Department of Agriculture Annual Report 2008/2009

Agriculture, Land Reform and Rural Development

02 November 2009
Chairperson: Mr. Johnson (ANC)
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Meeting Summary

The Department reported that there had been a 17.1 % decline in the agriculture growth rate (2009, second quarter) and loss of 26 000 jobs. Agriculture had been faced with a number of food security issues and basic food inflation of 10-18% which had implications on the vulnerable farming communities. Commodity costs had increased due to oil and electricity costs. Extreme price volatility could not be ruled out in the coming years, which put the poor at risk. Vulnerable households and emerging farmer groups (79 866) had been supported by agricultural starter packs as part of the Household Food Production Programme (HFPP). Only 49 of the 7000 farmers targeted for access to financial services were reached. The target for Comprehensive Agricultural Support Programme (CASP) beneficiaries was 80 000 and only 32 733 beneficiaries were actually supported. The target for training of entrepreneurs in trade, marketing and business development was achieved in Limpopo (50) and the Free State (50). Of the targeted 1 100 farmers for training in trade, marketing and business development, 308 farmers were trained. The joint programme with AgriBEE had financial and support challenges. It was hoped that with the appointment of the AgriBEE Charter Council, the challenges would be overcome. Investment in the Agricultural Research Council (ARC) and other research sectors had not been invested in sufficiently. The Department showed that only 0.2 % of the budget was unspent.

Discussions with the Committee included irregular expenditure, non compliance, travel costs, AgriBEE, the decline in growth of the sector, failure to meet targets for training of farmers, misuse of funds, the Public Finance Management Act requirements for payments, the Auditor-General’s findings, performance standards for bonus rewards to staff, recruitment of foreign veterinarians and the large amounts of spending on assessments, outsourcing and contractors.
DAFF was asked about its role in revitalising the 49% failure of restituted farmers. A comment was also made about the excessively large delegation at the meeting. Also, the 11 official international visits and the quarter of the financial year spent away by the Minister seemed excessive.

Meeting report

Department of Agriculture Forestry and Fisheries (DAFF) 2008/09 Annual Report
Ms Kgabi Mogajanea, Deputy Director General: Bio-Security and Disaster Management, DAFF briefed the Committee on the Annual Report 2008/09. Agriculture had been faced with a number of food security issues and basic food inflation of 10-18% which had implications on the vulnerable farming communities. Agriculture (food) was a basic necessity and the demand for food was relatively income-elastic, which caused a resilient trade balance between 2001 and 2008, with a deficit in 2007. Quantity of exports had increased by more than 900 000 tons. However, there was a 17.1 % decline in the agriculture growth rate (2009, second quarter) and loss of 26 000 jobs (2009, first quarter). There had been a higher demand for poultry and other low cost products and reduction in demand for beef and mutton. There had been a decline in production of beef (3.8 %) and commodity prices had increased due to oil and electricity costs. Extreme price volatility could not be ruled out in the coming years, which put the poor at risk. Strategic objectives were to increase the growth and job opportunities, enhance sustainable management, ensure effective governance and partnerships, information management and bio-security.

Challenges for government were the strengthening of food security, broadening market access, infrastructure development, investments in research, implementation, monitoring and evaluation of performance of DAFF and projects, and quantifying deliverables in terms of how many jobs were created from the projects. DAFF was currently working on systems to address these challenges. In March 2009, the new Director General had restructured DAFF. Some programmes had merged which was why there was a large contingent in attendance that day.

Mr Isaac Miti, Acting DDG: Corporate Services, DAFF, said that the DAFF administration comprised mainly African Females (35%) and African Males (22%). The vacancy rate was 17%. The introduction of Personnel Suitability Checks (PSC) which screened qualifications, criminal records, employment records, credit standing and security of candidates was a lengthy process and had delayed the appointment of personnel.

