Safcol: impact of land claims & other challenges: Departments of Public Enterprises & Rural Development and Land Reform briefings

Meeting report

The Chairperson welcomed Members and other participants and received apologies from Mr M Rayi (ANC, Eastern Cape) who would be unavailable for the next two weeks due to the passing away of his mother, Mr A Nyambi (ANC, Mpumalanga) and Minister of Public Enterprises, Ms Lynn Brown.

Briefing by the Department of Public Enterprise (DPE)

Mr Kgathatso Tlhakudi, Deputy Director-General (DDG): Forestry, DPE, welcomed everyone in the Committee and indicated that by 1998 when the lodging of land claims closed, South African Forest Company Limited (SAFCOL) forestry plantation were affected. In 2008, a verification study was undertaken, which confirmed that 61% of KFL forestry plantations had been claimed. In 2011, following numerous complaints by land claimants, the DPE Deputy Minister and DG met with tribal authorities to inter alia discuss how the resolution of land claims on KFL operated land can be fast-tracked. Subsequent to that, the DPE established a task team comprising of Department of Agriculture, Forestry and Fisheries (DAFF), Department of Rural Development and Land Reform (DRDLR) and SAFCOL to fast track the resolution of land claims without much progress. To date no land has been fully settled and transferred nor is there an agreed settlement model. The Deputy Minister had meetings with communities in Mpumalanga (12-14 March 2013 and 17 August 2013) and Limpopo (27 September 2013) and the DRDLR was also represented. The communities are beginning to show impatience with the process.

The progress on land claims shows that there is total of 32 land claims that had been settled in Limpopo (14), Mpumalanga (17) and KwaZulu-Natal (1). There is also a research that is being done in Limpopo (1) and Mpumalanga 13) on ways to fast-track these land claims. The meeting for the Land Claim Task Team are held twice a year effective from 2013 and the progress to date shows that the appropriate settlement model is required for the SAFCOL land claims. A draft document was produced that proposes two options: strategic partnership and lease-back models and the proposed models will be piloted to the three claimant communities in Limpopo. The workshops on the proposed models were held at Entabeni plantation in Limpopo, March 2015 led by DRDLR. The inter-departmental engagements between DPE and DRDLR led by the Deputy Ministers are on-going to fast-track the resolution of land claims. There had been engagements between the two Departments on progress of the land claims process post the meeting with the tribal authorities and discussion around the wagon wheel model of the DRDLR.

Mr Tlhakudi mentioned that in relation to the lease back option, government is planning to the title and the rights on the land to claimant’s communities for ownership. This model means the community owns land and leases back to SAFCOL/KFL for a maximum of two rotations (70 years). KFL retains ownership of the trees and pays a market rental for the use of the land. There are incentives that are provided by SAFCOL/KFL to claimants so as to help guarantee supply of raw material. At the end of the second rotation, parties may re-negotiate new terms that could result in the increased ownership of business by claimants. The second option is strategic partnership and government is planning to transfer the rights to the land or land in title to claimants’ communities. There will be assistance offered to the communities in acquiring share in the tree (to be informed by a plantation management/business plan for the plantation). Claimants and SAFCOL/KFL will form a partnership in the ownership and management of the trees and the land is not to be included in the partnership. The lease back option is a product of forestry sector including government. The strategic partnership option was generated by the KFL land claims Task Team led by DPE and the forestry sector and SAFCOL prefers the lease back option.

