Tshumisano Trust Annual Report and Audited Financial Statements 2009/10: Technology Innovation Agency briefing

Meeting report

Tshumisano Trust Annual Report Financial Year 2009/10. Presentation
Mr Duncan Tungande, Chief Financial Officer (CFO): Tshumisano Trust, and General Manager: Finance Operations and Administration, Technology Innovation Agency (TIA) said that Tshumisano had been established by the Department of Science and Technology (DST) in 2003 with three Technology Stations and had grown to include 15 Technology Stations by 2010.  These stations served technology-based small and medium enterprises (SMEs) and were hosted by the universities of technology (UoTs). The Government provided finance and policy instruments, the universities provided the intellectual capacity to enhance growth and competitiveness of the SMEs, and, in turn, industry served the broader civil society. Tshumisano was fully funded by Government and did not fund the SMEs financially.

Project highlights of the Technology Stations for 2009/10 were agri-food processing training, chemical manufacturing and automotive projects.

Institutes for Advanced Tooling (IAT) were centres of excellence for demonstrating advanced tooling to SMEs. These were at situated at Tshwane University of Technology, Walter Sisulu and Stellenbosch Universities.

The provincial government in Limpopo funded a joint initiative by Tshumisano with R1.4 million toward technology transfer projects for SMEs. The Universities of Limpopo and Tshwane assisted with agri-food processing in Mpumulanga and it was expected that Mpumulanga would operate its own Technology Station by 2011. In Kimberley a business plan for agri-food processing and mining had been signed for Technology Stations to assist SMEs interested in supplying commodities to the mining or agri-food industry.
 
Challenges for Tshumisano in 2009/10 had been establishing a footprint in under-served provinces; mismatch between service demand by SMEs relative to Tshumisano’s capacity to supply adequate intervention; industry buy-in for Government-funded technology; diffusion and transfer initiatives; and establishing a critical mass of black women-owned businesses assisted by Tshumisano.

Tshumisano received an unqualified Audit Report for 2009/10. In March 2010, total assets were R3.3 million when taken over by the Technology Innovation Agency (TIA). Cash and cash equivalents at the end of the year amounted to R2.7 million. Tshumisano had operated on a wide spectrum with very few resources. Government grants received totalled R51 million; payments to Technology Stations totalled R30 million; project payments totalled R 13 million; and staff costs totalled R4.4 million.

Mr Simphiwe Duma, Chief Executive Officer (CEO); Technology Innovation Agency, said that his Annual Report would be the last report of Tshumisano, which together with six other agencies had amalgamated to form the TIA on 1 April 2010. The agencies were: Advanced Manufacturing Technology Strategy (AMTS) implementation unit, BioPad, LifeLab, Cape Biotech, PlantBio, the National Bioinformatics Network, the Innovation Fund, as well as the Tshumisano Trust. All business, assets and liabilities were taken over by TIA at their carrying values as of 1 April 2010. TIA would offer more than what Tshumisano had offered by harnessing skills such as advisory and business skills assistance, intervention on patenting, specific skills development, facilitation of funding and assets as well as bring additional footprint to the area. TIA’s strategic intent was to be within reach of every SME in all nine provinces in South Africa.

Discussion
Ms M Shinn (DA) said that there was concern by some TIA entities over lack of budget made available by DST for the integration process and asked if TIA would apply for additional funding.

Mr Duma replied that funding shortfalls had been due to transfer of funding from Treasury, because there was a legal requirement that all the agency businesses had to be linked to TIA in order to have a line item for funding. TIA worked with the Director-General (DG) and Chief Financial Officer (CFO) of DST to complete that loophole and TIA now had its own allocation for funding.

Ms Shinn said that previous presentations on TIA had showed that there could well be duplication of services between entities. She asked if any of the trusts, projects or staff been made redundant.

Mr Duma responded that there was indeed duplication especially in bio tech projects, but TIA’s value proposition was addressing this issue. Organizational structures were in place to optimize skills and resources and tackle the haphazard manner of first-come-first-served assistance to SMEs. The Advisory Support Services was addressing mismatching of services by finding out what the specific requirement of the client was and offering the client exactly that. This included assistance with marketing of products produced by South Africa’s leading scientists in science and technology.

