National Flagship Institutions; Free State Performing Arts Centre Strategic Plan & Budget 2007/8

ARTS AND CULTURE PORTFOLIO COMMITTEE
29 May 2007
NATIONAL FLAGSHIP INSTITUTION & PERFORMING ARTS CENTRE OF THE FREE STATE STRATEGIC PLAN & BUDGET 2007/8: BRIEFINGS

Acting Chairperson: Ms P Tshwete (ANC)

Documents handed out:
Northern Flagship Institution Presentation: Strategic Plan and Budget 2007/2008: Part1, Part2 and Part3
Northern Flagship Institution Annual Report
Performing Arts Centre of the Free State Presentation
PACOFS Performing Arts Centre of the Free State Annual Report 2005/2006: Part1 & Part2

SUMMARY
Delegates from the National Flagship Institution and from the Performing Arts Centre of the Free State met again with the Committee. They had first appeared at the Committee meeting on 15 May, but, owing to a misunderstanding, had not brought complete financial documentation, and this meeting would address those issues.

The National Flagship Institution noted that was staging three major exhibitions – Footprints of the Past: Reflections of South African Cultural History in Tshwane, at the National Cultural History Museum, A New Exhibition on Biodiversity at the Transvaal Museum, and the Meteorite Crater, Climate Change and People of Tshwane Exhibition at the Tswaing Meteorite Crater. A breakdown of the budgets was tabled. It was indicated that the Institution was broadening its perspective to make the museums under its auspices less narrowly scientific, more user-friendly, more interactive, and embracing of an African world-view. Oral history was of special importance. NFI’s budget was however woefully inadequate. Salaries and working conditions were uncompetitive resulting in the loss of highly skilled employees. The Institute spent most of its budget on personnel, but had to employ certain well-experienced and well-paid employees to comply with the Public Finance Management Act. The Institute needed R130 million to ensure that the museums under its jurisdiction could be fully transformed and upgraded by 2010. Full details were given of the emphases of matter in the 2005/06 audit report and explanations given for the steps followed to address these issues. Systems and policies had been developed and were being implemented. Questions by members addressed the ownership of the museum buildings, the use of the name Tshwane, name changes of museums, the 95% budget spending on personnel costs, the number of staff, the vacancies, whether funding would become available from the Lotto, and the reasons for staff resignations. The Committee would support the Institutes's request for more funding to fulfil its aims and avoid redundancies.

The Performing Arts Centre of the Free State was established in 1963 and was well-resourced with facilities that included the Sand du Plessis Theatre Complex. The Centre had changed its direction from being a production house to a playhouse and facilitating institution. By strict financial discipline, staff reduction, and increasing rental income it had succeeded in changing a financial deficit into a surplus in the years between 2004 and 2007. It currently had a budget of R6 million for artistic events. It had an excellent opportunity to confirm itself as the one major exponent of arts and culture in the Free State. Various festivals and productions were presented and it also contributed to the infrastructure of community arts development. For the past three financial years PACOFS had received an unqualified financial report from the Auditor-General. It had an effective internal control system in place and its audit committee was fully functional. It had developed policies and strategies to ensure good corporate governance, had updated its procurement, complied with the Preferential Procurement Policy Framework Act, had held a skills audit, and had been involved in negotiations over the longer working hours of some stage personnel. it needed to increase the number of senior women employees and disabled. It aimed to secure partnership with provincial and local government and the business sector. Questions by members related to the drop in personnel spending, the effect of this on efficiency, the forensic investigation into three employees, the disposal of obsolete assets, ownership of the buildings. The Committee proferred support and encouragement to PACOFS. s four years.

MINUTES
Northern Flagship Institution (NFI) Presentation
The Acting Chairperson welcomed again the NFI delegation – Mr M Makgolo, Chief Executive Officer of the NFI, Professor A W Oliphant, Chairperson of the NFI Council, Ms Thandi Sakawuli, Chief Financial Officer, and Mr Jacobus Basson, Projects Officer. He reminded the Committee that NFI had been asked to return to  rectify misunderstandings concerning the financial documentation that should have been submitted to the Committee.

