New Agric cash scandal

2010-07-02 00:00

THE KZN Agriculture, Environmental Affairs and Rural Development Department, previously under the spotlight for maladministration, is once again courting controversy.

This time it has apparently gone against Treasury rules and the Public Finance Management Act (PFMA) in sponsoring a two-day agribusiness investment summit whose initial cost is £200 000 (R2,23 million). The amount is expected to go up to well over R3 million.

Dr Sizwe Mkhize, appointed head of the department earlier this year, signed an agreement with an international investment communications company to co-host the two-day summit. The watertight agreement specifies that the department will not only have to pay the R2,4 million sponsorship fee, but also cover the cost of the venue, catering for 300 people and promotional material. The clause on promotional material says this has to be done in accordance with company specifications. “The company reserves the right to determine the colour, design and content of the promotional material.”

Mounting costs for a department that is subject to the provincial government’s stringent cost-cutting measures is the least of the department’s worries. It is alleged that the manner in which the department circumvented Treasury rules has rung alarm bells.

Treasury rules do not allow provincial departments to sponsor or donate amounts more than R100 000 in foreign currency. Any amount above this has to be sanctioned by the legislature.

This was apparently pointed out in a legal memo to Mkhize. The department then opted to go the single-sourcing route to appoint the company, without going to tender. This resulted in an additional R600 000 having to be paid to appoint the company, Africa Investor, as the events management team to organise the summit. The outcome is that Africa Investor is being paid to manage its own event. According to Treasury rules, single-source appointments without going to tender cannot cost more than R500 000.

The move has resulted in an added financial burden on the department. The tag has now gone up from R2,23 million to about R2,9 million — before paying for the venue, catering and promotional material.

A list of questions was sent to Mkhize. One questioned why he had signed the agreement without going to the legislature.

He was also asked how he overcame the hurdle of the PFMA as the agreement states that the sponsorship fee has to be paid in pounds sterling into an overseas bank account. Section 67 of the act says a provincial department cannot bind itself to a commitment denominated in foreign currency or conducted in a foreign currency market.

While the agreement drawn up by Africa Investor is standard for the corporate world, it is viewed as one-sided. The agreement calls for the sponsorship amount to be paid within 15 days of the agreement being signed. Government regulations allow the state to make payment within 30 days. The agreement gives the company, but not the department, the right to change the dates of the summit. If the event is cancelled, the department will not be entitled to a refund — only a credit note that can be used for another event at a later date organised by the company.

Treasury stipulations call on officials entering agreements with third parties to ensure that the state’s interests are protected. Mkhize was asked to outline the benefits to the state in this agreement.

The Witness has learnt that legal opinion within the department is that the service of senior counsel should be sought, because the department may be faced with legal serious challenges if it wishes to cancel the agreement.

In answer to the questions put top him, the HOD said he cannot comment on the agri­business summit because “it has not taken place at all”.

Africa Investor has confirmed that the event will take place in Durban on August 31 and September 1.

Asked about the likely benefits to the province, a spokesperson for Africa Investor, Natasha Nunes referred The Witness to the announcement of the event.

The announement states, “The summit will profile African investment opportunities in agribusiness to the investment community, as well as bring farmers, investors and rural entrepreneurs together to maximise effective government spending on rural development and funding for commercial and small scale farmers.”

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