investigations
6 February 2007
Following extensive media coverage of our performance and activities during
2005/06, I have decided to host this press conference to deal with issues which
in my view require comment from the department. These issues are as
follows:
1. Directorate Entrepreneurial Development (DED)
The Executive Council at its 1999/2000 Lekgotla held in Hunters Rest,
resolved to rationalise the number of parastatals in the province. This
decision was informed by the desire to comply with some of the decisions taken
at national level to rationalise agricultural and related institutions.
In the Department of Agriculture then, the following are specific
organisations that had to be integrated, rationalised, or amalgamated to
constitute a formal department:
* Agribank
* Agricor (later Agriserve and now DED)
* Marketing Board
* Tswana Livestock Co-operative
* Western Transvaal (public servants)
* Northern Cape (public servants)
* Directorate of Land Administration (DLA)
* Taung Agricultural College
* P H Moeketsi Agricultural High School
* Directorate Development Planning (DDP)
* Potchefstroom Agriculture College.
At that time, there were � 10 employees formally employed as public servants
by the department to support the then Minister in the Bophuthatswana era. All
agricultural functions (for development, projects, extension, marketing land
administration, etc.) were performed under one or more of these parastatals. It
should be noted that salaries of these parastatals' employees were very high
compared to the public service salary scales.
The ethos and values of the new government were completely different from
the former Republic of South Africa (RSA) and homeland governments. An overhaul
of the system and policies dictated that all these parastatals and institutions
should be transformed, rationalised and amalgamated into a department. As a
result, our challenge therefore remained the rationalisation of our parastatals
into one entity for agricultural and agri-business promotion and
development.
Subsequently, the department then began a legal and policy process to
establish a single entity for agribusiness promotion and development. The
consultative process included all stakeholders in agriculture, the State Law
Advisors (both of the Office of the Premier and the Legislature), treasury, the
executive council and the bill were finally debated in the Legislature. The
advice of the Auditor General was also obtained in this process. Finally, the
Legislature formally approved the DED Act, (5 of 2003) in August 2003. The
members even proposed and approved that the Act be implemented with
retrospective effect from 1 April 2003. At all material times, the purpose,
mandate and provisions of this Act were explained to all and sundry.
During the implementation of the DED Act, the auditors identified certain
shortcomings from the DED legislation which required attention. In my opinion,
these shortcomings occurred as a result of legal drafting which deviated from
the original purpose. More problems have also been reported about the assets
and liabilities which had not been finalised during the Agricor era. Further
challenges encountered were those of transferring parastatals assets into
government. The legal advisors, auditors and treasury advised at that time that
this was not feasible. For instance, it is not possible for government to take
over vehicles that have travelled over a particular kilometre distance.
Given these and other problems, it has been decided to wind down the
activities of this institution in order to make time for legislative amendments
as well as the disposal of assets and liabilities. I have accordingly approved,
in terms of section 54 (2) (d) of the Public Finance Management Act (PFMA),
that all assets of the DED be disposed to various institutions and some through
public auction. All movable assets will be disposed prior to March 2007. An
auctioneer has already been appointed to begin the process of selling movable
assets of the DED. The immovable rural assets will be distributed to various
stakeholders as per government asset needs (including tribal authorities,
municipalities and other government institutions). The sale of immovable
properties had started in 2003 and still continues. Some properties like houses
have already been sold and some are in the process of registration. The
occupants are given the first option to purchase the houses.
2. Forensic investigations
During or about 2005, allegations were made that there was rampant
corruption within the DED. An investigation was accordingly embarked upon
through the services of a reputable firm of forensics firm, Ramathe Fivaz.
Fifty specific projects are covered in this report. The conclusions and
recommendations of this report are hereto laid bare (as is) for your own
information and public records (Annexure A). I have read this report and
hereby, on behalf of government, accept its recommendations.
Since most of the recommendations are similar with issues previously raised
by the Auditor-General, the department has already embarked on a process to
regularise these issues. The following is progress registered and actions still
to be taken with regard to the recommendations.
52 Recommendations
52.1 Based on the findings set out in the body of this report we recommend
the following:
* Instances where the DED suffered financial losses due to negligence and/or
the unlawful conduct of officials should be considered in terms of the PFMA and
Code of Conduct of the DED to consider disciplinary action.
