Report to the portfolio committee on Arts and Culture by Adv. Z. Feni

Discussion Points Covering a period from the last oversight visit by the Portfolio Committee on Arts and Culture until January The appointment of Mr. Mxolisi Zwane during 2012 to Appointment of staff during the period 2012 to The resolution of the board and implementation 4.Irregularities incurred to date and Forensic Investigation 5.Contracts with service providers. 6.Litigation against the Board. 7.Financial challenges facing the Board 8.Legislation governing the Board and interference by DAC. 2

1. The appointment of Mr. Mxolisi Zwane 1.1 On 15 June 2015, the minister of Arts and Culture Mr. Paul Mashatile, appointed Mr. Zwane as DDG of the department of Arts and Culture and simulteneously seconded him to be the caretaker CEO of the Board. 1.2This appointment was invalid for two reasons: 1.2.1The minister had no power or authority to appoint a DDG in the department as that is the prerogative of a Dg of the department; and 1.2.2the minister had no power or authority to second anybody to the Board as a Caretaker CEO 1.3This posed problems for the Board as decisions made by a person appointed in this manner are invalid and the Board cannot be bound by such decisions. 3

2. The appointment of staff by Mr. Zwane 1.4Upon assumption of duties, Mr. Zwane appointed twelve employees on a twelve months’ contract with a view to advertise the positions to afford others an opportunity to apply upon expiry of the term and this never happened as these individuals were absorbed on a permanent basis into the system. 1.5Mr.Zwane went on to appoint a total of 49 employees without following proper recruitment processes of the Board and these positions were either not budgeted for or were not funded and it appears that some of those he employed are connected to him in one way or another and some either lacked the necessary qualifications and experience for the positions they were offered. 1.6This took the wage bill of the Board from an annual R36 million to R56 million diverting funds which were meant for capital projects to staff compensation. 4

3. The resolution of the Board and its implementation 2.1 On 28 November 2014, and after obtaining a legal opinion, the Board resolved in its meeting to disregard the employment contracts entered into by and between Mr. Zwane and the affected individuals as he had no power or authority to make these appointments and the contracts were not enforceable against the Board at the instance of the affected individuals. 2.2 On ! December 2014, I communicated the decision of the Board to the affected individuals who had to vacate the premises upon receiving such notice but defied such a request and continued to occupy the offices. 5

4. Irregularities incurred by the Board 3.1Upon assumption of duty as Acting CEO, I unearthed a number of irregularities which were committed during Mr. Zwane’s period at the helm of the organization and contracts which did not add value to the Board and which did not follow proper procurement processes. 3.2As these relate mainly to procurement of goods and services, there were either no tendering process or ignored the outcomes of the tendering processes. 3.3 The irregular expenditure amount to R28 million for the past three years. 3.4a forensic investigation into these transgressions by the forensic department of the national treasury is underway with the implementation plan having been signed already and have started the actual investigation already. 6

5. Contracts with service providers 4.1The Board also had through the ACEO, to deal with the question of contracts entered into during the same period and to ascertain whether they added any value to the organization. 4.3There were also payments made, during this period, to service providers when there were no contractual obligations on the part of the organization. These relate to a company known as CSFS and Sithole Mzumbo Consulting. 4.4 Apart from hundreds of thousands of rands paid to these companies, there were still hundreds of thousands of rands which are outstanding payments. For example, CSFS which was appointed to, amongst others, spy on old staff members of the organization was paid more than R1 million and about R is still owing. 7

4. Contracts with service providers (Cont...) 4.5 Sithole-Mzumbo Consulting was paid more than R and according to them about R is still owing. 4.6 Both companies had no contracts entered into with the organization while Sithole Mzumbo was billing the organization monthly for services which were not covered in any contractual agreement. 4.7 A contract entered into with this company is in respect of a project of establishing a server room for the purposes of hosting the facilities of the organization and this contract was about R11 million and communication was sent to both companies that we will no longer honour payments of the outstanding invoices. 4.8 The combined figure accumulating for the organization in respect of internet and services amounted to more than R per month. 8

4. Contracts with service providers (Cont...) 4.9 On 30 November 2014, BCX, a company that used to host the organization severed its ties with the organization for non-payment as it is owed about R which was made up of R monthly instalments. As a result thereof, for the month of December 2014, the organization had no internet and connection. 4.10A new contract was entered into with Telkom to provide the same services at a reduced cost of about R per month. 4.11The service is presently operational. 4.12A number of contracts were cancelled due to financial constraints and because they added no value to the organization. 9

