National Development Agency (NDA) Annual Report 2022/2023

Meeting report

The Chairperson welcomed the National Development Agency (NDA) and Members of the Committee. She noted the developments in the war between Israel and Palestine and the consistently rising death toll. She wished peace upon these two warring nations.

The meeting’s agenda is set around hearing and considering the NDA annual performance report for the 2022/2023 financial year, thereafter, followed by questions and a discussion.

NDA’s opening remarks
Ms Nozabelo Ruth Bhengu, Chairperson, NDA, thanked the Portfolio Committee for receiving the NDA in the meeting. The present officials from the NDA were welcomed and introduced to the Committee. Ms Bhengu echoed the sentiments of the Chairperson and emphasised her condolences for Palestine.

Ms Reekeletseng Hlapolosa, Acting CEO, NDA, introduced the present officials of the NDA in the meeting, welcoming Mr Bongani Magongo, Development Management and Research Executive, NDA, Ms Hajra Mansour, Internal Audit, NDA, Mr Solomon Shingange, Acting CFO, NDA, and the acting company secretary.

National Development Agency (NDA) Annual Performance Report 2022/2023
Ms Hlapolosa presented the contextual analysis as well as the introduction.

The NDA operated without a board for three quarters of the year, after which a board was sworn in in December of 2022. There was an interim accounting authority to allow the NDA to operate. The absence of a board negatively impacted the finalisation of the NDA turnaround strategy. The turnaround strategy has now been approved in July of 2023 and will be going through the next stages of implementation in the near future.

The NDA had 12 key performance indicators across the three programmes, of which nine were achieved.
-Key performance indicators on organisation structure and ICT strategy and architecture could not be completed because of delays in finalising the NDA turnaround strategy.
-The key performance indicators on reducing irregular, fruitless and wasteful (IFW) expenditure were affected by stringent internal processes required for the condonation of the IFW expenditure.
-These three failed key performance indicators are all derived from Programme One.

Mr Ben Morule, Senior Manager: Office of the CEO, NDA, took Members of the Committee through a more detailed summary of the 12 key performance indicators under the three programmes.
-The Department began the 2022/2023 financial year with a goal of an 80% reduction of non-compliance resulting in IFW expenditure reported.
-This target was not met due to the nature of the lengthy processes of consequence management and investigations required by IFW frameworks.

The remaining key performance indicators under programme one that have been achieved include:
-A new organisational structure aligned to the NDA business model approved and implemented.
-NDA strategic partnership model aligned to NDA business model approved.

Key performance indicators achieved under programme two include:
-Rand value of resources raised from NDA partnerships to fund civil society organisation (CSO) development interventions - a partnership with the UIF was established, allowing this to be achieved.
-Number of work opportunities created because of CSO development interventions - a total of 3 175 work opportunities were created by implementing the second phase of the Criminal Asset Recovery Account (CARA).
-Number of CSOs capacitated to strengthen their institutional capacity – 3 124 (exceeding the targeted 2 000) CSOs were capacitated at the provincial level through partnerships with DSD and Hope World-Wide SA.
-Percentage disbursement of funds for grant funding - 107% of the committed funds were disbursed, exceeding the 95% target for the 2022/2023 financial year.
Reviewed CSO development interventions piloted in one district per province aligned to the District Development Model - the pilot project was concluded in nine provinces in ten districts.

Key performance indicators achieved under programme three include:
-Number of research publications produced to provide a basis for development policy - three research publications were produced as per the target.
-Number of evaluations conducted to inform programme design and implementation - three evaluations were conducted as per the target.
-Number of dialogues held with external stakeholders to inform development policy - five dialogues were held with stakeholders as per the target.

