Most projects under the recapitalisation and development programme are starting to realise profitability because in the first three years the concentration was on infrastructure development in order to make farms farmable.
The Department of Rural Development and Land Reform revealed this when it recently appeared before the Portfolio Committee on Rural Development and Land Reform. The programme targets distressed land reform properties, properties under the administration of the Minister and sites within the former homelands and other communal areas.
The recapitalisation programme has an exit strategy which is a tripartite collaboration between the Department, strategic partners and the farmer. The Department is involved in the farm at financial and project management levels for a period of five years.
A total amount of R3 228 234 929 was disbursed and has benefited nine irrigation schemes, 10 commonages, 58 restitution claims, 1 382 farm redistributions and 99 Land Redistribution for Agricultural Development (LRAD) projects for emerging farmers. 64 farms are expected to exit the five-year incremental funding by the end of 2016.
On the financial management of the recapitalisation fund, funds were disbursed into joint project business accounts in terms of the approved business plan. On monitoring compliance and financial controls, the farmer may not unilaterally remove the strategic partner as a co-signatory without the written consent of the Department.
Challenges facing the programme include the lack of dedicated strategic partners because they are not willing to invest in the programme and share the risk with farmers, and a lack of alignment with other departments providing support to farmers in the sector.
Members wanted to know about the kind of benchmark used in order to know that one is a trained farmer, and enquired if profit sharing includes recap funding or if it becomes profit sharing after the exit. They asked why allocation for training per province is different; if an assessment had been done on the socio-economic impact of the programme; how the identification and selection of beneficiaries are done; if the Department in its training of farmers has thought about collaborating with academic institutions, other government departments and non-governmental organisations that provide training; why the Department was expecting no farmers to go through the programme in provinces like Limpopo, KwaZulu-Natal and Northern Cape.
Recapitalisation and Development Programme: Department of Rural Development and Land Reform Mr Elton Greeve, Acting Deputy-Director General: Land Redistribution and Development, explained that the recapitalisation programme seeks to provide black emerging farmers with social and economic infrastructure and basic resources; complement agricultural programmes of the Department of Agriculture, Forestry and Fisheries (DAFF); to combat poverty, unemployment and income inequality and to reduce rural-urban migration.
The programme targets distressed land reform properties, properties under the administration of the Minister and sites within the former homelands and other communal areas. It also seeks to create developmental pathways for household with no or limited individual access to land, small scale farmers who have been farming for subsistence purposes and selling part of their produce, and medium-scale and large-scale farmers who have already been farming commercially but are constrained by location, size of land and other resources or circumstances, and with real potential to grow.
The recapitalisation programme has an exit strategy and is a tripartite collaboration between the Department, strategic partners and the farmer. The Department is involved in the farm at financial and project management levels for a period of five years. The contribution of the Department decreases from the first to the fifth year while the contribution of the strategic partner and farmer increases both financially and at project management level.
The following are key factors on the execution of the exit strategy:
▪ viability and sustainability of the project
▪ farm assessment
▪ financial standing at the time of exit
▪ skills development on farm management, record keeping, financial skills development and market related relationship and linkages
▪ future business plan
▪ commitment and performance report for strategic planning and monitoring and evaluation report of the Department.
Since its inception in 2009, a total amount of R3 228 234 929 has been disbursed. It has benefited nine irrigation schemes, 10 commonages, 58 restitution claims, 1 382 farm redistributions and 99 Land Redistribution for Agricultural Development (LRAD) projects for emerging farmers. 64 farms are expected to exit the five year incremental funding by the end of 2016. 1 889 farmers have received training under the recapitalisation programme. The training, for example, ranges from communication and financial planning and management; business management and administration; health safety; mixed farming system; and supplementary feeding of livestock and vegetable production. (Tables and graphs were shown to illustrate budget expenditure, number of farms under the recapitalization programme and farms redistributed)
Challenges facing the programme include the lack of dedicated strategic partners because they are not willing to invest in the programme and share the risk with farmers, and a lack of alignment with other departments providing support to farmers in the sector. In order to address these challenges, a recapitalisation and developmental manual is being finalised to provide guidelines for the proper implementation of the programme. Commodity based support would be adopted to maximise support given to farmers under land reform and this would be aligned with the Agricultural Policy Action Plan. Collaboration with AgriSeta would be forged and the legal contracts of strategic partners would be improved.
Regarding financial management of the recapitalisation fund, funds are disbursed into the joint project business accounts in terms of the approved business plan. Accounts should be registered in the name of the new farm business account. Both farmers and strategic partner should have co-signing rights on the joint account during the contractual period.
On monitoring compliance and financial controls, the farmer may not unilaterally remove the strategic partner as a co-signatory without the written consent of the Department. The procurement of goods and services must be approved by the project adjudication committee and signed by all parties to the agreement including the Department. The Pro-active Land Acquisition Strategy (PLAS) Trading Account in the office of the Chief Financial Officer would monitor the management of the funds with financial institutions where the joint account is opened or was opened on financial control terms agreed upon by these entities.
The strength of the financial controls is that it allows the farmers to procure their required goods on time, farmers' creditability improves as they procure services. This leads to improvement in their financial management skills. The weaknesses of the financial controls are that farmers deviate from the business plan by procuring assets which are not in line with approved business plan. The farmers unilaterally remove strategic partners as co-signatories to the account. There is no proper accountability on money spent, and there is a lack of control and investment on the profit received.