Progress
Disciplinary steps were taken against relevant Senior Management Service
(SMS) members and other officials. The senior management members were Messers L
Malambo, P Mokoena, M Kgantsi, M Mkhondo. The disciplinary hearing against Mr
Mkhondo is still outstanding. We hope that it shall be finalised before the end
of the financial year (March 2007). Messers Malambo and Kgantsi obtained an
interdict against the department. The court in Case No 1202/06 ordered that
they be allowed to resume duties as Chief Director and Director within five
days from the date of the order, 16 November 2006. The matter has since been
closed. Ms P Mokoena has since been discharged from the public service.
* The DED should consider the recovery of funds on the following projects,
(see annexure K) through civil litigation where losses were incurred as a
result of the conduct of officials of the DED and/ or the expenses where
incurred outside the ambit of the business plan.
It however follows further that the outcome of such litigation remains with
the court based on evidence presented, which may be influenced by deficiencies
in the internal control mechanisms employed with the DED.
Progress
We have requested the State Law Advisors to obtain a legal opinion on the
chances of recovering losses suffered by the DED through civil litigation
against the above mentioned officials. As the report suggest, this will require
careful analysis of available evidence and prospects of success.
52.2 The MEC or a delegated official would review the structure and
responsibilities of structures required to be established under the DED Act and
ensure that same are adequately implemented and resourced to be able to conduct
its legislated functions.
Progress
The Accounting Authority has been directed to ensure that a structure
consistent with the current responsibilities of the DED is drafted and approved
before end February 2007.
52.3 The process of identifying, considering and providing support to
projects should be reviewed and formal guidelines established to ensure that
such projects are funded in a sustainable manner.
Progress
A strategy on development funds has been drafted and has been circulated
internally for comment. A workshop is scheduled for the Thursday, 8 March 2007
with stakeholders to obtain their comment prior to approval by the Executing
Authority.
52.4 DED should develop clear guidelines on funding principal based on the
beneficiary grant ratio, type of projects and targeted geographical areas.
Progress
Kindly refer to 52.3 above.
52.5 The DED should simplify the business plans created by the Business
Planning Department and emphasise describing, detailing and estimating the
value of the needs of the venture based on the realistic and legitimate
requirements for the project to succeed.
Progress
Kindly refer to 52.3 above.
52.6 Although a number of instances of criminal conduct related to theft and
fraud have been reported to the South African Police Services (SAPS) for
further investigation, the department should consider the apparent
transgression of the PFMA for criminal prosecution.
(see annexure M).
Progress
The information provided to the SAPS provided the basis for the Directorate
of Public Prosecutions to consider criminal charges based on the PFMA. The
decision of this institution is that "the matter can best be dealt with by the
Accounting Officer, Treasury and/or the Executive Authority, together with the
state Attorney's office." Since these steps have already been taken, no further
action can be taken by the department. We refer you in this regard to our
response in paragraph 52.1.
52.7 The MEC should appoint an accounting authority, referred to in Section
47 of the Public Finance Management Act, 1999 who will be responsible for the
administration of the DED Act and all requirements of an accounting authority
as detailed in Chapter 6 of the Public Finance Management Act, 1999 as well as
the management of the day to day affairs of the Directorate, subject to the
directions and any delegations that the MEC may determine, and maintain
operational and administrative control over staff of the Directorate.
Progress
An Accounting Authority has been appointed in the name of Mr Katlego
Gaoraelwe who previously was a member of the DED Advisory Council.
52.8 The DED should review the process flow of transactions in order to
achieve the following:
* avoid the excessive recording of transactions by journal entries
* Eliminate unreconciled transactions between the 100 day expenditure account
and the accounts with numbers 27075/AAAAAF, 27075/AAAAAG and
27080/AAAAAA.
* create a sub-ledger with the complete financial history on all projects.
Progress
The accounting authority has been directed to attend to this recommendation
as a matter of urgency. You will note from the conclusion and recommendations
that no corruption or fraud is mentioned. The conclusion largely refers to
misconduct and possible criminal conduct on the part of managers as
contemplated in the Public Finance Management Act. I believe that we should
educate our people on what is corruption and what is mismanagement of state
resources.
The two concepts are quite distinct from one another. Mismanagement refers
to the use of state resources for legitimate government purpose but
circumventing prescribed rules and procedures and at times not paying attention
to detail. It is therefore some form of misconduct on the part of management in
terms of the policies. The conclusions and recommendations clearly point out
mismanagement than corruption. This is the issue of internal systems,
structural issues and policies.
The second issue which we need to highlight is the role of government in
funding projects. A perception is increasingly being created that government is
managing or operating projects on behalf of the beneficiaries. This is not the
case. Government merely provides financial and technical advice on the
management of the project. The responsibility and accountability of each
project remains with the beneficiaries. They are responsible to implement our
advice. If beneficiaries choose not to manage and operate their own projects,
these are bound to collapse. This has nothing to do with government.