The DPE’s position is that land claims should be informed by the following principles:

• It should result in tangible and realistic benefits for the communities and the restitution package should be aligned to these benefits

• It should be equitable and not disadvantage the communities by putting them in a position where they are worse off than before the settlement

• It should uphold the principles of economic viability, financial sustainability and holistic management of the compensation package

• The agreement should be a full and final settlement of the land claim and no further claims can be instated against the government and SAFCOL in respect of the land claimed

• The communities will establish institutional vehicles to warehouse various interests received as a result of the land clam-risk mitigation strategy

Mr Tlhakudi highlighted that the Department’s appraisal of SAFCOL investment projects are informed by the national economic development imperatives like the National Development Plan (NDP), National Growth Path (NGP), Industrial Policy Action Plan (IPAP) and Medium Term Strategic Framework (MTSF) 2014-19. Investment must be aligned to the mandate of SAFCOL as articulated in its shareholder compact and this investment must not compromise the financial and credit worthiness targets outlined in SAFCOL’s shareholder compact. There a number of risks and challenges that had been identified and managed and these included SAFCOL’s inability to engage directly with the land claimant communities as it is the responsibility of the DRDLR to negotiate and settle land claims. Land claims are not timeously resolve thus leading to impatience to communities and resorting to riots. The increase in temporary unplanted areas as a result of land invasions by claimant communities and unresolved land issues in the long run will impact negatively on the supply of softwood sawlogs.

There needs to be a resolution to communities’ immediate need for access to land for agricultural purposes and sustainability of SAFCOL operations. In the meantime SAFCOL is leasing the land from DAAF and from 2004-2012 R50/ha/year and R5.7 million was paid over to DAAF on 26 March 2013 and R1.3 was paid over to DAAF on 10 December 2013 for Entabeni land claim. The Department had noted that R94 million from 2013 and 2014 had not been paid-pending rent review. SAFCOL investment projects will be subject to the land claims and the lifespan and payback period of these projects will exceed the current ownership agreement. The risks or benefits associated with the investment will need to be taken over by the new owners (investor assurance), and the settlement model chosen shall have an impact on the future plans of the State-Owned Companies (SOCs).

Briefing by the Department of Rural Development and Land Reform

Mr Lebjane Maphutha, Regional Land Claims Commissioner: DRDLR, stated that the progress on the settlement of claims shows that a total of 77831 claims have been settled with a total of 792 persons that had been awarded claims as at 31 January 2015. The land cost of the settlement of claims was R18 billion as at 31 January 2015 and a total of R30 billion had been spent on the settlement of all land claims. There are a total of 5 152 land claims that are still in the screening and categorisation process and 350 that still needed determination of qualification in terms of section 2 of the Restitution Act, 2 533 are still in negotiations and the total outstanding claims was 8 035.

Mr Sanjah Singh, Chief Director: Land Claims, DRDLR; mentioned that in pursuit of the objects of NDP, the DRDLR adopted the Rural Economy Transformation Model (RETM) and the key to RETM is the separation of governance from development. A wagon wheel, which is part of the RETM, provides for a land use plan as well as security of tenure for household, particularly vulnerable ones-female and child headed ones. The wagon wheel is also enhanced by clearly delineated administrative and developmental institutions, each with a defined role and how each institution related to the others. In 2008 the Minister approved a principle that claims on commercial forestry land would be settled by the acquisition of land only, and not the timber. It would not be in the interest of the economy that trees must also be acquired. A second option of strategic partnerships, informed by the RETM was developed by the Commission and both models can be supported by the Recapitalisation and Development Programme (RADP) which provides development assistance to beneficiaries of land reform. The strategy of the RADP is strategic partnerships which can take the form of mentorships, co-management, share equity arrangements and contract farming and concessions.

The lease back model works in a way that the DRDLR acquires and transfers ownership of the land to claimants and claimants own land and lease it back to the owner of the trees for a maximum of two rotations (between 16 and 20 years for gum trees). The rental payable is 7% of the value of the land and land values are reviewed every 6 years. Lessee pays a market rental for the use of the land and lessee provides incentives to claimants so as to help guarantee supply of raw material. The strategic partnership model works in a way that the DRDLR acquires and transfers ownership of the land to claimants and government acquires a share in the trees, the extent of which is informed by a plantation management for the plantation. The partnership is to rent the land for the duration of the partnership, paying rental of 7% of the value of the land and partnership to have four pillars, tangible benefits, transparency and accountability, transformation and risk management.

