ATC201204: Report of the Portfolio Committee on Higher Education, Science and Technology on the consideration of the Financial and Non-Financial Performance of the 2020/21 Second Quarter of the Department of Science and Innovation, dated 4 December 2020
Report of the Portfolio Committee on Higher Education, Science and Technology on the consideration of the Financial and Non-Financial Performance of the 2020/21 Second Quarter of the Department of Science and Innovation, dated 4 December 2020.
The Portfolio on Higher Education, Science and Technology, having considered the Financial and Non-Financial Performance of the 2020/21 Second Quarter of the Department of Science and Innovation, reports as follows:
Section 5 of the Money Bills Amendment Procedure and Related Matters Act (9 of 2009) (hereafter, the Money Bills Act), as amended by Act 13 of 2018, requires the National Assembly, through its committees, to annually assess the performance of each national department. This culminates in a committee submitting a Budgetary Review and Recommendation (BRR) Report where the committee may make recommendations on the forward use of resources to address the implementation of policy priorities and services, as the relevant department may require additional, reduced or re-configured resources to achieve these priorities and services.
To give effect to the requirement of Section 5 of the Money Bills Act, the Portfolio Committee on Higher Education, Science and Technology (hereafter, the Committee), on 17 November 2020, considered the 2020/21 second quarter financial and non-financial performance of the Department of Science and Innovation (hereafter, the Department or DSI) against the Department’s predetermined objectives and targets.
- Department of Science and Innovation
The 2019 White Paper on Science, Technology and Innovation, which seeks to specifically enhance the role of innovation, now sets the current long-term policy direction for the National System of Innovation (NSI) and seeks to ensure an increasing role for science, technology and innovation (STI) to accelerate inclusive economic growth, increase the competitiveness of the economy, and improve the livelihoods of South Africa’s citizens.
The Department, building on the successes of the previous period and to ensure that the NSI expands its positive impact on reducing poverty, inequality and unemployment as envisioned by the 2019 White Paper, identified the following six outcomes for the period 2020-2025:
Outcome 1: A transformed, inclusive, responsive and coherent NSI
Outcome 1 seeks to improve the contribution of the NSI to achieving the goals of the NDP. The key driver of these contributions will be the Decadal Plan, which will define the critical missions that South Africa will pursue during the period 2020-2030. The four outcome indicators against which performance will be measured are:
i) Percentage increase in the number of formalised partnerships between different category actors of the NSI that advance Decadal Plan priorities;
ii) Number of STI missions introduced and adopted by Cabinet that crowd in resources and capabilities across the NSI;
iii) Percentage increase in the investment support by government that advances gross expenditure on research and development (GERD) towards 1.1% of GDP (revised down from former target of 1,5%); and
iv) Number of approved strategies that give effect to the agreed dimensions of transformation to be effected in the NSI.
Outcome 2: Human capabilities and skills for the economy and for development
Outcome 2 seeks to further address the lack of transformation within the NSI. Hence, the Department will continue as well as expand the transformation agenda in all its science focus areas. The Department’s agenda targets four levels of transformation; namely, spatial, institutional, demographic and transdisciplinary transformation. The five outcome indicators against which performance will be measured are:
i) Number of Department-funded PhDs graduating annually as a contribution to the NDP target of 100 PhDs per million population by 2030;
ii) Number of artisans and technicians absorbed into the economy in sectors where DSI has active programmes;
iii) Percentage increase of women and black researchers in South Africa’s Research workforce;
iv) Percentage increase of PhD-qualified teaching and research staff; and
v) Improved knowledge about science among the general public.
Outcome 3: Increase knowledge generation and innovation output
Outcome 3 seeks to increase South Africa’s research productivity, currently 0.88% of global share, to 1% of global output. The three outcome indicators against which performance will be measured are:
i) Increase South Africa’s share of global publication outputs;
ii) Percentage increase in prototypes, technology demonstrators, pilot plants that advance industrialisation through innovation; and
iii) Percentage increase in patent and design applications filed from publicly financed research and development (R&D).
Outcome 4: Knowledge utilisation for economic development in (a) revitalising existing industries and (b) stimulating R&D-led industrial development
Outcome 4 seeks to drive economic development through various initiatives associated with the sectoral masterplans and revitalised industrial strategy. The four outcome indicators against which performance will be measured are:
i) Rand value of research, development and innovation (RDI) investment attracted to support RDI needs identified through the sectoral masterplans process;
ii) Percentage increase in Small, Medium and Micros Enterprises (SMMEs) or Co-operatives whose performance has improved or who have secured new opportunities through support provided by the Department and its entities;
iii) Percentage increase in the commercialisation of granted IP rights from publicly-funded R&D; and
iv) Number of new R&D-led industrial development opportunities initiated by the Department.
