Department of Rural Development on its 4 Quarter 2014/15 & 1st quarter 2015/16 performance & Financial and Fiscal Commission analysis

Rural Development and Land Reform

19 August 2015
Chairperson: Ms P Ngwenya-Mabila (ANC)
Share this page:

Meeting Summary

The Committee was briefed by the Financial and Fiscal Commission (FFC) on the expenditure trends and performance of the Department of Rural Development and Land Reform (DRDLR) and its entities for 2014/15 and the first quarter of the 2015/16 financial year.

The FFC said the rural share of poverty fell from 70% in 1993 to 57% in 2008 as a result of an improvement in household welfare due to social grant expenditure and migration to urban areas. Access to basic services had increased, but at slower pace than in urban areas. Rural areas were still characterized by significant poverty and inequality, however. As many as one in five children experienced stunted growth, and rural households paid more for a basket of food than urban households. There was extreme differentiation in rural towns in terms of settlement types and economic activity.

The National Development Plan (NDP) had identified key strategies to develop rural economic opportunities and ensure food security. These included job creation through land reform and agricultural development by promoting small scale irrigated farming; investment in infrastructure and support services; the Agricultural Policy Action Plan (APAP); and efforts by the Departments of Rural Development and Land Reform (DRDLR) and Agriculture, Forestry and Fisheries (DAFF) to collaborate in implementing the APAP.

While there had been good progress in developing infrastructure in rural areas, there were still significant backlogs which could slow down rural development. Land reform beneficiaries faced a number of challenges, such as access to credit, equipment and technical assistance that made it difficult to convert land acquired into productive use. Recent policy proposals, such as re-opening the land claims process, were likely to require a substantial amount of funding to be implemented. A lower than anticipated economic outlook could have a negative impact on the medium term spending plans of the DRDLR, as well as its strategy to achieve APAP goals.

Between 2013/14 and 2015/16, the budget allocated to the department had declined -- by 3.4% between 2013 and 2014, and by 3.9% between 2014 and 2015. Over the 2015 medium term expenditure framework (MTEF) period, growth was recovering, reaching 7.6% in 2016/17 before dropping to 2% in 2017/18. Three key activities were driving the Department’s plans over the MTEF period. These were the establishment of the Office of the Valuer-General, the implementation of the Spatial Planning Land Use Management Act and the reopening of the lodgement of land claims. While the DRDLR had taken concrete steps to address sector challenges such as coordination, area-based planning, infrastructure and access to credit, it remained to be seen whether these initiatives would be sufficient to lead to a positive impact on rural outcomes, as there was an underlying assumption that kick-starting job creation in the agriculture sector was the silver bullet for rural development.

The DRDLR commented that despite various governmental interventions, there had been no increase in jobs over the last five years. The major strategy that had helped rural people to fend off hunger was the government social grant. It had never held the view that agriculture could solve the challenges of the people living in rural areas. The Departments of Transport, Public Works and Small Business and Cooperative Development had more money than the DRDLR, and were role players in rural development. The challenges of the people did not rely solely on intervention by the DRDLR, as the Department was just one of the many role players involved in improving the lives of the rural people.

The Department reported on its financial performance in the first quarter of 2015/16. Its total spending for the quarter amounted to R1.5 billion, representing 15.8% of the appropriation of R9.4 billion, leaving an available budget for the remainder of the year of R7.9 billion. Its performance reflected a 9.2% (R861.7 million) under-spending against the linear target of 25%. The main contributor to the under-spending was the 14.9% under-spending by Programme 3: Rural Development, and Programme 4: Restitution's under-spending of 12.4%. Compensation of employees reflected an under-spending of 1.6% against the linear target due to 714 funded positions, which implied a vacancy rate of 14.7%.

The Department’s achievements against its planned targets were also presented to the Committee. To date, it had achieved 33% of the planned targets for the quarter. 19% of the targets had been partially achieved, and 48% were not achieved during the period under review. This was the lowest first quarter achievement compared to the previous three financial years. The Department had been able to achieve above 51% in both 2013/14 and 2014/15.

Members said the 16% level of spending was not acceptable, and it was the responsibility of the executive to give account to Parliament. There would have to be a revision so that expenditure could catch up with what had been unspent in the first quarter. People living in the rural areas were being compromised.