Mr Billy Morokola Acting DDG: Livelihoods, Economics and Business Development, DAFF, said that his programme concentrated on development and facilitation of appropriate strategies and programmes to promote access for opportunities within the sector as well as access of markets internationally, and promoted shared growth and commercial viability of emerging farmers. The other element of the programme was the promotion of broad-based economic empowerment (BEE) and provided economic and statistical data to support economic growth as well as monitor economic growth and development through trade. In addition, it monitored food prices through SA Food Prices and Monitoring Unit.

The economic status of the agricultural sector was monitored on a quarterly basis and reports on the economic changes and their impact on the sector were produced. There were improvements to the crop forecasting system on expected grain and cereal crop production, with 95% accuracy of actual harvest, and 79866 vulnerable households and emerging farmer groups had been supported by agricultural starter packs as part of the Household Food Production Programme (HFPP).

The 7000 farmers targeted for access to financial services was not reached. Only 49 farmers were disbursed with a total of R973 926. The target for land and reform beneficiaries was 80 000 and 32 733 beneficiaries (CASP supported beneficiaries) were actually supported. The target for agricultural starter packs to vulnerable households was 70 000 and 79 866 households reached. The target for training of entrepreneurs in trade, marketing and business development was achieved in Limpopo (50) and the Free State (50).

Of the targeted 1 100 farmers for training in trade, marketing and business development, 308 farmers were trained. This joint programme with AgriBEE had financial restraint and AgriBEE support challenges. It was hoped that with the appointment of the AgriBEE Charter Council, the challenges would be overcome. While most of the challenges were internal, finalisation of the Farmer Register would be an instrumental tool in identifying the profile of farmers in the country and this would assist in implementation of intervention strategies.

Dr Mogajane said that the Bio-security and Disaster Management Programme managed the risks associated with animal diseases, plant pests, natural disasters and Genetically Modified Organisms (GMOs). The programme had succeeded in introducing contingency measures for the southward spread of the fruit fly within the SADC and with recruitment of experts to strengthen risk management relating to GMOs, and suspension of import of poultry from China which contained melamine. Training manuals on Fertilisers, Farm Feeds, Agricultural Remedies and Stock Remedies Act of 1947 were made available and Regulations for Grading, Packing and Packaging of 36 vegetable types in South Africa was published on 13 February 2009. These regulations assisted in price determination and quality standards. The Agricultural Climate Change Sector Plan would be finalised at the end of the first quarter of the 2009/10 financial year. The main challenge was that high staff turnover was affecting performance of the Directorate. This was due to competition with the private sector.

Mr Andile Hawes, DDG: Production and Resource Management, DAFF said, that SA had hosted a three-day capacity building and training event to encourage SADC countries to finalise and implement plant variety access legislation. A survey of 700 emerging and established cattle farmers had assisted in understanding the needs of the farmers. The Household Food Production Model had been developed to increase food production at household level. A target of distributing 200 power hoes had not been implemented due to all capacity being reallocated to the Land and Agrarian Reform Programme (LARP) initiative. Draft guidelines for irrigation development of 100 000 hectares of were approved. Three community seed production schemes on sorghum, maize and ground nuts were delivered in Limpopo and Mpumalanga and 506 animal breeding materials were delivered to the Eastern Cape, Free State, North West and Limpopo Provinces.

Ms Vangile Titi, DDG: Sector Services and Partnerships, DAFF, said that a mentorship programme had been implemented by 12 organisations contracted by DAFF. A total of 4658 beneficiaries received mentorship support. Through bilateral agreements DAFF was actively involved with the implementation of the African Agricultural Development Programme (AADP) and the African Green Revolution to minimise the negative impact of high food prices on the poor in sub-Saharan Africa. A strategy document on engagement with national and international public and private sector stakeholders in support of black entrepreneurs had been postponed to the 2009/10 financial year. This was due to the vacancy of the director who needed to approve documentation for the Western Cape and South African Sugar Association in Durban.

One of the challenges was that the R20 million budget for the education, training and extension services was too small amid the growing interest in the programme in the sector. Lack of financial and human resources meant difficulties in effectively coordinating implementation of the recovery plan. Submissions requesting financial resources had been forwarded to the Director General. Another challenge was that in the Research and Technology Development Directorate, there was lack of information from some institutions which made validation and interpretation of results difficult. This was being addressed.