Mr Makgolo had explained NFI’s history, administrative profile and mandate at the Committee’s 15 May 2007 meeting. He now showed slides, together with financial statistics for ‘Priority special projects’. These comprised three major exhibitions during 2007/2008 – Footprints of the Past: Reflections of South African Cultural History in Tshwane, at the National Cultural History Museum, A New Exhibition on Biodiversity at the Transvaal Museum, Meteorite Crater, Climate Change and People of Tshwane Exhibition at the Tswaing Meteorite Crater. Also under priority special projects was the GaMohle Oral History Project, a research project, and The Birth of a Democratic Nation exhibit which had a focus on the City of Tshwane and featured a rotating selection of visual and audio-visual artworks reflecting South African cultures, centres of knowledge, belief systems, and a formal display on the Constitution of the Republic of South Africa 1996, with particular reference to the right to freedom of conscience, religion, thought, belief and opinion. Full details were contained in the presentation.

Mr Makgolo said that NFI had inherited museums that had projected an outdated view of South African society. NFI aimed to make the museums user-friendly, with a much broader prospective, indicating how humans had through all ages interacted with the natural environment. NFI also aimed to embrace an African perspective. Oral history was of special importance. Four students were being trained as oral history practitioners and had interviewed 39 narrators from townships around Tshwane with a view towards fostering community engagement and access to their own heritage for members of the community, especially the elderly, whose memories were a priceless resource. NFI was engaging on a project to re-brand itself and had chosen the acronym ‘mOsa’ meaning ‘National Museums of South Africa’. The acronym and design were tabled.

NFI needed R130 million to ensure that the museums under its jurisdiction could be fully transformed and upgraded by 2010 and was seeking support from the Government and especially this Committee. The report of the Auditor-General for 2005/2006 had raised an emphasis of matter on post-retirement medical aid benefits. Mr Makgolo explained that NFI management had since adjusted the disclosure requirement. In regard to the Auditor-General’s findings of non-compliance with laws and regulations, NFI had made adjustments to the residual value of assets and financial leases, and had put in place a risk management policy. In regard to the Auditor-General’s remarks on the collections policy, NFI had now developed a policy and it would be submitted for approval in July 2007. The Auditor-General had further found that the validity of non-financial performance information could not be verified. NFI had now again developed a policy to control verification that would be submitted for approval in July 2007. The Auditor-General had commented on the leave provision, and NFI had reconciled leave since July 2003 and the leave system had been adjusted accordingly.

Ms Sakawuli added that NFI had wanted to present a comparison of 2005/2006 figures for post-retirement medical aid benefits but the 2006/2007 figures were still being audited and were due for submission to NFI’s Council on 31 May 2007. NFI management was encouraging staff members to take all the leave to which they were entitled to reduce the leave liability. In terms of compliance with legislation, NFI could not avoid such a high expenditure on personnel as compared with core business. NFI had an approval from the Treasury to put unspent funds in an account with the Reserve Bank. The Council  and management extended an invitation to the Committee to visit the museums under NFI’s auspices.

Discussion
The Acting Chairperson asked about the meaning of rented equipment.

Mr Makgolo explained that this referred to office equipment.

Ms D Van der Walt (DA) said she was concerned at the continued use of the name Tshwane, although the Minister of Arts and Culture had not yet agreed to the change of name, and the city was still formally named Pretoria.

Mr Makgolo said that NFI used the name ‘Tshwane’ because the museums were spread over the area that fell under the jurisdiction of the Tshwane Metropolitan Council, and there was no need for an approval from the Minister for those name changes.

Ms Van der Walt asked the reason for the R325 000 remuneration for external auditors, why NFI had spent R500 000 on outsourced security services, why it had spent R500 000 more on staff, and who owned the buildings that NFI occupied. She pointed out that the Minister had said that he would penalise entities that presented incomplete financial reports.

Mr Makgolo said in response to the question on ownership of buildings, that NFI’s various premises belonged to the Department of Public Works, and NFI had to contribute towards the cost of upkeep.

Mr M Matlala (ANC) asked how far NFI had progressed in changing apartheid era names such as those of the Transvaal Museum, and what plans NFI had to mark the 2010 World Soccer Cup Event.

Mr Makgolo reported that one museum had objected to the name change even after the Department of Arts and Culture and the Portfolio Committee had agreed to NFI’s request to change the museum names. This was not conveyed directly to Mr Makgolo; he had discovered it from the Government Gazette. He asked for the Committee’s continued support to complete the name changes.

