Adjustments Appropriation Bill [B37-2013]: hearings with Department of Rural Development and Land Reform

Standing Committee on Appropriations

29 October 2013
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Department of Rural Development and Land Reform stressed that government efforts had to be coordinated to address rural development challenges. The key lever was the budget, but the Departmental budget was inadequate. Resources had to be looked for in other departments. The Department had to strengthen its capacity for coordination - there had been a reprioritisation of programmes conducted within the baseline. Virements exceeding 8% had been effected on the programmes of Restitution and Land Reform. The question was how to leverage government funding for the National Development Plan, and the Comprehensive Rural Development Programme. The Committee was taken through budget expenditure per programme and per economic classification for the end of the second quarter.

In discussion, Members were unhappy about the way virements had been effected, and questioned the legality of it. It was particularly disconcerting that funds had been taken from core programmes such as Restitution and Land Reform. The Committee noted that the Department was asking for budget assistance, and yet could achieve only a low percentage of targets. Members questioned the Department about land claims. Members thought the number of land claims settled was too small. The unsuccessfulness of new farms was a cause for concern. The Department was taken to task for not consulting sufficiently with the National Treasury about reprioritisation and shifting funds through virements. The huge budget for the Administration programme was criticised, and Departmental planning was also questioned. There was concern about hidden costs. It was felt that the Department had shifted resources to close loopholes not there at the beginning of the year. The Department had to look outside of the box for resources other than state resources.
 

Meeting report

Department of Rural Development and Land Reform: 2013 Adjustments Appropriation Bill
Mr Mdu Shabane, Director-General: Department of Rural Development and Land Reform (the Department), said that there was not only concern about the current year, but also about years to come. There had to be a way to coordinate government efforts to address rural development challenges. The key effective lever was the budget. The Rural Development and Land Reform (RDLR) budget would decline over the Medium Term Economic Framework (MTEF) period. The Department, with the help of the Portfolio Committee and the National Treasury, had to look for resources in other departments. The Departmental budget, on its own, was nowhere near enough. It was simply inadequate. It was not just a matter of other departments giving money.  There had to be a dashboard to indicate which departments were sitting with what money. It had to be known where money was sitting for education, electricity, sanitation and water. The Department had to strengthen its capacity to coordinate. There had to be effective and prudent use of money. The sector as a whole had a bigger budget than the Department could monitor.

Mr Thapelo Motsoeneng, Chief Financial Office for the Department, said that there had been reprioritisation of programmes conducted within the baseline. Total spending at the end of the second quarter had amounted to R5 billion, representing 53.8% of the appropriated funds. Virements exceeding 8% were effected on the programmes of Restitution and Land Reform.                                                 

The Committee was taken through financial performance versus the adjusted budget, per branch and per economic classification. Branches covered were Administration; Geo-spatial and Cadastral Services; Rural Development; Restitution, and Land Reform.

The Department worked with other sector departments, especially the Department of Agriculture, Forestry and Fisheries. The question was how to leverage government funding for the National Development Plan, and the Comprehensive Rural Development Programme. The Department had also worked with the National Treasury, as the structural misalignment of the current year had to be dealt with. The Department had been engaged for several years with the Treasury regarding the Administration budget. The Treasury was wary of expenditure on administration. It was said that it was not core business money. The administration budget would be fixed.

Discussion
Mr M Swart (DA) remarked that there had been no budget change, as everything was done through virements. It was illegal.

Mr Motsoeneng replied that the virement shifting was legitimate, as the Department had dealt with the Treasury.

The Chairperson asked that the Committee be told where things were going.
 
Mr Motsoeneng replied that money was taken from the Land reform and Restitution programmes, and spread across other programmes. The Department had gone through a legislative process with the Treasury. The Minister of Finance allowed it the previous week.

Mr Swart referred to under spending on internal audit, and under spending related to the vacancy rate for managers. There was both gross under spending and overspending.

Mr Motsoeneng replied that all money for internal audit had been spent in the current year. Slow spending was due to lack of filling of posts.

