Report of the Portfolio Committee on International Relations and Cooperation on Budget Vote 5: International Relations and Cooperation, dated 20 April 2010

The Portfolio Committee on International Relations and Cooperation (the Committee), having considered the budget of the Department of International Relations and Cooperation (the Department), Vote 5: International Relations and Cooperation, reports as follows:

1. Introduction

1.1 The Committee considered the budget of the Department on 17 March 2010. The purpose of the meeting was to primarily outline the Department’s budget for 2010/11 financial year and its Strategic Plan 2010-2015.

1.2 The delegation representing the Department was comprised of:

· Director General: Dr A Ntsaluba,

· DDG Multilateral: Amb G Nene

· DDG Corporate Services: Mr A Moodley

· DDG Human Resources: Mrs M Joyini

· DDG Diplomatic Academy: Ms M Dlomo

· DDG Africa Multilateral: Amb Kudjoe

· DDG Americas: Ms N Mxakato-Diseko

· DDG Asia & Middle East: Amb S Ngombane

· DDG Europe: Amb R Molekane

· DDG Disarmament & NEPAD: Amb A S Minty

· DDG State Protocol: Amb L M Makhubela

· DDG Africa Bilateral (apologies) Mr M Nkosi

1.3 This report gives a brief summary of the presentations made by DIRCO to the Committee, focusing mainly on the 2010 Medium Term Expenditure Framework (MTEF) allocation across programmes.

1.4 Due to the technical and detailed nature of the Department’s Strategic Plan, the Committee remarked that it was not an easy task for it to engage as thoroughly as it would have wished on the details of the Department’s plans. To allow it to fulfil its oversight more effectively, the Committee resolved that it was work in progress and it would engage further with the Department’s plan during the next quarter of 2010.

1.5 The Committee informed the Department of its new additional powers to amend the budget as derived from the Money Bills Amendment Procedure and Related Matters Act No 9 of 2009. Although it has legislative power to amend the budget, the Committee recognised that the ability to do so is currently hampered by lack of capacity. Accordingly, it resolved that it will consider the legislation in the future reports of the department.

2. Distribution of the Budget

2.1 The aim of the Department of International Relations and Cooperation is to formulate, coordinate, implement and manage South Africa’s foreign policy and international relations programmes.

2.2 The DG, Dr Ntsaluba, provided the background to the distribution of the budget. He referred to the strategic priorities for the period 2010-2013 as the stated in the State of the Nation Address 2008, as the line of action that South Africa will continue to pursue, and it includes the following:

• Strengthening the political and economic integration in SADC; resuscitation of NEPAD and improving regional climate for growth;
• Promote the attainment of MDGs in Africa in 2015;
• Intensify mainstreaming of gender issues into the African Union activities;
• Accelerate the establishment of SADPA and its rationalisation with African Renaissance and International Cooperation Fund (ARF);
• Support peace building in the Great Lakes Region, though concerned with elections intended for 2011 as rebels in the east of the DRC are regrouping;
• Pursue political solutions in Madagascar;
• The AU has once again lent its support for South Africa’s candidacy to the UN Security Council, and South Africa’s focus will be to strengthen cooperation between AU Peace and Security Council and the UN Security Council;
• Continue to support implementation of Zimbabwe’s GPA and facilitate the political dialogue in the country; encourage private sector to invest in Zimbabwe following the conclusion of BIPPA, signed in November 2009;
• Closely cooperate with Nigeria as a strong ally to support enforcement of peace, security and development in the region;
• Enhance efforts to normalise relations with Morocco, in order to gain its confidence to pursue a solution to the plight of the Saharawi people in their fight for self-determination;
• Send election observers to Sudan and continue to support initiatives for peaceful dialogue towards reaching a sustainable solution in Darfur;
• Since President Zuma took office, there has been a deliberate initiative to close ranks with leaders in the SADC region. It is with realisation that a divided SADC could weaken the African Agenda; SA will enhance economic activity and development in the region to strengthen integration; SA to endeavour to assist with industrialisation of the region; and
• continue to assist international efforts aimed at resolving the Middle East conflict.

