DIRCO, African Renaissance & International Co-operation Fund Quarter 3 performance

Meeting report

Opening remarks
The Chairperson welcomed all in attendance to the first public meeting of the Portfolio Committee for 2019. The Chairperson stated that the Committee embarked on a successful oversight visit to the office of the Department of International Relations and Cooperation (DIRCO) in Pretoria, and they were grateful to the Minister and officials of the Department for visits’ success.

The Chairperson stated that during the oversight visit, the Committee asked the Department to brief it on the elections in the Democratic Republic of Congo (DRC), Madagascar, Mali, ‘Brexit’ and to advise on South Africa’s role pursuant to its assumption of a third term as a non-permanent member of the United Nations Security Council (UNSC)

The Chairperson said that Mr S Mokgalapa (DA) had informed him at the oversight meeting that he would be attending his last Committee meeting after having served in the Committee for eight years. Mr Mokgalapa had accepted an appointment of Mayor of the City of Tshwane from his party.

The Chairperson said that Ms R Lesoma (ANC) had informed him that she will be late.

Mr M Maila (ANC) stated that during the course of the meeting he will need to be excused to attend another Committee meeting.

Mr Kgabo Mahoai, Director-General (DG), DIRCO apologised on behalf of Mr Caiphus Ramashau, Acting Chief Financial Officer (CFO), DIRCO, who was not able to be in attendance.
 
The agenda for the meeting was adopted.

Presentation on DIRCO 2018/2019 third quarter report

Mr Mahoai introduced the members of his delegation to the Committee. He informed the Committee that Ms Shameema Moosa, Director: Monitoring & Evaluation (M&E), DIRCO will be handling the first part of the presentation on performance information after which he will present the second part on Financial information.

Ms Moosa stated that in terms of Programme one: Administration, all targets were achieved by the department in the third quarter. She also stated that there was a 100% compliance with the 30-day payment period for undisputed invoices. 22 specialised and 23 generic skills training programmes were implemented and three advocacy activities were organised.

There was an increase in the sales of manufactured value-added exports from the Industrial Policy Action Plan (IPAP) priority sectors to the value of R426 million, and there was a total value of commitment in the investment pipeline of R193.5 Billion.

On Programme two: International Relations, there were 22 trade and investment engagements, 14 tourism events, 16 engagements with the chamber of commerce, 27 meetings with high-level potential investors, and 19 meetings with targeted government ministries. This contributed to the R5.1 billion export sales of value-added manufactured products and 2.57 million tourist arrivals.

On Programme three: International Cooperation, South Africa had participated in the G20 Leaders summit in Buenos Aires where it was successful in advancing its G20 priorities. Also, South Africa attended the regular sessions of the United Nations General Assembly, the 11th Extraordinary session of the Assembly of African Union Heads of State and Government, the Indian Ocean Rim Association (IORA) of Ministers meeting, the Informal meeting of BRICS (Brazil, Russia, India, China and South Africa) leaders and the South Africa-EU summit.

On Programme four: Public Diplomacy, three of four targets were achieved and on the targets on State Protocol, all the target was achieved.

Mr Mahoai said that the total expenditure for the department in the third quarter amounted to R4.5 billion or 70.1% of the appropriation. And compensation of employees was 78%. He said that by including the expenditure of the 13 missions on the compensation of employees, the percentage spent increases to 79%. He added that the anticipated overspending of compensation of employees is being reduced due to the favorable exchange rate as well as the delayed filling of vacancies at the missions abroad.

In terms of FOREX, the South African Rand performed favorably towards the end of the financial year compared to what it was at the beginning of the financial year.

On Programme one: Administration, the adjusted appropriation was R1.5 Billion, and the accumulated actual expenditure totaled R871.7 million which is 55.6% of what was appropriated. Payments for capital assets was at 23.2%, however, because there were still outstanding expenditures such as the relocation of the New York Chancery and the renovation of diplomatic lounges at the airport, the percentage had to be raised to 65.5%.

For Programme three: International Cooperation, the total expenditure as at the third quarter amounts to R388.8 million which constitutes 73% spent. Compensation of employees was still higher because of payments to people who were paid their allowances in foreign currencies when the Rand was underperforming.

Presentation on African Renaissance and International Cooperation Fund, third quarter performance information

Ms Lerato Sempo, Finance Manager, ARF, provided the Committee with explanations on the third quarter performance of the African Renaissance and International Cooperation Fund (ARF). On the number of ARF advisory committee meetings held, the target for the quarter was to hold one meeting, but two were held. On the percentage of requests reviewed, the target was 100% of requests, and that target was also met. On the percentage of approved disbursement processed, 100% of approved disbursements were processed to support democracy and good governance, and 100% respectively for the targets of socio-economic development, humanitarian assistance, capacity building and cooperation. On the percentage of quarterly progress reports produced, 25 project reports were produced for every project undertaken.