Mr Swart said that his party supported land reform. The Department was asking for assistance with an inadequate budget. But the Department had spent 97% of the budget whilst achieving only 36% of its targets. The Department was saying that it would require R180 billion to give effect to the Land Restitution Bill, once it became law. The Department did not have enough money, but was also not reaching its targets.

Mr N Singh (IFP) questioned the taking of money from Land Reform and Restitution, as those were key programmes. He asked how much the Department owed in claims settled but not yet paid. He asked how this was reflected. There was a stage during the previous year when the Treasury and the Department were talking “past” each other. He wanted to know about the Department’s relationship with the Treasury.

Mr Motsoeneng replied that there had been problems with restitution, but the process had since been streamlined. R72 million had to go through the Department’s processes.

Mr Shabane added that the judgment of land claims had come in the target, so that the target had to be sacrificed. It could be asked why it had not been anticipated, but it was not always practical. Parties sometimes appealed. Unanticipated claims caused diversion. Court orders had to be matched outside of prioritised claims. It was the fault of the Department to delay the pay after the signing of agreements. It happened that when land was to be conveyed, the owner would say that the evaluation had expired, and then different claims had to be settled. Land redistribution was a sale. Land acquisition could be improved. At any given time there was more planned applications than money available. Viability was interrogated, and sometimes the Department would walk away from a deal and not buy. Planning was done in the current year for the next Annual Performance Plan. It had to be ensured that evaluations could be completed while valid. There were a number of farmers in distress who were presenting themselves as a good buy. Sometimes decisions favoured the programme, but what was bought was often costlier than anticipated. There had to be a report to explain deviations. A project register was being developed to settle a completely different list of claims. The Department insisted on getting the project list upfront. He could not speak on behalf of the Treasury about the Department’s relationship with them.

Mr J Gelderblom (ANC) referred to land reform and rural targets that were not reached. The number of settled land claims was small. The new Act could assist, as some farms were highly priced. It was easy to criticise the Department, but it was sometimes impossible for new farms to make a success.

Dr S Van Dyk (DA) said that he was aware that it was a difficult portfolio. But, it was also a highly important one. There were large programmes and many stakeholders. He asked if anything had been sacrificed by taking money from land reform.

Mr Shabane replied that the sacrifice was a number of hectares that was going to be bought. It was more costly to recapitalise farms than to buy them. Seven million hectares of land had been bought, and farmers had to be assisted. The Minister had said in his budget speech that investment in acquired land had to increase. Less had to be bought and more invested. Restitution funds went to restitution farms. There was no large number of claims settled. There was rather investment to move operations along.

Mr Gelderblom said that it was a new vision, to buy less and be more productive.

Mr Shabane replied that the emphasis was on buying well. Dairy farms were facing challenges reported in the media. The Department thought before it bought.

The Chairperson said that a huge budget for Administration was unacceptable. The Portfolio Committee had raised the matter with the Treasury, and recommended that the Treasury try to streamline the administration budget. It would not do to have too many resources in Administration, and less in other programmes. He asked about reasons for the shift, and implications moving forward.

Mr Motsoeneng replied that colleagues from the Treasury would assist with the streamlining of the Administration budget. The question was how the Comprehensive Rural Development Programme could be allowed to assist.

Mr Shabane added that the Department was established in 2009, and was committed to far reaching reforms. Costs for administration had increased. Once things were up and running, the budget would be dealt with more effectively. There would be policy reform and better service. The Department would no longer be ripped off, as he phrased it, once norms and standards had been set. The cost of administration had increased because land was paper based. Land registration could be digitalised, but it was going to cost money. IT infrastructure had to be built. But in the long term it would be cost effective.

The Chairperson asked if challenges were experienced around recapitalisation.

Mr Shabane replied that recapitalisation challenges had improved. The Department could not rely on state grants only. Farmers assisted with recapitalisation would have to pay back.

Mr L Ramatlakane (COPE) referred to slide 12. There was a need to shift reprioritisation. Planning could be improved. The shift had been the result of not anticipating. When asked about virements, the Treasury had stated that the Public Finances Management Act (PFMA) prescribed that it was not to exceed eight percent. The excessive use of virements had not been approved, and yet the Department wanted Parliament to approve it. He asked why there were continuous virements. Money was transferred from the core function of land restitution. He asked if it was because of poor planning that had led to reprioritisation. He asked why it had been necessary to transfer funds to defray the cost of compensation.