3. Strategic focus on financial matters

3.1 The DG presented the financial analysis of the Department to demonstrate that it received a total budget of R4824.4 billion from Treasury for 2010/11 financial year. The breakdown of voted funds is as follows:

Program 2009/10 2010/11

Administration 1207.7 1020.0

Int. Relations 3072.0 2786.8

Protocol & Pub 257.6 232.9

Transfers 1015.6 784.7

Total 5552.9 4824.4

3.2 It was explained that expenditure grew from R2.9 billion in 2006/07 to R5.6 billion in 2009/10 at an average annual rate of 23.5 percent. This growth was attributed to the construction of the new head office building; increased contributions to the African Renaissance and International Cooperation Fund (ARF); the acquisition of properties to expand domestic and international property management portfolios; improvements in the Department’s ICT infrastructure and strengthening of missions capacity.

3.4It was reported that expenditure was expected to decrease marginally over the MTEF period at an average annual rate of 0.3 percent. That was as a result of a decrease in the capital payments budget subsequent to the completion of the head office building in 2009/10 and fewer property acquisitions in the missions abroad over this period. The Department would concentrate on completing existing capital projects before embarking on new projects due to prevailing economic conditions and government spending priorities. The total available for capital projects over the MTEF period is R798.3 million.

3.5 It was pointed out that over the MTEF period, savings of R771.4 million were expected to be realised from foreign exchange rate gains. Allocation of R384 million in 2010/11 and R138 million in 2011/12 for the construction of the Pan African Parliament (PAP) has been removed from the Department’s baseline, alternative methods of funding will be explored.

3.6 The Department confirmed that it would not impact negatively on service delivery as PAP will continue to operate from Gallagher Estates in Midrand. The transfer payment to the ARF had reported as reduced by R30 million, R60 million and R80 million over the medium term. The funds have been allocated to other urgent government priorities. The reduction in the funds was also not expected to hamper service delivery, as there were still enough funds for all its projects.

3.7It was highlighted that efficiency savings of R36 million in 2010/11 and R34 million in 2011/12 had been identified in the following areas: catering and entertainment; travel costs through enhanced control measures to rationalise domestic travel; administration support services- by improving department’s ICT; and suspended services to mobile phones exceeding allocated limit. Saving was identified in the areas where expenditure was not cost effective. Reduced funding was not expected to negatively impact on service delivery.

4. Expenditure by programme

4.1 Administration- It was reported that expenditure increased from R537.1million in 2006/07 to R1.2 billion in 2009/10 at an average annual rate of 31 percent. Expenditure over the MTEF period was expected to decrease marginally at an average annual rate of 1.9 percent. The decrease was due to the completion of the head office building and some of the capital projects in missions. The DG pointed out that the medium term spending focus in this programme would be on completing capital projects in missions. The Department would continue improving ICT infrastructure for better communication and coordination with missions.

4.2 International Relations- Bilateral relations component is responsible for development and monitoring policy it also gives support to the diplomatic missions abroad. It represents 10% of the total budget and funding is used mainly for head office support functions, including personnel.

4.2.1 Diplomatic representation component- implements foreign policy and oversees the activities of all SA missions worldwide. It was reported that the programme represented more than half of the total budget, and it was used for the day to day running of the missions. Funding in this programme was also meant for South Africa’s contribution to post-conflict reconstruction and development; strengthening of political solidarity, economic cooperation and socio-cultural relations with countries of the world; contribution towards the political and economic integration of the Regional Economic Communities (RECs).

4. 2.2It was highlighted that expenditure under this programme was expected to decrease over the MTEF period at an average annual rate of 0.3% due to an expected strengthening of the Rand against major currencies. It was acknowledged that the exchange rate fluctuations significantly affect expenditure under this programme. Over MTEF period, focus was to be on strengthening capacity for small scale missions to improve service delivery.