Outcome 5: Knowledge utilisation for inclusive development
Outcome 5 seeks to advance the vision of an inclusive and responsive NSI that provides equitable access to the country’s knowledge infrastructure, and supports the broader concept of innovation. The two outcome indicators against which performance will be measured are:
i) Grassroots innovations whose commercialisation has been facilitated by the support / access of the multi-tiered support package provided by the Department and its entities; and
ii) Publicly-funded IP made available (accessible) in support of grassroots innovators.
Outcome 6: Innovation in support of a capable and development state
Deploying national STI interventions is a challenge because the Department does not have a concurrent function within provincial and local government. However, the Department contributes to the development of an innovation ecosystem and a capable and developmental state via its Regional Innovation Support programmes. Outcome 6 seeks to increase the spatial footprint of innovation support so that innovation will enable localised socio-economic development. The four outcome indicators against which performance will be measured are:
i) Increase in the number of use cases of decision support systems;
ii) Number of demonstrators that have successfully introduced a new way of delivering a service;
iii) Number of districts / metros supported with technology-based applications as part of the District Development Model for Service Delivery Improvement; and
iv) Evidence informed integration of innovation in service delivery.
The Department’s original 2020/21 budget allocation increased from R8.1 billion in the 2019/20 financial year to R8.8 billion. This represented, when adjusted for inflation, a real increase of 3.1%; and was the first real increase in the Department’s budget allocation since the 2015/16 financial year. In terms of economic classification, the apportionment of the Department’s 2020/21 budget allocation of R8.8 billion remained the same as in previous years and comprised Current payments of R632.5 million (7.2%), Transfers and subsidies of R8.2 billion (92.8%) and Payments for capital assets of R2.8 million (0.03%).
The 2020/21 Special Adjustment Budget revised the Department’s 2020/21 budget allocation from R8.8 billion to R7.36 billion. The total funds suspended for COVID-19 purposes amounted to R1.76 billion, where R324 million had been reprioritised for the Department’s COVID-19 interventions. Hence, the total net downward revision of the Department’s budget allocation equalled R1.44 billion, and comprised R40 million from Compensation of employees, R53.4 million from Goods and services and R1.34 billion from Transfers and subsidies (Table 1). The budget cut to Transfers and subsidies comprised R295 million from the Parliamentary grant transferred to entities and R1.05 billion from transfers to specific projects and programmes. The latter amount constituted 72.9% of the total cut to the Department’s budget.
The apportionment of the Department’s revised 2020/21 budget allocation across its five Programmes (as well as the economic classification) remained more or less the same, and these Programmes continue the priorities of strengthening and expanding STI human capital development and ensuring that innovation and knowledge underpin the government’s growth strategy. Hence, Programmes 2 (19%), 4 (52%) and 5 (24%) that are responsible for the transfers to the Department’s entities; still received 94% of the Department’s total budget allocation. Within the Programmes, the largest net adjustment of R1.07 billion was effected on Programme 4: Research, Development and Support because it is allocated the largest share (52%) of the Department’s total budget; R1.8 billion of Programme 4’s budget was earmarked for infrastructure projects that would now be delayed due to COVID-19 measures; the other programmes had already redirected substantial amounts of their current budget to support COVID-19 initiatives; and most of Programme 4’s projects reported surpluses from the 2019/20 allocation. It is hoped that these surpluses will sustain these projects for the remainder of the 2020/21 financial year; however, this will be monitored and assessed mid-year.
- 2020/21 Second Quarter – 1 July 2020 to 30 September 2020
At the end of the second quarter, the Department spentR3.7 billion or 50.4% of the available budget. This translates to R944 million or 20.3% slower spendingagainst the projected expenditure of R4.7 billion for the quarter. The underspending is mainly attributable to slow spending of transfers and subsidies within the Research, Development and Support and SocioeconomicInnovation Partnerships Programmes due to the delayed implementation of various projects.
The Department achieved 20 (61%) and did not achieve 13 (39%) of the planned 33 performance targets for the quarter under review.The reason for a large number of the targets that were not achieved was ascribed to the COVID-19 lockdown and its effect on operations and productivity. Furthermore, ongoing and worsening staff capacity issues, as well as the current review of section 11D of the Income Tax Act, continues to hamper the administration of the Research and Development Tax Incentive.
Programme 1: Administration: Actual expenditure for the second quarter amounted to R107.6 million or 33.8% of the Programme’s available budget of R318.3 million for the financial year, representing a variance of R40.7 million or 24.7% underspending of the projected spending for the second quarter.The underspending is attributable to slow spending due to the COVID-19 pandemic.Programme 1 achieved two of the four performance targets for Quarter 2.
