DIRCO & African Renaissance Fund 2018/19 Annual Performance Plan; with Deputy Minister

Meeting report

Mr Luwellyn Landers, Deputy Minister: Department of International Relations and Cooperation (DIRCO), said he had been informed by the Minister of Finance and Treasury that there would be substantial cuts this fiscal year. The first reduction had to involve DIRCO’s locally recruited personnel (LRP) in order to stretch the budget allocation. Treasury had requested the Department to surrender R1.65 billion which was normally maintained in the surplus of the African Renaissance Fund (ARF), and the Department had no choice but to surrender the money.

DIRCO: Annual Performance Plan 2018/19

Mr Kgabo Mahoai, Director General (DG): DIRCO, said the strategic plan had not changed materially, but an analysis must always be done. The rand had been gaining in value, but that was now being lost. Global trends, such as the change of leadership in the United States and France, were having an effect everywhere. South Africa’s economy was linked to the global economy, and had to be able to respond to these fluctuations.

The Department was struggling financially and was having challenges with its mandates without the budget to fulfill them. With the responsibility of serving as chairpersons of organisations such as the Southern African Development Community (SADC) and BRICS, there were responsibilities that had to be maintained and the funds must be taken from elsewhere to accomplish them.

Mr Mohoai briefly outlined the focus of the APP through BRICS and the Indian Ocean Rim Association (IORA). Attention would also be devoted to the support for peace and security efforts on the continent, the Continental Free Trade Agreement, and the lobbying for a non-permanent seat on the United Nations Security Council (UNSC).

Ms Delores Kotze, Chief Director: Planning, Monitoring and Evaluation, took Members through the APP.

In programme one, the focus was on administration and support for the Department.

• 100% compliance with the 30-day payment of suppliers requirement;
• Conducting 105 training programmes;
• Providing legal services upon request;
• 10 programmes to advance gender mainstreaming, youth development and access for people with disabilities.

The budget needed for this programme amounted to R1.6 billon.

Programme two pertained to international relations and the budgets for both bilateral and regional integration. The total allocation needed was R3.3 billion.

Programme three focused of internal cooperation, and contained the sub-programs for global governance and continental cooperation, which required a budget of R568 million.

Programme four addressed state protocol and consular services, and had a budget of R302 million.

Mr Caiphus Ramashau, Chief Financial Officer (CFO): DIRCO, provided the Committee with a further explanation of the budget allocations for 2018/2019.

He said programme five, which pertained to international transfers, provided for membership of South Africa of international organisations such as the UN, African Union (AU), and SADC. The presentation broke down transfer allocations by organisation and fiscal year. The total budget amount allocated to honour these commitments was R657 million.

The 2018/2019 allocation for the medium term expenditure framework (MTEF) stood at R6.5 billon, an increase as a result of an adjustment in the foreign exchange rate -- it was not an increase in the allocation in order to do more or to cover additional mandates.

Current budget pressures were arising from the compensation of employees (CoE) within the predetermined expenditure ceiling, the funding of unavoidable expenditures, and the managing of the fluctuation of main currencies. The CoE ceiling stood at R2.96 billion, but with the current number of filled positions for DIRCO members and LRPs, the amount needed the compensate them all was R3.09 billion, leaving a budgetary shortfall of R125 million.

South Africa would be hosting two major events during the 2018/19 fiscal year, which included the BRICS Summit at a cost of R60 million and the Indian Ocean Rim Associations chairpersonship at R13 million.

Mitigating factors that had been implemented included the laying off of LRPs, deferring the filling of some vacant positions in the Department, freezing posts, reprioritising the 2018/19 budget to prepare for the unavoidable expenditure for the summit, and continuous engagement with the Treasury to consider additional funding for the mandatory foreign policy priorities

African Renaissance and International Cooperation Fund: APP 2018/19

Ms Dineo Mathlako, Head of Operations: African Renaissance and International Cooperation Fund (ARF), said that the strategic plan of the ARF had not changed. There would be more emphasis on the provision of loans and investment projects, in addition to the pursuit of the AFR’s strategic objectives. There were three elections taking place in SADC countries in this financial year -- Zimbabwe, Madagascar, and the Democratic Republic of Congo (DRC) -- with South Africa’s involvement in Zimbabwe limited to SADC. The administration of loans and financial assistance was granted in accordance with an agreement entered into by the country in question and the Minister of International Relations and Cooperation. The ARF had granted its first loan to Cuba, which had already repaid R48 million of the R63 million borrowed.

