Annual Report 2019/2020 2
TABLE OF CONTENTS PART A: GENERAL INFORMATION 1. GENERAL
INFORMATION
..............................................................................................................................................
2. LIST OF ABBREVIATIONS/ACRONYMS
.......................................................................................................................
3. ARC 2019/20 COUNCIL MEMBERS
...........................................................................................................................
4. ARC 2019/20 EXECUTIVE MANAGEMENT
...............................................................................................................
5. FOREWORD BY THE CHAIRPERSON
..........................................................................................................................
6. CHIEF EXECUTIVE OFFICER’S OVERVIEW
.................................................................................................................
7. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE
ANNUAL REPORT .............. 8. STRATEGIC OVERVIEW
...............................................................................................................................................
9. LEGISLATIVE AND OTHER MANDATES
.......................................................................................................................
10. ORGANISATIONAL STRUCTURE
.................................................................................................................................
PART B: PERFORMANCE INFORMATION 1. AUDITOR’S REPORT: PREDETERMINED
OBJECTIVES
.............................................................................................
2. SITUATIONAL ANALYSIS
...............................................................................................................................................
2.1. Service Delivery Environment
...............................................................................................................
2.2. Organisational environment
..................................................................................................................
2.3. Key Policy Developments and Legislative Changes
.............................................................................
2.4. Strategic Outcome-Oriented Goals
.......................................................................................................
3. PERFORMANCE INFORMATION BY PROGRAMME 3.1. Programme1: Crop
Production, Improvement and Protection Programme
.......................................... 3.2. Programme2: Animal
Health, Production and Improvement Programme
............................................. 3.3. Programme 3:
Natural Resources Management Programme
...............................................................
3.4. Programme 4: Mechanisation and Engineering Programme
................................................................
3.5. Programme 5: Agro-Processing, Food Technology and Safety
............................................................. 3.6.
Programme 6: Smallholder Agricultural Development Programme
...................................................... 3.7.
Programme 7: Agricultural Economics and Commercialisation Programme
........................................ 3.8. Programme 8: Training
and Extension Programme
..............................................................................
3.9. Programme 9: Administration and Corporate Affairs Programme
........................................................ 3.10
Research Highlights
..............................................................................................................................
PART C: HUMAN RESOURCES MANAGEMENT 1. INTRODUCTION
.............................................................................................................................................................
2. HUMAN RESOURCES OVERSIGHT STATISTICS
........................................................................................................
PART D: GOVERNANCE 1. INTRODUCTION
.............................................................................................................................................................
2. PORTFOLIO COMMITTEES
...........................................................................................................................................
3. EXECUTIVE AUTHORITY
..............................................................................................................................................
4. THE ACCOUNTING AUTHORITY/BOARD
....................................................................................................................
5. RISK MANAGEMENT
.....................................................................................................................................................
6. INTERNAL CONTROL UNIT
...........................................................................................................................................
7. INTERNAL AUDIT AND AUDIT COMMITTEES
.............................................................................................................
8. COMPLIANCE WITH LAWS AND REGULATIONS
........................................................................................................
9. FRAUD AND CORRUPTION
..........................................................................................................................................
10. MINIMISING CONFLICT OF INTEREST
........................................................................................................................
11. CODE OF CONDUCT
.....................................................................................................................................................
12. HEALTH, SAFETY AND ENVIRONMENTAL ISSUES
.....................................................................................................
13. COMPANY/BOARD SECRETARY
...................................................................................................................................
14. SOCIAL RESPONSIBILITY
.............................................................................................................................................
15. AUDIT COMMITTEE REPORT
.......................................................................................................................................
16. B-BBEE COMPLIANCE PERFORMANCE INFORMATION
............................................................................................
PART E: FINANCIAL INFORMATION 1. REVENUE COLLECTION
...............................................................................................................................................
2. REPORT OF THE EXTERNAL AUDITOR
.......................................................................................................................
3. ANNUAL FINANCIAL STATEMENTS
...............................................................................................................................
3
28 31 33 34 36 38 39 41 42
45
145 147
152 152 152 153 156 156 156 157 158 158 158 159 160 160 162
164
6. Chief Executive Officer’s Overview
7. Statement Of Responsibility And Confirmation
Of Accuracy For The Annual Report
8. Strategic Overview
10. Organisational Structure
REGISTRATION NUMBER: Agricultural Research Act 86 of 1990 (as
amended)
PHYSICAL ADDRESS: 1134 Park Street, Hatfield, 0001
POSTAL ADDRESS: PO Box 8783, Pretoria, 0001
TELEPHONE NUMBER: +27 12 427 9700
FAX NUMBER: +27 12 430 5814
EMAIL ADDRESS:
[email protected]
WEBSITE ADDRESS: www.arc.agric.za
BANKERS: Standard Bank
COMPANY/BOARD SECRETARY: Ayanda Ndamase
2. LIST OF ABBREVIATIONS/ACRONYMS
4IR Fourth Industrial Revolution AATF African Agricultural
Technology Foundation AD Anaerobic Digestion AESA Agricultural
Economics Association of South Africa AGSA Auditor-General of South
Africa AHSV African Horse Sickness Virus AR Annual Report ARC
Agricultural Research Council ASBVd Avocado Sunblotch Viroid B-BBEE
Broad-Based Black Economic Empowerment BBTV Banana Bunchy Top Virus
BGP Beef Genomics Programme BMGF Bill & Melinda Gates
Foundation BRICS Brazil, Russia, India, China and South Africa BW
Bacterial Wilt CA Conservation Agriculture CARA Conservation of
Agricultural Resources Act CCARDESA Centre for Coordination of
Agricultural Research and Development for Southern Africa CEO Chief
Executive Officer CFO Chief Financial Officer CIMMYT International
Maize and Wheat Improvement Center CMI Cell-Mediated Immunity CREA
Council for Agricultural Research and Economics
CSA Climate Smart Agriculture
1. GENERAL INFORMATION
Annual Report 2019/20205
DALRRD DEA DEFF DLDD DPME DSI DTIC EB EBP ECSP EMC EPs EPF ERM ESD
EU FAO FARA FAW FCM FHB FMD FSR G4AW GAC GAP GDARD GDP GIZ GPS HGBF
HSRC IA IAP ICAR ICT IDRC IGR IWE IIA IKS IMF IP IPAP IPGR IRM KyD
LSD M&E MINMEC MIF-PA MISS MLND MoA/U MPSS MTBPS MTEF MTO MTSF
MV NAMC NAMPO NARIS
Department of Agriculture, Land Reform and Rural Development
Department of Environmental Affairs Department of Environment,
Forestry and Fisheries Desertification, Land Degradation and
Drought Department of Planning, Monitoring and Evaluation
Department of Science and Innovation Department of Trade, Industry
and Competition Elementary Bodies Extension Big-Five Economic
Competitiveness Support Programme Executive Management Committee
Extension Practitioners Entomopathogenic Fungi Environmental
Resources Management Enterprise Supplier Development European Union
Food and Agricultural Organization Forum for Agricultural Research
in Africa Fall Armyworm False Codling Moth Fusarium Head Blight
Foot-and-mouth Disease Farming System Research Geodata for
Agriculture and Water Global Affairs Canada Gauteng Accelerator
Programme Gauteng Department of Agriculture and Rural Development
Gross Domestic Product German Development Cooperation Global
Positioning System Howard Graham Buffet Foundation Human Sciences
Research Council Internal Audit Invasive Alien Plants International
Committee on Animal Recording Information and Communication
Technology International Development Research Centre
Intergovernmental Relations Institute for Water Education Institute
of Internal Auditors Indigenous Knowledge System International
Monetary Fund Intellectual Property Industrial Policy Action Plan
Institute of Plant Genetic Resources Insect Resistance Management
Kaonafatso ya Dikgomo Lumpy Skin Disease Monitoring and Evaluation
Ministers and Members of Executive Council Makonde Indigenous Fruit
Processing Association Minimum Information Security Standards Maize
Lethal Necrosis Disease Memorandum of Agreement/Understanding
Minimum Physical Security Standard Medium-Term Budget Policy
Statement Medium-Term Expenditure Framework Mountain To Ocean
Medium-Term Strategic Framework Military Veteran National
Agricultural Marketing Council South African Agricultural Trade
Show National Animal Recording and Improvement Scheme
Annual Report 2019/2020 6
NCEP NCFAD NDP NEHAWU NEMA NGOs NGP NIR NPP NRCS NRF NSDF NSO NSW
NUPSAW OBP OIE PBMC PDP PFMA PLAS POMASA PSA PwD(s) QTL R&D R4A
RB RDI RVF RMRDSA ROI RTU SADC SAFCOL SAMRC SATI SAWS SCM SDG SEACF
SEDA SHF SMART SMME SOC SPCA SPI STEMI TIA TMV TRV UAV UK UN UNCCD
UNDP USAID USDA-ARS VC VIDO-InterVac WEMA WRC WUR
National Cultivar Evaluation Programme Canadian National Centre for
Foreign Animal Diseases National Development Plan National
Education, Health and Allied Workers’ Union National Environmental
Management Act Non-Governmental Organisations New Growth Path Near
Infrared Net Primary Productivity National Regulator for Compulsory
Specifications National Research Foundation National Spatial
Development Framework Netherlands Space Office National Science
Week National Union of Public Service and Allied workers
Onderstepoort Biological Products World Organisation for Animal
Health Peripheral Blood Mononuclear Cells Professional Development
Programme Public Finance Management Act Pro-Active Land Acquisition
Strategy Pomegranate Association of South Africa Potatoes South
Africa People with Disability/ies Qualitative Trait Loci Research
and Development Rain for Africa Reticulate Bodies Research,
Development and Innovation Rift Valley Fever Red Meat Research
Development of South Africa Return on Investment Real Time
Ultrasound Southern African Development Community South African
Forestry Company Limited South African Medical Research Council
South African Table Grape Industry South African Weather Service
Supply Chain Management Sustainable Development Goal Southern and
Eastern African Cotton Forum Small Enterprise Development Agency
Smallholder Farming Specific Measurable Achievable Realistic and
Time-bound Small, Medium and Micro Enterprise Soil Organic Carbon
Society for the Prevention of Cruelty to Animals Standard
Precipitation Index Science, Technology, Engineering, Mathematics
and Innovation Technology Innovation Agency Tobacco Mosaic Virus
Tobacco Rattle Virus Unmanned Aerial Vehicle United Kingdom United
Nations United Nations Convention to Combat Desertification United
Nations Development Programme United States Agency for
International Development United States Department of Agriculture -
Agricultural Research Service Value Chain Canadian Vaccine and
Infectious Diseases Organisation Water Efficient Maize for Africa
Water Research Commission Wageningen University &
Research
Annual Report 2019/20207
Prof Sibusiso Vil-Nkomo
* 1 April 2017 until 30 June 2020
# 1 April 2017 until 30 June 2020 (Re-appointed to new Council on
1st July 2020)
Dr Mnqobi Ngidi Member *
Ms Bongiwe Kali Member *
Annual Report 2019/2020 8
Dr Shadrack Moephuli President and CEO
Ms Maureen Manyama Chief Financial Officer
(CFO)
Resources and Legal Services
Annual Report 2019/20209
On behalf of the Management Team and Council (Board), it gives me
pleasure to present the Annual Report for the Agricultural Research
Council (ARC) for the financial year 1 April 2019 to 31 March 2020.