Mr Shingange presented the Annual Financial Statements on behalf of the NDA.
-The total financial assets of the NDA increased by R20 851 258 between the 2021 and 2022 financial years.
-Cash holdings between the 2021 and 2022 financial years by R23.1 million.
-Financial liabilities concerning the NDA’s net assets increased by R 45 865 959 between 2021 and 2022, including provisions of R 5.9 million and R7.7 million for performance bonuses in the financial years 2021 and 2022, respectively.
-Total revenue was recorded at R 275,5 million, with the recorded total expenditure sitting at R229.7 million. The R229.7 million was spent on mandate expenditure, mandate staff costs, administrative expenditure and administrative staff costs.
-The surplus remaining from total revenue totalled R45.8 million.
-Disbursements to projects under the NDA totalled R38.3 million, with R 24.5 million being disbursed by 3rd parties and R12.8 million being disbursed by the NDA.
-Irregular expenditure totaled at R77.3 million in 2022, decreasing by a total of R98 million recorded in the previous year.
-Fruitless and wasteful expenditure totaled R1.2 million in 2022, increasing by R7 053 from 2021.

Mr Shingange noted the extreme improvement experienced by the NDA, particularly according to the audit findings. The NDA is finally receiving a clean audit and they hope to continue to improve in the coming years.

See attached for full presentation

Discussion
Ms L van der Merwe (IFP) thanked the Department for their presentation and sent her condolences to Ms K Bilankulu (ANC) and her family. She noted that it has taken many years for the NDA turnaround strategy to be approved, and the Committee would welcome a detailed presentation of this strategy plan by the NDA. Are there timeframes for implementing this strategy and does the strategy include a review of the organisations that the NDA currently funds?

She requested that clarity be given on the vacancies listed within the NDA; when do these vacancies plan to be filled? Furthermore, the bulk of the NDA’s budget is allocated to the salaries and administrative costs of staff, despite the NDA previously reporting issues of shortages of skills. How does the NDA plan to remedy this?

The NDA has offices in all provinces. Very little of the budget is allocated to the core work of the NDA and there is cause for concern that the NDA is not visible enough to increase its footprint. Is there a media strategy to raise awareness about the existence of the NDA? This could potentially increase the number of partnerships the NDA holds and create opportunities for the funding of more projects.

The dialogues as part of the key performance indicators achieved could be further expanded upon. Where were these dialogues held and what was the established outcome of these dialogues?

In terms of the presentation given by Mr Shingange, there was a mention of a budget for performance bonuses for staff members and that a review will take place to allocate these bonuses to deserving staff members. What positions and how many staff members are eligible for these bonuses?

Ms van der Merwe noted the excessive expenditure considering the limited travel and accommodation budget and consulting professional fees. Is there a plan within the scope of the turnaround strategy to limit such expenditure?

Lastly, she made the Committee aware of the R1 million board fees reported as expenditure during 2022 despite the NDA operating without a board for three quarters of the year. What were these board fees for?

Ms L Arries (EFF) requested the NDA clarify the number of senior positions that remain vacant or are occupied by acting members. When does the NDA plan on filling these positions permanently?

Ms Arries expressed her disappointment that only one key performance indicator target out of four was reached in programme one. According to IFW expenditure being delayed because of lengthy consequence management processes, does the NDA have a timeframe within which they wish to conclude these disciplinary investigations and processes?

Ms A Abrahams (DA) expressed similar concerns to her colleagues on filling the CEO position and the time taken to pass the turnaround strategy. She asked the NDA what the Committee could expect regarding the impact resulting from the turnaround strategy. By when should the Committee recognise a noticeable difference in operations at the NDA because of the turnaround strategy?

How does the NDA understand the term ‘capacitation’ mentioned under the work the NDA has done to support NGOs and other organisations? Does this suggest that these organisations have been able to become self-sufficient? Is it a once-off process of capacitation or is it an ongoing process?

Ms Abrahams asked the NDA if the research reports published under programme three cover this year’s supported and capacitated CSOs. Research reports covering the details of the organisations and CSOs that have been assisted by the NDA and the successes thereof will assist the Committee in better understanding the work of the NDA.

