Report into the mismanagement of the Presidential Employment Stimulus Programme (PESP) funding by the National Arts Council

R300 million was transferred to the National Arts Council to distribute to the creative sector to retain jobs and create new income opportunities for people who make their livelihoods within the creative sector.  This was to have been a welcome injection of capital into a sector that had been decimated by the pandemic.

But this was not to be.

The NAC over-allocated the budget by more than 100%.  The new Council that took office on 1 January then unilaterally changed the contracts of hundreds of successful applicants and slashed the amounts to be awarded to them.

Last week, in a case against the NAC brought by the National Arts Festival, the South Gauteng High Court ruled that the NAC’s unilateral change of contracts was illegal, and ordered the NAC to pay the original amount to the National Arts Festival and to cover their legal costs.  Should this be applied to all those whose contracts the NAC changed, the National Arts Council would be bankrupt.

The Minister of Sport, Arts and Culture announced that a forensic investigation would take place and the National Arts Council suspended its CEO and CFO, thereby hinting at whom they believed were to blame for the debacle.

When ‘forensic investigations’ are commissioned, they seldom point fingers at the institutions that commission them, since those institutions provide the terms of reference for the investigations and pay the investigators to do the work.  For this reason, we believe that a civil society organization like TADA, that exists to defend and advocate for the interests of its members, should undertake our own investigation.

TADA members were directly and adversely affected by this gross mismanagement, and TADA’s National Steering Committee decided that we should do our own investigation into what happened, why it happened and who should be held accountable.

TADA’s report and findings is available below. 

TADA’S RESPONSE TO THE MEDIA BRIEFING BY THE MINISTER OF SPORT, ARTS AND CULTURE ON THE NATIONAL ARTS COUNCIL FORENSIC INVESTIGATION
- 28 September 2021

The Theatre and Dance Alliance (TADA) welcomes the briefing by the Minister of Sport, Arts and Culture about the findings of the forensic investigation into the mismanagement of the Presidential Employment Stimulus Programme (PESP) funding by the National Arts Council.  It is not usual practice for the Minister and DSAC to be transparent about such matters, and it is to the credit of the arts sector that has agitated for greater transparency that this briefing has been held.  However, for us to be able to assess the thoroughness of the report and the justification for its recommendations, we would need to see and study the report as a whole; accordingly, we hope that the full report will be released in due course.

Given that many of its members were affected by the funding debacle, TADA conducted its own investigation into the mismanagement of the PESP funding and made its findings known in June this year.  The briefing by the Minister generally confirms one of the six findings of TADA’s investigation, that a number of internal issues within the NAC directly related to the management of the PESP funding, contributed to the mismanagement and overallocation of the funding.  While the briefing correlates with TADA’s recommendation for senior management to be disciplined, TADA also holds accountable the previous Council as a whole but particularly the Executive Committee that approved the funding allocations and did not ensure sufficient checks and balances.  The NAC’s previous Audit and Risk Committee should also be held accountable. 

We hope that the five people alluded to in the briefing will not be sacrificial lambs to appease the wrath of the arts sector that, in the midst of a most devastating pandemic, had their livelihoods further compromised by the incompetence of previous EXCO and Council members who should be prevented from holding public office in the arts in future.

TADA is not surprised that the role of the Department of Sport, Arts and Culture and of the Minister in the crisis is not mentioned in the briefing at all, and yet, we believe that the Minister and the DSAC should bear a large responsibility for the debacle.  While the NAC, its Council, management and staff must be held accountable for the internal shortcomings that resulted in this large-scale bungling, we should remember the broader context in which they were operating:

  1. DSAC gave them 5 months to complete this mammoth project, from the end of October 2020 to the end of March 2021.

  2. The NAC received R300m which they were to distribute in that period and have it all accounted for, three times more funding than they normally receive and allocate for a year.

  3. This funding had additional requirements – they had to create and retain jobs, so it wasn’t just normal NAC funding; there were political imperatives attached to it that the arts sector had to be educated about and that the NAC had to ensure.7000 jobs to be retained with R100m and 10 000 new job opportunities to be created with R200m.

  4. The call for applications took place in November, and applications had to be adjudicatedduring December, when the NAC is normally winding down.Furthermore, the term of this Council ended on 31 December 2020 and they had to do all the work required of them as the minister declined to extend their term till the project finished on 31 March 2021.He appointed a new Council from 1 January in the midst of the NAC’s most urgent crisis.

  5. Then, applications were made during Level 1, but projects were to be implemented under the stricter Level 3, so that the job opportunities envisaged were compromised by shut theatres, cancelled festivals and the like.Yet, the NAC still claims that it created more than 20000 jobs – no audit has been done to determine if this was actually the case.

