The Department of Rural Development and Land Reform focused on the under spent fiscal position of the Department at the end of the third quarter. The Department outlined their initial appropriations for the fiscal year and the rollovers received during the year. The Department noted that they were 56% spent. The presentation detailed the breakdown of where the rollover amounts were to be spent. The Department had also shifted R2 billion from the Land Claims budget to the Restitution budget to cover an increasing number of court orders for payments. The Department noted that they expected to end the fiscal year over 95% expended.
Members questioned the Department on their budget planning capacity. They pursued the Department's increasing number of Restitution claims, given that the programme was to be completed in 2008. They questioned the Department on their decision making for either rolling over funds or transferring funds between programmes within the Department. They questioned the impact on service delivery in Land Claims having moved R2 billion out of this budget. They asked the Department what their total exposure was to the outstanding restitution claims.
The Committee was then briefed by Statistics South Africa (StatsSA) on their third quarter financial position. StatsSA had spent a total of 59% of their appropriation. Notably, they had only spent 35% of the budget allocated to Census 2011. StatsSA explained their position and provided justification for being in this under spent position. StatsSA estimated that they would spend 64% of their total appropriation by fiscal year end.
The Committee questioned StatsSA planning capacity. They asked why StatsSA had asked for so much funding for the fiscal year while not being able to spend it. They noted that had StatsSA planned better for year 2010/11 and 2011/12, they could have asked for less this year and more for the year in which they would be spending all of the funds. This would have avoided placing StatsSA in such a situation as they were facing right now.
StatsSA justified their planning and position given the time it took to put requests out for tender and the fact that they had to have cash in hand at the time of putting out requests for tenders, despite the fact that they would not be receiving the goods and services until the following fiscal year.
Briefing by the Department of Rural Development and Land Reform
The Chairperson welcomed the Director General, Department of Rural Development and Land Reform (DRDLR). The Chairperson noted that the Department was called here to discuss the fact that they were at 66% spent. The expectation was that departments should spend approximately 25% of their allocation per quarter unless otherwise noted. He expressed a concern about the low expenditure and that the Department should address this in their presentation. He also noted that the Committee expected some explanations on expenditures stemming from the last time the Department was in front of the Committee.
Mr Mduduzi Shabane, Director General, Department of Rural Development and Land Reform, introduced his team from the Department. He stated that the presentation from the Department would address the letter from the Committee to the Department on 14 March 2011.
Mr Protas Phili, Chief Financial Officer, Department of Rural Development and Land Reform, stated the presentation would provide an explanation for the under spending of R621 million or 8.5% against its linear target for this period and also the 56% spent against current payments. He would also discuss the shifting of funds from the Land Reform to Restitution Programme. Lastly, the Department would present the progress it had made to date on the plan to address the under spending.
Mr Phili presented a slide that demonstrated the initial appropriation, rollover funds, adjustments, and final appropriation. The Department had an initial appropriation of R 6.7 billion, rollovers totalling R495.7 million, and a final appropriation of R7.2 billion. Of the R495.7 million rollover, R487 million was approved for the Restitution Programme and R8.3 million for goods and services not paid by year end. He noted an unforeseen expense of R28 million for public sector wage increases. An amount of R478.5 million was reprioritised during the Adjustment Estimate process from Transfers and Subsidies to augment the following departmental priorities: R8.1 million for ICT infrastructure and office furniture, and R470.5 million for current payments of goods and services. The R470.5 million for current payments funded the following departmental priorities: the establishment and equipping of newly leased office buildings, including ICT infrastructure; Rural Disaster Mitigation and Management and Technology Research and Development in support of the new rural development mandate to implement the Comprehensive Rural Development Programme (CRDP); funding the National Rural Youth Service Corps (NARYSEC); the Occupational Specific Dispensation (OSD) and Job Evaluation (JE) costs to improve the services of Geospatial, Cadastral and Spatial Planning specialist services; and augmentation of the insufficient allocation of office accommodation budget.