The Chairperson said there had been a decrease in spending, which was linked to underperformance. She hoped the Department had developed a plan to address the issues. In the second quarter, the Committee would like to see improvement, and the challenges should be addressed. When the Department failed to spend its allocations, the Treasury could not be engaged for more money. She asked how the Department was going to improve on its performance. The bottom line was that the Committee was not happy with the performance of the Department.

Meeting report

Briefing: Financial and Fiscal Commission (FFC)

Mr Ghalieb Dawood: Researcher, FFC, briefed the Committee on the expenditure trends and performance of the DRDLR and its entities for 2014/15 and the first quarter of the 2015/16 financial year. The rural share of poverty fell from 70% in 1993 to 57% in 2008 as a result of an improvement in household welfare due to social grant expenditure and migration to urban areas. Access to basic services had increased, but at slower pace than in urban areas. Rural areas were still characterized by significant poverty and inequality, however. As many as one in five children experienced stunted growth, and rural households paid more for a basket of food than urban households. There was extreme differentiation in rural towns in terms of settlement types and economic activity.

The National Development Plan (NDP) had identified key strategies to develop rural economic opportunities and ensure food security. These included job creation through land reform and agricultural development by promoting small scale irrigated farming; investment in infrastructure and support services; the Agricultural Policy Action Plan (APAP); and efforts by the Departments of Rural Development and Land Reform (DRDLR) and Agriculture, Forestry and Fisheries (DAFF) to collaborate in implementing the APAP.

While there had been good progress in developing infrastructure in rural areas, there were still significant backlogs which could slow down rural development. Land reform beneficiaries faced a number of challenges, such as access to credit, equipment, technical assistance that made it difficult to convert land acquired into productive use. Recent policy proposals, such as re-opening the land claims process, were likely to require a substantial amount of funding to be implemented. A lower than anticipated economic outlook could have a negative impact on the medium term spending plans of the DRDLR, as well as its strategy to achieve APAP goals. A lack of proper coordination had undermined sector outcomes, and an evaluation of the Comprehensive Rural Development Programme (CRDP) had found the linkage with the land reform programme was weak

Between 2013/14 and 2015/16, the budget allocated to the department had declined -- by 3.4% between 2013 and 2014, and by 3.9% between 2014 and 2015. Over the 2015 medium term expenditure framework (MTEF) period, growth was recovering, reaching 7.6% in 2016/17 before dropping to 2% in 2017/18. Three key activities were driving the Department’s plans over the MTEF period. These were the establishment of the Office of the Valuer-General, the implementation of the Spatial Planning Land Use Management Act and the reopening of the lodgement of land claims.

Over the entire period reviewed, transfers and subsidies were significant and projected to grow by a real annual average of 6% over the 2015 MTEF period. Transfers were predominantly for settlement of land restitution claims. As a result of cost containment measures, expenditure on goods and services slowed down to 2.1% per annum, and payments for capital assets were projected to decline by 2.2%. Compensation of employees was projected to show steady growth of 3.4% over the medium term.

Significant reductions in the overall growth of the Restitution Programme in 2014 and 2015 were due to Cabinet approved reductions following slow spending on land restitution grants, and a reprioritisation of departmental funds from the Restitution Programme to the Rural Development Programme and the National Geomatics Management Services Programme. However, strong growth in 2016/17 was projected to be driven by transfers to households for finalising claims and the expectation that with respect to the 353 restitution land claims that were currently under litigation, provision had to be made for the possibility of the land claims court ruling in favour of claimants in some of the cases. The largest sub-programme in the Land Reform Programme was the Agricultural Land Holding Account, which consumed over half the total Land Reform Programme allocation. The sub-programme was responsible for buying/holding land until suitable beneficiaries were identified, and the budget was used for recapitalisation, development and land acquisition. The rural infrastructure development sub-programme had received an allocation of R917.9 million in 2015/16.

In the first quarter of 2015/16, the Department had spent 16% of its total budget. This compared with 18%, 21% and 22% in the previous three years. During the 2012/13 and 2013/14 period, the Department had fully utilised the funds appropriated, but it was critical to assess the quality of spending and whether the Department was achieving maximum outcomes from the available resources. It had met or exceeded 63% of all its performance targets in 2013/14, and in many instances targets had been exceeded, which explained why it had spent close to 100% of its total budget. The Auditor-General had made no material findings on the performance information concerning the usefulness and reliability, which suggested that the indicators had been well formulated and accorded with SMART principles. For 2013/14, 270 land claims had been settled and 292 had been finalised under the land restitution programme.