Mr Makgolo said that the NFI’s programme of change included greater interaction with young people from townships and rural areas, and this was partly motivated with preparations for 2010 in mind.

The Acting Chairperson noted that GaMohle had formerly accommodated the ‘Bantu’ Commissioner’s Office, a word that had had an unfortunate connotation.

Ms N D Mbombo (ANC) commented on the long history of name changes, from ‘Native Affairs’ to ‘Bantu Affairs’, to ‘Plural Affairs’: it had been a long history with different ministers introducing new names.

Ms D Kohler-Barnard (DA) asked how NFI could spend 95% of its budget on staff which resulted in hardly any budget being allocated to the museums’ core business. She also asked for an explanation why NFI was employing more people despite the deficit and losses.

Mr Makgolo said that NFI had to comply strictly with legislation, otherwise it would be questioned for non-compliance. NFI had had to employ specially qualified people, at great expense, in its efforts to carry out work-studies as part of the process of restructuring. Amalgamations had taken place without prior study. It was a great concern to NFI that this had involved high expenditure.

Professor Oliphant added that NFI’s budget was woefully inadequate, and salaries and working conditions were poor, resulting in the loss of highly skilled employees. The Minister had agreed to meet with NFI to discuss these issues.

Ms Sakawuli added that the figures for 2005/2006 looked high in comparison with 2006/2007 because of the backlog from 2004/2005.

The Acting Chairperson said that NFI’s organisational chart did not indicate the number of staff in the museums.

Mr Makgolo said that the NFI’s total number of staff was 260. Salaries were much lower than in other institutions, an inherited situation as he had explained earlier. He said that NFI lacked a sustainable budget for staff.

Mr G Lekgetho (ANC) asked how many vacancies existed in the NFI and how NFI was going to deal with those vacancies.

Mr Makgolo responded that NFI wished that it could fill vacancies and attract highly committed young people, but lacked sufficient funds, despite the Government’s policy to promote employment. NFI’s core business was exhibitions, but because of under-funding, the largest proportion of the budget had to be devoted to personnel.  It had lost vital research scientists. The heritage sector competed for budget with other sectors such as housing. NFI had to develop a strong business case to convince Government of the importance of the heritage sector.

Ms D Kohler-Barnard asked what chance there was of any more funding from the Lotto project.

Mr Makgolo said that the companies responsible for administering the Lotto must be considered separately from the Lotto trust funds. In that light, it was possible that future funding might be obtainable from the trust funds.

The Acting Chairperson asked why staff members were resigning from the NFI and how such resignations affected the NFI’s stability.

Mr Makgolo said that staff members resigned for various reasons, but most frequently because of better opportunities elsewhere. NFI had recently lost young employees who had been offered fringe benefits such as a car and mobile phone allowance, as well as better salaries, elsewhere.

The Acting Chairperson requested Members who had any further questions to submit them in writing to NFI. She invited the NFI delegation to visit Parliament on Friday 08 June 2007 to hear the Arts and Culture Budget debate. Committee Members would support NFI’s request for more funding to fulfil its aims and avoid redundancies. She felt positive about the work of NFI, and hoped to visit it next year. 

Performing Arts Centre of the Free State (PACOFS) Presentation
The Acting Chairperson welcomed again the PACOFS delegation – Ms Thandiwe Kgosidintsi, Chairperson of the PACOFS board, and Mr Barry R Swanepoel, Acting Chief Executive Officer of PACOFS. This delegation had been asked to return to this session to deal with the financial statements, that were not previously included in the presentation.

Ms Kgosidintsi said that PACOFS was an old and well resourced institution with a magnificent theatre venue, worth over R180 million. PACOFS was in the process of changing its direction from being a production house to a playhouse and facilitating institution. Posts were becoming vacant, but it had proved difficult to fill vacancies, and there had been a financial deficit, which had recently been turned around to a financial surplus.

PACOFS had previously had a senior staff with a culture of self-enrichment,but was now facing a problem in attracting and retaining artists, who tended to move to Johannesburg. At this critical time PACOFS needed the Committee’s guidance and support. Three senior staff members had been suspended, and frustrated artists were leaving, while most of the budget had to be allocated to salaries rather than to the promotion of the arts.

