First Quarter Expenditure 2009/10: Departments of Rural Development & Land Reform, Cooperative Governance & Traditional Affairs, and Basic Education.

Meeting report

First quarter expenditure 2009/10
Department of Rural Development and Land Reform
Mr Thozi Gwanya, Director-General: Department of Rural Development and Land Reform, stated that within the land reform programme there were two other programmes that absorbed most of the expenditure.  Money had been spent on the Land Redistribution for Agricultural Development (LRAD). This programme was designed to provide grants to black South African citizens to access land, specifically for agricultural purposes.  Other expenditure went to the Pro-active Land Acquisition Strategy (PLAS), which allowed the department to buy land for the purpose of effecting land reforms. The problem that the Department had encountered was that land-owners wished to sell the land at a very high price, especially when they learned that the State was the prospective buyer, claiming sentimental attachments to the land. The Department had met with Agri-SA in an attempt to find solutions. The Department was willing to give reasonable compensation.

The Land Restitution programme, which dealt with the acquisition of land for land claimants, was still left with 3 000 claims. These claims were rural based. Discussions with land-owners were continuing so that the Department could buy the land at market value. With regard to agreements with land-owners, the Department had negotiated with the National Treasury to be able to honour the commitments made to land-owners. These factors had led to over-expenditure on restitution for this quarter. The transactions were concluded in April 2009, and payments were made. The budget for Land Restitution was exhausted, because of the purchase of land. Consequently, the Department could not sign further deeds of sale, owing to lack of funds for this financial year. As an interim measure, where the Department had signed an agreement with land-owners, it had negotiated with the National Treasury that it could shift funds allocated to other land reform programmes, such as Land Restitution and Distribution, to finance these transactions. It had also informed National Treasury that the baseline for the Restitution Programme was not realistic, and thus needed to be reviewed. However, National Treasury said that it had no further available funding, because of the recession, and the Department was presently limited to the allocated funds.

Slides showing expenditure figures were shown.

Discussion
The Chairperson commented on the shifting of funds between programmes – for instance, R20 million was shifted from land reform to cadastral surveys at the Department of Rural Development and Land Reform, and R15 million from the restitution programme to administration. He asked the Department to provide an explanation for that, especially why the Department could shift funds from its main or core cost driver programmes. He pointed out that PFMA provided guidelines for shifting of funds.

The Chairperson also questioned why issues from previous year were raised in the first quarter of this year. He asked whether land reform worked according to projections, and whether it was needs-based or demand-based.

The Chairperson also requested an explanation how far the Department was with land expropriation.

Mr J Gelderblom (ANC) asked the Department to send the Committee all letters of approval from the National Treasury within seven days.  He commented that in the first quarter, 75% of the budget went to land restitution. He questioned how much had been spent on consultants, and if the Department had provided auxiliary services, because it seemed to be giving people grants, not service.

Mr L Ramatlakane (COPE) asked what the agreement was with Treasury on baseline budgeting. He said that when the Department shifted money from one programme to another, that must surely affect baseline budgeting of the Department in the following financial year’s cycle and questioned whether National Treasury was of the view that funds could be moved around without further implications.

Mr Ramatlakane asked what the implications would also be for budgeting on a particular item, in the next cycle, if the Department, in the current cycle, had budgeted for it but had then moved the money away.

Mr Ramatlakane asked if the issue of the declining of the budget was a Treasury or Departmental problem. He noted that when budgets were drawn, the Department would work out a strategic plan of what it planned to do, and it had to convince the National Treasury of the importance of the programmes spelt out in that Strategic Plan. If the Department failed to convince National Treasury, which might be the case here, he asked if this failure was based on the evidence it forwarded to National Treasury and how it impacted on its budgeting.

Mr Ramatlakane found the explanation of the Director-General on projections problematic.
He said that projections must be based on real intentions, in this case, acquiring the land. This could not change if there was a delay in the acquisition or completion of a programme, although he conceded that costs could increase if a programme was not finished on time. He asked for further details when the departments were speaking of projections.

Mr Ramatlakane asked how the Department was going to manage with 25% of budget for the rest of the year when 75% had been spent already in the first quarter. He also wanted to know what punitive measures would be taken against officials who failed to make sure that things happened at national and provincial level.

Ms R Mashigo (ANC) said the Department had promised that 30% of the land would be given back to claimants by 2014. The Department was facilitating this process, and it was experiencing difficulties. The Minister, in the budget speech, had pointed out the shortage of funding and said that the Department would investigate the cheapest ways of getting the land back to the people. She asked how far it had gone in this process.

Ms Mashigo said that in rural areas there were agents or consultants who liaised between the Department and the communities, and asked if they received payment from the Department.

Mr G Snell (ANC) commented it must be a complex matter to budget for purchasing land, and he assumed the budget of the Department was based on cost per hectare; if so, he asked what these costs were.

Mr Snell also pointed out that the valuation for the properties was surely based on the latest purchase prices for equivalent land in the areas, and asked the Department to explain why it was being asked to pay more than the market value.

Ms B Ngcobo (ANC) commented that the Department had said that the process of purchasing land was costly, and conflated by other difficulties, and there was also the possibility of collusion. She asked what the Department was doing to address the issue. She also asked if the projections made by the Department would take into account the money shifted from one programme to another, and if it would effectively ‘pay back’ funds that had been moved. 