5. Litigation against the Board 5.1The Board is currently facing a litigation from some service providers demanding payment for services they claim to have rendered to the Board. 5.2 Zanenza Communications is claiming more than R1 million for commission on fundraising activities regarding some donations from the National lotteries Board. 5.3Raborifi Attorneys are claiming about R for legal services rendered. 5.4On the 11 th December 2014, the individuals whose contracts were disregarded by the Board also lodged an application against the Board in the labour court, a matter which was dismissed on the same day for lack of urgency. 5.5Despite the fact that communication was sent to service providers informing them of the financial situation of the Board and despite the fact that in the case of Zanenza, there appears to have been an understanding between Zanenza and the previous management of the Board that Zanenza would not be paid commission for the grant from the National Lotteries Board but would co-opted as a service provider in furtherance of the objectives of the grant. 10

5. Litigation against the Board (Cont…) 5.6In the case of Raborifi Attorneys, the Board is being sued despite that communication was sent to him notifying him of suspension of payment of his invoices pending the final determination of a complaint lodged against him with the law society of the Northern provinces as there is a prima-facie view that he has inflated his invoices to the Board. 5.7CSFS is also suing the Board for about R for services rendered which we have no evidence of and a meeting requested with them to shed some light on what they claim for was not honoured. 11

6. Report of the Auditor-General After the audit by the Auditor-General of South Africa, obtained a disclaimer of opinion which means that there was no paper trail of how the finances of the Board have been spent. This relates, amongst others, to the following: 6.1Staff costs not all accounted for; 6.2Leases which were not classified as financial leases; 6.3Irregular, fruitless and wasteful expenditure which were not disclosed; and 6.4Contingent assets which were incorrectly declared. 12

7. Achievements 7.1Appointment of internal auditors(Governance and internal controls) 7.1.1For the financial year 2014/2015, PanSALB was able to advertise and appoint an effective audit firm (PWC) to perform the internal audit function. These internal auditors managed to produce internal charter as required by legislations. 7.2Appointment of Audit, Risk and ICT committee(Internal Oversight) 7.2.1For the financial year 2014/2015, PanSALB was able to advertise and appoint an Audit, Risk and ICT Committee as required by legislations. This Committee convened on 7 November 2014 and made some recommendations in a bid to stabilize PanSALB. 7.3Risk assessment workshop conducted as per legislations 7.3.1The strategic risk assessment workshop was conducted and the report was submitted to the Board and management. 13

7. Achievements (Cont...) 7.4 Identification and preventing of irregular, wasteful and fruitless expenditure is in place 7.4.1The Identified irregular, wasteful and fruitless expenditure were reported to the accounting officer. The condonation letter was also written to DAC and Treasury A forensic investigation has been initiated to probe all irregular procurement processes during the period in question. 7.5Asset register VS Finance 7.5.1The management decided to start the Asset register afresh as it was in very bad state and we are in the processes of registering and consolidating the Board’s assets country wide. 14

7. Achievements (Cont...) 7.6Registration of the skills levy 7.6.1The process of registering for the Skills Development Levy (SDL) through SARS is currently underway. The HR Division is still awaiting a municipal statement and a letter from the Department of Public Works indicating that they are responsible for the payment of rentals for PanSALB The said letter will serve as a supporting document and will accompany the application form to be submitted to SARS for registration. 7.7Regular updates and consultative meetings with staff 7.7.1Despite some logistical challenges that prevailed, the organisation is on track with regular updates and consultative meetings with staff. 15

8. Challenges 8.1Non-observance of legislation and other legal prescripts 8.2Unapproved strategic plan 8.3Lack of an effective reporting template 8.4Deficit/Mounting debt: 8.4.1Mounting debt as a result of contracts entered into by the previous management) PanSALB began the 2014/2015 financial year with outstanding debt of around R16,000,00,00 for goods and services which were not budgeted for. This figure stands to increase as some invoices are still in provinces and could not be submitted for logistical reasons Courier and postal Services which were suspended due to non-payment. 16