4.3 Protocol and Public Diplomacy – This programme was reported as responsible for liaison with the media, national stakeholders in foreign policy and promotes South Africa’s foreign policy both nationally and internationally. Funding mainly relates to logistical costs for promotions, policies and programmes. It focuses on marketing activities of building and projecting a positive image of South Africa.

4.3.1 Protocol component – This programme was reported to deal with protocol administration, ceremonial services, state visits, diplomatic liaison, and training on protocol matters. The main focus for MTEF period would include assisting in 2010 FIFA WORLD CUP related events. A lot of these services would be required for dignitaries who will be visiting South Africa during the games. However, overall expenditure is expected to decrease marginally over the MTEF period at an average annual rate of 1.9% as no further expenditure for presidential inauguration is expected.

4.4 International Transfers – This programme was reported as responsible for funds, fees and contributions to various international organisations. Expenditure under this programme was reported to have grown from R402.2 million in 2006/07 to R1 billion in 2009/10 at an average annual rate of 36.2%. The growth was attributed to the recapitalisation of ARF, aimed at increasing funding for post-conflict reconstruction and development initiatives which South Africa had to undertake in furtherance of the African Agenda. Over the MTEF period, expenditure is expected to decrease marginally at an average annual rate of 1.7%. This would mainly be due to reduction in the transfer payment to the ARF to enable government to fund other urgent priorities.

5. Concerns raised by the Committee

· The Committee enquired as to what will become of ARF when SADPA is established, and how accountability processes would be carried out, as according to DG’s explanation, there would be also donor funding into the coffers of SADPA.

· The Department was informed that the Committee has powers to amend its budget vote pursuant to the Money Bills Amendment Procedure and Related Matters Act No 9 of 2009.

· The Committee probed into how coordinated the acquisition of assets system was in relation to missions, whether it was Public works or DIRCO responsible for the maintenance of these properties.

· It was in the Committee’s interest to know how South Africa would approach and try win its partners from the North to buy into its application for a World Bank loan of R27 billion, for construction of a coal power station for generation of electricity.

· Explanation was sought as to which other sources were envisaged, other than government, for contribution towards the construction of PAP headquarters.

· It was acclaimed as paramount to protect South Africa’s investments in Zimbabwe. The committee sought to know what guarantee government had that Zimbabwe would comply with judgement of a South African court when it refused a SADC Tribunal ruling on protection of investments.

· A concern was raised regarding the military junta in Burma which had banned political parties including Sung San Chi from participating in the coming elections, and what would be the government stance with regard to these issues.

· The committee asked DIRCO whether it had an Asset Register and a risk management process, R1 billion allocated for operational costs was considered too little.

· The identification of certain countries in the continent as strategic partners solely because of what they stood for in the short term in regional or continental portfolios was seen not of strategic importance to South Africa. Sustainable, economically strategic relationship was instead envisaged with Algeria, Angola, Namibia, Nigeria, and Mozambique, if pursued with that kind of thinking, it was probed whether DIRCO shared the same sentiment.

· The Department was asked about progress towards regional integration.

· A concern was raised on the situation in the Saharawi which had been dragging for a long time, and an explanation was sought as to why government would respond by normalising diplomatic relations with Morocco instead.

· A serious concern was raised to the effect that there was still no effective policy on public diplomacy, white paper which was being mooted was to be most welcomed, to both demystify international relations and facilitate popular participation in its development and implementation.

· The Committee probed into whether strategies existed and were being looked at to address and deepen debate on intolerance towards foreigners. It was suggested that such strategies should also incorporate labour, police, business immigration and other relevant stakeholders.

· A question was raised with regard to the way the department’s tendering processes were conducted for procurement of services.