Audit opinion of the Department for 2013/14 was financially unqualified, with emphasis of matter. There had been no provision for potential commitments in the financial statements for issues such as court cases and potential liability, and internal audit had not established sufficient controls to comply with Treasury regulations.

While the DRDLR had taken concrete steps to address sector challenges such as coordination, area-based planning, infrastructure and access to credit, it remained to be seen whether these initiatives would be sufficient to lead to a positive impact on rural outcomes, as there was an underlying assumption that kick-starting job creation in the agriculture sector was the silver bullet for rural development. For improved coordination, the different roles of the DRDLR and the DAFF, as well as other sector departments in the rural space, should be clarified. The FFC’s submission on the 2017/18 Division of Revenue would be tabled in Parliament in May 2016.

Discussion

Mr M Filtane (UDM) appreciated the Commission for a comprehensive presentation and asked if the decrease in poverty from 70% in 1993 to 57% in 2008 was a persistent trend, and if so, why.

Mr Dawood replied that when the global economic depression had kicked in, it had had a massive impact on the economy. The growth of the Department had declined over time and while poverty had declined, the rate of decline was not significant, as growth had been much lower.

Mr Mduduzi Shabane, Director General: DRDLR, added that despite various governmental interventions, there had been no increase in jobs over the last five years. The major strategy that had helped rural people to fend off hunger was the government social grant. There were many challenges, and Statistics South Africa could give reliable information about the improvement in the quality of life of people in the rural areas.

Mr Fitane asked what had caused the weak link between the Comprehensive Rural Development Programme (CRDP) and the land reform programme, and how the Commission proposed to correct the deficiencies.

Mr Dawood replied that the information on the cause was not available at the briefing. In order to have a strong link, there was a need to know where the lands for the different beneficiaries were located and take a different approach. Different plans and structures were actually being developed to take into consideration the land reform process for beneficiaries. The Commission was working on a strong integration between programmes at the implementation level.

Mr Shabane added that part of the reason for the weak links was that the Department had been established in 2009, and in the same year it had implemented the CRPD. In the first two years, it had run parallel to older programmes, and it had taken a while to force the convergence of the CRDP. The CRDP should be the over-arching programme of the Department.

Mr Filtane asked why the internal audit unit had not established sufficient controls to comply with Treasury regulations, and how this would be corrected.

Mr Shabane replied that it would be an interesting comparison if the internal controls identified by the FFC in the last three financial years were the same in the 2014/15 financial year.    

Mr Filtane asked what had caused the 16% expenditure in the first quarter of 2015/16, compared to the first quarter expenditures of previous years.

The Chairperson replied that the second presentation of the day would address the issue.

Mr Filtane asked if the Department intended changing its implementation policy to multi-sectoral, and not focusing only on agriculture.

Mr Shabane said there had never been a view that agriculture could solve the challenges of the people living in rural areas. The Departments of Transport, Public Works and Small Business and Cooperative Development had more money than the DRDLR, and were role players in rural development. The challenges of the people did not rely solely on intervention by the DRDLR, as the Department was just one of the many role players involved in improving the lives of the rural people. To have a better perspective, it would be useful to look at all 14 Outcomes. Outcome No 4 dealt with economic growth and was led by different departments towards the implementation of various economic strategies, including the New Growth Path (NGP) and most recently, the Nine-Point Plan that had been announced in the State of the Nation Address (SONA). Economic departments were responsible for economic growth and for ensuring that the growth was shared broadly and inclusively.

He said that the 2015/2020 strategic plan had been premised on Chapter 6 of the National Development Plan (NDP) that identified six strategic areas of intervention -- land reform, spatial inequality across the country, socio-economic infrastructural development, education, and health – and added that massive infrastructural investment was what would unlock growth. What would be more helpful was if the Minister of Finance announced that in 2015, the Government was going to allocate a budget of R1.3 trillion. How much of that would go into rural areas, in which department and for what programmes – those were the fundamental questions. There was need to look at the percentage of the budget allocated nationally and what percentage of that was given to the different department and what the departments did with the allocations for rural development.