This Annual Report is presented in terms of the Agricultural
Research Act, 1990 (Act 86 of 1990 as amended by Act 27 of 2001)
and the Public Finance Management Act, 1999 (Act 1 of 1999, as
amended by Act 29 of 1999).
Further, this Annual Report provides information and data on the
organ- isational performance based on the approved Strategic Plan
(2015/16- 2019/20), the Business Plan for 2019/20, and progress
made on the ac- tion plans that resulted from the Auditor-General
reports on the 2016/17 to 2019/20 audit cycles.
Due to the outbreak of Coronavirus that causes COVID-19, the term
of Council was extended from 1 April 2020 until 30 June 2020. This
resulted in a new Council that assumed responsibility for
governance and over- sight on the management and control of the
Agricultural Research Coun- cil (ARC) on 1 July 2020. Consequently,
the new Council has assumed responsibility for finalisation of this
Annual Report, an unusual context.
We hereby acknowledge and appreciate the contributions of the
previous Council towards ensuring the ARC remains in pursuit of
fulfilling its mandate, particularly as a leading agricultural
research and development organisation.
During 2019/2020 the ARC continued to be well governed and managed.
The Council carried out its mandate through the proper exercising
of good governance and effectively carrying out the fiduciary
responsibilities while working very well with management to ensure
appropriate utilisation of public and private resources.
The scientific endeavours of the ARC during this year continued
despite limited resources.
Firstly, the organisation did not shy away from producing cultivars
through innovation and contributing to new discover- ies. These
cultivars were intended to improve the nourishment of our people,
to contribute to stable food supplies in our country and to ensure
that agriculture remains sustainable. Let me once more say: “A
country that cannot feed its people is a basket case and therefor,
besides political leadership, scientific leadership by
organisations like the ARC remained a sine qua non”.
Secondly, this scientific entity also focused on vegetables and
ornamental plants research. Its focus was on fighting diseases and
pests that infect sweet potatoes, green beans, carrots, tomatoes,
potatoes and others. Experiments in the ARC laboratories were used
to the fullest to combat these potential threats.
Thirdly, the ARC focussed on advancing food production from the
scientific perspective of conservation agriculture (CA). As
succinctly articulated: “The Agricultural Research Council promotes
conservation agriculture as the preferred crop- ping system to
optimise crop water use, while improving yields and reducing the
drought risk.” As observed in the reports management shared with
the Council during the year under discussion, the studies on soil
protection were fundamental, the education of growers on the use of
mulch was promoted and crop rotation was advanced to support
CA.
Finally, on the domestic animal side, fighting Foot-and-mouth
Disease remained a challenge for the ARC. Previously, the
development of a vaccine did not receive adequate funding from the
shareholder. This year, funding was promised by the Department to
build a state-of-the-art facility that will enable the ARC to once
more become a leader in the vaccine production locally,
continentally and globally in 2021 onwards.
During the 2019/2020 financial year the ARC renovated its wine
cellar in Stellenbosch, including conversion to renewable energy.
Further, the facility was renovated to meet the demands of this
millennium, including training of new entrants into winemaking and
is being used for testing wines produced in the Western Cape. As
Council, we also encouraged the head of the facility to position
the cellar as a historic tourist attraction site.
5. FOREWORD BY THE CHAIRPERSON
Ms Joyene Isaacs Chairperson of the ARC Council
(With effect 1 July 2020)
Annual Report 2019/2020 10
Collaborations remained critical for the ARC. Research work with
South African universities continued, global partner- ships were
promoted, the private sector was encouraged to participate in the
ARC endeavours and small as well as large farmers were also the
focus of the ARC. The Council noted that improvements, in
particular with the South African private agricultural sector, was
a necessity.
Considering the success and challenges of the ARC during this year,
a Turnaround Strategy was approved by the Council for
implementation by management. This strategy took into consideration
the financial state of the ARC, the poor con- dition of the South
African economy and that of the world, the threat to South Africa’s
sovereignty if agriculture was to collapse, the need to properly
make use of the scarce financial resources, consolidation and
effective utilisation of the ARC campuses and the focus on
investing in the human capital that drives the primary research
business of the ARC scientific endeavours. Here, management was
requested to make hard and difficult choices for the ARC to remain
viable into the future.
The above said were well supported with the recent appointments to
the ARC Executive Team who came on board in the previous year.
These include Ms M Manyama: Chief Financial Officer, Dr T Mkhabela:
Group Executive, Impact and Partnership and Dr T Sethibe: Group
Executive, Information Systems. Their contributions in 2019/2020
were invaluable and they strengthen the Executive Team.
In this year, the ARC had to confront a challenge that no one
foresaw, COVID-19. The CEO, his team and the Council had to make
hard decisions when the country went into Lockdown-5. The Council,
Executive Management interactions and all the research operations
of the ARC had to be conducted virtually. Thank you and
congratulations to the Executive Team for implementing what some
refer to as the “New Normal”, wherein which the organisation
demonstrated to South Africans and the world that ICT was not an
enigma to this society.
I am delighted that the CEO, CFO and Council relentlessly pursued
revenue collection from long outstanding debtors as reported in the
financial statements contained in this report. This would not have
been achieved without the assistance of Minister Thoko Didiza. We
thank her for her strong leadership and wish her the best in the
important work assigned to her by the President and the people of
South Africa. This achievement bodes well for the financial
recovery of the ARC.
While in 2019/20, the ARC witnessed improvements, there were,
however, some exogenous wicked problems. The ARC experienced losses
due to a rise in crime. Burglaries, land invasions and other
unpalatable criminal activities were expe- rienced on some of our
campuses. As a result, financial resources that could have been
dedicated to research activities had to be channelled to securing
the ARC facilities. The continued inconsistency in the Tshwane
Municipality electricity billing system also caused some havoc with
the ARC financial planning.
“To my fellow Council members, you took the 2019/20 task of the ARC
with determination. You were forthright and willing to turnaround
an ARC that is important for agriculture and its science. I thank
you for your steadfastness”, said Professor Sibusiso Vil-Nkomo,
former Chairperson of the Council.
To the previous Chair and Council members, we have taken note of
the plans to make the ARC resilient, and this ultimate challenge
remains for the new Council to continue with renewed vigour and
commitment.
_________________________ Ms Joyene Isaacs Chairperson of the ARC
Council 06 October 2020
Annual Report 2019/202011
In accordance with the requirements of the Agricultural Research
Act, 1990 (Act No. 86 of 1990 as amended by Act No. 27 of 2001) and
the Pub- lic Finance Management Act, 1999 (Act No. 1 of 1999 as
amended by Act No. 29 of 1999) we hereby present the Annual Report
of the Agricultural Research Council (ARC) containing the audited
financial statements and performance information for the year
ending 31 March 2020.