Mr Johan Venter, Acting Chief Financial Officer, DAFF, said that irregular expenditure resulted from non compliance with Section 38(1)(j) of the Public Finance Management Act (PFMA). DAFF had to ensure that the recipients of transfer payments met with control requirements. Payments to the amount of R15,592 million had been done in terms of MoUs signed and had been performed in this manner in previous years. However, this was picked up by the Auditor-General. It was reported to the department which had rectified the situation so that all transfer payments would meet the requirements of that section in the Act.

The Auditor-General had highlighted to DAFF that performance information was not up to standard in that it lacked transparent, efficient and effective systems with internal controls with regard to its performance management and that performance information was not reliable nor relevant. The Department was working on this so that in the future it would be improved.

The total budget appropriated for 2008/09 was R2,937 billion, and actual expenditure was R2,847 billion. Therefore 96,9% was spent by the Department with R89,8 million unspent. This was beyond department control, due to Classical Swine Fever (CSF) claims still outstanding by the Provincial Department of Eastern Cape Agricultural of R20,335 million. Subsequently, claims had been received and R10,276 million had still to be cleared. R1,003 million from unspent service provider activities and R3.485 million from unspent capital projects funding had been approved for rollover. R60 million was supposed to go through the Development Bank (DBSA) for a project, but due to changes to the allocation of funding in order to spread the funding more evenly across provinces, and the Development Bank reneging as the front line manager, the amount was not spent. Since these amounts were beyond the control of the Department, only 0.2 % of the budget was actually not spent.

Ms Mogajane said in summary that one of the challenges was that DAFF needed to align functions with the Department of Rural Development, now called Rural Development and Land Reform. Purchase of land and setting of targets by the Department of Rural Development had not been done through consultation with the provinces. A five-year plan with the provinces would enhance deliverance on the ground.

There were serious challenges around AgriBee and disaster management turnaround time and DAFF was addressing these issues with special measures. Some provinces had performed well and some had not because of existing systems.

Investment in the future required investment in agriculture now. Investment in the Agricultural Research Council (ARC) and other research sectors had not been invested in sufficiently.

A workshop in November would address guidelines for international relations which would assist the various tiers of government with communication as one body.

Over the past 15 years, the market had focused mainly on the traditional markets such as EU markets. DAFF would be focusing on new market opportunities for growth of the sector.

Discussion
Mr S Abram (ANC) commented that SA was a poor country and questioned why such a large delegation from the Department was attending the meeting.

He asked for clarity on the incident of non-compliance which had resulted in the irregular spending of R121 000 by DAFF. If disciplinary steps were taken, what were the offences and outcomes? He cited a newspaper report about a DAFF Deputy Director General who owned two IDs with two different dates of birth and asked what action was taken against this official.

He also commented that the Committee was told that the redistribution of the 5 million hectares of white-owned land to 10 000 new agriculture producers in two years, meant that new producers had to be settled at a rate of 13 per day. He asked how many farmers were settled, whether they were still on the land and if they were making a living. He further commented that the majority of farmers affected by Swine Fever were poor and many had gone out of business after waiting 3 to 4 years for assistance. He asked what was being done about turnaround time by DAFF. He also asked how DAFF was addressing the 17% decline in growth of the agricultural sector and job losses in the sector and what role DAFF was playing in revitalising the 49% farms which had failed after receiving land through restitution. Lastly, he asked what the impact of misuse of AgriBEE funds was on the AgriBEE programme and in the sector in general.

Mr Pretorius commented that the 11 official international visits and the quarter of the financial year spent away by the Minister seemed excessive. He also cited the amounts spent on transfer to foreign organisations and governments and asked what value was offered from these overseas relations. He also asked for an explanation on the ‘wasteful expenditure’ of R74 000.

Ms Phaliso asked what DAFF was doing to address the high vacancy rate particularly with regard to skills in management and employment of interns and graduates as a huge amount had been spent on consultants.

