Land Claims Commission on land reform process; Rural Development & Land Reform 4th Quarter 2009/10 Expenditure

Standing Committee on Appropriations

10 August 2010
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Department of Rural Development and Land Reform had spent 92% of its budget in the 2009/10 financial year. Contributing factors were the change to its mandate by the addition of the rural development function. Programmes had only been set up late in the year. Money had not been spent due to vacancies. A particularly problematic area had been the attempted transfer of R500 million from the land reform to the restitution programme. Another source of under-spending was concerned with the non-provision of office accommodation in some of the provinces.

Members found aspects of the report difficult to understand. The Department's planning was criticised as lacking in forethought. There was concern over the high level of vacancies. Although the Department had been subject to restructuring, the same did not hold for other departments that had gone through a similar experience.

Members were concerned about the number of unprocessed land claims. Several cases had gone to court. There was already a backlog of R7.5 billion in unpaid claims, and this figure would grow to at least R12bn. This did not include those claims which had not been quantified and members feared that the total cost could be in excess of R70bn. They did not know where the money would come from.

The Department was asked to verify the information presented as the Committee needed to compile its report within the following week. Members were not satisfied with the answers provided.

Meeting report

The Chairperson said that the quarterly report should be signed by the accounting officer for that entity. The Committee could assume that the information contained was correct. There had been discussions around the rural development programme. The former Department of Land Affairs had spent 86% of its budget. People had come to Parliament at the start of the year and finances had been approved. They would soon be coming for adjustment. The new Money Bill would give Parliament some muscle. Parliament should be satisfied that the resources were used fully. Entities would always claim that they did not have enough resources. It was difficult for Parliament to support these requests if entities did not use all the resources granted to them.

Mr Sogoni welcomed the delegation from the Department of Rural Development and Land Reform (DRDLR) as well as the Committee on Rural Development and Land Reform. All members of Parliament were entitled to take part in this meeting. The Department of Higher Education was not present.

Department of Rural Development and Land Reform (DRDLR)
Dr Nozizwe Makgalemele, Acting Director-General (DG), DRDLR, said that both the DG of the Department and the Chief Land Claims Commissioner had resigned at the end of July. Their posts had been advertised. Traditionally the Department of Land Affairs had spent 99% of its allocation. The figure for the latest financial year had dropped to 92%. This was due to the restructuring of the DRDLR and the new mandate. There were new concepts to be grappled with.

Mr Protas Phili, Chief Financial Officer (CFO), DRDLR, said that the allocation for 2009/10 was R6.1 bn. This had been supplemented by an additional R292m in November 2009. Of this, 92% had been spent by the end of the year. This equated to 8.4% of the budget or R534m. The budget spending was 88% for Programme 1 (Administration), 96% for Programme 2 (Surveys & Mapping), 90% for Programme 3 (Cadastral Surveys), 99% for Programme 4 (Restitution), 92% for Programme 5 (Land Reform), 65% for Programme 6 (Spatial Planning and Information), 95% for Programme 7 (Auxiliary and Other Services) and 25% for Programme 8 (Rural Development).

Mr Phili echoed the DG by saying that the main reason for under-spending was the change of mandate as a result of the Department of Land Affairs becoming the DRDLR. Rural development programmes were a new concept. New funding had to be requested from National Treasury (NT) and the Department had to change its priorities. The R292m in the adjusted budget was for rural development and had only been allocated late in the year. Activities could not be completed by the end of the financial year. The Department had applied for roll-overs for these funds.

Mr Phili then gave a breakdown of the under-spending, mainly made up of Administration; Land Reform and Rural Development. In Programme 1 (Administration), the amount of pay-outs of leave gratuity had been less than expected. The Department had used its internal capacity for recruitment rather than use external agencies. Vacant posts had not been filled with a corresponding reduction in related expenditure. In Programme 5 (Land Reform), R500 m had been transferred to the Restitution programme in November 2009. However, only R100m could be transferred and there had been too little time for the Land Reform Programme to make use of the R400m which had been returned to it. Staff vacancies also led to under-spending in Programme 5. Programme 8 (Rural Development) was a new programme and the budget of R252 million was only received late in the year. Due to the late establishment of the Programme not all the posts were filled.