She referenced slide 24 of the presentation which detailed funds relating to CARA. Can the NDA elaborate on why they are still holding funds back, considering under the budget there is a dire need for NGOs to prevent gender-based violence and offer victim support? Considering the increase in budget also allocated to volunteer programmes, what kind of programmes is the department planning on facilitating to be able to use up such a considerable budget?

Mr D Stock (ANC) applauded the NDA for achieving a clean audit without any significant findings. He also observed that the NDA was compliant with several legislations, however a repeated audit finding is that of uncompetitive and unfair procurement processes. This issue must be interrogated, and preventative measures must be put in place to ensure it does not occur again. Mr Stock also commended the NDA for striving to develop and capacitate CSOs.

Mr Stock posed a few questions to the representative members of the NDA. Firstly, what has been the impact of the variations in funding of CARA in terms of fulfilling its mandate to provide services to victims of crime?

Secondly, Mr Stock requested that the NDA clarify when they plan to finalise the condonation of irregular, fruitless expenditure. These records must be published according to the National Treasury instruction of disclosure of IFW expenditure in the NDA.

He asked what the current status of the amendment of the NDA Act is. What governance and performance issues are going to be addressed in the amended Act as it relates to the current Act?

Further, Mr Stock acknowledged that the effectiveness of the NDA has been challenged frequently over the past few years. In responding to these challenges, the NDA often cited the turnaround strategy including implementing changes in management and governance. Does the turnaround strategy have plans to implement key interventions to successfully ensure the effectiveness of the NDA in fulfilling its mandate?

How were consequence management systems managed regarding the irregular expenditure, and what were the findings of the pilot projects undertaken in ten districts and nine provinces around the country?

The last question Mr Stock posed was regarding the funding the NDA supplies approved CSOs. Are the systems that CSOs go through to be approved such funding effective? Does a more effective framework need to be developed or focus on particular areas to improve?

Ms P Marais (EFF) expressed her concerns at the large sums of money reported as going towards salaries and irregular expenditure. These costs are so great that there is not much left for the core work of the NDA. The promise of bonuses above and beyond the high salary costs greatly concerns the Committee. Ms Marais also acknowledged previous reports citing expenditure on unnecessary items such as furniture and new computers. The NDA has not yet found it in them to turn themselves around, and it leaves the general population of South Africa feeling desperate.

Ms A Hlongo (ANC) requested that the NDA provide clarity on the outcomes of the research and dialogues conducted in programme three. Are these findings being included in policy formulation, governance and strategy planning?

What strategies exist to ensure that CSOs in provinces with high unemployment, poverty and inequalities are being prioritised to receive grant funding through the NDA?

Further, Ms Hlongo asked what challenges the NDA has been able to observe regarding site visits conducted and tracking targets from provincial reports.

Lastly, what impact will the budget deficit of R 23 million have on the functioning of the NDA in the upcoming year, and what programmes will most likely be affected?

Ms J Manganye (ANC) greeted the Committee and welcomed the new board of the NDA. Ensuring that the new board was sworn in in the fourth quarter has already had a significant positive impact on the NDA. Ms Manganye expressed her hopes that this positive impact will continue to build and strengthen in the upcoming year.

NDA responses
Ms Hlapolosa clarified that the turnaround strategy is meant to be implemented by the start of the next financial year on 1 April 2024. She assured the Committee that, despite there not yet being a set date, a presentation will be made some time before this date to the portfolio committee. Target groups have been set to guide this turnaround strategy, focusing on community-based cooperatives and social enterprises led by entrepreneurial ideas.

Ms Hlapolosa responded to Ms van der Merwe and Ms Arries’ concerns about the vacancy of the CEO position. The board commenced the recruitment process, and reached the final two candidates earlier this year, but these candidates were thereafter deemed unsuitable. This process thus had to restart in June of this year, but the board is currently busy with selection processes and Ms Hlapolosa expressed her wish that this process would conclude by the end of 2023.