On the ARF’s financial report, Ms Sempo said that the ARF received an annual allocation of R38.6 million from the National Treasury (NT) for the 2018/19 financial year. They had received interest of R59.2 million bringing the total to R98.2 million. There was a FOREX loss of R33.7 million in December 2018 due to the weakening of the Rand resulting in a surplus of about R40 million.

Ms Sempo stated that cash in the bank was around R873 million and highlighted to the Committee that as per NT’s instructions in November 2018, R300 million was surrendered to it. She added that receivables were R1.1 million. Costs for projects which are committed were R666 million, and the available funds at the bank were R209 million as at 31 December 2018.

Discussion
Mr D Bergman (DA) asked about the high-level engagements that took place in the third quarter regarding payments made for the Ambassador of Palestine in South Africa and their mission. He also noted that there was no update in the report regarding the President’s announcement in 2018 about giving a visa-free status to 20 countries. He asked if the Department could give the Committee a fair idea of when and how this was going to happen, and also, why the ARF was asked to surrender R300 million from their budget.

Ms S Kaylan (DA) asked if the 25 projects stated as accomplished in the presentation by the ARF were available in any annexure or Annual Report because the details regarding the projects are unknown. Given that the financial year was coming to an end, Ms Kaylan asked if the commitments for some stated projects could be rolled over to other projects.

On the report on generic skills training, Ms Kaylan asked what the training entailed and who it was directed at.

Regarding the organisation of 14 tourism events, Ms Kaylan asked why a part of the budget of DIRCO was going to Tourism. Also, on the report regarding the consular assistance on mortal remains provided during the quarter, the Committee had asked if DIRCO had the post mortem report on a businessman. The Committee asked what assistance had been given to the young people who went on a holiday and drowned in Mozambique.

Ms Kaylan asked for reasons why 13 missions did not interface during December 2018 as contained in the report. She also asked why the UNSC expenditure had not been factored in. Finally, why was the Pan-African Parliament contribution was omitted in the report on membership contributions?

Ms D Raphuti (ANC) asked which country the strategic engagement with Diplomatic/consular corps in support of facilitating diplomatic immunities and privileges was held with.

Ms Raphuti queried the high rate of transfers and subsidies which was reported at 136.6% as well as the R33 million FOREX loss reported by DIRCO. Ms Raphuti asked to be advised on what could be done to avoid such a loss in future.

Ms R Lesoma (ANC) asked who qualifies as volunteers and whether it depends on the terms of their volunteerism contract. On the ARF, she asked whether there was a tracking mechanism to ensure that the spending on projects reached the intended beneficiaries. She said that she did not understand why there was a lack of administrative interface between the diplomatic missions in December 2018.

Ms T Kenye (ANC) commended the department for surpassing their target of eight on generic skills training by accomplishing 23. She noted that out of the eight high-level engagement achievements stated by the department, she only noticed seven, and queried the absence of the eighth, and asked why this was underreported.

Chairperson said that even though the ARF is necessary because many countries are getting into the wrong hands, discussions need to be held around the gains to be made from South Africa’s contributions through the ARF. He stated that there should be economic, trade and political spin-offs from South Africa’s contributions and that national interest must be served to some extent.

The Chairperson also asked for clarifications on the currencies listed in the 2018/2019 FOREX analysis table which was included in the report.

On the ARF, the Chairperson asked what the possibility of obtaining the approval of NT to using unutilised funds of the ARF at the end of the financial year for the compensation of employees would be. He also commented on the way Saharawi was written in the report of the ARF.

The Chairperson commended the department on meeting its target on compliance with the 30-day payment period for undisputed invoices. He however sought clarity on the meaning of undisputed invoices and what the dispute was with the invoice, if any. He asked who did the final adjudication with the disputed invoices.

The Chairperson noted as odd and wanted to understand the terms of engagement between the Chamber of Commerce (COC) and DIRCO. He also wanted to know which COC was involved and whether the Department was engaging with them alone or in conjunction with another department. He sought clarity on why there was a non-achievement of targets set in this regard, and that if there was to be an engagement between the Department and the COC, there ought to be good training for personnel.

The Chairperson wanted to know how the department arrived at the figure of 22 on the specialized training programmes. He expressed concern that perhaps the targets were set low to enable the department easily to meet up.

