Operational funding shortfall for museums and plans to address this: DSAC briefing; with Deputy Minister

Meeting report

The Chairperson said the Committee had to build momentum for the Netball World Cup 2023 that would be hosted in South Africa, including the proposal to have T-shirts distributed across the country.

This was seconded by Ms Nocawe Mafu, Deputy Minister of Sport, Arts and Culture, who said that the Department would support the Portfolio Committee in stimulating interest in the Netball World Cup.

Funding shortfall for museums

The Portfolio Committee was briefed by the Department of Sport, Arts and Culture (DSAC) on the funding shortfall for museums, and the long term plan involving the reprioritisation of R21 million in 2022/23 funding to address this matter.

Mr Vusithemba Ndima, Acting Director-General (DG), DSAC, introduced the delegation from the Department.

Mr Israel Mokgwamme, Chief Financial Officer (CFO), DSAC, said that COVID-19 had hurt businesses and livelihoods in the country, and museums had not been spared as doors had had to be closed due to the restrictions imposed as part of the country’s response to the pandemic. Although museums were funded annually from the fiscus, the revenue of museums depended on tourism, as major museums like the Robben Island Museum, the Iziko Museums and the Ditsong Museums of South Africa benefited a lot from tourism activity in the country.

Due to the loss of revenue and the shortfall of funding from municipal rates and taxes, requests for financial assistance were made to National Treasury, and among the museums which benefited was the Robben Island Museum, which received an amount of R20 million, and the Ditsong Museums of South Africa, which received R17 million.

Mr Mokgwamme said that 12 of the 14 heritage institutions had been in a good financial position for the past two financial years. Ditsong Museums of South Africa was not liquid, however, as its current assets were less than its current liabilities. The KwaZulu-Natal Museum was in equilibrium, as the current assets were equivalent to the current liabilities.

The long-term plans included the amalgamation of public entities, as per the recommendations of the feasibility study commissioned by the Department. This process would lead to the consolidation of entities, and it was envisaged that the number of entities would reduce from 28 to nine, including sport sector entities. This would lead to the realisation of savings and a reduction of expenditure on governance structures like boards and audit committees.

Referring to the reprioritisation of the R22 million allocated to the monumental flag project, which had subsequently been put on hold, he said R5 million had been reprioritised towards the "Smart City" project, with approval from the National Treasury. Approval had been requested from National Treasury to reprioritise the remainder of the budget for projects which would not be limited to funding for museums.

Mr Ndima added that the DSAC was of the view that the amalgamation project would assist in reducing costs for government.

See presentation for further details

Discussion

Mr T Mhlongo (DA) said that the Department must plan better to ensure that resources were used sufficiently throughout the entities. He asked for clarity on what it meant that the R22 million flag project was "on hold." He wondered if it was on hold or cancelled.

What was the Department’s strategy to increase revenue in the entities affected by COVID-19? What were its plans to correct the liquidity situation in the future?

He was not satisfied with the response from the acting DG and the CFO about the amalgamation project. He asked when the Department was planning to implement it through the entities. He said that there should be a practical action plan that would be used to monitor progress.

Ms V van Dyk (DA) wanted more information about the feasibility study on the amalgamation of public entities. She asked if the study could be made available to the Portfolio Committee.

She agreed with Mr Mhlongo about a detailed plan that the Department should have for the whole amalgamation project. She asked for more detail about the specific entities that would be amalgamated. Had there been any consultations with the South African public to ensure that the amalgamated entities would be functional?

Mr M Zondo (IFP) said that the budget allocated for the prioritisation of museums was insufficient given the many challenges the Department faced. He asked if the prioritisation of museums would assist the Department in saving jobs and creating new job opportunities.

He asked what the Department’s timeline for the amalgamation project was, as this was a complex process that involved many stakeholders. He agreed that the amalgamation project would help the Department manage the entities more efficiently.

On the spending plan for the Robben Island Museum and the Ditsong Museums of South Africa, which had received money from the Department, he asked if the DSAC encouraged its entities to develop financial reserves to mitigate risks.

Mr D Joseph (DA) asked if the various entities of the Department had set targets for revenue generation, as this was important to keep track of progress.

What was the Department’s strategy to encourage local tourists to go to Robben Island and other local museums?

He pointed out that more information about the building type, size, market price evaluation and all relevant details should be included in the amalgamation process to ensure accountability where buildings were leased. He requested a detailed plan for the amalgamation project.

He asked what the Department intended to do with the money not used in the R22 million flag monument project and where the money was sourced from. He also asked if there were any job losses at the Robben Island Museum, and what had been the Department's strategy for responding to this.