Further, on behalf of all employees, including management and
together with Council, the ARC hereby submits this Annual Report to
South Africa’s Parliament, through the Executive Authority, the
Minister of Agriculture, Forestry and Fisheries (now called
Agriculture, Land Reform and Rural Development): Ms A. Thoko
Didiza, MP.
The outputs in this Annual Report were in accordance with the pre-
determined objectives that are contained in the Business Plan for
financial year 2019/20 as approved by Council, and tabled in
Parliament by the Executive Authority. Further, this Annual Report
provides information on the organisational performance for the
fifth year of the five (5) year Strate- gic Plan for the period
2015/16 to 2019/20.
On behalf of all employees, management hereby express gratitude for
oversight, good governance and strategic advice provided by the
previous Council (Board), including the Audit and Risk
Committee.
During the financial year, the ARC received science policy and
financial support from the Department of Science and Innovation.
Other financial support was from the Department of Environmental
Affairs. All financial support enabled the ARC to fulfil its
mandate as a science council and towards natural resource
management. The ARC expresses apprecia- tion for the support from
these government departments in particular. In addition, the ARC
hereby expresses appreciation for financial support from various
other stakeholders, particularly the agriculture commodity trusts
and associations (list is too long to mention), for enabling the
organisation to develop and deliver scientific solutions sorely
needed by various agriculture enterprises.
In the reporting period the ARC, through research and development,
technology transfer and dissemination placed par- ticular focus
towards contributing to the achievement of the following national
priorities as outlined in the Medium-Term Strategic Framework
(MTSF):
• Outcome 4: Decent employment through inclusive economic growth; •
Outcome 7: Vibrant, equitable, sustainable rural communities
contributing towards food security for all; and • Outcome 10:
Protect and enhance our environmental assets and natural
resources.
As expected, the ARC’s efforts were also aligned to the United
Nations Sustainable Development Goals (SDGs).
Briefly, the ARC achieved good performance as per strategic goals
with limited resources, particularly people (scientific skills and
capacity), ageing infrastructure (buildings and laboratory
equipment) and obsolescence of technology, primarily through
effective utilization of partnerships, collaboration and other
cost-saving measures. Due to financial constraints and escalating
costs the ARC could not entirely fulfil its mandate.
During the reporting period the ARC continued to invest in skills
development through partnerships mainly in the following
areas:
• Employee Development: Education and training of employees, mainly
through short term courses as well as im- provements in employee
qualifications;
• Mentorship and Coaching: Introduction of post-retirement
mentorship, including partnership with international or-
ganisations on a number of projects to improve the skills of junior
employees; and
• Professional Development Programme (PDP): A partnership with
various universities for the training and educa- tion of
postgraduate students in practical applications of scientific
solutions for the agriculture sector. This pro- gramme has
increased from about 50 students in 2007/08 to more than 200 in
2019/20. During this period, ARC scientists have supervised PDP
students, resulting in the granting of postgraduate degrees (MSc
and PhD) at a rate of 20 per annum.
6. CHIEF EXECUTIVE OFFICER’S OVERVIEW
Dr Shadrack Moephuli ARC President and CEO
Annual Report 2019/2020 12
Research and innovation are critical elements for enabling
sustainable and competitive agriculture enterprises. During the
reporting period, the ARC has developed and released crop cultivars
to ensure increased yield, productivity, improved quality
(nutritional aspect) and resilience to pests, diseases and drought.
Examples include the registration of wheat, maize, soybean and
fruit cultivars through government authorities. Further, the ARC
has continued to provide research services aimed at disseminating
data and information about suitability of various cultivars, mainly
through National Cul- tivar Evaluation trials.
Livestock production and productivity are an important component of
South Africa’s agri-food systems, in particular, as a source of
protein that is essential for food and nutrition security among the
population. During the financial year 2019/20 the ARC provided
technical and scientific support to 4 625 smallholder farmers,
mainly through Kaonafatso ya Dikgomo (KyD), an animal improvement
scheme. Participating farmers in the KyD were generally more
successful in livestock sales, including higher incomes. Other
research services for livestock production included real-time
ultrasonic assess- ment for carcass traits, beef genomics for feed
efficiency, disease diagnostics and vaccine development.
As a key provider of solutions for the management of pests and
diseases and the mitigation/adaptation to climate change, a
non-functional ARC would present significant threat to food and
nutrition security, agriculture and economic growth, peace and
sustainable development. It is therefore essential to ensure a
financially resourced ARC able to fulfil its mandate.
Analysis of financial performance linked to organisational
performance is hereby presented in this Annual Report.
GENERAL FINANCIAL REVIEW OF THE PUBLIC ENTITY
Figures in Rand Thousands FY2020 FY2019 * VARIANCE (R) * VARIANCE
(%)
Financial Performance Overview ____________________________
Total Expenditure
Financial Position Overview ________________________
Cash Flows Overview ___________________
Cash flows (net) from Operating Activities Cash flows (net) from
Investing Activities
Cash balance at the end of the year
379 041 978 340
314 423 248 563
372 130 139 645
Financial Performance
The Total Revenue of the Council for the FY2020 was R1.36 billion
which represents an overall 3.3% (R43.6 million) growth.
The revenue from exchange transactions earned for the FY2020 is
R379 million which a slight decline of 1.5% as com- pared to the
prior year. The performance was influenced positively by the
performance of the following revenue streams namely: Rental of
facilities and equipment; Bad debts recovered; Other income; and
Interest received (interest received from invested funds).
Annual Report 2019/202013
The performance of the following revenue streams was lower than the
previous year’s performance: Sale of goods in agricultural
activities; Rendering of services; and Royalty income.
The ARC received a 5.3% growth of the Parliamentary Grant, and has
continued to receive funding (conditional grant) towards the
Foot-and-mouth Disease (FMD) facility, which has been ring-fenced
and invested at the Corporation for Public Deposits (CPD).
SPENDING TRENDS OF THE PUBLIC ENTITY
The total expenditure was R1.28 billion and resulted in a 1.6%
(R21.2 million) year-on-year savings.
The personnel cost remains the significant cost driver within the
ARC, as it constitutes an average of 63% of the total expenditure.
The year-on-year savings on the employee costs are attributable to
the delayed filling of positions, which has been a conscious
decision to minimise the recruitments whilst the organisation is
busy with the implementation of the Sustainability and Financial
Turnaround Plan (as approved during April 2019). The Employee costs
continue to absorb a major portion of the Operational Parliamentary
Grant; however, there has been an improvement year-on-year from 98%
(FY2018/19) to 90% (FY2019/20). The organisation has, during the
2020 financial year changed its funding for ICT equipment from the
lease option to outright purchase, which has resulted in
year-on-year savings of R10.7 million.
REQUESTS FOR ROLL-OVER OF FUNDS
Section 53(3) of the Public Finance Management Act (PFMA) requires
a public entity, which must submit a budget in terms of section
53(1) of the PFMA, not to budget for a deficit and not to
accumulate surpluses, unless prior written ap- proval of the
National Treasury has been obtained.
Calculation of Surpluses FY2020
Cash and cash equivalents at the end of the year Add:
Receivables
245 935 648 132 014 635
Less: Current Liabilities
Surplus 63 527 757
The ARC will submit a request to the National Treasury to seek
approval for the roll-over of surplus funds of R63.5 million.
Annual Report 2019/2020 14
SUPPLY CHAIN MANAGEMENT
The ARC has a Supply Chain Management Policy in place, which was
approved by the Council. The SCM standard operating procedures as
approved by the Executive Management Committee (EMC) are in place.
The ARC submitted its Procurement Plan for FY2020 within the
prescribed timelines in compliance with Paragraph 3 of National
Treasury In- struction 2 of 2016/17. The Procurement Plan had 92
projects with an estimated value of R336.6 million, including Value
Added Tax (VAT). Due to various internal challenges, 68 tenders to
the value of R223 million were not processed during FY2019/20.
There were no unsolicited bid proposals concluded by the ARC during
the period under review (FY2019/20).
AUDIT REPORT MATTERS IN THE PREVIOUS YEAR
The ARC had in place an Audit Improvement Plan, which was presented
and monitored by the Audit and Risk Commit- tee as well as the
Council. Progress on the Audit Improvement Plan was subjected to
review by the Internal Audit on a quarterly basis. The ARC prepared
the Interim Financial Statements for the period ending 30 September
2019, which were audited by the Auditor-General South Africa (AGSA)
with an Interim Management Report issued. The organisation further
prepared the Financial Statements for the period ending 29 February
2020, which were subjected to a review by Internal Audit. The
February 2020 review was aimed at ensuring that all audit findings
raised by the AGSA were ad- dressed, initiatives per the AIP were
closed, whilst assessing the state of readiness for the FY2019/20
year-end audit.