Mr Singh took the Committee through the additional benefits (applicable to both models) and these included:

• Formation of enterprise, where communities could start their own business and provide service to the plantation management. This shall enable preferential procurement, i.e. contracting opportunities for claimants

• Owner of the trees and DRDLR to assist claimants with development of enterprises and providing claimants with funding assistance

• Owner of the trees to continue with its social compact and socio-economic development initiatives within adjacent rural communities inclusive of claimants

• Provision of skills and knowledge transfers to land claimants

• Focus to rural infrastructure development for community benefit

• Employment opportunities

The appropriate settlement model to be implemented will be community specific and will be determined by various factors including project size, availability of government funding, age class distribution and technical, management and business expertise within community. There are 36 land claims on SAFCOL operations (lodged before 1998 cut-off date and new claims are not being processed yet (section 6 (1) (g) of Restitution Act). 61% of the land where SAFCOL operates is claimed based on claims lodged before 1998 cut-off date and most of the land is owned by the state, through the Department of Public Work (DPW), and leased by DAAF. To date, only 1 land claim has been settled with the land transferred to beneficiaries (Shannon in Mpumalanga). 3 land claims were settled in Limpopo in 2005, but the land has not been transferred because there was no settlement model to settle SAFCOL claims, until May 2015 and SAFCOL only started paying rental for the land it uses in 2013.

Mr Singh highlighted a number of challenges at the moment and the discussions with SAFCOL on the settlement model to be applied to it started in 2008, after the erstwhile Minister of Land Affairs approve the settlement model for commercial forestry land. In February 2014, the Commission presented the RETM to DPE and SAFCOL Executive Council, and proposed model. In May 2015, the SAFCOL Board approved, for piloting the leaseback settlement for piloting in the claims in Entabeni plantation. The biggest challenge with the model is that the duration of the lease will be 70 years, as SAFCOL’s rotation is 35 years. Section 27A of the National Forestry Act entitles successful claimants, which have claimed a state forest that is rented to a third party, to rental collected by the Minister of DAFF from the date of gazetting to the date of settlement. After settlement the rental is payable to claimants. The rental payable by SAFCOL (for DPW land it leases from DAFF) was R50 per hectare per year, significantly below market rental. SAFCOL only started paying rental for the land it uses in 2013. This limits the benefits that claimants would ordinarily be entitled to, making it difficult to convince them to accept the lease back model that SAFCOL has opted for. It was also noted that most of the claimed land is not vested (confirmation of ownership of land by the state in terms of the Constitution). Approval for disposal of land in terms of State Land Disposal Act, 1961 is signed by the Minister of Public Works and this approval tends to delay transfer process, which normally takes the form of donation, which then require the National Treasury (NT) approval in terms of Treasury regulations.

There are a number of remedial actions that had been taken to resolve these challenges as the Commission has appointed universities and research institutions to supplement its research capacity. Of the 5 152 land claims that require research, 2 660 will be researched in the 2015/16 financial year and the balance in the 2016/17 financial year. The RETM provides a framework for the settlement of claims, including dispute resolution and problem solving mechanisms. The DPW has appointed a service provider that is assisting it with vesting of its properties and this will assist to fast track the vesting process and enabling the settlement of claims.

Discussion

The Chairperson welcomed both the presentations and indicated that there seemed to be a problem in the process of settlement of land claims in the country. She wanted to know whether the DRDLR had a strategy in place of prioritising land claims, considering that the issue of land was having a huge impact on developmental agenda of government. Is there a timeframe for the processing of land claims? It is important to know if there are any partners that had shown interest in partnering with the communities after the settlement of claims especially in different programmes like the formation of enterprises and providing claimants with funding assistance. She asked whether it was realistically possible to settle all the outstanding claims and reach all the targets of government.