The Chairperson commented on the use of the term ‘global governance’ in the International Cooperation agenda of the department. He asked whether the use of the term could be construed to be an act of taking responsibility of some of the “troubles in the world” not directly caused by South Africa or the African continent or whether it could mean participation in global governance. He stated that if South Africa or Africa must measure itself on issues of global governance, it must be to the extent that it is listened to.

Mr M Lekota (COPE) recommended to the Chairperson the possibility of converting the style of the meeting to a dialogue so that the questions asked are not lost.

The Chairperson declined the recommendation stating that the style being implemented is the standard practice.

The Chairperson inquired on which department made up the core group on tourism established to advance cooperation at the IORA Council of Ministers meeting.

The Chairperson asked Mr Lekota if he had any questions for the department.

Ms Kaylan had some follow up questions. She wanted to know of the financial implications, if any, of the decisions taken at the African Union summit. She also wanted to know If there was any discussion about the African Passport at the African Union summit.

Ms Lesoma asked whether the Mandela Legacy internship programme which was stated in the report as an outcome of the IORA Council of Ministers meeting will benefit other African citizens.

Responses

Mr Mahoai informed the Committee that his colleagues will first answer the questions after which he will do a recap.

Ms Mathu Joyini, DDG: Diplomatic Training, DIRCO, stated that she will begin answering the questions on training and development after which she will try to answer any other questions that she can answer.

Ms Joyini said that the generic training was provided by the section on Human Resources development to individuals in government. Specialised training includes all the training that takes place within the academy and it is offered at all levels. This is called the foreign service training made for people even at low levels such as, all foreign affairs associates and everyone in the mission orientation programme at the top. Specialised training was made specifically for foreign service.

Ms Joyini said that the SA missions focus on a variety of issues including tourism. And if the department were to promote South Africa as a holiday destination it will have to provide funds for that in conjunction with the Department of Tourism, which is why tourism ends up in their report.

Ms Joyini said that the South African mission will attend to the issue as a course of their normal consular services.

Ms Joyini said that on the issue of 136% in terms of transfers and subsidies, there are obligations which must be fulfilled.

Ms Joyini said that the department assess the programme for the entire year carefully and fits in training which must be held, linked to the transfer cycles as well as those which improve competencies are essential to driving emerging issues.

Mr M Maila (ANC), addressing the Chairperson, said that the Committee was at a stage where it ought to be developing a legacy report, and that in the legacy report which was handed over in 2014, one of the issues was the South African Development Partnership Agency (SADPA). Nothing had been done by the Committee to address the issue.

Ms Joyini said that South Africa has to do more in terms of Post-Conflict Resolution and Development (PCRD) since it has become clear that the African Union is not really good at PCRD. So South Africa has to do more in terms of peace building, peace-making and mediation.

Mr Kenny Govender, Deputy Director-General (DDG), DIRCO, said that what the Department did was to identify and highlight the skills that were needed for each individual and then provide training accordingly. He said the reason why there were 23 training sessions, and not more is because the department had to work within the confines of a fixed budget for the year.

Mr Govender said that there was an obligation on the department to manage compensation of its employees, and a part of that obligation was to allow a number of the personnel in a couple of the missions to exit, and when this happens, there arises a need to pay them pensions, gratuities and severance packages. This is what accounts for the 136.6% in the report. He added further on the question of fees paid to volunteers that what Mr Mahoai said in his presentation was “voluntary exits” and not volunteers.

Mr Kenny assured the Committee that the Department was working with the NT and the Department of Public Service and Administration (DPSA) to operationalise SADPA. He stated that they encountered difficulty however with migrating ARF with SADPA because SADPA was constituted in terms of legislation which came into being. The department will, however, establish SADPA as a government component providing a service to ARF.

The Chairperson stated that the question on SADPA was only asked because the Committee was already closing its books.

Ms Lesoma stated that the position of the Committee was that a decision was taken by government to migrate, and until a Bill is tabled in Parliament, and Parliament advises itself on what the governing of SADPA is going to be like, it is advised that the Committee stick to the same narrative which is that the department should migrate to SADPA.

Mr Mahoai said that the operationalisation of SADPA was done to use it as a mechanism to administer the ARF which is currently administered by a secretariat because the AFR Act did not provide for an institutional mechanism. The arrangement in this regard was therefore to gazette the SADPA, and so Heads of Departments (HODs) have agreed and are now awaiting a response from the NT. And if NT agrees, as from the first April 2019 SADPA will be operationalised and used as a mechanism to deal with the partnership fund.