She addressed questions posed on the employment of persons unqualified to fulfil their work requirements. The implementation of the turnaround strategy is reliant upon ensuring that the organisation design of the NDA can seamlessly ensure all the requirements of this strategy, as well as assessing the capacity and skill sets of staff members needed to ensure the turnaround’s ultimate success.

Ms Hlapolosa acknowledged Ms van der Merwe’s concerns on the visibility of the NDA and informed the Committee that this had been previously due to budget constraints. The turnaround strategy requires the NDA to conduct a review of the marketing, communications, and publicity strategies to better the visibility and reach of the NDA. Public partners have been identified and the NDA works with some of these partners already, while others will be coming on board to work with the NDA. Ms Hlapolosa confirmed that the NDA will also partner with several other government departments to ensure collaboration on some projects such as access to housing with the Department of Human Settlement.

Further, Ms Hlapolosa addressed the concerns raised by Ms van der Merwe and Ms Marais on the allocation of funds towards performance bonuses. Currently, bonuses are a policy provision, but they are not required and must go through a process of investigation by the board of the NDA. Bonuses are only given should the performance of the staff member be outstanding and the affordability of declaring performance bonuses is aligned to the budget constraints of the NDA. According to the policies, performance bonuses must be provisioned in the budget, but the board can choose not to declare any bonuses.

She informed the Committee that two senior positions within the NDA are currently vacant: that of the CEO and the CFO. The CEO recruitment process is underway, as was stated by Ms Hlapolosa earlier in the discussion, but the CFO position is only currently being undertaken by Mr Shingange due to the CFO being currently on leave.

Mr Morule answered the question posed on the ICT strategy. A service provider was appointed to assess the ICT department’s environment before implementing the turnaround strategy to provide a basis to compare to the turnaround strategy. A target architecture for the ICT department was established so that this department could begin its work in turning around the technological environment of the NDA. This project will conclude in the next two months.

Mr Magongo responded to questions posed on the research and publications under programme three. Research areas were aligned with the national priorities defined by government. The main interest of this research was to look at poverty reduction through policy decisions. Outcomes derived from these research reports included that engagement between different structures must take place. Comparative reviews must be done on inequality on the people who are economically active.

Income generation projects allowed the NDA to derive from findings that the approach, the strategy, and the measurement of both the outcomes and the impact were flawed and needed to undergo processes of evaluation. The poverty alleviation projects were largely successful, and its impact could still be seen today comparatively to the income generation projects. Research evaluations and dialogues have shifted the thinking of the NDA, particularly regarding the design of impact projects, especially in ensuring the sustainability and measurement of these projects.

Mr Magongo finished by clarifying that the names of the organisations that the NDA evaluates are not published, but the CSO development programme would have a better database from which members of the Committee can request access to these names.

Mr Shingange referred to the question requesting clarity on the high board fees by Ms van der Merwe. In the absence of a board the NDA was assisted by an Interim Accounting Authority, and they were assisted by an Audit Committee. Two independent members made up the Audit Committee and had to be remunerated. This current board had to hit the ground running in January of this year, so the remuneration was due to the board's work until the end of the financial year.

Mr Shingange further clarified that expenditure on laptops only occurs after an assessment is done. The assessment must prove that the laptop no longer works, cannot be repaired, and has lived longer than its proposed lifespan. According to the constrained budget of the NDA, they do not unnecessarily replace laptops, and new laptops are bought with a longer warranty. He clarified that the same applies to furniture. It is not unnecessarily bought, yet there are situations where chairs and tables are no longer functional and must be replaced.

Mr Shingange then addressed the question posed by Ms Hlongo on the R23 million deficit. He noted this as an accounting deficit. This will be funded by some of the rollover funds already approved by the National Treasury and will not cut into the budget for the 2023/2024 financial year. 

The CARA funds have been slowly distributed across the past few years, and currently still have a budget remaining of R4.5million. These remaining funds will be completely disbursed by the end of the current financial year.