· It was asked whether there were any cost-cutting interventions that could be put in place with regard to the many properties DIRCO has abroad.

· With the emergence of China and the formation of BRIC, it was of importance to the Committee to find out whether DIRCO’s predictions were on whether IBSA would outlive the formation of BRIC in the country’s relationship with the South?

· It was enquired whether there was in place, a mechanism for a coordinated conduct of foreign policy activities by other departments and municipalities which was discussed in previous meetings with the Department.

6. Responses

• The Department was fully aware of the activities of BRIC, and it started as an investment/finance based forum, however lately it deals with political issues too, this has no detrimental consequence to South Africa’s interests. It was felt that IBSA will stand the test of time as the member countries involved are renowned democracies in the South.

• It was explained that the countries which were mentioned like Malawi, Zambia etc, were mentioned as of strategic importance on a multilateral level, it was agreed that indeed for bilateral strategic partnerships other countries feature more.

• The department noted the powers that the Committee now has to amend the budget vote and expressed its hope for continued common understanding during the process.

• Closing down of missions to try and cut cost, has not proved cost effective in the past, so DIRCO has no intention to do so.

• Outsourcing of services has been as a process that became necessary especially when it came to moving officers on posting, recall or on transfer between missions. Frasers Company has been so engaged over a lengthy period of time.

• There were guidelines adopted by Cabinet for the coordination of foreign policy activities by all stakeholders, DIRCO had been mandated to lead the process and first discussions with municipalities had already taken place and more were in the pipeline.

• There had been major challenges; it was explained, with the outside funding into the African Renaissance and International Cooperation Fund (ARF). Treasury had to be involved in the transfer of such funds into South Africa. It was reported that the process of handling of these funds by Treasury required a service commission, which in turn brought about shortages on the amount given and raised concerns by donors around the service fee. It was believed that the creation of SADPA as an entity would surpass some of the red tape, hence the intention to phase out ARF in the wake of SADPA. SADPA was to operate as a partnership, not a donor, for development and mutual benefit for the region.

• It was explained that the issue of ESKOM having applied for a loan from the World Bank which would enable it to generate electricity from coal, had been a point for discussion by several climate change groupings, including opposition parties in the country, for pollution considerations. Nonetheless, the reasons for the move far outweighed the other considerations, especially because the country had also undertaken to benchmark and significantly decrease its carbon emissions.

• It was reported that the government had since decided to seek funding from other sources to comply with its commitment to built headquarters for the Pan African Parliament as provided in the Headquarters Agreement it has signed with the African Union.

• A White Paper on Public Diplomacy was reported to be in the pipeline, and that the move would open corridors for popular engagement on the elements of SA Foreign policy. However, weaknesses in the current media strategy were acknowledged.

• As a facilitator in the Zimbabwe political crisis, South Africa will continue to mediate and bring the parties closer to the solution until it is accomplished. As a facilitator, South Africa cannot communicate to the media or anyone else about the outcomes of the discussions; this is solely the responsibility of the Chair of the SADC Troika, Mozambique. The press had been hurling accusations at government on these matters without full knowledge of the protocol at play.

• DIRCO has taken a conscious decision to have an Audit branch which is responsible for risk management, furthermore, this function, has become the responsibility of management as a whole to follow risk management processes.

• There are strategic organisations that South Africa is a member to, like the OECD, ECOSOC to advance its national interest. It is the resolve of the Department to popularise SADC and the African Union. There will be Africa Day celebrations on 25 May, and they will be held in Khayelisha, the current chair of the AU, President of Malawi, will be invited and cultural groups of African countries that will be participating in the world cup will be featured.

• It was explained that South Africa decides which peace-keeping missions it will support. It is involved in the Sudan through MONUC, as a UN Security Council mission.

• The Polisario Front had suggested that it might work to their advantage to normalise relations with Morocco, as no meaningful contact will be established if it is sidelined. In no way will this strategy influence South Africa’s principled position in support of self-determination for the Saharawi people.