Mr Phili presented a slide that demonstrated the third quarter spending for 2010/11. He noted that the Department had spent R4.85 billion, which represented under spending of 66.61% against its final adjusted appropriation. An analysis of third quarter spending in the Current Payments economic classification noted: the Department had undergone a restructuring process to align its organisational structure and resources to the new mandate. A moratorium on the filling of vacant posts was put in place which was lifted in January 2011. The moratorium delayed spending on the compensation of employees and related goods and services expenditure, hence the 56.65% spent on this economic classification in the third quarter. The NARYSEC was implemented in September 2010 with planning, training and activities taking place during the third quarter, payment would be made during the fourth quarter. Lastly, savings from current payments would be utilised to augment excessive expenditure in line with Section 43 of the Public Finance Management (PFMA). In regards to the Payment for Capital Assets classification, the under spending was a result of a delay in ICT infrastructure expenditure, which was projected for September 2010 but occurred in February 2011 due to delays in finalising the lease for a new office building. For the Transfers and Subsidies economic classification, the Restitution Grand was already depleted and there were still outstanding court cases to be settled. To mitigate this, savings from other Programmes would be utilised to settle the over-expenditure in the Restitution Programme. He noted if court orders were not settled within 30 days, the Department would incur interest charges that the Auditor General would record as fruitless and wasteful expenditure.
Mr Phili explained the shift in funds from the Land Reform Programme to the Restitution Programme. He noted that the Restitution Programme budget decreased from R3.6 billion in 2007/08 to R2.5 billion in 2011/12. The reduction in budget was because the Programme had been expected to be completed by 2008. Section 38 and 39 of the PFMA place a responsibility on the accounting officer to ensure that effective and appropriate steps were taken to prevent unauthorised expenditure and to ensure that there was effective risk management in place to prevent such from happening. Given the restitution exposure to date, the department was compelled to reprioritise an amount of R2 billion to pay urgent court orders and finalise critical outstanding claims. This R2 billion was funded by R1.5 billion shifted from Land Reform Grants and R0.5 billion received from rollovers approved by the National Treasury. He noted that fiscal funding still remained a challenge, particularly with the Restitution Programme. Court orders would remain the principle driver of these costs.
Mr Phili noted that the Department was at 94% spent as of 24 March 2011. He stated that spending trends had been monitored on a regular basis by the Executive Management Committee of the department. He noted that this was also an improvement from the previous year's actual results, which saw spending at 91.6% for the 2009/10 financial year. To continue to prevent the accrual of interest, savings from other Programmes would continue to be utilised to settle the deficit in the Restitution Programme. He concluded by stating that the Department was confident that it would spend at least 95% of its appropriated final budget in line with the limitation imposed by PFMA in shifting funds post Appropriation Process.
The Chairperson asked if the Director General, DRDLR, wished to add any comments to the presentation.
Mr Shabane stated that earlier, the Department had made representations for additional funds to the National Treasury. However, at the time National Treasury had felt that there was under spending on the Land Reform Programme and an increase in spending on Restitution. The National Treasury stated that instead of being given new money, funds would be transferred within the Department. The Department was already seriously exposed in regards to the Restitution Programme, as they had declared in the last two Annual Reports. As the Department settled claims, they continued to be exposed to more claims and the Department was unable to settle some of their commitments. As a result, many landowners went to court to compel the Department to pay. This was the basis for the court orders that were referred to in the presentation.
Mr D Van Rooyen (ANC), from the Standing Committee on Finance, noted that the Department did not present a permanent solution to the problem of restitution. He wanted to know the monetary value of the problem and what was the Department's proposal to address these court orders without compromising the budget. He asked what the expected savings were against the value of the outstanding court cases.
Dr P Rabie (DA) asked how much was budgeted for the NARYSEC, what was their brief, and how much were they being paid per day. Additionally, the presentation noted that the payments for the NARYSEC would be made in the fourth quarter and he asked how much of the total budget for NARYSEC had already been spent. Lastly, in regards to the Restitution Programme, how many court cases still had to be settled, and what was an estimate of the cost of these outstanding cases? Furthermore, he wanted to how the Department prioritised their Programmes.
The Chairperson noted that the question was what the Department planned to do to prevent these court cases as opposed to budgeting for them.
Mr J Gelderblom (ANC) noted that R2.11 billion was allocated for the Land Reform Programme, of which only 51.38% was spent at the end of the third quarter. He asked how this under spending affected service delivery.
A member of the Committee (ANC) noted that the Department was under spent. The Department was not given money to save it. She asked about the vacancy rate of the Department and whether the vacancy rate had something to do with the planning. She asked if the Department could further expand on the level of authority that had been given to Land Commissioners, what responsibilities that they have been delegated and how were they held accountable for their decisions. She reiterated that this presentation was discussing the third quarter and she asked that the Department refrain from discussing the fourth quarter.