The audit qualification matters which have been addressed as
follows during the FY2019/20 include:
Reference to the Audit Report FY2019 Basis for Qualification
Progress or Status
3 Asset register includes assets at zero and R1 values, which are
still in use. [Residual values and Useful lives]
Accounting records were updated and the Annual Financial Statements
for the year ended 31 March 2020 have resolved this matter.
4 Assets acquired through non-exchange transactions were not
measured at fair val- ue at date of acquisition.
Accounting records were updated and the Annual Financial Statements
for the year ended 31 March 2020 have resolved this matter.
5 Assets under construction could not be au- dited.
Accounting records were updated and the Annual Financial Statements
for the year ended 31 March 2020 have resolved this matter.
6 Property, Plant and Equipment overstated due to differences
between the accounting records and financial statements.
Resolved. A 100% assets verification was performed and all legacy
balances on the Fixed Assets register have been written off. Assets
scrapping and disposal approved by Council - 06 June 2020.
7
ARC recognized all living resources as in- ventories, and not only
the items used for research purposes, as required by GRAP 27
biological assets.
This has been corrected and will be accounted for as Biological
Assets, and Property, Plant and Equipment (Bearer Plants). The
accounting records were updated based on the valuations reports for
the respective farms (Vine- yards and Orchards) as well as the
Livestock valuation report. The matter has been resolved.
8 Appropriateness of the accounting for Live- stock as
Inventory.
The Accounting policy for biological assets was approved by
Council. The change in accounting policy will be accounted for
appropriately in the FY2020 AFS.
9 Inventories understated by R4.4 million. Resolved. Inventory
count performed at year-end.
10 Unable to obtain sufficient appropriate audit evidence for other
payables (R227 million). Resolved.
11 Unable to obtain sufficient appropriate audit evidence for
payment received in advance. Resolved.
12 Payables from exchange transactions were understated by R6.2
million. Resolved.
13 Unable to obtain sufficient appropriate audit evidence for trade
debtors. Resolved.
14
Unable to obtain sufficient appropriate au- dit evidence for staff
debtors, as entity did not perform adequate reconciliation of out-
standing debtors.
Resolved.
15
The entity did not recognize receivables from exchange transactions
as assets and liabilities were offset inappropriately (WIP
accounts).
Resolved. The use of WIP accounts has been discontinued effective
01 April 2019.
16 Revenue for rendering of services incor- rectly recognized.
Resolved.
17 Revenue from rendering of services was not recorded in the
correct period. Resolved.
18 Unable to obtain sufficient appropriate audit evidence for
rendering of services. Resolved.
Annual Report 2019/202015
OUTLOOK/PLANS FOR THE FUTURE TO ADDRESS THE FINANCIAL
CHALLENGES
The ARC has developed a Sustainability and Financial Turnaround
Plan, which is aimed at improving the financial posi- tion of the
organisation. The plan was approved towards end of FY2018/19, and
implementation is underway. As at 31 March 2020, the ARC was
considered solvent as the assets exceeded the liabilities by R1.6
billion. Therefore, based on this assessment, it can be concluded
that the ARC is solvent. The liquidity assessment was concluded at
year-end, which took into account the impact of COVID-19 on the
business. It was concluded that the ARC will continue as a going
concern, for the foreseeable future.
IMPACT OF THE COVID-19 PANDEMIC
COVID-19 is an unprecedented challenge for humanity, businesses and
the economy at large. At the date of the report, its effects are
subject to significant levels of uncertainty. In order to further
address the inherent uncertainty embedded in the current situation
that the ARC and country find themselves in, management has
considered the potential impacts on the organisation by taking a
variety of risk elements into account and their impact on
forward-looking business prospects as articulated in the MTEF
FY2021-FY2023:
• Future revenue pipeline: it is assumed that 40% of the external
income is at risk and thus highly unlikely to be achieved. This is
estimated at an external income loss of R197 million and R247
million for the 2021 and 2022 financial years, respectively;
• Impacts on cost structures: the additional costs arising from the
COVID-19 pandemic will be prioritized and catered for, within the
approved budget. The Operating Costs for FY2021 is estimated to be
at 60% of the planned levels due to the delayed spending on core
business;
• Impact of the reduction in employee-related costs arising from
the implementation of the ARC Financial Sustain- ability and
Turnaround Plan. The resulting savings is estimated at 15% and 30%
for the 2021 and 2022 financial years, respectively; and
• Impact of the non-payment from private customers has been
considered not significant.
Some of our clients may also face credit-related issues but an
assessment of credit risk found that the ARC customer base is
unrelated and concentration of credit risk, with respect to trade
receivables, is limited.
Despite the potentially considerable impact of this pandemic on the
2021 results and financial position, the equity of the ARC is
strong enough for the foreseeable future to absorb the economic
shock caused by COVID-19. The ARC will be able to continue its
operations for at least the next twelve months. Therefore, the 2020
Annual Financial Statements have been established on a
going-concern basis.
Based on the assessment done, the use of the going-concern
assumption is considered appropriate.
EVENTS AFTER THE REPORTING DATE
The ARC has received R60.4 million from the Department of
Agriculture, Forestry and Fisheries towards the settlement of its
long outstanding debt.
The extended term of Council (Accounting Authority) for ARC expired
on 30 June 2020. Therefore, on behalf of the ARC management hereby
expresses appreciation for the contribution, good governance and
oversight of the previous Council.
As at 1 July 2020 the Minister of Agriculture, Land Reform and
Rural Development appointed a new Council (Accounting Authority)
for the ARC. All employees and stakeholders of the ARC hereby
welcome this appointment and we look for- ward to working with the
new Council members.
Management has accepted with disappointment the outcome of the
external audit from the Auditor-General of South Af- rica and
resolved to implement immediately measures to eliminate adverse
audit findings for 2020. This includes, among others:
• An Audit Improvement Plan targeted at eliminating root causes of
adverse findings, including consequence man- agement;
• Review and development of policies, business processes and where
necessary, associated delegations of author- ity;
• Review of skills (competencies and appropriate placements),
including required training among all relevant per- sonnel;
Annual Report 2019/2020 16
• Further implementation of the ARC Financial Sustainability and
Turnaround Plan approved by Council during fi- nancial year
2019/20.
TO OUR CLIENTS AND STAKEHOLDERS
To our most valued customers, partners, beneficiaries, suppliers
and stakeholders, we, the people at ARC, hereby extend our utmost
gratitude for your support and assistance during the financial
year. We trust and hope you will continue to collaborate with the
ARC in various ways to ensure that we meet the expectations and
developmental needs of the South African communities.
Management hereby expresses gratitude and appreciation for the
dedicated contribution/s of all employees of the Agri- cultural
Research Council. It is your contributions that enable the
sustainability, competitiveness and growth of the agri- culture
sector; which in turn enables food and nutrition security.
Re a leboha, le ka moso
Re a leboga, le kamoso
Re a leboga, le gosasa
Siyabulela, nangamso
Siyabonga, naksasa
Siyathokoza, nangamoso
Ria livhuwa, khazwiralo na matshelo
Baie dankie
Thank you
___________________ Dr Shadrack Moephuli ARC President and Chief
Executive Officer Date: 06 October 2020
Annual Report 2019/202017
7. STATEMENT OF RESPONSIBILITY AND CONFIRMATION OF ACCURACY FOR THE
ANNUAL REPORT
To the best of my knowledge and belief, I confirm the
following:
• All information and amounts disclosed in the Annual Report are
consistent with the Annual Financial Statements audited by the
Auditor-General;
• The Annual Report is complete, accurate and is free from any
omissions; • The Annual Report has been prepared in accordance with
the guidelines for the Annual Report as issued by Na-
tional Treasury; • The Annual Financial Statements (Part E) have
been prepared in accordance with the Public Finance Manage-
ment Act (No.1 of 1999, as amended) (PFMA) standards applicable to
the public entity; • The accounting authority is responsible for
the preparation of the Annual Financial Statements and for the
judge-
ments made in this information; • The accounting authority is
responsible for establishing, and implementing a system of internal
control that has
been designed to provide reasonable assurance as to the integrity
and reliability of the performance information, the Human Resources
information and the Annual Financial Statements; and
• The external auditors are engaged to express an independent
opinion on the Annual Financial Statements.
In our opinion, the Annual Report fairly reflects the operations,
the performance information, the Human Resources infor- mation and
the financial affairs of the public entity for the financial year
ended 31 March 2020.
Yours faithfully
6 October 2020 ___________________ __________________ Dr Shadrack
Moephuli Chief Executive Officer Date
6 October 2020 ___________________ __________________ Ms Joyene
Isaacs Chairperson of the ARC Council Date
Annual Report 2019/2020 18
8.2. MISSION
MISSION
The Agricultural Research Council (ARC) is a premier science
institution that conducts research with partners, develops human
capital and fosters innovation to support and develop the
agriculture sector.
8.3. VALUES
VALUES - “TARGET”
Truth Incorporates honesty and integrity. The ARC shall conduct its
business in a trans- parent and ethical way towards its employees,
stakeholders and shareholders.