The MTEF allocations for the next three years were quite minimal. The current financial year retained a budget of R38 million, and this would increase marginally over the periods. On top of the R38 million in appropriated funds, the year closed with an accumulated surplus of R752 million. However, the ARF had been requested to surrender R1.6 billion to the national revenue fund.

Discussion
 
Mr S Mokgalapa (DA) commended the reduction of LRPs, as well as the reduction in the foreign allowances. DIRCO was starting on a positive note with these cuts. What was the status of the consensus on South Africa obtaining a non-permanent seat in the UNSC? Regarding programme one, there had been issues with disciplinary cases not being finalized -- what was the status of these pending cases? He said that when one looked at South Africa’s transfers, it seemed like DIRCO was a charity organisation. He found all these transfers hard to comprehend. Was there a gun being held to the Department’s head to make these contributions?

On the ARF, there were three elections this year and South Africa would participate through SADC in the election in Zimbabwe. Why would South Africa have missions for the elections in Madagascar and the DRC, but for Zimbabwe the assistance was through SADC? These elections would not happen without military assistance, especially in the DRC. He congratulated the Department on the repayment of the loan granted to Cuba and said that he looked forward to the completion of the payment -- hopefully with interest.

Ms T Kenye (ANC) was concerned about the reduction of LRPs, although it appeared necessary. How many had been laid off at DIRCO’s missions currently? What would be the impact on the headquarters and the missions after these reductions? How would South Africa keep the UNSC issue alive on the agenda? Did the ARF’s reduced allocation impact on its SADC plans?

Ms S Kalyan (DA) posed questions with regard to South Africa’s membership of many international organizations -- about 60 of them. She asked for a list of them, and what the contribution was to each. What was the political and land value in respect of the memberships? South Africa gave so much money to the AU it was basically running it, but what was the value to South Africa? Was it a good enough reason to become a member and participate? Was the money a talking fee? South Africa was the chair of SADC, but she was yet to see a report from the Committee regarding achievements. How far was South Africa from upgrading its information communication technology (ICT) and catching up with technology? How far along was South Africa in terms of pushing for the reformation of the UNSC? Finally, did LRPs get a pension package worked into their contracts? How would they get a pension?

Mr M Maila (ANC) wanted to know where the money that Cuba was repaying was going -- does it go straight to the ARF or to the Treasury department? It had been also indicated that National Treasury had asked DIRCO to surrender R1.6 billion -- what were the reasons? He jokingly asked if DIRCO could refuse.

Ms D Raphuti (ANC) commended Cuba for repaying its debt on time. She said that ICT was appalling, and South Africa was not competing well globally. It was highly concerning that there were only 10 programmes for the youth, who were the future.

Mr M Lekota (COPE) questioned the lending of money to Cuba. Under the law, when money was budgeted in Parliament, it was budgeted for the wealth of all departments. He was not aware that any department authorised the lending of money to another country. Who from the senate of Cuba had approached South Africa to borrow money? Who was authorised in DIRCO to lend money to other countries from a budget that was passed in Parliament? If for any number of reasons, money was lent to a country that decided not to pay that money back, what provisions were there to recover it? War? Nations had gone to war over a soccer match, so these matters were not to be taken lightly. How had this loan been legislated? What were the terms?

The Chairperson started with a recommendation. In the past, the former Minister of International Relations had been requested to come before the Committee to make a general political presentation. Everything was politics -- all these international organisations came down to politics. This meeting had never happened, so the Chairperson would like to request the same of Minister Sisulu, accompanied by the deputy ministers. A discussion like that should come first, as understanding the politics behind everything was very important. This would deepen the quality of debates in the House and be useful for explanations to the public.