Mr Phili outlined some general problems leading to under-spending. The Survey and Mapping Programme had suffered from vacancies not filled. Uncompetitive salaries made it difficult to attract and retain the specialists required. The same applied in respect of Cadastral Surveys. There were delays in implementing the Occupational Specialisation Dispensation (OSD). There had been delays in securing appropriate office accommodation in the Eastern Cape and North West. Re-prioritisation in the Spatial Planning and Information Programme had seen sub-programmes being created too late for all the budgeted funds to be spent. The Auxiliary Services Programme had also been impacted by the late approval of projects.

The CFO said that all of the structures of the DRDLR had now been finalised. Critical posts were being filled. The Department would be striving to return to 99% spending levels. The DRDLR had applied for funds to be rolled over. Approval by NT was pending.

Discussion
The Chairperson said he failed to understand the language used in the presentation, in particular the transfer of funds from one programme to another.

Mr Phili said that R500 million had been transferred from the Land Reform Programme to the Land Restitution Programme, but only R100 million was transferred.

Ms Irene Singo, Executive Manager: Financial Management, DRDLR, said that the Department's intention had been to spend money on backlogs that had developed in the Restitution Programme rather than on land reform. This was the reason for making the transfer.

The Chairperson said the Department should know at the start of the financial year what its intentions were and not wake up at the last moment. He asked where the money had come from.

Ms Singo said that there was supposed to be a move from land reform to restitution.

Mr M Swart (DA) said that two of the under-spending programmes were land reform and rural development. These were the two most important functions of the Department. He had heard what the reasons were but was unconvinced. He had visited the Eastern Cape the previous week and observed how much unused land there was. He asked if the DRDLR could compile a list of what it wanted to do so that there could be a budget for each programme. Members would then know exactly where the money was needed.

Dr J Rabie (DA) said that vacant posts occurred in every department. He asked what the total vacancy rate was and what steps were being taken to fill the vacancies. The Department owed explanations to both this Committee and Parliament.

The Chairperson said that while the reconfiguration of the Department had started early in 2009, the process had only really started in November. He was not surprised to see the resulting problems.

Dr Rabie countered that he knew about the time constraints. However, other departments which had undergone a similar restructuring process had managed to staff all their posts.

Mr L Ramatlakane (COPE) said that there should have been a plan in place. The DRDLR had known what reconfiguration processes were necessary as from 1 April 2009. Surely, they would have expected the R500 million transfer. He asked why the Committee should approve a roll-over of funds. Critical posts had not been filled. Funds should have been redirected for other expenses. The personnel budget was based on the current establishment. Newly appointed staff would not be paid retrospectively. New additions to the Department's responsibilities did not mean that other programmes should remain stagnant. He saw no reason for the approval of roll-over funding for personnel related expenses.

The Chairperson had asked the CFO about this. There was a requirement for justifying roll-overs in the Public Funds Management Act (PFMA). The CFO should know what these conditions were.

Mr N Singh (IFP) was worried about the vacancies. The vacancy rate was 22% in 2008/09. In particular there were sixteen vacancies at senior management level. Two very senior officials had resigned and he asked what the reasons were. He asked about the budget for the Land Claims Commission (LCC). Many agreements had been signed with landowners but there was no money to pay for the purchases. Special funding was needed. He asked how much was outstanding and how many court cases had resulted. He also could not understand the report.

Mr J Gelderblom (ANC) needed to see the plans. A monitoring programme had been advertised but people at the regional offices were unaware of the programme. He was also concerned about the number of vacancies. He asked what the outcome of the mentorship programme was. He was not sure if this was an existing or a new programme.

Mr G Snell (ANC) noted that the DRDLR had stopped using external agents for recruitment. Instead the Department would rely on its internal capacity. He doubted that there was no plan for this. Something else was at play. R500 million had been transferred for restitution but only R100 million could be shifted. There was clearly a plan, but if the transfer had gone through then the budget would have been exceeded.