The political pressures and demands and the unreasonable timing foisted on the NAC are the responsibility of the Minister and his political principles; it is too easy to make a few officials the ‘fall guys’ when their actions need to be understood in the context of the broader pressures placed on them by DSAC, the minister and National Treasury.

TADA is also not surprised that no adverse findings were made against the current Council.  This is because the current Council appointed the forensic investigators and determined their brief. 

The Minister’s media statement says “No new Council Members were found to be conflicted.  The investigation confirms the findings of the State Law Attorneys that all Council Members appointed from 1 January 2021 whose organisations were funded from the PESP and had declared their applications, were not conflicted as they were not part of the adjudication process (which was concluded by 30 December 2020).”

However, the media statement also states conflicts of interest were found “in respect of some former Council members who were in the previous Council, who contravened Section 8(5) of the NAC Act”.

This section states that “A member of the Council shall not vote or in any manner participate in the proceedings of any meeting of the Council nor be present at the venue where such meeting is held, if, in relation to any matter before the Council, he or she has any interest which precludes him or her from performing his or her functions as a member of the Council in a fair, unbiased and proper manner.”

First, it is clear that current Council members are beneficiaries of PESP funding.  What is not clear is whether they – or their organisations – would have received funding based on the mismanagement and decisions taken by the previous Council.  Whether they would have or not, and even if their applications had been adjudicated by the previous Council, they had a direct interest in how the PESP funding was to be allocated.  The spin in the briefing states that “driven by the commitment to ensure that public funds were going to be disbursed based on principles of fairness, equity and administrative justice, the New Council applied the following principles: all approved and compliant applications must receive a PESP grant….”.  Clearly, those Council members who were beneficiaries of the PESP funding and who participated in this decision, contravened Section 8(5) of the Act too as they had a direct interest in receiving such funding.  The consequences of their decision are that applicants who had received confirmation of funding from the previous NAC, had their grants drastically slashed to comply with this decision by the new Council.

That the forensic investigation found no new Council member to have been conflicted can only be true if those who benefited from PESP funding did not participate in any meeting, nor were at the venue (or in the Zoom room) where the above decisions were made.

The briefing states that “after consultation with affected organisations, the NAC issued revised grant notification letters and contracts with adjusted guiding figures to ensure that all approved beneficiaries would receive funding.”  The notion of “consultation” is applied very loosely in this case as it is clear from the briefing that the NAC had decided on its principles of ‘fair’ allocation and consequently, those who had received communication from the NAC about their funding allocations, were simply informed of the new funding formula and allocations.  It is for this reason that the NAC was taken to court by the National Arts Festival and other organisations as they had arrogantly and unilaterally changed funding agreements.

Interestingly, in terms of corrective measures to be taken by the new Council, one of the recommendations is to capacitate councilors “to effectively discharge their fiduciary duties”.  The new Council was appointed by the Minister to take office from 1 January 2021, at the height of the funding mismanagement crisis.  While their induction apparently began in January, for a number of reasons they were not formally inducted till March so that the new Council was acting with little or no guidance about their fiduciary responsibilities and the legal parameters of their actions.

As per TADA’s Report, for this, the Minister is directly responsible as he failed to extend the life of the previous Board to complete the PESP funding allocations by the deadline of 31 March and required the new Council to act with little understanding of their roles, with little institutional memory and under huge pressure to resolve the crisis.

The briefing states that 96% of the available funding  - R272m – has been distributed, implying that the new Council has done a great job in allocating the funding to the 1309 beneficiaries who have received funding, ‘yielding more than 20 000 job opportunities’ in ‘this very trying time’.

It is precisely because of this ‘very trying time’ that the overwhelming number of beneficiaries have accepted the revised grants as something is better than nothing, but this should not be assumed to mean that the sector is satisfied with how the process has been managed by the new NAC. 

While the “more than 20 000 job opportunities” is more modest than the 26 124 jobs to be created by the NAC’s PESP funding allocations reported by the minister in August, there is still no proof that these job opportunities were actually created.

At their media conference of 24 February 2021, the new Council announced that they had created 21 249 jobs within less than two months and claimed it as a massive achievement for the NAC!  As per the Theatre and Dance Alliance’s Report into the mismanagement of the PESP funding by the NAC, what the NAC failed to say was that the 21 249 jobs were created in theory, based on their new formula rather than an actual number of job opportunities created.

Furthermore, applications for PESP funding were made in October 2020 during lockdown alert level 1, but the funding was allocated and was to be used largely during lockdown alert level 3 (29 Dec to 28 February 2021) when theatres, festivals and other cultural platforms were largely shut.

Consequently, the NAC’s projected number of jobs has simply not been tested in practice nor audited.

In conclusion, while we welcome the briefing, our recent experience of the spin by the new NAC and of DSAC and the Minister, make us wary of accepting the briefing at face value and would like to study the report in more detail.