Mr M Mbili (ANC) noted that on slide 9 of the presentation the Restitution budget had been decreased from R3.6 billion in 2007/078 to R2.5 billion in 2011/12 because the Programme was supposed to be completed by 2008. He noted that another R2 billion was shifted into the Restitution Programme. He asked how this could not have been budgeted for, given that such large expenditures did not suddenly appear. He asked why the Department was not focusing on Land Reform, which should be the primary concern.
Dr Z Luyenge (ANC) questioned when the government became a profit making organisation with savings. He asked if the Department's savings were at the expense of the customer. He asked who litigated against the Department and why were people forced to obtain lawyers to defend the rights that the Department was supposed to uphold. He expressed a doubt about the planning capabilities of the Department. He stated that the Department should be prioritised to address rural communities.
The Chairperson added his concern over the moratorium on filling vacant posts at the Department.
A member of the Committee asked what process the Department followed in applying for rollover funds from the National Treasury. She asked how the Department was going to handle all of the restitution cases with a reduction in their budget.
Mr Shabane replied that he was confident that his team could answer many of the questions that were posed.
Mr Phili stated that the process to rollover funds was established and approved by the National Treasury.
The Chairperson asked the Department to clarify how they received their rollover of funds.
Mr Phili noted that they had reached their limit for moving funds within the Department for the previous fiscal year; therefore they had to seek approval for a rollover of funds.
Mr Vusi Mahlangu, Acting Deputy Director General: Land Reform, DRDLR, responded that the nature of court orders were such that it was a demand on the Department. The Department had to respond within the same line items within the budget. He noted that if the Department took money from land reform and put it towards restitution, it would affect service delivery in a province. It would compromise the number of projects that were planned for that province. In order to mitigate this, when the Department received a court order for restitution within a province, they would reduce the land reform projects within the same province so that the effect in a given province was neutral.
Mr Shabane provided a history of the magnitude of court orders facing the Department. He noted that about May 2010, neither the Minister, nor the accounting officer of the time knew the extent of the exposure to the state. The Minister had a report prepared to ascertain the extent of the exposure. The exposure at the time was estimated to be about R12 billion. Unfortunately, the Department gazetted more claims that were available from the Department. If the Department could not pay, the landowner had no choice but to take the Department to court to be forced to pay. In other cases, a land agreement was reached, and the Department agreed to pay 50% of what was owed right now and the rest alter. Again, no one kept track of how much was paid to whom, so landowners were compelled to go to court to get the remainder of their money. In the last type of case, landowners forced the Department to make settlement agreements an order of court so that the Department could not renege on the deal. He noted that the Department did not properly manage the activities of the Commission, as they were a public entity reporting to Parliament and the Minister. Another report was expected at the end of this month that would again evaluate the extent of exposure of the Department. The latest estimates suggested that there were over 300 court applications, and increasing all the time. The Department removed certain powers from the Land Commissioners and stopped their ability to Gazette or settling any agreements while the Department attempted to quantify the extent of their exposure. This issue had also raised questions regarding the organisation of the Commission and of the Department. The moratorium on filling posts was made to avoid filling administrative jobs that did not increase the service delivery capabilities pending reorganisation.
A member of the Committee spoke inaudibly without a microphone.
Ms L Yengeni (ANC) asked what the status of the Land Reform Programme was, given that they had taken large amounts out of the Programme budget. She asked why the Department budgeted so much for Land Reform only to shift it to other Programmes. She asked at which stage the Department start monitoring their spending patterns. She asked for clarity on the intervention teams, what was the composition of the teams, what they were supposed to be doing, how much was it costing, and where did the money come from for these teams.
Dr Rabie noted that there were capacity problems within the Department. He wanted to know if the Department had the capacity to implement the NARYSEC Programme.
A member of the Committee asked if the Department had a new strategy to manage the Department properly, without which they would be in the same situation next year.
Mr Shabane noted that the R12 billion exposure had been reduced, but there were still court orders coming in, hence the reason they were again attempting to determine the exposure of the Department. He stated that the budget for Land Reform had been increasing from about R300 million five years ago to about R4.7 billion next year. They found that there was no balance between acquiring land and making sure that the land was properly managed with sustained production on that land. Previous efforts were focused on the acquisition of hectares, not sustainability. The focus now was balance. He noted that they have looked back at all the farms acquired since 1994 to say to National Treasury that there was a need to re-capitalise these farms to avoid risks to food security and unemployment.