Mr Gelderblom asked how much had been put aside for consultants.

Ms B Ngcobo (ANC) asked why there was no appropriate office accommodation in the eastern Cape and North West. The former Department of Land Affairs had used office space at the Department of Agriculture. She asked when accommodation would be found.

Mr Ramatlakane asked if the transfer subsidy was less than anticipated. He asked if the Department would buy back leave from its staff.

The Chairperson asked if savings were appropriate and if saving should be made at all costs.
The DRDLR should identify redundancies. It was correct to stop using recruitment agencies. Planning was an issue. He asked if this was the only area where the OSD was being implemented. Why was so much of the budget allocated to administration rather than the core function of the Department? While all programmes had administration costs, he thought those of the DRDLR were a bit high. This was why the budgeted funds could not be exhausted. What were the PFMA requirements? Why could the funds for restitution not be used? The Minister had instructed government departments to do away with the unnecessary things.

Dr Makgalemele said that the administrative function had four components. These were the Ministry, the DG, supportive and financial components. This was the first time that the Ministry was located within the Department. Finances were a big component of support services. Vacancies were in specialised fields such as land surveyors. The whole profession was struggling.

The Chairperson asked what DRDLR was doing about this situation.

Mr Singh understood the problem with scarce skills. The big numbers were in administration and restitution. It was twelve years later and hundreds of claims had not yet been gazetted. The Department could not tell him if the claims had been staked. There were abnormal figures for the lack of personnel.

Dr Makgalemele replied that the Department had embarked on a bursary scheme. They had visited various career expos. Agriculture and related subjects had traditionally not been offered by black training institutions. Farming was not seen as financially attractive. DRDLR was providing internships.

Mr Mduduzi Shabane, Deputy DG: Land Reform, DRDLR, said that he hoped that the situation had improved since the end of the previous financial year.

Mr Vusi Mahlangu, Acting Chief Financial Officer, DRDLR, said that the mentorship programme was a new unit under strategic planning. It was a slow process. Advertisements had to be placed for 21 days. There were a number of applications. There was a need to budget for this. This was why the R500 million had been shifted. Systems were not yet in place.

Mr Snell said that if the money had not been shifted the land reform programme would have been overspent by R299m.

Ms A Steyn (DA) had been told that restitution was coming to an end. This was the reason for the cutbacks. The Portfolio Committee on Rural Development and Land Reform was concerned that opportunities were not being used. It was five months into the new programme and yet farms were still lying fallow. She asked what was being done.

The Chairperson said that the Committee would be lenient. They were dealing with the fourth quarter of the previous financial year only. They would deal with matters pertaining to the current year when the first quarter report was presented. The Committee would be invited to that meeting.

Mr Sibusiso Gamede, Acting Chief Land Claims Commissioner, DRDLR, said that the status quo still applied on restitution. The Department had commitments from the beginning of the programme. The matter had been addressed in the Department's Annual Report. The commitments amounted to R7.5 bn at present. This resulted from sale agreements. He estimated that this figure would rise to R12 bn. In some instances the DRDLR had been taken to court and ordered to pay. Overheads were accumulating. The Department was only ordered to pay in cases where there was a signed offer. After the initial decision a number of land owners had chosen the legal route.

Mr Gamede said that DRDLR had paid almost R700m in court applications and orders. The total figure would be about R950m. Often the Department was instructed to pay the second half of the cost if it had already paid the first, or the first half if it had not yet paid anything. Normally money was only paid over when the transfer was registered or if ordered to do so. The figure of R7.5bn excluded some 4 000 claims that still had to be researched.

Mr Gamede could not quantify the monetary value of the unresearched claims. An evaluation would have to be done on the value of the property concerned. The DRDLR was conducting a clean-up in its office. Some claims had not been validated. They had approached NT with their needs for the first three years. Most of the claims were complex where the land in contention had subsequently been used as conservation areas or mines. If no land was to be returned it would reduce the backlog.