Mr Shingange addressed the final question, asking why there was overspending on projects (recorded at 103%). The extra 3% was funded by reprioritising the budget towards the end of the year.

Ms Bhengu responded to the question asked by Ms Abrahams on the changes the portfolio committee can expect to see in implementing the turnaround strategy. This includes the development of poor individuals overdependent on government grants, unemployed and unemployable youth, and graduates, of the beneficiaries of free services on municipal indigent registers, and of the beneficiaries of the Public Employment Programmes (PEP). The purpose is to develop these individuals enough to be able to leave these registries permanently and be self-sufficient.

The skills development programme of training institutions includes developing the teaching of skills required to address service delivery issues in municipalities and to enable those that belong to the groups mentioned above.

Ms Bhengu addressed the footprint of the NDA and suggested that, should the NDA be committed to alleviating and eradicating poverty, they should be able to work within the municipalities to have better access to those who are in need. A district development model must be adopted, and increased interaction with other departments and international organisations must occur under the requirements of the turnaround strategy. The NDA has recently signed a Memorandum of Understanding (MoU) with the German Cooperative and Raiffeisen Confederation (DGRV) and further relationships are being established to build the capacity of the NDA. The NDA was invited by the China NGO Network during BRICS, and the NDA Board Chairperson will, because of this, serve on the steering committee of the Belt and Road Initiative.

When the turnaround strategy is implemented, the Portfolio Committee will observe a shift away from the exclusive focus on CSOs towards a broader focus on all affected individuals and the capacity building of CSOs that can better position themselves as skills development facilitators for those impacted by poverty. One should also observe those who are dependent on grants or social welfare mechanisms becoming more active beneficiaries as opposed to passive beneficiaries. These observations may be seen over an extended period and will not occur immediately.

Dr Anthony Bouwer, Executive Director: Development Management Directorate, NDA, provided Ms Abrahams with clarity on the volunteer programmes. Volunteers in the programme amounted to 22 beneficiaries per CSO and were awarded R 18 00 over a six-month programmes, but the grant funding programme, however, varied according to the cost and length of the project.

Dr Bouwer confirmed his part in the DGRV MoU negotiation process and echoed the views that the Chairperson of the NDA board expressed in terms of the shift in focus of the NDA according to the turnaround strategy. Capacity building has become a consistent focus for the NDA and this also exists in alignment with the MoU signed with DGRV.

He confirmed a new working relationship with FinMark with whom the NDA has been working with in terms of research. There have been discussions to further the relationship with FinMark beyond a research and academic relationship.

Lastly, Dr Bouwer addressed the lessons learned during the CARA project with communities and municipalities providing the NDA feedback on the development of these CSOs.

Mr Siyabonda Shozi, Senior Manager: Legal Services, NDA, closed off the responses from the NDA by addressing Mr Stock’s question on the status of the amended NDA Act. The NDA has not yet had the opportunity to brief the board on the amended Act. The anticipated changes include consideration of reducing the number of board members in the NDA, the regulation of the expertise of appointed board members, the reduction of government and CSO sector representation in the board and allowing the Minister to appoint the board chairperson directly. The amendment also includes allowing the CEO to renew their term, which currently is not provisioned for.

Mr Shozi also provided clarity on the disciplinary processes under some cases amounting to R14 million which have now been submitted to National Treasury. Two further cases amounting to R50 million recorded the transgressions as occurring due to incorrect supply chain processes, and these cases are in the implementation of the consequence management stage. These cases should be ready by the start of the fourth quarter to be submitted to National Treasury for condonation. Seven or eight cases are currently with HR before they can be submitted to National Treasury for condonation.

Mr Shingange referred back to Ms Abrahams’ question on the volunteer programme. The implementation of the volunteer programme began in 2022/2023 and as of the end of March 2023, there was a remaining R5 million to be paid out to CSOs, and this should conclude by the end of November 2023.

The Chairperson confirmed with the Committee Members that there were no follow-up questions, and the meeting was adjourned.