performance targets, particularly where annual targets are reports.

 

 

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.