Mr O Sefako (ANC, North West) commented that the issue of land was a very important matter especially to a country like South Africa. There is indeed a fear that the DRDLR will not be able to reach the target of 2019 for the settlement of all the outstanding claims and there should be systems in place to fast-track the processing of claims in order to redress the imbalances of the past. The Constitution makes it very clear that land reform should not be done in a violent manner and therefore it is imperative to prevent illegal occupation of land. He asked if there were any specific impediments that were making it difficult for the country to be able to successfully transfer land to those that had been dispossessed in the past. The myth that SAFCOL was not assisting the communities needed to be demystified and it will be crucial important know if there are any workshops in place to ensure that SAFCOL was community-friendly. What are the specific universities that had been chosen by DRDLR to collaborate with in terms of research for the settlement of outstanding claims?

Mr C Smit (DA, Limpopo) asked if there was any particular reason why the communities were reluctant to accept the lease back model and he assumed that part of this might had to with the fact that this model was not lucrative enough for communities. The price of leasing the land wasR50/ha/year and this was indeed a small amount of money for the majority of poor communities. The recent Communal Land Indaba did not mention any option of full rights for the ownership of land especially for residential units. There is a general feeling amongst the communities that although communal land should be kept within communities but they want to start having economic benefits from the residential units. However, this was not given and it was difficult to see how the individuals who had been given land were to benefit without ownership of the residential units.

Ms C Labuschagne (DA, Western Cape) wanted to know whether it was possible to utilise the R5.7 million that had been paid over to DAFF and the R1.3 million paid for Entabeni land claim for the process of land claim since there are two Departments that are overseeing the process of land claims. It had been indicated that the whole process of land restitution and settlement of the claims could take up to 18 years and therefore it important to know if communities had been made aware of all these processes so as to avoid all the negativity and frustrations. She asked if the formation of enterprise, where communities could start their own business and provide service to the plantation management was the responsibility of DRDLR or DPE. It seemed like there could be a conflict of interest between the people that claim back their land while SOEs are involved as this had been the case on SAFCOL. Was there a strategy in place from the DPE to deal with this possible conflict of interest?

The Chairperson asked about the impact of the R94 million that had not been paid-pending rent review on the processing of land claims.

Mr Maphutha responded that according to Restitution Act and the Constitution, every claim is a priority and every claimant has a right to come to the Department to ascertain on the reasons why some claims are taking so long and this is making it difficult to prioritise other claims. The Commission has really gone back and looked at its processes and decided that it was important to introduce the project management system to ensure that every claim is processed in a project management way. This has helped in terms of planning on a number of claims to be dealt with on a particular year and looking at the fiscus and available resources. This project management system has also assisted the Commission to monitor every claim and meaning there is a system in place to monitor all the claims settlement cycle from research to negotiations and make necessary steps to fast-track the outstanding claims. The Commission is now able to determine the number of claims to be settled within a specific period of time. Currently, there are 2 533 claims in negotiations and all these claims are about to be settled and this is thanks to this new system in place.

Mr Singh responded that there are 8 035 that are currently outstanding from the old process and the Commission was doing a business cost model in terms of getting additional funding to fast-track the settlement of the claims. The 2 533 claims are already in an advance stage and the availability of enough funding could result in the increase in a number of claims to be settled. The total of 5 152 outstanding claims are still in screening and categorisation and part of this would be done internally and then with the assistance of universities. Some of the universities that will collaborate in the process of screening and categorisation (research) of outstanding claims will be University of Fort-Hare (UFH), University of the Western Cape (UWC), University of Pretoria (UP) and the University of KwaZulu-Natal (UKZN).

In relation to the question on whether it will be possible to win the battle against the settlement of all outstanding claims, it is crucial important to be cognisant of the injustice of the past and the need of it to be corrected. There were over 80 000 claims that were lodged in 1998 and the number is now 77 831at the cost of R30 billion and 1 million hectares of land that had been settled and this illustrates that there had been progress made. The process is a bit slow but there is certainly movement that is happening and this number could be increased with the availability of additional funding. The Commission was winning the road on the settlement of claims although this was a very tough road. There are other partners that had shown interest in partnering with the communities after the settlement of claims and these included Bedrock, SAPPI and Mondi and all of them have come on board to assist and there were currently busy with the business model to assist these communities. There would be a need for the involvement of stakeholders and SAFCOL was not the only one involved in assisting the communities.