3. Bonolo Farms
This project is one of the 50 projects investigated by Ramathe Fivaz. It is
being isolated as being one of those projects which had received prominent
coverage from the media. The brief background of the project is as follows:
* this company acquired immovable property (farm) through the funding of the
Department of Land Affairs (R2,9 million) and the Land Bank
(R5,3million).
* sixty four beneficiaries (previously disadvantaged) were part of the
shareholders in this company
* the DED funded the company for infrastructure to the total amount of R1,8
million.
In terms of the Comprehensive Agriculture Support Programme (CASP)
guidelines, the DED and the department are obliged to use 70% of the
conditional grants on Land Reform projects. This project is therefore typical
of many land reform projects that qualified for funding.
The funding extended to Bonolo was therefore, made in good faith by the DED,
as was the case with many projects. It is still believed that this was a viable
project capable of creating job opportunities in the long term and is
sustainable if managed correctly. Given the forensic investigation, the DED
discontinued funding to the project and it has now, understandably, collapsed.
We agree however, that weak internal control systems and irregular conduct of
officials tainted this otherwise good prospective project.
The following are verbatim findings of the investigation with regard to this
project which are shared with the public for own judgment.
6.6 Conclusion
6.6.1 The ownership structure of Bonolo as it was held out to the Land Bank
in its Land Redistribution for Agricultural Development (LRAD) application was
amended, evident from various other documents submitted in funding
applications. The submission to the Land Bank included three shareholders
including entities wherein the beneficiaries' interest of 49% in the project
was registered. Later documentation indicated that another entity, namely
Bakwena Chicks was introduced as a shareholder.
6.6.2 The list of beneficiaries included the names of 65 beneficiaries who
ostensibly qualified for a subsidy grant. The list includes the name of
Tshephe, who would not qualify for a grant as he was employed as a government
official. We have not been able to establish whether the beneficiaries were
included as shareholders in the ownership of Bonolo Farms.
6.6.3 It is contrary of the DED to create wealth and sustainable development
that the majority was vested in the name of Tshephe and his wife while the
minority ownership vested with 64 other beneficiaries.
6.6.4 It is unclear whether the land claim was dismissed following due
process and proper consideration.
6.6.5 Tshephe made a number of requests for funding to the department for
various purposes. The underlying reasons for the request for funding were
different at the time of each request. It was however evident that the
sustainability of the project was doubtful, on Tshephe's version, since at
least June 2004.
6.6.6 The payment of the development grant to Bonolo was not approved by the
Planning and Approval Committee as required in terms of the policies of the
DED.
6.6.7 Payments to the suppliers were made on the basis of Pro-forma invoices
submitted to the DED.
6.6.8 In respect of a payment ostensibly for the purchase of diesel, the
payment was effected to Bonolo.
6.6.9 The following amounts were paid to suppliers that were refunded by the
suppliers to Bonolo:
* Henwil: R263 275,76
* Van Vuuren: R31 792,92
* Olifantshoek: R57 260 (Cheque issues to Bonolo)
6.6.10 The payment to Bonolo did not meet the criteria for the payment of
grant funding as the payment from the development fund did not meet the
requirement of Comprehensive Agriculture Support Programme (CASP) and/or post
settlement grants. The payment further did not ensure the sustainability of the
project as Tshephe continued to request funds for the improvement of the
project. As indicated earlier, the findings with regard to this project are not
different from those of other projects investigated. There is a common thread
of weak systems of internal control and funding criteria.
4. Past performance of the department
The department had experienced a slow pace of service delivery during the
2005/06 financial year. As a result, most of the development funds were not
spent. The expenditure for 2005/06 (which has been reported in our annual
report, is as follows:
Land Care
Budget: R 5 000
Expenditure: R1 468
Percentage: 29%
CASP
Budget: R33 594
Expenditure: R4 351
Percentage: 13%
Disaster Grant
Budget: R16 000
Expenditure: RNIL
Percentage: 0%
Total
Budget: R54 594
Expenditure: R5 819
Percentage: 11%
The reasons for this poor performance was mainly due to one or more of the
following factors
* individual item procurement of services per project
* misunderstanding by management about the flexibility and authority to change
projects
* shortage of specialist skills (project management, economists and
engineers)
* constraints imposed by financial delegations at the beginning of
2004/05
* constitution of the Supply Management Committee and training for
members
* late transfers to the province (R16 million of drought/ disaster relief
transferred in December 2005)
* too many projects on a small scale requiring a lot of turnaround time in
management
* group dynamics affect project implementation
* projects under forensic investigation were put on hold
* poor managerial supervision and accountability.