Mr Shabane noted that the intervention teams were constituted from people within the Department. This was a Departmental problem so they took people from all sectors within the Department to bring as many resources as possible to bear on the issue of restitution in order to determine where the crisis was coming from. There were no external consultants used.
In regards to the NARYSEC programme, Mr Shabane noted that there were over 7 thousand young people who had been enrolled in the Programme. This Programme was being conducted in partnership with other Departments and provinces. They were currently paying R60 per day to the young people in the Programme. He described some of the skills that the young people were being taught in this Programme.
Mr Shabane noted that the Department had been looking at alternative settlement models on a small scale. They had proposed that negotiations with large corporations could achieve an agreement where the private sector would bring their own resources to the table to ensure continued production while the Department looked at various settlement possibilities. He stated that restitution should not just become a social justice Programme and that the Department was looking in the direction of buying equity for land reform beneficiaries in industries use land such as sugar or timber.
A representative from the National Treasury explained that rollover's were based on commitments that were made in one fiscal year but paid in the following year. The Department motivates to the Treasury to rollover funds to meet these commitments. If the Treasury did not approve, then the Department would be required to find the money elsewhere to pay for those commitments. The Treasury usually approves the rollover's, which were included in the adjustment estimates and approved by Parliament around October each year. He also noted that the Land Restitution Programme baseline funding reduction in 2007/08 was a result of Departmental targets for that period. The National Treasury then reduced the Restitution Programme in line with the targets and shifted the funds to the Land Reform Programme. The Department requested additional funds for restitution that were not approved. The Department then requested to shift funds, but since the request was for over 25%, the request would have to go to Parliament for approval. He noted that the Treasury could only authorise a shift of eight% of funds within the Department.
The Chairperson asked if Mr Sizani wished to comment.
Mr S Sizani (ANC), Chairperson of the Portfolio Committee on Rural Development and Land Reform noted that he was pleased to be invited to listen to the presentation. He stated that there were three issues that the two Committees needed to collaborate on going forward. First was the medium to long-term plan for the Department in regards to Land Claims and Land Reform. There was no Programme within the Department to state when the Commission would be finished with Land Claims. The Department had no confidence in the Treasury to give them funds, so the plan seemed to be for the Department to limp along as funds became available. There needs to be a national plan, approved by the state that outlines when Land Claims work would be complete so money could be put against these targets. He noted this as a potential threat to South African stability. There were three reasons why this was a threat: 1) commission farmers looked at the government as the enemy. Therefore they were not investing in their farms. 2) there needed to be a link between the Departments of Agriculture and Trade and Industry to resolve tariff concerns and subsidies that were making it too costly for farmers. 3) food security was becoming a problem in
The Chairperson noted that there was nothing preventing Portfolio Committees from inviting the National Treasury to meetings. He stated that there needed to be a solution found to the issue of outstanding claims and restitution. He thanked the Department of Rural Development and Land Reform for their presentation.
Briefing by Statistics
The Chairperson expressed a concern with the under spending position of StatsSA. He questioned whether being under spent would impact on StatsSA's ability to conduct the Census 2011 for example. He asked StatsSA to introduce themselves and to give their presentation.
Ms Kefiloe Masiteng, Acting Statistician General, Statistics South Africa, presented a chart outlining the performance of the organisation as of 31 December 2010. She noted that they had spent 72% of their voted funds and 35% of the funds allocated to census 2011, providing for a total of 59% of the Departmental appropriation spent. She then presented a slide that provided a breakdown of corporate and survey operations expenditure positions.
Ms Masiteng explained that survey operations were under spent as a result of unit costs being lower than what they were budgeted for. Also, economies of scale contributed to a reduction in spending. She also noted that the large volumes and quantities needed of some items required that the bid process be undertaken at a point that would not allow for deliveries to take place too early. Early delivery would mean that items sat idle while product warranties expired and StatsSA would have to source storage space for these items. Acquisitions were only just currently underway as tender processes, which ended about November 2010, required a lead time of approximately six months.