Accountability Incorporates responsibility. The ARC shall accept
responsibility and accountabil- ity with respect to employee
well-being, occupational health and safety (OHS), environmental
sustainability and agriculture.
Respect Includes equity, diversity and dignity. The ARC shall
conduct its business with respect for our colleagues, clients and
stakeholders.
Growth Includes equity, rewards and recognition. The ARC shall
ensure equity in terms of race, gender, creed, fair treatment,
training and development to all its employ- ees, stakeholders and
shareholders.
Excellence Incorporates empowerment and innovation. The ARC strives
to conduct R&D in an efficient, effective, professional and
accountable manner.
Trust Includes ethics and transparency. We shall ensure and foster
trust among our employees, stakeholders and shareholders.
Annual Report 2019/202019
9. LEGISLATIVE AND OTHER MANDATES
The ARC was established as a Public Entity on 1 December 1990,
under the then Ministry of Agriculture (now reconfig- ured as the
Ministry of Agriculture, Land Reform and Rural Development).
• The ARC is listed as a Schedule 3A Public Entity in terms of the
Public Finance Management Act (No.1 of 1999, as amended) (PFMA),
and is required to ensure full compliance with all prescripts and
regulations arising from the PFMA.
Specifically, the ARC was established in terms of the Agricultural
Research Act (No. 86 of 1990, as amended by Act 27 of 2001), from
which it derives its core mandate. The objectives of the ARC
outlined in the Act are to conduct research, drive research and
development, drive technology development and transfer
(dissemination) information, in order to:
• promote agriculture and industry; • contribute to better quality
of life; • facilitate/ensure natural resource conservation; and •
alleviate poverty.
The Act defines: • Research as the furtherance, accumulation and
improvement of knowledge in the agricultural and related
sciences
through original and other investigations and methods of a
scientific nature with the advancement of agriculture as its
object;
• Technology Development as activities by which knowledge acquired
through research is utilised; and • Technology Transfer - transfer
of knowledge, techniques and processes for application
thereof.
Further, the Act states that in order to achieve its objectives,
the ARC may:
• undertake and promote research, development and technology
transfer in connection with: • the optimal utilisation of the
agricultural resources and the improvement of the production
capacity of such
resources; • the rehabilitation and improvement of the agricultural
resources; • the opening of possibilities and the generation of new
knowledge to solve particular problems; • the improvement of the
nutritional value and quality of agricultural products; • the
pollution of the environment and the prevention thereof in respect
of agriculture; and • the improvement of existing techniques and
the creation of new techniques for the processing of
agricultural
products, and to improve the keeping quality of perishable
agricultural products; • utilise the technological expertise in its
possession and make it generally available; • publish information
concerning its objectives and functions, and establish facilities
for the collection and dissemi-
nation of information in connection with research and development;
• establish and control facilities in those fields of research,
development and technology transfer which the Council
may from time to time determine; • promote cooperation between the
Republic and other countries with regard to research, development
and tech-
nology transfer; and • cooperate with persons, institutions and
associations undertaking research, development and technology
transfer
in other countries.
The ARC performs its functions through several research campuses
that are predominantly commodity-based and are strategically
distributed throughout the country. Further, research at these
facilities is complemented by on-field experi- mental sites
distributed throughout every province of South Africa. In addition,
selected farm fields are utilised to study the performance of ARC
research technologies under actual farm production
environments.
The Council of the ARC is the Accounting Authority in terms of the
PFMA, and provides strategic direction and leadership to enhance
shareholder value and ensure the long-term sustainable development
and growth of the Entity. In fulfilling its responsibilities, the
Council is supported by the ARC Chief Executive Officer and the
Executive and Senior Management team in implementing the approved
strategic and corporate plans and policies. The ARC seeks to
operate on sound business principles and practices, and to this
end, strives at all times to comply with the principles contained
in the King Code on Corporate Governance in South Africa (2016)
(King IV).
Annual Report 2019/2020 20
LEGISLATIVE MANDATE
In delivering on its core mandate, the Agricultural Research
Council (ARC) is responsible for performing its functions in line
with the following key legislation, which thus directly informs the
various day-to-day operations of the organisation:
Legislation Objective of the Act ARC Responsibilty
Fertilisers, Farm Feeds, Agricultural Remedies and Stock Remedies
Act, 1947 (Act No. 36 of 1947)
The registration of fertilisers, farm feeds, agricultural rem-
edies, stock remedies, sterilising plants and pest control
operators are regulated by this Act. Provision is also made for
control over the acquisition, disposal, sale and use of
fertilisers, farm feeds, agricultural remedies and stock rem-
edies.
The Directorate Food Safety and Quality Assurance is re- sponsible
for the administration of this Act.
There is no specific delegation for the ARC. However, on
assignment, the organisation conducts analytical, testing and
advisory services to enable regulatory de- cisions by the
Department of Agriculture, Land Reform and Rural Development.
Animal Protection Act, 1962 (Act No. 71 of 1962)
This Act provides for the maintenance of proper standards of
hygiene, and in the handling of animals and the preven- tion of
cruelty to animals. The SPCA is responsible for the enforcement
thereof.
The Directorate Animal Production is responsible for the ad-
ministration of this Act.
There is no delegation to ARC. However, the organi- sation has to
comply with the requirements of the Act.
Plant Breeders’ Rights Act, 1976 (Act No. 15 of 1976)
This Act regulates the granting of certain rights relating to the
new varieties of certain kinds of plants, the protection of such
rights and the issue of licences in respect of the exercising of
the rights.
The Directorate of Plant Production is responsible for the
enforcement thereof.
The ARC provides services to the registrar to enable evaluation of
material for granting of Plant Breeders’ Rights in recognition of
new varieties. The ARC must comply with the requirements of the
Act.
Plant Improvement Act, 1976 (Act No. 53 of 1976)
This Act provides for the registration of establishments where
plants and propagation material are sold and packed; for the
introduction of schemes for the certification of certain
propagation material; for the requirements to which plants and
propagation material sold for the purposes of cultiva- tion must
conform; and for quality control over plants and propagation
material imported or exported.
The Directorate of Plant Production is responsible for the
enforcement thereof.
Registered testing laboratories (nematology, mycology, virology,
bacteriology - American Foulbrood Disease) provide diagnostic
services to government in terms of seed/plant quality (free from
pests and pathogens), as well as nurseries and other plant
propagation material.
Agricultural Pests Act, 1983 (Act No. 36 of 1983)
This Act introduces measures for the prevention and com- bating of
agricultural pests.
The Directorate of Plant Health is responsible for the en-
forcement thereof.
ARC serves on the National Steering Committees to ad- dress
specific pest problems. Responsibilities include:
• Calibration of aircraft for control of migratory pests;
• Identification services and registered testing lab-
oratories;
• The insect quarantine service is rendered through a contract with
the DALRRD.
Conservation of Agricul- tural Resources Act, 1983 (Act No. 43 of
1983)
This Act provides for control over the utilisation of natural
agricultural resources in order to promote the conservation of
soil, water sources and vegetation, and the combating of weeds and
invader plants.
The Directorate of Land Use and Soil Management and the Engineering
Directorate are responsible for the enforce- ment thereof.
No delegation. Certain aspects of the Act are contained within the
mandate of the ARC.
Animal Disease Act, 1984 (Act No. 35 of 1984)
This Act provides for control measures for the prevention of
diseases and parasites, and for schemes to promote animal
health.
The Directorate of Veterinary Quarantine and Human Health is
responsible for the enforcement thereof.
No specific delegation in terms of the Act. However, the ARC
provides various services (diagnostic and analyt- ical) to fulfil
the aims of the Act, including through OIE reference
laboratories.
Animal Identification Act, 2002 (Act No. 6 of 2002)
Provide for the identification of animals and procedures to be
followed when applying for an identification mark.
The Directorates Animal Production and Veterinary Quar- antine, and
Human Health are responsible for the adminis- tration of this
Act.
No delegation to ARC. However, certain aspects of an- imal
identification are contained in the implementation of INTERGIS. The
INTERGIS is delegated to the ARC.
Intellectual Property Rights from Public- ly-funded Research and
Development Act, 2008 (Act No. 51 of 2008),
Seeks to ensure that all publicly-funded research gets in-
tellectual property protection for the purposes of commer-
cialisation.
It further places an onus on the ARC to establish an Intellec- tual
Property Management Office.
The ARC has established a functional Intellectual Prop- erty
Management Office, along with associated internal policies to
ensure compliance to licensing agreements.
Annual Report 2019/202021
Genetically Modified Organisms Act, 1997 (Act No. 15 of 1997)
To provide measures to promote the responsible develop- ment,
production, use and application of genetically modi- fied
organisms; to ensure that all activities involving the use of
genetically modified organisms (including importation, production,
release and distribution) shall be carried out in such a way as to
limit possible harmful consequences to the environment; to give
attention to the prevention of acci- dents and the effective
management of waste; to establish common measures for the
evaluation and reduction of the potential risks arising out of
activities involving the use of genetically modified organisms; to
lay down the necessary requirements and criteria for risk
assessments; to establish a Council for genetically modified
organisms; to ensure that genetically modified organisms are
appropriate and do not present a hazard to the environment; and to
establish ap- propriate procedures for the notification of specific
activities involving the use of genetically modified
organisms.