The Chairperson noted that Mr Ramatlakane had asked the same question Mr Swart had asked, in different words.

Mr Motsoeneng replied that in terms of section 43 of the PFMA, the Accounting Officer could vire up to eight percent without having to go back to the Treasury or Parliament. The Department had adjusted what Parliament had voted.

Mr Singh said that Parliament had not voted it.

The Chairperson said that the Treasury had to be approached for virements.

Mr Kismore Mangondo, Acting Director, National Treasury, replied that the Chief Financial Officer could vire, but within limitations set by the Treasury. Increased compensation of employees could not be done without going to the Treasury.

Mr Shabane added that there would be improved planning. The Green Paper on Land Reform dealt with a whole range of policies that had been taken to Cabinet. Those cost money, but it was not to be seen in the Annual Performance Plan. There were national workshops on hidden costs.

Mr Ramatlakane asked about currently outstanding but unregistered land claims. It was a moving target. Hidden costs could drive the State to spend billions not reflected in the budget. 4000 claims still had to be evaluated. The Department had said that evaluators would be appointed.

Mr Shabane replied that there was a list of claims. The Department had to submit a plan on how to research, verify and validate. Long-term costs had to be estimated. It was not yet possible to say how many claims had not been done. A diagnostic report was needed for a sense of how many claims there were, and prices in that district. There had to be an educated estimate of the total amount.

Ms R Mashilo (ANC) referred to securing resources from other departments. The Comprehensive Rural Development Programme was huge. Other departments were involved. There was a Memorandum of Understanding with the Department of Agriculture, Forestry and Fisheries. She asked what other departments could come in with their resources. Small-scale farming fell under the Department of Trade and Industry. Agrarian support services could be provided. If programmes were with the Department, and money with other departments, the Department was in deficit.

Mr Shabane replied that the question was how to leverage on the votes of other departments for the Comprehensive Rural Development Programme (CRDP). The Department had looked at cooperation with other departments for a long time. Working together was too ad hoc. Not all budgets were in one department, but all were working on one plan. There had to be one plan across districts for every space. Investment would be where poverty was. That would become visible in the next Medium Term Strategic Framework (MTSF).

Ms Mashilo asked if the Department was attending to rural housing development. She asked where the money was.

The Chairperson asked about cooperation between the Departments of Rural Development and Agriculture.

Ms Nomfundo Gobodo, Chief Land Claims Commission, emphasised that the Department had to buy sustainable land. There had to be rural infrastructure development. The full CRDP package had to be spoken to.

The Chairperson remarked that the Treasury, the Auditor-General and the Public Service Commission had examined the Department’s predetermined objectives, because that was what the Department had undertaken to do. The Director-General had said that there would be better planning. When the Department deviated, it had to consult. The Department was judged on what it had not consulted about. It was measured in terms of the Annual Performance Plan. The Treasury had to see that quarterly reports improved, and deviations had to be dealt with timeously. It would not do to wait until the end of the year. Members had asked why resources had been shifted to fill loopholes not there at the beginning of the year. Rural Development and Land Reform was a new and evolving department.

Mr Singh said that the Committee was not satisfied with responses. There were good explanations, but medium and long-term land reform was imperative. There had to be more planning for land claims. It was a “hot potato”. There was tension caused by claimants. The productivity of landowners was affected. There had to be other mechanisms in place. Targets had not been met. What had been done was acceptable for the current year, but it would be unacceptable to again take money from core programmes. Land claims had not even been Gazetted yet.

Mr Gelderblom remarked that it was about money. The Department needed funds for progress. There was a new focus on money from other sources. Possibilities outside of state resources had to be considered. New sources had to be looked at outside of the box.

The Chairperson concluded that the current year could be accepted as a once off situation. The Department had proposed that planning would be different in the following year. Members would approve the proposal.

The Chairperson adjourned the meeting.

 

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