Dr Mogajane said that the big delegation was due to the fact that the programmes had been shifted and she would ensure that in the future the Department would monitor the situation so that only the relevant people for the presentations would meet with the Committee.

Mr Miti said that the incident mentioned in the newspaper referred to
Land Bank boss, Phil Mohlahlane, who was linked to property transactions paid for by the AgriBEE Fund. He had been dismissed, but had thereafter appealed to the bargaining council and the matter had been settled out of court. However, the Land Bank was pursuing a criminal case against him. The Department supported the Land Bank.

Dr Mogajane said that she would ensure that in future the Department would furnish the Committee with information and improve communication so that the Committee was briefed in advance of information which had reached the newspapers. The issue of 10 000 new farmers being settled had been a target set by and the responsibility of Land Affairs.

Mr Venter said that DAFF and National Treasury (NT) could not budget for Disaster Management but that through the PFMA, DAFF engaged with the NT so that funds could be appropriated against its budget to assist farmers affected by disaster. DAFF was working on reducing the time frame so that farmers did not have to wait for remuneration. With regard to Swine Fever Compensation, the Eastern Cape Department had to submit claims to the National Department. DAFF was allocated money and all beneficiaries had been compensated.

Dr Mogajane said that each province had disaster management units which could be immediately deployed to assist farmers. Some provincial units responded faster than others. DAFF handled this by distributing people and utilising systems from strong provinces to assist the weaker provinces during disasters as the turnaround time from submission of the report to appropriation by the NT was two weeks.

Ms Titi said that in September the Minister had presented to the Committee the proposal of rescue packages which included immediate assistance and relief to assist stressed farmers who were in arrears of production loans from the Land Bank.

Mr Abram asked what DAFF’s role was in revitalising the 49% failure of restituted farmers.

Ms Titi said that DAFF was focused on farmers who were targeted for Land Reform and who initially had secured production loans from the Land Bank. With respect to restitution there were always problems. The Department of Rural Development and Land Reform had to identify which farms needed resuscitation.

Dr Mogajane said that DAFF was assisting farmers with production implementation.

Dr Mogajane said that only the DG and DDG traveled in business class. In terms of travel, organisations visited were relevant to: agriculture, climate change, partnerships with China and Germany, SADC and mechanisms of assisting neighbours, food security, research and trade. It was necessary to attend international meetings to defend the standards for developing countries and to utilise the Consultative Group on International Agricultural Research (CGIAR) which offered advanced research tools and training to member countries. In a scientific capacity, overseas travel offered value for money. Mr Venter said that the R74 000 of wasteful expenditure was for six month’s rental of office space for agricultural debt inspectors at Dangor Medical Centre in Klerksdorp. DAFF was bound to the lease agreement when the offices were no longer required. The decline in function in terms of need for collection of loans (R1.2 billion in 1997 to R300 million in 2009) as well as the resignation of three staff members caused the expenditure to be deemed wasteful, yet it was still more economical than employing more staff.

Mr Miti said that a strategy was in place for the vacancy rate. DAFF had contacted
National Intelligence Agency  to speed up the PSC process but this was beyond the control of DAFF. DAFF had established an Organisational Development Committee which met weekly to monitor filling of posts. Where a post had been vacant for three months, it was cancelled and the money was used elsewhere. The Job Evaluation Co-ordination Committee met on a quarterly basis to ensure that all posts in the provinces were on the same salary level to discourage movement between posts. DAFF absorbed 20% of interns trained but aimed to absorb all interns by looking after them sufficiently.

Mr Venter said that payments made to consultants, contractors and other outsourced services was R133 million and a report on payments to companies would be made available to the Committee.

Dr Mogajane said that DAFF had done away with extension of contracts for consultants and had limited time frames of consultancy work to reduce expenditure on outsourcing and to increase utilisation of those within DAFF.