The Department was asked to provide responses in writing.

Department of Cooperative Governance and Traditional Affairs (COGTA)
Mr Elroy Africa, Acting Director-General: Department of Cooperative Governance and Traditional Affairs, took the Committee through the current expenditure trends. Total expenditure as at 30 June 2009 was 21%, compared to the 22% that was projected for this period. Goods and services reflected 27% spending, compared to the projection of 22%. Overspending on projections was due to services that were rendered in the previous financial year, but paid in the current year.

Mr Africa noted that payment for capital assets was at 9% although the projection was estimated at 41% by the end of June 2009. The under spending was due to posts that were not filled.

On overall expenditure trends, 98% of the budget of the department was transferred to associated institutions and municipalities. The department spent 6.3% of its allocated budget of R35, 6 billion. The expenditure was in line with projected expenditure for the first quarter. Municipalities spent 96% of the allocated funds. Free State and Northern Cape were the lowest, due to overlap of funds into new financial year.

Reasons for variance on Municipal Systems Improvement Grants (MIG) were highlighted. These included delays in the registration of projects due to poor planning by municipalities, lack of capacity at provincial level, inadequate information on registration forms reaching the national office, and late approvals of technical reports and Environmental Impact Assessments by relevant sector departments. There was also poor consultant / contractor performance on projects, expenditure by municipalities on unregistered projects, the fact that Value Added Tax and retention funds on MIG projects were not clearly understood by municipalities, challenges relating to supply chain processes, the high staff turnover and a lack of technical and financial capacity in municipalities, hampered further by political challenges and governance issues within municipalities.

National Treasury had written to all under-spending municipalities to return the unspent grant funds to the National Revenue Fund in terms of the Division of Revenue Act (DORA). Quarterly review meetings and one-on-one intervention visits to municipalities in all provinces were done. Technical support was provided to those who were under spending.

The performance of COGTA in the first quarter was in line with the projected 6,3% expenditure of R2, 2billion. The department was undertaking remedial measures to improve performance in the remaining quarters.

Graphs and tables for expenditure were shown

Discussion
The Chairperson asked the Department to communicate its concerns to the Committee in writing.

Ms Mashigo asked the Department to explain the objectives of the Municipal Systems Infrastructure Grant.

Mr William Ramphele, Senior Manager: Municipal Finance Monitoring, COGTA, explained that this was aimed at supporting municipalities in terms of financial systems, implementation of legislation, development of structures, and human capacity, where this was lacking in certain municipalities.

Mr Africa advised that the Department would also look at the issue of transformation raised in another context by the Chairperson.

told the committee he will look at the issue the chairperson has raised e.g. transformation.

Department of Education
Ms Penny Vinjevold, Acting Director-General: Department of Education, highlighted that the total budget of the Department of Education was R21, 287 billion. The majority of the budget consisted of transfer payments. The transfer amounts were outlined. Transfers to the university sector were R15, 3 billion, where the spending on programmes was in accordance with plans. Conditional grants of R2.6 billion were transferred. Transfers to some provinces were withheld. The majority of the activities were scheduled for the third quarter of the financial year. Public entities received R2, 2 billion. In municipalities and provinces, HIV and Aids conditional grant transfers were made on a quarterly basis. Conditional grant transfers on the National School Nutrition Programme were done quarterly. UNESCO membership fees of  R12, 1 million  were transferred and he explained that these were paid during January and February 2009. Some transfers to UNESCO would take place in the fourth quarter, and there would be transfers to the Commonwealth of Learning reflected in the second quarter as projected, as they were paid during August 2009. Spending on the remainder of programmes was in accordance with plans.

Ms Vinjevold then outlined that the remainder of the budget (R1, 2 billion) consisted of the following:- Compensation of Employees: R314, 7 million; Examiners and moderators: R31, 3 million; Departmental Operations: R139, 9 million; Departmental Projects: R187, 9 million and Earmarked Funds: R499, 2 million.

Administrative and financial systems were in place in the Department. Expenditure was monitored on a monthly basis and responsibility managers were requested to provide reasons if their progress on projects was not satisfactory. The Minister would be informed of the spending trends, in terms of the Public Finance Management Act (PFMA). Once a month the senior management discussed the spending trends and reprioritisation of activities within the objectives of the department if this was necessary. Cost containment measures were implemented.

Discussion
Mr Gelderblom asked what the Department would do to assist schools that did not provide strategy plans regarding nutrition programmes, and what happened to money transferred to provinces when it was not spent.

The Chairperson asked if the HIV/AIDS conditional grant was useful. He also asked whether Further Education and Training Colleges would fall under the Department of Basic Education or of Higher Education. He further asked the Department to explain why capital expenditure was R9 million when the total budget was around R21 billion.

The Chairperson asked the Department to file a report on ineffective school nutrition programmes in Free State, Mpumalanga, Northern and Eastern Cape.

Mr G Snell commented, with regard to transfers to universities and technikons, that some of that money took the form of a bursary to students, and some of them would leave the country after completing their studies. He enquired what the Department was doing to ensure that they stayed, and how much was the cost to the State per year.

Ms Mashigo asked what the Department had done about the school in Mqanduli, Eastern Cape, that was damaged by wind.

The Department was asked to reply in writing within 7 days.

The meeting was adjourned.