The Directorate Bio-Safety is responsible for the adminis- tration
of this Act.
No delegation to ARC. However, ARC expertise, facil- ities and
scientific data/information are utilised to sup- port
decision-making.
Animal Improvement Act, 1998 (Act No. 62 of 1998)
To provide for the breeding, identification and utilisation of
genetically superior animals in order to improve the pro- duction
and performance of animals in the interest of the Republic.
The Directorates Animal Production and Veterinary Quar- antine, and
Human Health are responsible for the adminis- tration of this
Act.
Certain services that are discharged under this act are managed by
the ARC.
• Animal improvement services, including collec- tion of animal
data, as well as management of National Databank (INTERGIS);
• Section 20 of the Act on the establishment of the Schemes;
• Declaration of the Schemes Notice 29516 of 2007 Section
5(1)(a)(iii) - the Schemes shall en- sure that all recorded data
must be submitted to the Integrated Registration and Genetic
Informa- tion System (INTERGIS);
• Furthermore, Section 44 of the Declaration stip- ulates that: •
The Schemes will be managed by the ARC,
a statutory body established in terms of Sec- tion 2 of the
Agricultural Research Act, 1990 (Act No. 86 of 1990);
• The ARC will exercise the powers and per- form duties conferred
to it in terms of the Schemes; and
• The ARC may make rules relating to the Schemes in consultation
with the Depart- ment.
National Environmental Management Act, 1998 (Act No. 107 of
1998)
Provide for measures to prevent pollution and ecological
degradation; promote conservation; and secure ecological- ly
sustainable development and use of natural resources, while
promoting justifiable economic and social develop- ment.
The Department of Environment, Forestry and Fisheries (DEFF) is
responsible for the administration of the Act.
ARC supports by hosting of national collections and de- veloping
data used for conservation and management of natural
resources.
Baseline biodiversity data is essential for policy-makers regarding
conservation and sustainable use of natural resources.
National Environmental Management: Biodi- versity Act, 2004 (Act
No. 10 of 2004)
To provide for the management and conservation of South Africa's
biodiversity within the framework of the National Environmental
Management Act, 1998; the protection of species and ecosystems that
warrant national protection; the sustainable use of indigenous
biological resources; the fair and equitable sharing of benefits
arising from biopros- pecting involving indigenous biological
resources.
The DEFF is responsible for the administration of the Act.
As outlined above in respect of NEMA.
The above-mentioned legislation and Acts are not exhaustive, and it
is recognised that the ARC is subject to, and must comply with, all
national and provincial legislation and regulations, and all
municipal by-laws, applicable to its functions or the areas in
which it operates.
Annual Report 2019/2020 22
POLICY MANDATE
Whereas the above legislation and regulations define the scope of
the mandate and regulate how the ARC must op- erate, various
national policy and strategy frameworks give effect to how the
mandate should be implemented, and have direct bearing on the
priorities and focus areas of the ARC for the 2020/21-2024/25
period of its Strategic Plan.
National Framework Implication
Longer-Range Developmental Priorities:
The National Development Plan, Vision 2030
Adopted by Cabinet in 2012, the NDP is the visionary blueprint of
government, with business and society as collaborative partners -
seeking to eliminate poverty and sharply reduce inequality and
unemployment by 2030. All of government is challenged to ensure
their medium and short-term planning and M&E are aligned to the
NDP. Inclusive growth and development, an active and united
citizenry and a capable State are some of the visionary elements of
the NDP 2030.
The NDP identifies the following critical actions to realise Vision
2030: • A social compact to reduce poverty and inequality and raise
employment and investment; • A strategy to address poverty and its
impacts by broadening access to employment, strengthening the
social wage, improving public transport and raising rural incomes;
• Steps by the State to professionalise the public service,
strengthen accountability, improve coordination
and prosecute corruption; • Boost private investment in
labour-intensive areas, competitiveness, and exports, with
adjustments to low-
er the risk of hiring younger workers; • An education
accountability chain, with lines of responsibility from the State
to the classroom; • Phase in national health insurance, with a
focus on upgrading public health facilities; • Public
infrastructure investment at 10 percent of gross domestic product
(GDP) financed through tariffs,
public-private partnerships, taxes and loans and focused on
transport, energy and water; • Interventions to ensure
environmental sustainability and resilience to future shocks; • New
spatial norms and standards - densifying cities, improving
transport, locating jobs where people live,
upgrading informal settlements and fixing housing market gaps; and
• Reduce crime by strengthening criminal justice and improving
community environments.
Implications and opportunities for the ARC are to support
agriculture to create 1 million jobs by 2030, through: • Expansion
of irrigated agriculture by 500,000 ha; • Conversion of
under-utilised land in communal areas into commercial land; •
Support to commercial agricultural areas that have the highest
potential for success; • Job creation in upstream and downstream
areas of agriculture; • Creative combinations for communal land
conversion and high potential commercial land; and • Exposure of
new entrants to product value chains.
UN Sustainable Development Goals (SDGs)
Adopted by the United Nations in 2015, the 17 SDGs and their 169
key indicators build on the success- es of the Millennium
Development Goals, while including new areas, such as climate
change, econom- ic inequality, innovation, sustainable consumption,
peace and justice, among others. The SDGs set a common sustainable
development agenda for pursuit by all signatory nations, including
South Africa. South Africa’s contribution to the SDG negotiation
process was informed by the priorities of its National Develop-
ment Plan (NDP).
Echoing the intent of the NDP, in support of the SDGs, South Africa
can realise the goals by drawing on the en- ergies of its people,
growing an inclusive economy, building capabilities, enhancing the
capacity of the State, and promoting leadership and partnerships
throughout society.
African Union Agenda 2063
Aligned to the UN SDGs, the African Union Agenda 2063 reflects the
following aspirations: • A prosperous Africa, based on inclusive
growth and sustainable development; • An integrated continent,
politically united and based on the ideals of Pan-Africanism and
the vision of
Africa’s Renaissance; • An Africa of good governance, democracy,
respect for human rights, justice and the rule of law; • A peaceful
and secure Africa; • An Africa with a strong cultural identity,
common heritage, values and ethics; • An Africa where development
is people-driven, unleashing the potential of its women and youth;
and • Africa as a strong, united and influential global player and
partner.
National Spatial Development Framework, 2050 (NSDF)
Under the theme: “Moving South Africa forward towards the desired
spatial future”, the National Spatial Develop- ment Framework sets
out an action plan to bring about radical spatial transformation at
scale, and manage and mitigate national risks (current and
emerging),
It proposes a set of five National Spatial Action Areas (NSAAs),
which require urgent, focused and integrated national spatial
infrastructure investment and spending; and concerted and sustained
intergovernmental col- laboration, including the alignment of
plans, budgets and departmental plans in and between the spheres of
government.
Annual Report 2019/202023
10. ORGANISATIONAL STRUCTURE
* Retired May 2019
2. Situational Analysis
Annual Report 2019/202025
1. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES
The AGSA currently performs the necessary audit procedures on the
performance information to provide reasonable as- surance in the
form of an audit conclusion. The audit conclusion on the
performance against predetermined objectives is included in the
report to management, with material findings being reported under
the Predetermined Objectives heading in the Report on other legal
and regulatory requirements section of the Auditor’s Report.
Refer to page 169-174 of the Report of the Auditor-General,
published as Part E: Financial Information.
2. SITUATIONAL ANALYSIS
2.1. SERVICE DELIVERY ENVIRONMENT
The ARC continuously strives for ensuring optimal value derived
from utilization of financial and other resources on be- half of
customers, the government and people of South Africa - particularly
in fulfilment of the organisational mandate.
Conducting business in the financial years 2016/17 to 2019/20 has
been difficult for the ARC, primarily due to inadequate resources
to fulfil the organisation’s mandate. Although there are many
contributing factors to challenges faced by ARC, South Africa’s
poor economic performance, unfavourable climatic conditions (e.g.
severe drought in the Western Cape and delayed summer rainfall) and
the underperforming agriculture sector had direct negative impacts
on the financial resources available to the ARC. This resulted in a
decline in external income (mainly farmers and other private sector
enterprises) for research services in the sector.
External factors that influenced the service delivery environment
of the ARC included the following: • Structural faults in the South
African economy, particularly poor educational outcomes that
perpetuate
inherited disadvantage, low levels of labour intensive growth,
skills shortage, spatial fragmentation of the urban landscape and
travel costs, highly concentrated industrial structures, limited
competition and high barriers to entry, as well as inefficient
public monopolies imposing high cost structures for network
infrastructure;
• A collapse in consumer and business confidence leading to a
contraction in private sector investments and consumption
demand;
• National elections that diverted attention to economic activity
associated with volatility in local markets; and • Persistent
under-achievement of the agriculture land reform programme.