Ms Shinn asked why there had been reluctance to buy in to these Government technology projects and what initiatives had been taken to encourage industry to buy in to the technology benefits offered.

Mr Duma said that this related to marketing again and would be addressed by ensuring that industry partners understood each other and that there was an appetite for TIA products.

Ms B Ngcobo (ANC) asked to what extent SME’s and the Tshumisano Trust contributed to growth of the economy.

Mr Duma said that the jobs which currently existed were largely due to Tshumisano’s intervention in the running of SMEs. Moving forward, would measure its impact on job creation and other auxiliary services.

Ms Ngcobo asked if there was a visible market for the SMEs agri-food products, such as marula and juices, outside the country.

Mr Duma replied that Advisory Support Services would assist with business plans to align SMEs with quantifying what the market needed and how it could enter the market. TIA was working together with the Department of Trade and Industry (DTI) programmes so that the client could also be offered intervention that was beyond TIA’s mandate.

Ms Ngcobo asked if part-funding by DST or TIA enabled student interns at the UoTs to complete their studies.

Mr Duma said that TIA was focused on identifying students who truly needed assistance. Funding students was not helpful when the student did not have on-job practical training and since TIA only had ‘so much’ funding; on-job training was an intervention strategy of TIA.

Ms P Mocumi (ANC) said that Research and Development (R&D) was important for addressing the needs of the community and asked what was being done to improve on 5% of the budget being spent on R&D.

Mr Duma replied that with less than R60 million funding for R&D, TIA was forced to spend this miniscule amount. Within DST, many entities played various roles and TIA had its specific purpose of immediate delivery. Discovery Research, for example, could afford to wait ten years for results of their research and other sister entities also performed research under DST.

Ms Mocumi said that the Auditor’s Report was omitted from the information furnished to the Committee.  In order to perform oversight it was necessary for the Committee to examine how the Tshumisano Trust arrived at the unqualified audit.

Mr Duma replied that a detailed version of the Annual Financial Report would be made available to TIA.

Ms M Dunjwa (ANC) commented that the low number of doctors of philosophy (PhDs) coming out of South Africa was not deliberate but as a result of South Africa’s history. She asked why students were reluctant to become professors and why they would need incentives.

Mr Duma said that TIA played a role in ensuring quality PhDs and preferred qualified students to be upfront with what they wanted to do with their skills so that they would place themselves where they could apply themselves best. TIA sought graduates who had the right consciousness to assist TIA with its desired outcome.

Ms Dunjwa asked for more information on the impact of socio-economic challenges and what TIA could do to ensure that poor youth and women, both black and white, could attend higher education and training without having to go to universities.

Mr Duma said this was a countrywide problem. TIA was focused on human capital and planned to work with organizations focused on youth in a manner that was constructive. It was TIA’s prerogative to market itself so that youth could align themselves with what TIA sought to achieve. TIA also wished to address and report on the reality of disadvantaged white communities.

Ms Dunjwa acknowledged that Tshumisano was focused on agri-food. She asked if a group of women could approach TIA for assistance with dairy farming.

Mr Duma replied that TIA would expand on Tshumisano’s limited scope.

Mr J Thebede (ANC) asked how the manufacturing sector played a role in helping TIA to advance, since tooling programmes provided skills to advance the private manufacturing sector and the programmes involved spending money.

Mr Duma said that the role of manufacturing industry in advancing the tooling programme talked to how TIA approached those industries. The industries did not want TIA to tell them what TIA had to offer but rather TIA had to ask what they were giving. TIA could then approach them with a value proposition, focus on specifics and set up structures that would assist both industry and TIA to meet their objectives.

Mr Thebede asked if TIA could establish mobile stations in rural areas where there were no UoTs to accommodate people who had the desire to acquire skills. He felt that it was important that the Department of Higher Education and Training and DST worked together with TIA to establish UoTs in all provinces. He also commented that Tshumisano’s intent to introduce Technology Stations in all nine provinces should have a time line.

Mr Duma replied that DST already had programmes within all the provinces and as a starting point TIA aimed to piggy-back on those as a partner. Measurable objectives and optimization of resources were important for TIA’s existence and where there was nothing happening in an area, this meant that they had to tread cautiously with taking on what it could not do. DTI had ‘incubators’ in all provinces and TIA would seek out how it could play a valuable role.