Ms Steyn asked if the estimated R12bn backlog included financial compensation. If it did not, she asked what the total estimate would be.

Mr Swart asked if government was committed to make payments even without money in the bank.

Mr Singh said that the country was sitting on a time bomb. He asked what impact there would be on national finances. The Committee needed to help the Department to redress the issue. The situation was not of the Department's making.

The Chairperson asked if it was possible to avoid court action.

Mr Gamede replied that DRDLR was trying to engage with land owners. Court action was expensive. Commitments had accumulated over the years. The Department was trying to develop an engagement and claims strategy. They needed to determine what was needed to buy land where this had been gazetted, and what was needed to pay out those claimants who preferred a cash pay-out.

Mr Shabane said that a decision had been taken early in the financial year, in June or July. The Department had anticipated that the money was gone. They had to apply for extra funds in the adjustment process. The NT had provided funding for the rural development programme.

The Chairperson asked if this had taken DRDLR over its budget.

Mr Gamede replied that the funds were part of the previous financial year.

The Chairperson asked when the DRDLR had noticed the problem. It was not reflected in the adjusted Estimate of National Expenditure (ENE). He questioned the roll-over request. It seemed that the Department had realised in November that it would need extra funding but the adjustment had been made in October. He wanted to understand the authenticity of the request. He felt that the programmes had not been properly costed.

Mr Shabane said that the Department had needed to get money from the land reform programme when they had realised the problem. There was scope for improvement in the process.

The Chairperson asked how much the legal costs were.

Mr Mahlangu said these were indicated in the annual report. He did not have the information at hand.

Mr Snell said that the restitution programme had not been provided for in the budget in November. DRDLR had asked for the R500m to be transferred and this had been done, but in the end only R100 m was shifted.

Mr Mahlangu said that there was a maximum of 8% that applied to such transfers. This was why only R100 million could be shifted.

Ms Elizabeth Mnisi, Senior manager: Programme Management, DRDLR, said that the R100m had been passed. This amount fell within the discretion of the accounting officer.

Mr Snell said that the slides in the presentation were misleading.

Mr Ramatlakane asked if the Department budgeted for legal costs, and if so, how much. On the 4 000 unquantified claims, he asked how long these had been on the table. Was it a matter of years or months? He asked if DRDLR had any capacity to bring in assistance.

The Chairperson asked why the R500m had been highlighted. Legal fees were a cost driver. He repeated the question on whether there was any budget for legal fees.

Mr Singh returned to the 4 000 claims. He suggested that the Department do a calculation based on an average of 100 hectares per claim. If they could attach a price per hectare it would make members aware of the total cost. This would be an informed guess.

Mr Gamede said that they were in the process of quantifying the claims. They were working towards estimating a figure.

The Chairperson said that the budget preparations were made over time. He was concerned that the Department could not come out with a quantified figure. There was already an indication that not all the claims could be paid. The budget adjustment would be happening in two months but the DRDLR still did not know if it would ask for funding and if so, how much.

Mr Gamede replied that the Department would request more funding to deal with the backlog. They were developing their request for the next two to three years.

The Chairperson asked if the Medium Term Expenditure Framework (MTEF) system of budgeting was working. He could not accept that the DRDLR had no idea of the MTEF.

Mr Gamede said that the Department was aware of the procedure. They would ask for R12bn.

Mr Ramatlakane said that the book closed on 31 December. The DRDLR was still not sure of the rand value of the 4 000 claims. This meant that the Department was chasing a moving target as the final figure could be several billion rand more. There was no early warning system. This was worrying. The R12bn was already more than the budget. There did not seem to be an answer.

Dr Makgalemele said that the roll-over request was not mainly based on compensation. Posts were being filled. Projects had been launched, mainly in terms of rural development.

Mr Phili said that it was not a matter of line for line budgeting.

The Chairperson told the Department that the Committee approved adjustments. There must be specific requests. Even a freeway had its rules. The DRDLR must be upfront with the Committee.