He announced his skepticism over suggestions that South Africa was being used by the bigger countries in BRICS as a way into Africa. South Africa was a small economic power in comparison. Another principle reason to have a discussion with the Minister was to make clear how South Africa’s national interest was best served through membership in these various organizations. Some people were saying South Africa seemed to be fizzling out. The country needed to be big politically and economically. Inter-African trade had been low for a long time now -- what was being done about that? Inter-African trade needed to increase because it was a very lucrative market. He also referred to the manipulation tactics used by the European Union and America, as they worked by manipulating one country against another.

DIRCO’s response

Deputy Minister Landers referred to the elections in SADC. South Africa had an unenviable record in SADC in respect of how elections were monitored and conducted. There had been a request made by the DRC for dialogue within the country. Until that dialogue took place, the elections were to be put on hold. What would happen in the DRC was that group of legal experts would go there to see if the climate was conducive to hold free and fair elections.

With regard to the lobbying for a seat on the UNSC, South Africa had engaged in intense lobbying at all levels. All missions and diplomats abroad had been instructed to use their missions as a chance to lobby other countries. He was confident that in June, South Africa would receive a favorable vote when the matter was put before the UN.

Responding to the request for rationalisation of South African missions abroad, he said that undoubtedly at some point the matter would be addressed, but Members had to bear in mind the principle of reciprocity. There would be a ripple effect when one mission was shut down, as it created uncertainty within all missions.

Deputy Minister Landers said that reform of the UN was absolutely crucial, especially with what was happening in Syria and Yemen. What needed to happen first, another world war? He mentioned the threats coming from the President of the United States in particular, and how problematic they were.

Regarding continental free trade, he was concerned about other countries dumping their goods and harming local economies. There was still a long way to go before the Trade Act reached the whole continent. Additionally, he did not view South Africa as a small player in the BRICS group of countries. If that were the case, the other players would not have agreed to South Africa being the domicile for the regional bank.

Mr Ramashau responded on the ARF loan process. The ARF had come in as a default after American sanctions on Cuba had prevented loan transactions. One of the conditions of the grant had been that Cuba had to procure locally, and the interest on the loan was 3%. The risk of default was handled through diplomatic channels.

Addressing the question on LRPs facing termination, he said they would receive their benefits in terms of their host country laws.

Further explaining the Department’s transfer payments, he said South Africa was expected to pay 15% of the operational budget of the AU, as were Nigeria, Egypt, Morocco and Algeria. In addition to this contribution, South Africa was also responsible for contributing to the peace fund, which allocated peacekeeping fees. Before the budget increase, South Africa’s combined contribution to the AU was $32 million, and its contribution to SADC was around $8 million.

Ms Mathlako referred to the questions raised regarding election assistance through the SADC. For Zimbabwe, the participation was limited to SADC because there had been no further request for assistance, whereas requests had been made by the DRC and Madagascar.

Regarding projects for the next financial year, two had already been recommended by the Minister, which would be covered by the $38 million budgeted. However, ARF could not do any other projects if the surplus could not be retained. This included sending technical assistance to the DRC and Madagascar for their elections.

Regarding progress on the package to Cuba, it was going well. The grant portion of package, which was made up of two components, had been completed and the loan portion was under way. The first component of the loan package made $70 million available to Cuba, from which they had taken $63 million and since paid back $48 million. Once the full $63 million was repaid, the second component of the loan package allowed Cuba access to $140 million.

Ms Kotze responded to the question about the ten programmes. She explained why the documentation seemed to show limited involvement through these programmes, because it excluded internships for the youth and learnership programmes. These ten programmes were just one set of focus, but there was a policy and framework behind each one.

Mr Mahoai had to keep his answers short, as he had to catch a flight. He wanted to brief the Committee directly on BRICS, as the Committee was very much part of the chain.

Mr Mokgalapa’s question about disciplinary action against the CFO was a very painful and difficult one. The CFO had not been suspended, although the allegations against him had been investigated. There was no need to suspend him, but a process would come for a proper sanction.

The meeting was adjourned.