Mr Tungande added that it was difficult to attach a time frame to the strategic intent which sought to establish stations in every province. As long as there were socio-economic differences, there would be under-served areas. He agreed that it was an objective which should be specific, measurable and time-related.

Ms Ngcobo asked what role further education and training (FET) played in technology training.

Mr Duma said that TIA took leadership from DST, which ran a number of programmes linked to FET colleges and other institutions. If TIA had to interact with a FET college, TIA’s specific role would be defined so that it did not encroach on another entity’s space.

Ms Ngcobo asked if TIA had an asset register and a strategy with which to deal with conflicts of interests when the entities were brought under one roof.

Mr M Nonkonyana (ANC) asked if Tshumisano’s assets had been cleared in the Audit Report.

Mr Duma said that TIA had already started an asset register and that the CFO was attending to all entities. Should there be any conflict of interest TIA had a strategy for resolving it, which was driven by the CFO. 

Ms Barbara Kortjass, Chief Financial Officer; TIA, added that TIA was in the process of integrating seven entities with seven different asset registers. Through the Auditor-General, KPMG had to audit the opening balances, integrate all the asset registers and do a full asset account for TIA before recording the asset register in TIA’s books. TIA would ensure that Executive Committee (Exco) members, supply team personnel and staff members could declare any conflict of interest in writing at each Exco meeting. The challenge which TIA was trying to resolve, which it inherited from the seven entities, was that staff members were sitting on boards of the companies which TIA was funding. This caused dramatic conflict of interest and was improper governance according to King III. TIA would remove these staff members and replace them with independent people who had relevant experience in each project which had been affected.

Ms S Molau (COPE) asked what methods Tshumisano used to assist SMEs to market their product and to what level of competence SMEs were expected to achieve before being able to manage on their own. She also asked how people with disabilities were provided for.

Mr Duma said that TIA was growing its marketing department to intervene on behalf of SMEs as the big brother to market their product.

Mr Tungande referred the Committee to the Annual report (page 21) regarding intervention at SMEs for previously disadvantaged individuals and people with disabilities.

Members objected that the report they were given did not include that information.

Mr Tungande apologized and asked if they could present on their interventions at a follow-up meeting.

Mr Nonkonyana commented that the Committee had the responsibility of oversight and therefore would need to check the full Annual Report.

The Chairperson said that governments of the world tended to fund institutions which delivered excellence and which spear-headed the economic growth of the country. In the legacy of apartheid, 80% of people in communities fell outside of such institutions. He felt that this should be addressed at Government level. Institutions such as the University of Cape Town (UCT) were well resourced with assets and human capital and produced better quality than, for example, the University of Zululand.

Mr Duma said that TIA had to ask questions and solve them where possible. With limited resources, TIA directed certain programmes to schools to assist with upliftment.

The Chairperson asked how relevant DTI technology was to DST technologies.

Mr Duma said that TIA was well aware of the Support Programme for Industrial Innovation (SPI) and the Technology and Human Resources Programme (THRIP) and TIA would be working together with these entities.

The Chairperson asked what criteria TIA used to decide what institutes would deal with the various technologies required.

Mr Nonkonyana asked what the effect was on the employees of entities which had merged to become TIA.

Mr Duma said that TIA had retained all employees but whenever there was merging of different entities, people of different cultures and focus were unsettled. The fact that there was an interim leadership did not help matters. The previous week TIA had conducted a team building workshop which had seemed to calm the waters for many employees. There was misalignment of skills in terms of where employees were positioned but this was being addressed.
 
Ms Dunjwa asked what criteria were used to identify students to be tooling engineers and why they were selected from the Western Cape.

Mr Duma said that TIA was aligning many initiatives which were not possible under Tshumisano. TIA planned to have tooling activities in all provinces. Criteria for programmes were based on where the need was and how much money was available. With a value proposition, TIA would operate by being proactive rather than proactive.

Mr Tungande said that the criteria for selecting of students for tooling was that anyone interested would apply for a bursary for the internship programme through DST. DST allocated students to Tshumisano depending on the number of students who applied and availability of funding. There were three Institutes for Advanced Tooling, one for design at Walter Sisulu University and two for manufacturing, at Stellenbosch University and Tshwane University of Technology.

The meeting was adjourned.