Mr Singh replied that there a potential risk in the lease back model as some communities might decide to cut down the trees and utilise the available land for agricultural purpose. However, the Commission could circumvent this by planting the mushrooms and the DAFF could offer assistance in this regard. The land restitution programme is essentially meant to address the imbalances of the past, as indicated before and therefore it is of paramount important to continue with the programme and find ways to fast-track the settlement of outstanding claims.

Mr Maphutha added that the bulk of the settlements that are being processed are on strategic land with the result that major economic impact arises out of the settlement of those claims and this was unlike when buying land for redistribution process. Some of the land that has to be compensated happen to be on strategic land and could have a major socio-economic impact once the claim is settled to the beneficiaries.

Mr Singh responded that part of the reason why some of the communities are reluctant to the lease back model is the fact that the model is indeed not lucrative enough for poor communities without food security and the bulk of the funding usually goes to the Trust or Communal Property Associations (CPAs). The Commission will need to put more on the table for the communities to ensure that the lease back model becomes attractive. The Commission together with the Department was currently engaged in an intensive communication strategy and this is to ensure that communities are made aware of all the processes in the settlement of claims. It was still difficult to get through all the communities at the moment and this weakness has been identified. There is a need of capacity to prioritise on fast-tracking the settlement of claims. A proposal is coming out which may come to the Committee on requesting additional financial resources. The DRDLR is responsible for the process of settlement of claims and land ownership.

Mr Tlhakudi added that communities are also courted by other players in the industry who are also making sure that those communities could get a better deal than what they get from SAFCOL. There is a leverage to ensure that communities get the best deals but there is no such with private players. The DRDLR will need to assist in evaluating the proposals that will be coming through to the communities as the DPE was not in a position to evaluate the proposals since it is the shareholder of SAFCOL. In relation to the question of R94 million and the impact of it, the funds are collected by Trusts which sits on DAFF and that money is dispersed on communities based on proposals that the communities will present to DAFF on the development in the communities. This money means there is R94 million less projects that it could be done if it does not make it to the account of DAFF. The Department was putting pressure on SAFCOL to pay those monies as they also distort the picture with regard to the financials of that particular business.

The Chairperson requested clarity on whether the R94 million was designated for projects as this was not clear from the provided response.

Mr Tlhakudi replied that the communities could not have a direct claim on the R94 million since the land has not been transferred yet and the communities could only propose projects to the Kabelo Trust which could then be funded through those monies. In essence, the communities will have a claim to the R94 million from the date of gazetting of the claim and this is a potential risk for SAFCOL as the money could be used for funding other operations within the business.

Ms Vuyo Tlale, Chief Director: Financial Analysis, DPE; added that SAFCOL was currently working closely with communities in investment and developing the conditions of communities. SAFCOL is not allowed to negotiate land settlement with the communities because they are leasing the land from DAFF and the entity is not the owner of land. SAFCOL invested R6.8 million in the previous financial year to the development projects which is socio-economic and enterprise development projects from the education facilities to housing and clinics and larger enterprises. There are 13 compacts that had been signed from 18 plantations and the projects here are identified based on the needs of the communities. This is part of building the image of SAFCOL to be the preferred partner in the future with communities. There have not been enough workshops to improve the image of SAFCOL but the Department was planning to ensure that SAFCOL is well-known not only on its operations but nationally as well.

The media and communication of SAFCOL and the Department was currently working on popularising SAFCOL. SAFCOL was working with the UP and there has been an establishment of a Chair in the Postgraduate part of the forestry where there is a research work on land claims. The Department has already reviewed the future role of SAFCOL and there are projects that have been identified to potentially benefit the communities and not only land claimants but overall communities especially in rural areas. There are a number of enterprises which had been identified to assist the communities and these included agriculture, forestry and timber frame structure just to name the few.