Mr Swanepoel said that PACOFS had been founded in 1963, and had been a section 21 company from inception to 2003. The current facilities dated from 1979, and the Sand du Plessis Theatre Complex had opened in 1985, being then the most advanced theatre in the southern hemisphere. Although there were many positive facets to PACOFS it was also important to be realistic about its many challenges.

At the beginning of the 2005/2006 financial year, PACOFS had a salary budget that was approximately 80% of its National Department of Arts and Culture grant. Medical aid liability also increased to R1.4 million, which was not budgeted for, and which resulted in an unacceptable financial deficit of R1.1 million. The PACOFS board and management therefore began to implement strict and stringent financial discipline and a conservative approach to procurement in order to eliminate the deficit. These measures included not filling posts when employees resigned or retired, unless they were crucial posts. Initially attempts to absorb the workload by existing staff were successful. PACOFS managed to achieve savings amounting to R4.1 million and reduced the salary component of the total budget by 10% to 70% of the total Departmental grant. These surpluses were channelled to the artistic programme for 2006/2007 and to medical and leave payout provision. PACOFS was unable to secure much, if any, funding from the private sector, since few corporate head offices were situated in the Free State.

In 2005/2006 PACOFS had presented many productions with the help of grants from the National Arts Council (R750 000), from the National Lotteries Distribution Trust Fund (R1.1 million), and from the Transnet Foundation (R500 000). It entered into many collaborative agreements with artists and promoters to ensure that it mounted as many artistic events as possible and shared resources. It had rented out most of its facilities, when not in use, at market related prices to ensure future financial sustainability. It lastly facilitated, presented or co-presented festivals such as MACUFE, the Volksblad Arts Festival and the Basha Youth Arts Festival.

At the beginning of the 2006/2007 financial year PACOFS still did not have enough provisions for medical and leave payouts, but was confident of achieving this within a year. The strict financial discipline mentioned earlier was continued. Costs were curbed to achieve estimated savings of R2 million, and a reduction in the salary budget component by a further 10% by the end of the year, down to 60% of the total Departmental grant. PACOFS was able to structure an artistic budget of R2.6 million to present artistic projects from the grant received from the Department of Arts and Culture (DAC), and many other productions, aided by collaborations and rental income. The National Lotteries Distribution Trust Fund indicated that they would consider future funding once their current funded projects had all been presented. PACOFS would in future enter into a service level agreement with the Free State Department of Sport, Arts and Culture to present MACUFE and stage it on their behalf.

By the beginning of the 2007/2008 financial year, PACOFS had a salary budget component of approximately 60% of the Departmental grant and now had enough provisions for medical and leave payouts and an artistic budget of R6 million. Management continued to comply with the Public Finance Management Act (PFMA). However, in April 2007, three senior PACOFS officials were suspended pending a forensic investigation and Mr Barry Swanepoel was appointed to act as Chief Executive Officer.

PACOFS had a wonderful window of opportunity to confirm itself as the one major exponent of arts and culture in the Free State. In the current financial year, PACOFS would continue to present or co-present festivals such as the Volksblad Arts Festival, Vuka Music Festival and Workshops and the Basha Youth Arts Festival. It was also contributing to the infrastructure of community arts development, including venues, sound equipment, free tickets to selected shows, lighting equipment, front-of-house personnel, in-house recordings, instruments, décor, props, costumes, rehearsal and office space.

Its major financial achievements were reversal of the 2004/05 deficit of R1.1 million to an estimated surplus of R2 million in 2006/2007. For the past three financial years PACOFS had received an unqualified financial report from the Auditor-General. PACOFS had an effective internal control system in place and its audit committee was fully functional. Total compliance was achieved in the preparation of the Annual Report. Major challenges had been identified but were being met, including effective budget control, developing more policies to ensure good corporate governance, financial training for non-financial managers, and supply chain training for all managers.

PACOFS had achieved much in terms of procurement as all old outdated procurement policies had been replaced with the new requirements of the supply chain management system. All committees were now functioning according to the Preferential Procurement Policy Framework Act and its related regulations. The demand/acquisition management unit invited quotations on a rotation basis. PACOFS aimed to maximise participation by black-owned businesses.