Ms D Sibiya (ANC) asked the Department how long the R22 million flag project would remain on hold.

Beyond financial risks, what other risks were facing the museums, and how was the Department responding to them to ensure their sustainability?

Mr B Madlingozi (EFF) asked what the Department’s plan was for the amalgamation. Was the R22 million being kept aside for another use, or was it being used for another project? If it was the latter, what was that project?

Ms R Adams (ANC) sought clarity on what the risk assessment of the Department's entities was, and what interventions the risk committee was implementing to ensure the sustainability of the entities.

She asked if the Robben Island Museum and the Ditsong Museums of South Africa had developed recovery plans, and what the financial strategies for the future were.

Ms Adams asked what had ensured that 12 of 14 museums had an asset-liability ratio which was sustainable, while two entities had challenges, and whether the asset ratio was backed by current assets or non-current liabilities.

She asked for information on whether Robben Island Museum was applying the new ticket cost which the Portfolio Committee had argued was too expensive for domestic tourists and citizens in general.

Ms M Khawula (EFF) asked when a permanent DG would be appointed. The continuous cycle of having an acting DG made it hard to track the progress of the Department. She commented that the finances budgeted for these projects often were unaccounted for, hence the importance of having a permanent DG.

The Chairperson asked about the liquidity ratio of the Department’s museum entities. She also asked about the long-term intentions for amalgamating the entities, including the projected operating costs.

DSAC's response

Mr Ndima referred to the amalgamation of the Department's entities. He said that currently, it was finalising the terms of reference for any organisation that would be assisting it in initiating the process to ensure a smooth process. The terms of reference should be out by February 2023, so work could start in April.

The feasibility study that informed the amalgamation process would be shared with the Portfolio Committee. The study was comprehensive, and was clear on all the possibilities of the process, the nature of the amalgamation, and the thematic approach, all of which dealt with the subject matter that the Committee had asked.

Mr Ndima clarified that the R22 million monumental flag project had been stopped, and the Department had been reprioritising the money. For example, for 2022/23, there was R5 million set aside for the "Smart City" project, and for 2023/24, it was R17 million.

On the strategy put in place to ensure sustainability, he said that the Department was dealing with diverse institutions. At a higher level, it was working with the Department of Tourism on a memorandum of understanding (MoU), which was a work in progress that would guide the process.  

For the revenue to increase for the Department’s public entities, the CFO had to devise a plan that included a look at the future that was not dependent solely on the Department or the Treasury. He said there would be more meetings to ensure a solidified plan in terms of the strategy for revenue generation.

He said that the liquidity ratio was looking at a high level, and did not include non-current assets. He added that the ratio alone was insufficient, as this should be coupled with a look at the cash flow statements of the various entities.

Mr Sibusiso Tsanyane, Director: Public Entity Oversight and Interface, DSAC, said that public entities did have targets for revenue generation. The draft annual performance plan for the coming financial year has been received, and this was being reviewed to provide feedback to the public entities. This would be looked at as to whether any adjustments had been made. However, there were targets set at the beginning of the five-year strategy.

He pointed out that entities were encouraged to strengthen their marketing activities, but acknowledged that marketing could be costly. The Department was looking at using marketing to ensure the promotion of the work of public entities, thus increasing revenue. There also were considerations for collaboration between public entities.

He said that the Robben Island Museum ticket prices were on their website. The ticket price for local adults was R400 and R210 for a child, while international visitors paid R600 per adult and R310 per child.

Deputy Minister's closing remarks

Deputy Minister Mafu confirmed that the feasibility study report would be made available to the Portfolio Committee, as it would clarify some of the questions that Members of the Committee had raised.

The terms of reference would be completed in February 2023, with the team that would work on the amalgamation project being appointed in April 2023. Following this, the Department would report back to the Committee with a concrete plan and time frames.

She added that the Department had tried to appoint a permanent DG, and this was something that was still being worked on.

Regarding Netball World 2023, she said that the dates would be shared with the Portfolio Committee, and those who were available could attend the games.

Committee Minutes

The Chairperson presented the minutes of 1 November.

Mr Madlingozi said that the Committee was concerned about the questions of Mr Nyathela (President of the SA Roadies Association), which had not been responded to. The minutes were not reflective, as it should have been mentioned that the Committee had discussed the slow responses to Mr Nyathela, which had prompted him to write to the Committee, as he was looking for answers.

The minutes were adopted.

The meeting was adjourned.