Programme 2: Technology Innovation: Actual expenditure for the second quarter amounted to R653.3 million or 47.5% of the Programme’s available budget of R1.4 billion for the financial year, representing a variance of R39.3 million or 5.7% underspending of the projected spending for the second quarter. The variance was mainly on transfers and subsidies due to the non-transfer of the South African National Space Agency and the Hydrogen Strategy Capital projects in the months in which expenditure was originally planned. Programme 2 achieved two of the three performance targets for Quarter 2.
Programme 3: International Cooperation and Resources: Actual expenditure for the second quarter amounted to R30.6 million or 25.2% of the Programme’s available budget of R121.1 million for the financial year, representing a variance of R31.7 million or 50.9% underspending of the projected spending for the second quarter. The variance was mainly on transfers and subsidies. In addition, the COVID-19 national lockdown has drastically limited the attendance of meetings abroad and equally the hosting of meetings. Programme 3 achieved four of the eight performance targets for Quarter 2.
Programme 4: Research, Development and Support: Actual expenditure for the second quarter amounted to R2.1 billion or 53.9% of the Programme’s available budget of R3.8 billion for the financial year, representing a variance of R580.6 million or 22% underspending of the projected spending for thesecond quarter. The variance was mainly due to transfer and subsidies on the following:
- South African Radio Astronomy Observatory: delays in the finalisation of the consolidated contract;
- Research and Development Infrastructure: delays in signing of the contract by the entity; and
- Square Kilometre Array: delays in transferring funds to allow the process of reprioritisation to be finalised.
Programme 4 achieved eight of the 11 performance targets for Quarter 2.
Programme 5: Socio-Economic Innovation Partnership: Actual expenditure for the second quarteramounted to R864.3 million or 48.9% of the Programme’s available budget of R1.7 billion for thefinancial year, representing a variance of R251.8 million or 22.6% underspending of the projectedspending for the second quarter. The variance was mainly due to transfers and subsidies on the following:
- Information Communication Technology: The Data Science for Impact Decision and Enablement was notbe paid due to the cancellation of the programme in 2020/21, funds will be reallocated within the ICTprojects;
- The Office of the Digital Advantage and the Block Chain projects: projects were delayed due to the slowspending by the programme;
- Environmental Innovation: The Water Research Council submitted a revised business plan in responseto the risk mitigation measures being implemented by the Directorate: Environmental Services andTechnologies with regard to the effect of COVID-19 on outputs. A submission to amend the contract inview of the unforeseen impact of the pandemic has been routed; and
- Advanced Manufacturing Technology Strategy: The Manufacturing Indaba was postponed to December2020 due to COVID-19, delaying the payment process.
Programme 5 achieved four of the seven performance targets for Quarter 2.
From the COVID-19 funds, expenditure was mainly under consumable supplies, for example: sanitisers,sanitiser dispensers, masks, etc. With the move to level one of the COVID-19 lockdown and the return tooffice, the Department is anticipating improvement on spending as more activities become operational.
Compensation of Employees
Spending on compensation of employees was R155.2 million against a projected adjusted appropriation of R382 million. This translates to underspending of R25.6 million or 6.7%. The Department had a year-end headcount of 373 posts against a total of 470 funded posts, resulting in 97 vacancies.
- Committee Observations
The Committee made the followingobservations in relation to the financial and non-financial performancefor the 2020/21 SecondQuarter:
- Members made congratulatory remarks to the Director-General and the Department for their performance and the accolades they achieved.
- Members asked about the written responses for outstanding matters, viz. an explanation for the irregular expenditure incurred during 2019/20 and the timeframe and plan for completion of the Decadal Plan, raised by the Committee.
- Members raised their concern about the less than 1% spent on procuring services and goods from small and medium enterprises, in particular those owned by black females and persons with disabilities
- Members urged the Department to include and support more persons with disabilities in their STI programmes, especially the blind.
- Members noted with concern that the Chief Financial Officer (CFO) for the Department of Science and Innovation has been appointed as theinterim CFO for the Department of Higher Education and Training until a suitable candidate for the position is found.
- Committee Recommendations
The Portfolio Committee on Higher Education, Science and Technology, having considered the financial and non-financial performance of the Department of Science and Innovation for the 2020/21 Second Quarter, recommends that:
- The written responses to outstanding matters be provided to the Committee as soon as possible.
- The Department ensure that its Procurement Strategy adequately and fairly includes small and medium enterprises, in particular those owned by black females and persons with disabilities. The Committee will monitor this expenditure when the Department delivers the next quarterly performance brief.
- The Department ensures the fair and representative inclusion of persons with disabilities in its STI programmes and initiatives.
Report to be considered.
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