In the Human Resource field a skills audit to determine training needs would receive priority in 2007/2008. Employees were regularly informed on how to adhere to PACOFS’ basic conditions of employment. Eight employees had been dismissed recently for charges ranging from theft, fraud and assault, and PACOFS faced difficulties in adhering to the working hours prescribed in the Basic Conditions of Employment Act, since in certain departments employees such as stage personnel were required to be involved in a production from the start to the end, resulting in longer working hours that prescribed by the Act. Efforts to resolve these problems with the Department of Labour had failed. The Unions concerned had been willing to participate only when salary negotiations were included in the discussions. The signing of a revised PACOFS Conditions of Employment would ensure the enhancement of labour relations between PACOFS, the unions, and all PACOFS employees.

A major challenge was employment of women in senior positions, as well as people who were physically challenged. A process was under way to ensure that a large percentage of current employees were trained to be multi-skilled to ensure that they could render a diverse range of services.

PACOFS’ way forward was to secure partnerships with all provincial government departments, municipalities and the business sector to ensure additional income through renting out facilities and services.

Discussion
Ms Kohler-Barnard asked for further clarity on the difficulties in negotiating with the labour unions. She queried the figures concerning the reduction of the personnel portion of the budget from 80% to 60%.

Mr Swanepoel said that PACOFS would bring its labour practices into conformity with the Basic Conditions of Employment Act as soon as possible. He clarified that the percentage of the total grant spent on salaries had dropped from 80% in 2005/2006 the portion was 80% to 70% in 2006/2007 and 60% currently.

Mr C L Gololo (ANC) asked if the renting out of the facilities meant that PACOFS was shifting its business focus to earning income from rentals.

Mr Swanepoel said that after 1994 PACOFS had been transformed from being a production house to a facilitating house, and that contractual deals were therefore included in the business. Rental income helped sustain its artistic budget.

Mr Lekgetho asked who was conducting the forensic investigation.

Ms Kgosidintsi said that PACOFS had appointed an independent firm of auditors that had completed the first phase of the investigation and was about to submit its report to the board.

Mr M R Sonto (ANC) asked what necessitated the disposal of obsolete assets.

Ms Kgosidintsi said that obsolete assets included such items as stage props and costumes that dated from the era when PACOFS had been a production house, and that were no longer useful to it. These had been given to schools and other deserving causes.

Mr Swanepoel added that PACOFS had had to upgrade its sound equipment. Computer equipment, which had a limited lifespan, had usually to be upgraded within 18 months of purchase and replaced at the end of three years. PACOFS followed legislation in regard to disposal of its assets.

Ms Van der Walt wondered what impact the suspension of the three officials had had on the activities of the PACOFS.

The Acting Chairperson asked who owned the buildings used by PACOFS.

Mr Swanepoel said that the  Department of Public Works owned the buildings.

Ms Van Der Walt was pleased with progress, in particular with matters raised by the Auditor-General. She said that it was evident that PACOFS had worked hard to generate other forms of income, but reminded PACOFS that it must still pay attention to items mentioned under ‘matters of emphasis’ in the Auditor-General’s reports.

Mr Sonto commented that it was noteworthy that PACOFS had reduced the personnel costs percentages down to 60% of grant, but this must have affected the day-to-day operations. He asked how PACOFS had managed to adapt to the loss of staff entailed in the reduction.

Mr Swanepoel said that the natural process of retirement and voluntary resignations had achieved the reduction in staff. Remaining staff absorbed the workload comfortably during the first year, because previously PACOFS had been overstaffed, but logistical problems had arisen in the second year. During 2007/2008 PACOFS would make every effort to examine its human resource policies in an equitable and transparent manner.

The Acting Chairperson asked how long the term of office was for board members.

Ms Kgosidintsi said that the present board had been appointed in 2003 and would remain in office until 31 August 2007. The term of office for a board member was four years.

Ms N D Mbombo (ANC) noted from the Annual Report that PACOFS sold liquor and asked for clarity.

Ms Kgosidintsi said that PACOFS made a considerable amount of money on the sale of refreshments to audiences, and this included liquor.

The Acting Chairperson noted that the arts must be kept alive and flourishing. She was pleased by this meeting, which had given the Committee a better opportunity to acquaint itself with PACOFS' aims and requirements. The Committee would do its best to support PACOFS and hoped to visit it early in 2008.

The meeting was adjourned.