Ms Masiteng explained the over expenditure that was occurring in corporate relations. She noted that Programme spending in this area was overspent by approximately five%. She explained that the Income and Expenditure Survey was cut by about R30 million; however, it was essential to maintain the field employees which incurred a cost of about R22 million. Additional funding of R17.3 million was provided during the Adjustment Estimate process to minimise the overspending in this area.
Turing back to the under spending in survey operations, Ms Masiteng stated that the total value of bids submitted to the bid office to date was R236.5 million, of which R134.4 million had been awarded to date. The acquisition of 110 satellite district offices were estimated to cost R50 million per annum for the next three years. She expected that the purchase of media and advertising for the Census would cost approximately R100 million. A bid process was underway for car hire for the Census that was currently part of the under spent position of StatsSA. They were also sourcing 300 training venues, a stationary contract, listing books, and a self-enumeration guide, again part of the unspent funds for this fiscal year.
Ms Masiteng addressed the StatsSA plans to improve their performance by year end. She noted that unspent funds would be shifted to Programme 6 to accommodate overspending at the provinces. As of 15 March 2011, spending for Census 2011 had increased to 29%. StatsSA would also be requesting from the National Treasury a rollover of funds for the earmarked Census 2011 funds. She fully expected that their voted funds would be over 95% spend by fiscal year end.
The Chairperson reiterated that presentations should be provided to the Committee at least three days before they appear. He noted that StatsSA was not able to provide the presentation until today. He asked StatsSA if the issue was around planning. He asked why they did not plan properly between operations and Census requirements and state what was actually required.
Mr Calvin Molongoana, Project Director: Census 2011, Statistics South Africa, explained the planning process for Census 2011. He noted that the Census would be undertaken in October 2011. They took into consideration the lessons of 1996 and 2001 and found that their field management was the weakest area. This resulted in an under-counting in both years. StatsSA ran a pilot in 2009, where they used the unemployed in the role of first level managers, but they produced similar results as 1996 and 2001. In 2010, StatsSA trialed teachers and found the results even worse. StatsSA felt that before finalising their plans, they needed to test what they proposed. These pilot projects proved that the proposed funding for 2011/12 would be insufficient to undertake the Census. In 2001, StatsSA had to go outside the country to obtain many of their products. Therefore, they decided that 2010 was when they would have to begin sourcing providers for the Census. There have been almost 30 tenders to date. They have also found that many pieces of equipment were costing less than expected. He concluded by stating that the plans were continually being refined in order to ensure a successful census.
The Chairperson asked, of the issues that were raised, when StatsSA had realised that these were chellenges. If they were realised early enough, then they should have been able to budget better to avoid being in the current under-spent position.
Ms Nombuyiselo Mokoena, Deputy Director General: Corporate Services, Statistics South Africa, replied that part of the plan was to acquire offices for some areas. Part of the capital expenditure was to equip these offices with furniture and equipment. Some of these procurement processes were stalled until suitable offices could be found.
Ms Semphete Thobejane, Chief Financial Officer, Statistics South Africa, stated that goods and services required a tender process of three to six months. The process required that before a tender was put out, StatsSA had to prove that they had the funding available. Therefore, since the final allocation was only received late in 2010, it meant that many tenders would not be finalised this fiscal year.
The Chairperson noted that the Committee wanted to see planning from StatsSA, but he was not convinced that they had answered his question.
Ms Gillian Wilson, Chief Director: Administrative Services, Public Finance Division, National Treasury stated that departments should talk about slow and fast spending instead of under and over-spending. Being under or over-spent was a condition that occurred only at the end of the fiscal year. She noted that one should be wary of a March spike in spending. There needed to be a reasonable level of expectation that the goods and services would be received by the end of March. She noted that there was a good relationship between the National Treasury and StatsSA. They provide support at regular monthly meetings, although they do not get involved operationally with the department. They look at the department's requests objectively.
The Chairperson asked StatsSA what level of under-spending they projected at year end.
Ms Masiteng noted that voted funds would be spent close to 100% and earmarked Census funds close to 64%. She reiterated the areas where spending was yet to occur to bring StatsSA to these final points. The remainder would be rolled over to next fiscal year.
The Chairperson asked again what their projected under-spending would be at the year-end.
Mr Molongoana stated that they had estimated at least 64% would be spent.
The Chairperson thanked StatsSA for their presentation and adjourned the meeting.
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