During the Medium-Term Expenditure Framework (MTEF) period ending
31 March 2018 the ARC Parliamentary Grant was reduced by R252
million; and, in addition, the grant allocation from the Department
of Science and Technology (DST) for the maintenance and operation
of national gene banks (National Public Good Assets) was reduced by
R40 million. In financial year, 2018/19 government implemented a
change in the rate of VAT from 14% to 15% that in turn, reduced the
parliamentary grant available to ARC.
Further analysis indicates that in the period 2012-2015 income
exceeded expenditure; however, since 2015, this trend has reversed
(i.e. expenditure exceeding income up to 2019). This scenario has
depleted the cash reserves of the ARC. Although the working capital
of the ARC showed a positive ratio in 2016, whereby current assets
exceeded liabilities; the opposite result obtained in 2017 and
throughout 2018, current liabilities exceeding current assets
indicating liquidity challenges. Because of prior period financial
performance, the ARC undertook drastic measures aimed at improving
organisational viability.
The ARC operating environment during financial year 2019/20
included the following risks: 1. Sustainability as a going concern
(with potential risk of loss of skilled personnel, inability to
fulfil financial obliga-
tions that could have consequences for existence of the
organisation); 2. Inability to fulfil mandates; 3. Increased risk
of poor agricultural production and productivity as a consequence
of frequent, uncontrollable out-
breaks of pests and diseases (e.g. FMD, Fall Armyworm, drought
etc.); 4. Increased risk of lack of food insecurity (increased
hunger and malnutrition); and
Annual Report 2019/2020 26
5. Increased risk failed agricultural enterprises, particularly
commercial agriculture with concomitant unemployment, among
others.
Noting that the consequences of a dysfunctional or liquidated ARC
would be ghastly to contemplate for South Africa. As a key provider
of solutions for the management of pests and diseases, mitigation
and adaptation to climate change; a non- functional ARC would
present a significant threat to food security, agriculture,
economic growth, peace and development.
To avoid the failure of the ARC, management working with Council
reviewed the operating business model. The outcome was the
development and implementation during financial year 2019/20 of a
financially sustainable business model that:
• Explores new and possibly expanded (outside agriculture sector)
revenue streams; • Improves upon resource management in terms of
effectiveness and efficiencies; • Organisational structure (e.g.
optimum ratio of cost of employees to baseline operational
parliamentary grant); • Resource mobilization through increased
partnerships; and • Consolidation of cost-saving measures,
including but not limited to reductions in the number of research
and
development campuses, eliminating long-term insufficiently funded
project, to mention a few.
2.2. ORGANISATIONAL ENVIRONMENT
Analysis of the ARC performance against pre-determined objectives,
key performance indicators and targets as outlined in the five-year
Strategic Plan for the period 2015/16 to 2019/20 was conducted. The
ARC had 49 indicators that were assessed for performance. However,
current analysis focused on key indicators that are representative
of the Research and Development value chain, noting that the ARC
has both a scientific and agricultural development mandate.
Generally, the ARC has surpassed its annual targets in a number of
key performance indicators for the period under consideration. As
reflected in the diagram below, the number of scientific
publications increased from 363 to 459 between 2015/16 and 2019/20,
a 26% increase. The ARC performance in terms of peer reviewed
scientific publications suggests an organisation with high
productivity, particularly as the information and knowledge were
published in both local (South African) and international journals.
A number of publications as measured in terms of the ISI rating had
an impact factor above one - which suggests a greater number of
users of the information published by ARC researchers. To enable
effec- tive utilization and innovation in the agricultural sector,
the ARC disseminated scientific data and associated information
mainly through popular publications, technical reports and
manuals.
Although scientific publications serve as a critical means of
determining and demonstrating the quality of the innovations and
information developed by the ARC, there is a need to provide or
transform such data into new technologies for use in agriculture.
The ARC continues to serve as one of the leading sources of new
agricultural technologies. Analysis indi- cates that the ARC
transferred more than 240 technologies through licensing in the
period 2015/16 to 2019/20, including cultivars that had obtained
Plant Breeders’ Rights. These new cultivars enable the agricultural
sector to increase yield, productivity and resilience to constantly
changing production environment, particularly climate change - such
as resis- tance to pest and diseases as well as drought
tolerance.
As indicated above, the ARC operating environment was impacted by
reductions in Parliamentary Grant allocations during the MTEF
period 2016 to 2019. Reductions in the Parliamentary Grant limited
the organisation’s ability to invest into critical scientific
laboratory equipment for research services as well as inability to
recruit highly skilled researchers. Further, reductions in the
Parliamentary Grant limited the ARC ability to generate revenue
from external clients, particu- larly the private sector.
Annual Report 2019/202027
Internally reduced financial resources had the following impact
upon the organisation: • ARC scientists reduced their time
conducting laboratory or field research, but instead focused on
data analysis,
that in turn, resulted in scientific publications of high quality;
• Reductions in field and laboratory research activities limited
the outputs of technologies from ARC, which in turn
has resulted in significant reductions in the number of cultivars
released or registered for Plant Breeders’ Rights; • During the
same period, the ARC ceased or limited research on vaccine
development; • Limited financial resources resulted in the ARC
unable to provide inflation linked wage adjustments for
researchers
and managers; • Under reduced financial resources, the ARC was
subjected to unrest by employees (employee work strike) with
damage to some infrastructure and adverse impact on the reputation
of the organisation as well as relations; and • In the same
operating period, the ARC limited or delayed recruitment of highly
skilled scientists essential for the
organisation to fulfil its mandate.
As outlined above, the ARC has initiated and implemented a
Financial Sustainability and Turnaround Plan aimed at ensuring
viability of the organisation. The impact of measures implemented
under the Financial Sustainability and Turn- around plan are still
unfolding and will become central to the success of the
organisation.
2.3. KEY POLICY DEVELOPMENTS AND LEGISLATIVE CHANGES
Apart from that set out in the paragraph below relating to a
heightened regulatory focus area on compliance, there have been no
other significant South African national body of law and policy
changes to the ARC mandate as set out in the approved Strategic
Plan. The duty of the ARC as a public entity, must comply with all
Constitutional law imperatives, National Legislation, Regulations,
Municipal by-laws, other subordinate legislation and the common
law, with suitable regard to the implications for the ARC business
and its sustainability of the case law interpretation of the said
parts of the national body of law, by the Higher Courts of the
Country.
2.4. STRATEGIC OUTCOME-ORIENTED GOALS
For each of the six strategic goals and reflecting the aligned ARC
Programmes, the strategic goals are unpacked into strategic
objectives (higher order outputs) and then reflecting the
performance indicators, baselines and annual targets for the
2019/20 financial year and MTEF.
The focus is on ensuring that the specified outputs are clear and
measurable, in accordance with the “SMART” principle. In addition,
at a level below the strategic goals and their related key outputs,
the ARC employs a Council (Board) ap- proved Programme structure
against which the focus of the goal is described and prioritised.
The Programme structure reflects nine Programmes, as described in
the Strategic Plan 2015/16-2019/20.
In the sections below, the ARC 2019/20 performance information is
packaged as follows:
Strategic Goal Responsible ARC Programme Research and/or Delivery
Outputs
Goal 1: To generate knowledge and tech- nologies that will enhance
the effi- ciencies in crop based agriculture.
Programme 1: Crop Production, Improvement and Protection.
1) Generation of knowledge through research; 2) Development of new
technologies; 3) Scientific services rendered; and 4) Information
dissemination.
Goal 2: To generate knowledge and tech- nologies that will enhance
the ef- ficiencies in livestock, wildlife and
aquaculture based agriculture.
Programme 2: Animal Health, Production and Improvement.
1) Generation of knowledge through research; 2) Development of new
technologies; 3) Scientific services rendered; and 4) Information
dissemination.
Goal 3: To generate knowledge and tech- nologies for the
conservation and
utilisation of natural resources.
_______________________________________
Programme 4: Mechanisation and Engineering.
1) Generation of knowledge through research; 2) Development of new
technologies; 3) Scientific services rendered; and 4) Information
dissemination.
Goal 4: To generate knowledge, solutions and technologies for food
safety, quality and improved efficiencies in
the agriculture value chain.
Programme 5: Agro-Processing, Food Technology and Safety.
1) Generation of knowledge through research; 2) Development of new
technologies; 3) Scientific services rendered; and 4) Information
dissemination.
Annual Report 2019/2020 28
Goal 5: To generate and disseminate knowledge and technologies for
decision-making and transforma-
tion of the agricultural sector.
Programme 6: Smallholder Agricultural Development.
_______________________________________
_______________________________________
1) Generation of knowledge through research; 2) Technologies
released to agriculture sector; 3) Scientific services rendered; 4)
Agriculture skills and capacity development; 5) Agriculture R&D
information communicated/dissem- inated to stakeholders; and 6)
Stakeholder management.
Goal 6: Apply best resource management practices, towards a high
perform-
ing and visible organisation.
Programme 9: Administration and Corporate Affairs.