Plans to improve these weaknesses include:
▪ improving the contracts of all forms of partnership
▪ the use of procurement cards without withdrawing cash from the bank
▪ direct linkage of suppliers with the procurement cards
▪ money paid direct to suppliers through internet banking controlled by strategic partners
▪ payment to be informed by the signed and agreed invoice between the farmer and strategic partners
▪ monthly monitoring of the joint account transactions done by the finance team from provincial offices
▪ all deliveries of goods and services must be verified and signed off by the project office before payment can be done.
It was highlighted that 298 mentorship projects are doing very well. 314 projects under other partnerships (Contract Farming, Co-management and Farm Equity) are also doing well. It was noted that most projects are only now starting to realise profitability because in the first three years the concentration was on infrastructure development to make farms farmable. The Chief Directorate through its Institutional Partnership unit is doing contract management wherein they are identifying all non-compliant projects and deal with them in line with the non-compliance clauses in the contract.
Mr T Walters (DA) asked about the kind of benchmark that is used in order to know that one is a trained farmer, and enquired if profit sharing includes recap funding or it becomes profit sharing after the exit.
Mr Mdu Shabane, Director-General: Department of Rural Development and Land Reform, explained that a farmer is considered to be a farmer. The farmers are getting a different type of training. Grain farming is different from sugarcane farming. The training is commodity specific. When they finish training, they get certificates. Others get on-the-job training. It is not a one set of training.
On profit sharing, he said profitability is one of the measurements of the recapitalisation programme. The programme wants to see emerging farmers as successful entrepreneurs and socio-economic game changers.
Mr T Mhlongo asked why allocation for training per province is different.
Mr Shabane replied that it is difficult to have the same figure because some projects or commodities are labour intensive and others are not. That is why, for example, you will discover that the Western Cape has more beneficiaries but less spend. He further noted that farms that are recapitalised are coming from a pool of no less than 5000 farms. The hectares are varied in terms of land acquired. That should be taken into consideration. For instance, the Western Cape will get fewer hectares because its land is expensive, hence more money is spent on the Western Cape.
Mr M Filtane (UDM) first asked if an assessment had been done of the socio-economic impact of the programme. Secondly, he enquired if beneficiaries, when it comes to procurement, have to still comply with the standard legislation.
Mr Shabane, on socio-economic impact, explained that change would only be seen after five years when the farmers have graduated from the recapitalisation programme. He added that a profiling of households in 27 district municipalities and municipalities has been done. For example, it has been discovered that in Cala there is a ram project and farmers have been supported on how to tend them and take care of the wool.
Concerning procurement, the process of recapitalisation starts on the farm where the purchasing or transaction happens. Strategic partners have to introduce the farmers to more suppliers so that they can be known. It must also be noted that there are projects that need urgent intervention and do not need strategic partners. For example, if there is no electricity, there is no need to wait for a strategic partner. An urgent intervention by the Department has to be done.
Mr Filtane commented that every year there should be information that gets communicated about progress in the socio-economic impact of the programme because the programme deals with human beings. Waiting for a report to come out after five years is too long.
Mr Walters asked how the identification and selection of beneficiaries are done.
Mr Shabane said it is the role of the district municipalities.
Mr M Nchabeleng (ANC) enquired if the Department in its training of farmers has thought about collaborating with academic institutions, other government departments and non-governmental organisations that provide training and are funded by international organisations.
Mr Shabane admitted that collaboration with non-governmental organisations and universities for research has been overlooked but not deliberately.
Mr Filtane wanted to know why the Department was expecting no farmers to go through the programme in provinces such as Limpopo, KwaZulu-Natal and Northern Cape.
Mr Shabane explained that the Department is analysing all the support programmes offered by the government to farmers. The Department is trying to avoid “grant seekers” who benefit from the Comprehensive Agricultural Support Programme (CASP) and then from Recapitalisation Programme. The Department is trying to find a balance with the Department of Agriculture, Forestry and Fisheries (DAFF).
The Chairperson enquired how the problem of electricity debt owed by the original farm owner and the farm beneficiaries is going to be addressed, and how the Department is going to ensure that beneficiaries are assisted with water. Lastly, she asked about the kind of penalties imposed when strategic partners are not complying with agreements or reporting in time.
On electricity debt, Mr Shabane indicated that before the property is acquired, the Department makes sure the farm owner has settled the bill. Beneficiaries are assisted with the electricity bill in the first production cycle. In the second year cycle, the beneficiaries settle the bills themselves. On the issue of water, he stated it would be great if the Department of Water and Sanitation could assist the Department with water licences at district level. Concerning penalty impositions, he explained that that is what has prompted the review of contracts because the whole programme emanates from non-compliance and there having been no consequences. The Department is trying to find a balance so that the beneficiary does not suffer when an allocation is being held back.
Mr Greeve indicated that with regard to provincial programmes and the work the Department is doing, they have to complement what the provinces are doing. It has realised that the Department has to assist them. For instance, the Department is assisting grain farmers with silos. Sometime provinces or a certain province would embark on a project without proper management and the Department would be forced to step in. The Department is currently in talks with DAFF to consolidate programmes.
The Committee adopted minutes of committee meetings for the 15th, 17th and 22nd of October 2014.
The meeting was adjourned.
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