Mr Tlhakudi responded that in relation to the discomfort of the communities with lease back model, the model is the one that the SAFCOL Board prefers going forward but the Ministry has not signed off on it. The DPE would like to see a greater involvement of communities in the business sector including in the full value chain and strategic partnership model based on the wagon wheel model as this provides the communities with opportunities for socio-economic development. The businesses would obviously like the lease back model as it keeps the communities dependent on them and communities only benefit from the rental money from the business. The money that is provided for the lease back model is not enough to ensure proper economic development in the communities and the Department will need to go for a model that will bring about sustainable development in communities where the plantations are located. There is a need to avoid a situation where the communities will resort to burning down the plantations as it does not bring value to their lives. There is a review of the rate of rental by SAFCOL and DAFF and this will certainly be a better rate than the one currently offered for the lease back model

Mr J Parkies (ANC, Free State) wanted to know whether there was a strategy in place to counteract to the exploitative model that is used by the “vampire corporations” on communities as it was quite clear that these corporates were using the available land for the furtherance of their interests.

Mr Tlhakudi responded that the Department was obviously concerned about the fact that communities were not fully benefiting from the lease back model and DRDLR was best positioned to address this kind of misalignment and advice communities on the best model that will equally benefit them.

Mr Sefako appreciated that there seemed to be a cordial collaboration between the DPE, DRDLR and SAFCOL to address the exploitative lease back model to make it more economically viable for the communities. There is a general senses that some financial constraints are impeding the fast-tracking and expediting the process of settlement of claims and Operation Phakisa was meant to address these challenges. There are a number of positive things that are happening in South Africa and it is just unfortunate that a number of people are trapped on negativity and all the good work that had been done to the communities needed to be shared to the general public. Members would need to perform a surprise oversight visits to different plantations just to check progress that had been made and a number of concerns that still needed to be addressed.

Ms Tlale responded that in regard to utilisation of the R5.7 million that had been paid over to DAFF and the R1.3 million paid for Entabeni land claim for the process of land, the National Treasury (NT) provides the guidelines how the DPE should utilise the revenue. Therefore, it was only the NT that could make that decision to transfer the funds to the DRDLR and what usually happens is that the money would be allocated according to the budget process. The discussion should be on whether the Kabelo Trust should rests within the DRDLR or DAFF as this would sort out the particular problem. The DPE supports the idea of the involvement of communities in enterprise development as there is a sense of disgruntlement from the communities where the plantations are located as it looked like the CPAs are not distributing the money coming from the leases

Mr Tlhakudi added that the direct involvement of communities through the enterprise development removes the bureaucracy and all the other structures that are put in place by the CPAs and this talk to the rural development strategy of government. In relation to the question of conflict of interest between the SOCs and claimant, the DPE ensures that the SOCs come up with initiatives that will benefit the communities directly and this is also to address this conflict of interest which may arise between the two parties. The Task Team is meant to identify the bottlenecks in terms of the land claim settlement and developmental model which was then only presented internally and SAFCOL was the one that had the biggest land claimed (61%). The Minister decided that the DPE needed to be on top on things on issues that are affecting communities. The Task Team meets twice a year with DPE, DRDLR, SAFCOL and DAFF.

Mr Smit appreciated that there is an emphasis on the importance of communities to have ownership even if this is a collective ownership especially on the rural development and land reform. It is concerning that the DRDLR had created an unfunded mandate as the allocated budget for land reform in the current financial year is only R2 billion whereas the estimated cost for the settlement of outstanding claims is likely to be approximately R200 billion when excluding inflation. It is also clear that there is an average of 4 500 claims a year every 20 years and this means it is likely to take the DRDLR about 100 years to finish all the outstanding claims and those that were still estimated to come in.

The Chairperson appreciated the presentations that had been made and promised that the two Departments will need to be invited in future to further discuss the issue of the settlement of land claims as this was part of redressing the imbalances of the past. The Committee still needed to do the oversight visits and ensure that the best models in some plantations are replicated to those where communities were still exploited.

The meeting was adjourned.