• In its association with ASEAN countries, DIRCO has established that these countries want democratisation in their region. They will spearhead the political inclusiveness in Burma.

• Management and maintenance of properties in the missions is the responsibility of DIRCO, while local properties are under Public Works portfolio. The Department confirmed it had an Asset Register in place

• It was explained that government does not as yet have a policy for trailing spouses of officers who get posted abroad as diplomats. DIRCO is in the process of finalising policies for either absorbing trailing spouses when they return; placing them on unpaid study/leave when abroad; spousal allowance paid straight to them; negotiate reciprocal agreements for them to work in host countries; in the meantime emotional and acclimatisation support are on going.

7. Conclusions

• Due to reduction in budget allocation in 2010/2011 by almost a R1billion because of the economic recession and other factors, the Committee noted that the expected tight alignment of budget to priorities would be a challenge to the Department.

• The Committee also noted that it would be a challenge to maintain ICT systems stable to cater for the growing needs of missions and staff complement at headquarters.

• The Committee raised a serious concern with regard to the current oversight model in operation in Parliament. The bulk of the work that the Committee has to exercise oversight on is either in the missions abroad or is project areas where South Africa is assisting in either post-conflict reconstruction or peace-keeping operations. With only two international study tours allowed in five years, and the budgetary constraints facing committees, it will be virtually an enormous challenge for the Committee to effectively execute its mandate. The Committee further pointed out that it had to deal with the budget which it could not verify, due to its inability to conduct inspections in loco on the programmes the Department was dealing with.

• It was acknowledged that the property portfolio to be managed by DIRCO in the missions was huge, it was deemed necessary for the Department to have a functional Asset Register and personnel trained in property management in place.

• It was noted that Government departments were required to engage state recruited security and not private security; as a result, there had been reported personnel shortages accessible to the department for this kind of service.

8. Recommendations

The Committee recommended that the Department consider the following:

1. That there is a need for the Department to be diligent and religiously adhere to its plans and achieve the set objectives within the allocated budget of R4824.4 billion for 2010/11, albeit a decrease of about R1 billion from the R5552.9 billion budget of the previous financial year. The Department must advise the Committee, within two months of the adoption of this report, of any envisaged challenges in its execution of its mandate within the allocated budget in an elaborate presentation on its intended strategies of operation in pursuance of its objectives.

2. In recognition of the huge property portfolio the Department has to manage in missions abroad, the Department should train personnel on property and asset management skills. Furthermore, the department should submit, within three months of the adoption of this report, a detailed Asset Register, depicting the number of properties, locations, maintenance status, whether rented or owned and all other relevant information that would assist the Committee when examining such a report.

3. In the successive budget proposals since 2008, the Department highlighted a number of refurbishment projects in The Hague, Berne, Madrid, Munich and Kinshasa; however, no timeframes are stipulated for these projects. The Department should submit, within a month of the adoption of this report, a detailed report on the status of these projects, their timeframes for completion and whether they are aimed for short or long term expenditure.

4. There is a need to develop a detailed programme on public diplomacy objectives, and it be submitted to the Committee within two months of the adoption of this report. This programme should evidently depict elevation of public diplomacy activities to a higher and recognisable level within DIRCO. Currently there does not seem to be a synergy between the public diplomacy programme and national interest. The Department must be more visible and less elitist in its conduct of the South African International Relations Policy. It must employ ‘soft power’ more to achieve understanding and support for its policies in advancing national interest and communicating national imperatives.

5. The Department must submit a report with timeframes within one month of adoption of this report, on the progress towards the construction of the headquarters for the Pan African Parliament, as per the country’s obligations under the Headquarters Agreement signed with the African Union. The removal from the Department’s budget baseline of funding for PAP must not detract government from pursuing the project within expected timeframes.

The Committee recommends that Budget Vote 5: International Relations

and Cooperation be passed.

Report to be considered.