Ms Moosa said that one of the targets on global governance that was not achieved was the Africa, Caribbean and Pacific – European Union (ACP-EU) meeting which was rescheduled for May 2019. With regards to the strategic engagements for the diplomatic corps, the engagements took place.

Ms Sempo said that on the issue of R300 million, section 53 of the Public Finance Management Act (PFMA) states that State Owned Entities (SOEs) cannot keep their surplus or deficits without the approval of the NT. The Accounting Officer must write to the NT declaring what is left and ask for approval. She also added that the processes of the NT do not allow for funds to be moved from ARF to the department. All funds must be declared to the NT.

Ms Sempo said that there is a list which can be shared with the Committee which lists all 25 projects. On the roll-over, she said that ARF projects are multi-year in nature (such as the Namibia drought projects) so the funds of the AFR are committed and cannot be taken or rolled-over unless the projects are rescinded.

On the issue of FOREX losses, Ms Sempo said that according to the generally recognised accounting principles ARF reports are required to restate its liabilities and show the movements of the FOREX losses. She also said that the ARF has moved away from just giving monies to the government. What happens is that the ARF Secretariat goes on sight visits, and everything that is paid for has to be accounted for and reported back to the Advisory committee.

Mr Mahoai said that the internship was established in honour of former President Nelson Mandela since he was the founder of IORA, and that it will be kick-started on 18 July 2019. He added that the Chair of the IORA Council of Ministers (Minister Sisulu) informed the entire council that South Africa will be submitting a request for the intake of young South Africans.

Mr Mahoai said that the Department will brief the Committee in due time as the delegates only returned a day before. But on the issue of the African passport, the protocol was adopted in June 2018 and about 32 countries signed it. However, only Rwanda has ratified it, and it needs to be ratified by 15 countries to come into force. He added that he cannot be authoritative in responding to the question on behalf of the current assembly. However, the assembly mandated the African Union commission to provide technical support to member states in accelerating the implementation of the 0.2 levy and also facilitating the involvement of Committee on Finance Ministers in the consideration of the annual audit report of the Union.

Ms Kaylan clarified that her specific question was about the financial implications for South Africa from all the decisions reached at the international meetings, for example, one of the decisions reached was is to write off Somalia’s debt. The question was whether these decisions had an effect on increasing South Africa’s contribution, and what the increase, if any was. She added that this question can be answered by the DG at his next sitting before the Committee

Mr Mahoai said that the cost of migrating to the 0.2 levy will be very high for South Africa. He stated that the department will work with NT on it. On the FOREX report, the currencies reflected were the US dollars, Euro, The Swiss Francs, Hong Kong Dollar, Indian Rupees, Taiwan dollars, Saudi riyal and the United Arab Emirates (UAE) Dirhams respectively.

Mr Mahoai said that the main client of the department is the Presidency, so whatever involves the Presidency on an international level must be handled by the department, whereas the internal affairs of the Presidency are handled internally by it.

On the issue of membership contributions, Mr Mahoai said the department only mentioned in the report those which have not been contributed to. And the fact that it is not mentioned could mean that it has been paid. But the membership contributions due from any international organisation is paid from programme five. He stated that he will verify this fact.

Ms Joyini said that the IORA Core group on tourism is a group of countries, not Ministers. The core group on tourism is made up of those countries that are interested in contributing to tourism. On the question of the level of achievement in the Chambers of Commerce (COC), she said that it has actually been a challenge for the department dealing with the target of COC engagements in different countries, which will be better explained by Ms Moosa.

Ms Moosa said that in terms of their annual projects, the department has achieved 65%, and the last 35% will be completed during the fourth quarter of the year. She stated that during the third quarter they had challenges at missions with regards to mission transfers. In December there was a cycle of change which might have contributed to the underreporting during the third quarter.

The Chairperson said that the task of engaging with COC in strategic towns must be led by the Ambassador in that country, where the town is situated. And where the Ambassador feels there are opportunities for South Africa in that country it is his/her duty to confer that fact through the Ministers of Trade and Industry, Economic Development or Small Business. He emphasized the importance of the partnership between the Ambassadors and the Ministers in identifying opportunities available in towns/cities in other countries.

Ms Lesoma asked for assurance from Mr Mahoai that the report at the end of the financial year will make the Committee proud that it had performed its oversight role over the department actively.

Mr Mahoai assured that the Committee that the department will meet their targets and stated that they will improve on targeting. It was his firm belief that the department can provide better outcomes and expressed hope that this will happen in the next quarter.

The Chairperson concluded by thanking everyone present and all the officials who made presentations.

The meeting was adjourned.