Mr Abram asked for a response to his previous questions where he required clarity:
- Had disciplinary steps been taken following non compliance to supply chain management procedures and also after payments were made without PFMA required certificates, as stated under irregular expenditure/criminal proceedings of the Annual Report;
- The 17% decline in growth of the agriculture sector and job losses; and the impact of misuse of AgriBee funds. He accepted that the response to his question on revitalisation of restituted farms was that DAFF did not have a plan for these farmers.

Ms Phaliso asked for a written response by the 11 November on the lack of staff while in the report it was stated that there was a need for increased capacity.

Mr Bosman asked for reasons why veterinary services were recruited from outside the country rather than employing local veterinarians, and if DAFF had implemented better mechanisms to handle the delays in disaster management, as livestock could not wait a year to be fed. He also asked if the programmes for improvement of the agricultural sector and production, which cost R750 million, were in fact suitable for attaining their objectives. In the past weekend, 40 tons of seed capable of planting roughly 4000 hectares was delivered to a rural area where only 100 hectares of land were available. Monitoring was important in this regard.

The report stated that only 308 farmers had been trained when the target was for training of 1 100 farmers. He commented that mentorship was important for progress.

Mr Cebekhulu asked if reasons for decreased production related to poor soil fertilisation, if planning of land use zones was applied to reach the communities in rural areas, and if unspent money in provinces was recovered.

Mr Sipho Ntombela, Chief Operations Officer, DAFF, said that the 17% decline in growth of the sector was in value not quantitative terms. There were various reasons for the decline, such as slowing of exports.

Ms Mogajane said that the AgriBee programmes were progressing slowly as funds allocated for 2009/10 were not transferred pending fraud investigations by Land Bank.

Mr Miti said that recruitment of veterinarians in particular was a challenge as DAFF was competing with the private sector, the Department of Health and the Defence Force.

Ms Mogajane said that 80% of veterinarians who qualified left the country after servicing their loans. This needed to be addressed at a national level, and not only at a provincial level. The National Council was considering recruitment of veterinarians from Cuba starting at the end of November.

DAFF recognised their inefficiency in terms of response to disaster management. The provinces had been mobilised to submit reports to DAFF which would assess and submit the reports to National Treasury with a turnaround time of 14 days.

Mr Sam Malatjie, Chief Director: Livelihoods and Development Support, DAFF, said that it was their intent to start small with starter packs and loans and thereafter monitor the requirements and sustenance of the producers.

Mr Fenton said that he would undertake to explain to the Committee why disciplinary steps were not taken for non compliance to the supply chain management procedures and payment to public entities, hence the irregular expenditure. He said that where payment of R15.5 million was made in terms of MoUs to public entities, the Auditor-General found this to be without the necessary Section 38(1)(j) PFMA required certificates.

Ms Mogajane said that a summary of CASP would be made available to the Committee. Funds that were not spent in provinces were allocated to the poorer areas. DAFF was engaging with the Land Bank to develop a model for farmers in the future.

Mr Bayete Ndaleni, Chief Director: CASP, said that CASP trends in national expenditure had improved progressively since 2004. Mpumalanga and the Western Cape had spent 100% of their budget and had performed well. The 2010/11 grant framework would be revised at the end of November to address a new strategic direction and the needs of the sector and to reduce contract management.

Ms Titi said that R20 million was allocated to the AgriBEE fund annually for skills development, that is, literacy and mentorship.

Ms Mogajane said that the investigation into misuse of the AgriBEE Fund continued and DAFF would follow up on the case.

The Chairperson said that despite hearing the success stories from DAFF, he asked which ones were tangible. Applications submitted for CASP funds from Patensie, Eastern Cape had not received feedback after three consecutive years. It appeared that there was no real help for a number of farmers, despite the 91% expenditure in the Eastern Cape. He asked if the Department had taken a serious interest in climate change.

Mr Abrams asked for clarity on the court order payment of R21 million to Blueliliesbush Deli. He also said that the cost of R51 million for 99 tractors was expensive for CASP where it worked out that each tractor would be around half a million rand. He asked who was responsible for this procurement work, how many millions had been spent thus far on CASP, and what the outcomes were in terms of benefits for people. He also commented that with a budget of R2.9 million, 225 fruit trees and 228 vegetable seedlings was not significant.