Mr Gelderblom was still concerned over the mentorship programme. This was the key to success in land reform. There was an urgent need to implement the programme. He was not satisfied that only 200 people were involved.

Ms Leona Archary, Deputy DG: Rural Infrastructure Development, DRDLR, undertook to provide a written list of the projects. There were difficulties with the rural development mandate. The roll-over was being requested for infrastructure projects that were overflowing into the new financial year. In terms of mentorship, the Department had a strategic intervention programme for the recapitalisation of transferred farms.

Dr Makgalemele said that the DRDLR had assisted the Department of Public Works (DPW) with finding office accommodation in the Eastern Cape. It was a lengthy and frustrating process.

Mr Snell was ready to declare a state of emergency.  The Department needed to cut the red tape. The process of making and accepting offers on property was legally binding. There was a need to control the process in order to prevent budget overruns.

Ms R Mashigo (ANC) asked what was meant by auxiliary and other Services.

Mr Gamede said that the Department would evaluate the land negotiations process. Junior people were handling the negotiations and making offers. He had issued a directive that only commissioners would be entitled to enter into negotiations. The offers they made would be binding. A monitoring system was being put in place. The national Department must see and approve the purchasing process. DRDLR was quantifying the 4 000 outstanding claims. There was a focus on these claims. A team had been set up.

Mr Swart feared that the 4 000 claims could result in costs of up to R70bn. He asked where this money would come from. It was better if commissioners dealt with the offers, but up to R84bn of government funds might be committed.

The Chairperson said that there was a need to spend some time with the Department. The Committee had a narrow mandate to pursue answers.

Mr Snell said that the Committee appreciated the magnitude of the work. It was wrong that junior officials were committing the government into unbudgeted expenses. An offer would be binding if the representative making it was properly authorised. If this was not the case, he asked how the agreement could be binding. He asked how government could be held responsible for irregular procedures.

Mr Gamede said that the officials negotiating the purchases had the authority at present. DRDLR was trying to review the process.

Ms Mashigo asked if the approval for expenses related to auxiliary services had been late.

Ms Steyn asked about the delegation of authority. She asked if this was still happening. She had been called by a farmer who had been involved in a negotiation process. She asked if this new approach had been communicated to the bodies that represented the farmers.

Mr Singh said that expenses related to office accommodation should be placed under the administration programme.

Ms Mashigo said that the requests could not wait until the end of the financial year. Budgeting was a process and not an accident.

Ms Singo said that capital work depended on DPW. If this process did not work then the budget could be transferred to the administration programme. The Department of Public Service Administration would have to approve such a transfer.

The Chairperson said that what was happening in the Eastern Cape was that DRDLR was asking for a budget and then looking for beneficiaries. This did not sound right. DPW was saying it was requested to do capital work. This needed to be budgeted for at an early stage.

Mr Singh said that the DRDLR had to prove that it had funds before making commitments to capital expenditure.

Mr Gamede requested details on the information provided by Ms Steyn. A directive had been issued to officials. The Department had met with farmers' unions.

Mr Snell did not know how authority could be delegated in terms of purchases. There were complicating factors in the process such as the farm's balance sheet and sentimental value that might be attached to the property. He asked what value would be attached to the R12bn required for land purchases. The lack of value for money was a deep concern. He asked how junior officials could be allowed to operate with such a degree of independence.

The Chairperson said that the Department needed to review the procedure. Powers should be withdrawn. Members were belabouring the point. Government should expect to get value for money. Some of the members' questions had not been answered satisfactorily. DRDLR should provide further responses in writing. The Committee had to submit its 4th Quarter report by 16 August. The figures quoted by the Department did not add up. The Committee would compile the report in the next two days.

Mr Sogoni said that figures used in the MTEF were not a matter of thumb-sucking. There was a mandate for financial terms. He quoted relevant sections of the PFMA. The budget must be credible. He supported saving, but this should not be done at the expense of service delivery. The issue was not to find fault with the work of the Department but to assist it.

The meeting was adjourned.

 

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