5. Turnaround strategy
Given these challenges, the following measures were taken
* Bulk Procurement Systems implemented as from May 2006
* increase in financial delegations to responsible managers
* outsourcing of specialist skills on project management and increase our
capacity in economic and engineering units
* projects now reviewed from time to time to ensure amendments where
necessary
* the Supply Chain Management unit fully established and members have been
trained; the District Budget Committee (DBAC) has been restructured and is now
fully functional
* planning is done on large scale projects to minimise management turnaround
time
* institutional capacity building for large land reform beneficiaries is being
investigated
* improved managerial supervision and accountability.
Progress on the Turnaround Strategy
Tremendous progress has been registered on service delivery since the
implementation of the turnaround strategy. The following financial performance
on the conditional grants has been recorded as at Sunday, 31 December 2006.
Landcare
Roll over: 3 532
2006/07: 4 750
Total: 8 282
Spent: 2 818
Percentage: 34,0
CASP
Roll over: 29 243
2006/07: 40 313
Total: 69 556
Spent: 41 746
Percentage: 60,0
Drought Relief:
Roll over: 16 000
2006/07:-
Total: 16 000
Spent: 14 909
Percentage: 93,2
Total
Roll over: 48 775
2006/07: 45 063
Total: 93 838
Spent: 59 473
Percentage: 63,4
We have further recorded successes in the following areas of concern in the
previous year (2005/06)
* completed assessments for outstanding performance backlogs
* improved accountability of senior managers
* consultation with stakeholders on our projects
* approved internal policies to improve systems of internal control.
Given this progress, I am confident that we shall spend most if not all of
our funds by year end. I am even excited that we have our plans ready for
2007/08.
6. Terminations
A keen interest has developed from the media regarding dismissals in the
department. I have therefore taken liberty to once lay bare the information
regarding this matter. As from April 2006 to January 2007, the following
employees were discharged from the department
1. Name: Tisane F G
Date of termination: 21 July 2006
2. Name: Baijang J T
Date of termination: 21 July 2006
3. Name: Mokgojwa D G
Date of termination: 21 July 2006
4. Name: Malashe M Z
Date of termination: 31 July 2006
5. Name: Ramanand S
Date of termination: 3 August 2006
6. Name: Mosetho B A
Date of termination: 8 July 2006
7. Name: Mokoena P
Date of termination: 1 July 2006
8. Name: Molefe K
Date of termination: 23 January 2007
9. Name: Mothibedi P A
Date of termination: 7 August 2006
10. Name: Mampe R J
Date of termination: 23 January 2007
11. Name: Ngubane A
Date of termination: 23 January 2007
12. Name: Mogapi N L
Date of termination: 23 January 2007
13. Name: Mogwera C
Date of termination: 29 July 2006
NB. Some of the dismissals are being contested in the relevant labour fora.
The following are some of the SMS members who resigned during the course of
this year
* I Sinovich: 30 September 2006
* H Scholts: 30 March 2007
* M Kgantsi: 28 February 2007
* R Rantao: 30 January 2007.
7. Partnerships
We have made concerted efforts to improve our relations with our
stakeholders so as to ensure transparency and accountability. This has proved
very meaningful in making the progress reported. Thus far, we have established
the Agriculture Forum, a body responsible for harnessing the views of all
farmer organisations and other interest groups. This forum is attended by
Executive Mayors of Districts. Another forum established is the Land and
Agrarian Co-ordinating Committee. This structure is composed of District
Executive Mayors, the Departments of Land Affairs, Developmental Local
Government, Public Works, House of Traditional Leaders, the Land Restitution
Commission and the Land Bank.
8. Way forward
Given the impending budget policy speech of the department, I will not deal
with many service delivery achievements recorded during this year. I hope our
financial performance however, gives you an indication of what to expect.
Having accepted this forensic report, it shall later be tabled in the
relevant Portfolio Committee in the Legislature as part of our accountability
as the Executive. We hope the committee shall, as well, embrace the report and
thereafter monitor compliance with these recommendations.
Enquiries:
Ms Lesego Mncwango
Tel: (018) 389 5768
Cell: 082 220 6367
Issued by: Department of Agriculture Conservation and Environment, North
West Provincial Government
6 February 2007