1) Improved post-graduate SET base; 2) Improved staff profile; 3)
Optimal investment in training and development; 4) Funding and
revenue generation; 5) Applied Information technologies; and 6)
Optimal utilisation of assets.
3.1. PROGRAMME 1: CROP PRODUCTION, IMPROVEMENT AND PROTECTION
Strategic Goal 1 is delivered through ARC Programme 1: Crop
Production, Improvement and Protection.
The focus of Goal 1 is to generate knowledge and technologies
(intellectual property and tools) that will diversify, improve the
quality and increase the value of crop-based agricultural
production and related processes and products; enhance productivity
towards food and nutrition security (both at national and household
level); increase commercial exports and income for the agricultural
sector and enable producers to combat challenges brought about by
changes in climate.
The goal focuses on improving the productivity, competitiveness and
sustainability of both commercial and smallholder crop-based
agriculture through research and development in three areas namely,
field crops, horticultural crops and industrial crops. Crops
research and development includes a wide range of grains,
vegetables, indigenous ornamental plants, medicinal plants,
deciduous fruit and grapes, tropical and subtropical fruits and
niche crops, such as herbal teas. Industrial crops research and
development focus on fibre crops, such as cotton and hemp.
As defined in the Strategic Plan, the research and development
priorities of Goal 1, which includes Programme 1, are as
follows:
1. Crop cultivar development through genetic improvement and
modification; 2. Characterising and evaluating crops in terms of
quality, nutritional composition, shelf life and suitability for
pro-
cessing; 3. Disease and pest control by means of enhanced genetic
diversity; 4. Provision of strategies for management of pests,
diseases and alien invaders; 5. Bio-control of pests and diseases;
6. The improvement of agricultural productivity and profitability
through adaptive and innovative crop management
and production systems, such as conservation agriculture; 7.
Development of crop production practices and systems, including
crop rotation, intercropping, irrigation, fertiga-
tion, weed management, plant densities and general crop practices;
8. Optimisation of water use and nutrition uptake; 9. Lowering of
input costs; 10. Broadening the food base in order to enhance food
and nutrition security; 11. Production systems for low input, low
decision-making and marginal production areas; 12. Training of crop
growers and extension staff to ensure sustainable production; and
13. Provision of scientific services to farmers and clients of the
ARC.
3. PERFORMANCE INFORMATION BY PROGRAMME
Annual Report 2019/202029
Key performance indicators, planned targets and actual
achievements:
GOAL 1: TO GENERATE KNOWLEDGE AND TECHNOLOGIES THAT WILL ENHANCE
THE EFFICIENCIES IN CROP BASED AGRICULTURE
Programme 1: Crop Production, Improvement and Protection
Key Output Performance Indicator
Comment on deviations
proceedings; and
119 84 118 34 Publications accepted fast- er than
anticipated.
Technologies Developed Number of Cultivars registered. 9 12 8 (4)
Registration of cultivars
beyond control of ARC.
Scientific Services rendered
Number of Diagnostic and Analytical services rendered. 644 756 626
(130) Fewer diagnostic services
requested by clients.
Information disseminated
Number of technical reports and manuals. 516 329 442 113 Higher
number of reports generated for ARC clients.
Number of field trial sites. 356 588 541 (47) Fewer field trials
due to high rainfall season.
Basic and applied research conducted within the Crop Sciences
Division contributes significantly towards attainment of the ARC
strategic outcomes-oriented goals as a Science Council and
agricultural development organisation. Specifically, plant breeding
research and development through the disciplines of breeding,
physiology, and genetics enables the de- velopment of improved
food, feed and fibre cultivars. The new cultivars ensure higher
profitability and food and nutrition security, as well as
resilience of the agriculture sector. A case in point is the
registration of three (3) new wheat cultivars developed at the ARC
Small Grains campus, which are expected to increase the production
and productivity of wheat in South Africa. The new wheat varieties
are (i) Steenbok, (ii) Tredoux and (iii) Umzumbe; and their
performance in the National Cultivar Evaluation Programme (NCEP) is
summarised below:
• Steenbok is a new dryland wheat cultivar for the winter rainfall
region. Steenbok performed very well in the Nation- al Cultivar
Evaluation Programme (NCEP) for the winter rainfall region (Western
Cape) in the 2019 season; and achieved high grain yield and
hectoliter mass in both the combined Swartland regions and Eastern
Ruens regions.
• Tredoux is a new variety that was only included in the NCEP
trials for the first time in 2019 and seems to be better adapt- ed
for the Eastern and Southern Ruens production regions. Grain yield,
protein content and hectoliter mass of this new variety are
acceptable but the true value and potential production regions will
only be determined in the coming seasons.
• Umzumbe is a new variety that has good grain yield and quality
potential in the cooler irrigation regions and par- ticularly the
Vaalharts area. In a 4-year average (2015 to 2018) for grain yield,
Umzumbe outperformed the older ARC commercial irrigation varieties
such as ‘Sabie’ and ‘Renoster’. It was however decided not to
advance Um- zumbe for commercialisation as new candidates with
better yield and quality potential were becoming available. Umzumbe
was therefore also not included in the NCEP trials for the
irrigation regions.
As South Africa strives to become less dependent on wheat imports,
currently estimated at an average of 1.57 million tonnes per annum
over the past five years, the ARC continues to render research to
support the wheat industry. The ARC pre-breeding for enhanced
resistance/quality traits has released 2 021 wheat lines over the
past five years for exploitation by all South African wheat
breeding companies. On the other hand, the ARC wheat cultivar
development programme has released eight dryland and four
irrigation wheat cultivars over the past 4 years, while one oats
cultivar is in the process of being released. A metadata analysis
published in 2018 on wheat breeding research conducted by ARC has
revealed a return on investment (ROI) ratio of 5.1:1. Although
seemingly lucrative, there is reluctance to invest in cultivar
development research as wheat is a self-pollinating crop with
farmers retaining seed from season to season. The ARC therefore
places high importance on international research partnerships for
research and development outcomes.
Annual Report 2019/2020 30
A notable partner, amongst others, is the International Maize and
Wheat Improvement Center (CIMMYT), with regard to the Programme on
International Wheat Yield Partnership. In further support of local
wheat cultivar development, ARC has the mandate to conduct the
National Cultivar Evaluation Programme (NCEP) in all major
production areas in South Africa. This is done to supply reliable,
independent guidelines for the choice of adapted cultivars to small
grain producers and policy makers. On average, 55 cultivars are
evaluated in the NCEP per annum.
Other achievements in cultivar development include the awarding of
Plant Variety Rights in New Zealand for the ARC African Sunset
‘ARCCIT1519’, a late maturing mandarin, selected for its attractive
appearance and excellent flavour, that will be marketed in New
Zealand by an ARC designated commercialisation partner. The ARC
Tropical and Subtropical Crops, as part of its mandate, undertakes
citrus breeding research with significant contribution to the
citrus industry. Two ARC mandarins were granted Plant Breeders’
Rights certificates in Mexico, and this is expected to be
beneficial to the ARC in terms of potential royalties. A Plant
Breeders’ Rights certificate was awarded for a grape cultivar
called Sundown- er. This is a new, white seedless grape for the
production of raisins, developed in the ARC Infruitec-Nietvoorbij’s
grape breeding Programme and extensively evaluated in the Western
and Northern Cape. The ARC Grain Crops successfully registered
soybean variety ‘ARC-Soy 01’. Performance on cultivar development
is subject to external dependencies out- side the control of the
ARC and the Crop Sciences Division. The annual target was to
develop and register 12 cultivars, and ARC received feedback on 8
cultivars. There is outstanding feedback for another 8 cultivars
for which applications for Plant Breeders’ Rights were submitted;
which include:
• 4 maize varieties; • 1 soybean variety; and • 3 fruit cultivars
for apple, peach and pear.
It is expected that outstanding feedback will be received in the
subsequent year. Linkages on Crop Sciences performance and high
level imperatives such as food and nutrition security and
performance of the agriculture sector, highlights the importance of
continual dissemination of research outputs and outcomes to the
scientific fraternity, farming community and society at
large.
Scientific publications are an important platform to disseminate
research findings, and enhance visibility and stature of research
organisations and the calibre of scientists who are at the
forefront of the reported performance. Scientific publi- cations
are also an area where the performance of the Division continues to
report above set targets, and this is largely attributed to
acceptance of manuscripts being outside the control of
researchers.
Technical reports and manuals produced by ARC researchers and
technicians disseminate information directly to the agriculture
sector on demand by agricultural organisations and farming
communities that collaborate directly with the ARC, and the demand
for this service in many instances exceeds set targets. The
long-term nature of research con- ducted at the ARC and in Crop
Sciences is invariably impacted by seasonal variation in climatic
conditions, resulting in performance trends that are directly
correlated to such seasonal variation. For instance, open field
trials are subject to the onset of the rainy season, and this could
result in delayed planting due to continuous heavy rainfall leading
to waterlogged fields. The unpredictability of demand-driven
services such as diagnostic and analytical services, requires
closer monitoring. Generally, targets are increased annually on an
incremental basis, informed by perform