Mr Pretorius commented that he regarded bonus rewards for performance to 37% of staff as an unusually high percentage. He asked what systems of assessment were used to differentiate performance standards, where for example 83% of human resources staff received awards and 12% of technical staff received rewards.

Ms Mogajane said that DAFF required auditing of BEE projects. If systems were in place, business plans could evaluate land and project sustainability before funds were disbursed.

Mr Malatjie said that Land Bank was responsible for managing funds and approved the viability of programmes. In terms of the status of projects, DAFF was waiting on information from PricewaterhouseCoopers.

Ms Titi said that she understood the frustration of the Committee. The Annual Report did not cover accumulative data but year to year data on what had been done. The success stories existed with their lessons. DAFF would provide the Committee with a list of success stories and detail on what was spent. One of the challenges was the funds for land did not transfer to funds for production and maintenance. Redirection of funds would have an impact on creation of jobs. The focus for the financial year was improving monitoring of projects which would reveal value for money.

Dr Moshibudi Rampedi, Deputy Director General: Forestry, DAFF, said that 100 000 hectares of aforestation would go ahead in the Eastern Cape and KZN as planned. The only challenge was the availability of the aforestation licence which was issued by the Ministry. DAFF would ensure that the forests did not damage the eco-systems.

Mr Hawes said that DAFF had not previously looked at cultivar issues with regard to climate change. They were developing a strategy and counter position to respond to the change in climate and alleviate loss of stock. This included risk issues and harvesting of water, particularly in the dryer Western regions and development of cultivars which could survive in their environment. In Brazil, they were focusing on educating the citizens themselves on climate change issues.

Ms Kanthi Nagiah, Head of Legal Services, DAFF, said that the Bluelilliesbush legal dispute related to the interpretation of what constituted the market value and the slaughter value. The farmer had not exceeded the slaughter value.

Dr Mogajane added that DAFF had lost the case against the farmer.

In December DAFF would present and consult with the Committee on their finalised strategy for production which would assist with planning to improve soil quality. DAFF was engaging with the Department of Environmental Affairs regarding the seriousness of climate change.

Mr Bosman asked if the R13.5 million spent on consultants had been necessary. Also, it appeared that there was a discrepancy between the compensation paid to consultants who charged different amounts. A consultant had charged R1 million for 90 man-hour working days and an import/export systems consultancy had cost R9 million.

Mr Abrams asked DAFF to present the names of wrongful recipients of AgriBEE funding, how many jobs were created and if the farms still existed. He also enquired into the environmental impact assessment and the R5.8 million paid to Onderstepoort Veterinary Institute for Onderstepoort Biological Products (OBP) and asked why this information had been withheld from the Committee.

The Chairperson said that Forestry was an interest of DAFF and the annual Forestry Indaba would assist in guiding the Committees. He asked if DAFF had progressed in contributing to the 500 000 jobs targeted by the President by the end of December. He also asked what the nature of each cooperative unit in DAFF was and if DAFF had committed to the suggested aforestation of 100 000 hectares to mitigate the effects of climate change.

Ms Twala noted that the Auditor-General was unable to report on performance on production and resources due to lack of sufficient information and evidence. She asked for an explanation as to why there was a lack of information acquired.

Dr Mogajane apologised to members and said that the Committee would receive the necessary information by 6 November 2009. There was no intention to hide any information. She added that 4 178 jobs had been created.

Mr Malatjie said that in 2008/09, 124 primary agricultural cooperatives had been established. The nature of their farming and their province was specified on page 37 of the Annual Report.

Mr Venter said that the Auditor-General had requested the list of beneficiaries, not just the number of beneficiaries. DAFF was working on improving information systems and aspects of verification of information.

In conclusion, the Chairperson questioned whether cooperatives were a better model of farming than a family type business which could develop into a cooperative down the line.

The meeting was adjourned.

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