Challenges Cont We continue to have challenges from the Department of Arts and Culture which seeks to impose its will on the Board Section 4 of the Pan South African language Board Act 59 of 1995, as amended provides as follows: The Board and its members and its officials shall serve impartially and independently and exercise, carry out and perform their powers, duties and functions in good faith and without fear, favour, bias or prejudice, subject only to the Constitution and this Act No organ of state and no member or employee of an organ of state or any other person shall interfere with the Board, any member thereof or a person appointed under section 10 in the exercise, carrying out or performance of its his or her powers, duties and functions All organs of state shall afford the Board such assistance as may reasonably be required for the protection of the Board’s independence, impartiality, dignity and effectiveness in the exercise, carrying out and performance of the Board’s powers, duties and functions. 17

Challenges Cont… On 20 January 2015, the department sought to transfer an amount of R2 million for the payment of salaries for the individuals whose employment contracts were disregarded by the Board When this was declined, an amount of R2 million was transferred into our bank account on 28 January 2015 and our request to get clarity on the purpose of the transfer and its conditions drew a blank A piece of paper addressed to us by the department stated that this was an advance from our annual allocation, although we never requested an advance On 3 February 2015 the department transferred our monthly grant and it unilaterally decided to deduct R1 million in respect of the advance On 10 February 2015, the department through its Acting CFO informed us that the Acting DG instructed him to deduct R2,4 million from our monthly grant in respect of the other R1 million, it advanced us and a payment towards the monies expended by the department on Mr. Zwane’s salary. 18

Challenges Cont…. 8.6I wish to state that all these actions violates the independence of the Board and the unilateral deduction of funds from the monthly grant affect our cash flow as planning becomes impossible given that we might not get the full allocation for the month. 8.7I wish to state further that the department is not helping the situation we wish to disentangle the organization from and if the situation continues like this, there is a lot at stake for the Board, emanating from the interference in the independence of the Board by the department and if not properly managed would lead to the same failures the Board experienced in the last five of its 19 years of existence. 19

9.Appointment of the CEO 9.1The Board resolved in its meeting of 4-5 February 2015 to kick start the process of the appointment of the CEO of the Board. 9.2The advert has already been drafted and is in the process of being translated into other languages to be advertised in the national newspapers. 9.3The closing date for the applications is 23 Mach 2015 and we hope to have appointed the CEO to start at the beginning of June

10.Execution of the mandate 10.1From the little that has been saved from staff compensation, we have managed to ensure that the Board can once again begin to execute its mandate. 10.2This was in the form of recent celebrations of the International Mother Language Day celebration which took place in a number of provinces. 10.3We continue to address challenges that were faced by the structures of the Board which were rendered redundant by the interventions that took place during the past two years. 10.4We are communicating with provincial MECs to launch the appointment of PLC members in provinces where there are none. 10.5We are in the process of resuscitating the NLBs some of whom have their term expired while the term of others is coming to an end in August

11.Conclusion 11.1This is an organization which no long ago was facing an uncertain future and the tide was turned when bold decisions were taken by the board of the organization in its meeting of 28 November 2015 and we are making steady progress in resuscitating the fortunes of the organization as the debt trap is also coming down. 11.2On 15 October 2014, after a meeting of the select committee of Sport and Recreation, we were encouraged by the chairperson of the portfolio committee on Arts and Culture to stop the bleeding of the organization and after we have satisfied ourselves as a Board of the ills and what went wrong in the organization, we were able to act decisively as we did in an effort to stabilize the organization and I can say without any fear of contradiction that we are on course to resuscitating the organization. 11.3Language is a very important resource and a very important tool that ensures that citizens are able to follow government communication and its programs. 22

Cont … The concept of multilingualism helps citizens and their government to understand each other and this is a solution that should be encouraged as both the state and citizens have a symbiotic relationship. 11.7Institutions like ours play a very important role in this relationship which can be simply summarised as affording the state and its citizens an opportunity to hear and understand each other. 11.8About more than half of our population does not have the luxury of speaking and understanding either English and/or Afrikaans and the door would be shut on them if the principle of multilingualism is not promoted. 11.9Institutions which seek to foster and preserve this multilingualism to ensure this understanding between the state and its citizens should be strengthened as doing so would empower those who stand to benefit from this concept as they would talk with confidence that they are being heard I hope as we move forward to restore and stabilize the organization we will be guided by its founding legislation which spells out what roles and responsibilities organs of state should and must play in the organization’s well being and all those who are called upon to play a role in the affairs of the Board can put their feelings aside and do what they can in the best interest of the organization and within the confines of the law, as it cannot speak for itself we should all do that which will restore it to its former glory and we dare not fail. 23

End I thank you Adv. Z. Feni 24