Mr E Nchabeleng (ANC)asked about the relationship between the FFC and the Department of Performance Monitoring and Evaluation (DPME) and if the findings and recommendations of the FFC were binding on the DPME.

Mr Nico Steytler: Commissioner, FFC, said the Commission was not working with the DPME, adding that it was a state department and there was only a formal relationship between the two Departments

Mr Nchabeleng asked what the FFC meant by deficiencies in financial control and what those deficiencies were. He commented that part of the work of the Committee was to assist in budget approvals. He asked if the nation was getting more value for its money.

Mr Dawood replied that the negative economic outlook was likely to continue for the next five to six years, and the Department budget was not likely to increase. Economic development could be compromised, as there was a need to improve performance in the technical services and increase access to businesses.

Mr Steytler added that there was a need to have a marketing approach to rural development. The FFC had analysed the DAFF annual report, and no mention had been made of land reform. He said that the role of co-operation and co-ordination between the major departments should be emphasised by Parliament.

Mr P Mnguni(ANC) asked why rural households should pay more for a basket of food than urban households. Was the Department doing something to alleviate the problems of neglect and under-development in rural households? He commended FFC for opening their eyes to that fact that South Africa was the second most unequal society in the world, adding that part of the inequality was in the rural/urban divide.

Mr Steytler said all that the FFC could do was to provide advice to Parliament on how to redistribute in order to address the inequality. The FFC would advise on the redistribution of revenue and make recommendations on the issues in which conditional grants were based, and whether they were effective and productive. He said the other area where the FFC had control was in the transfers between governmental facilities and research programmes. The allocation of funds for backlogs would be used to enhance development of rural areas. The FFC dealt with portfolios and departments’ annual reports, and tried to provide financial and economic analysis of spending patterns in the department and how they were affected through conditional grants. The conception of the FFC was that it was a partner and a conscience of the Government. The FFC was not a Chapter 9 institution, but its independence was very similar to other Chapter 9 institutions.

Mr Mnguni said he welcomed the multi-sectoral approach, as it was more effective than focusing only on agricultural development.

Mr Filtane said by the nature of the operations of the Director General (DG) and the name of the DRDLR, the DG was well equipped to deal with issues linked with rural development. The DRDLR was more equipped to be the anchor, and should partner up with other departments to perform its crucial role.

The Chairperson thanked the FFC and said the Committee had noted the issues raised, especially with regard to the DAFF and the budget.

First Quarter Financial Report 2015/16: Briefing by DRDLR

Ms Rendani Sadiki ,Chief Financial Officer (CFO): DRDLR, briefed the Committee on the first quarter financial report against Outcome 7 of the Delivery Agreement signed in 2015/16.

The Department’s total spending for the quarter amounted to R1.5 billion, representing 15.8% of the appropriation of R9.4 billion, leaving an available budget for the remainder of the year of R7.9 billion. Performance reflected a 9.2% (R861.7 million) under-spending against the linear target of 25%. The main contributor to the under-spending was the 14.9% under-spending by Programme 3: Rural Development, and Programme 4: Restitution's under-spending of 12.4%. Compensation of employees reflected an under-spending of 1.6% against the linear target due to 714 funded positions, which implied a vacancy rate of 14.7%.

She provided the Committee with the following breakdown of expenditure:

  • Administration: R158 513 spent against a current budget of R709 937 (22.3%); Filled positions, 1 558. The branch spending trend was below the linear target due to the vacancy rate’s effect on the cost of employment, and delays in processing travel payments.
  • Geo-Spatial & Cadastral Services: R107 087 spent against a current budget of R478 210 (22.4%); Filled positions, 1 142. The branch spending trend below the linear target as payments for the bursary scheme had not yet been paid to institutions, transfers to Deeds to augment the budget and support for the E-Cadastre project had not been processed. Commitments for consultants under branch Spatial Planning and Land Use Management SPLUM amounting to R52, 7 million had not been translated into expenditure.
  • Rural Development: R68 418 spent against a current budget of R253 424 (27%). Filled positions, 528. The branch spending trend was due to the Rural Infrastructure Development (RID) review and realignment of performance targets for the branch to incorporate Agri parks; Rural Enterprise and Industrial Development (REID) had not made any payment to existing Service Level Agreements SLAs as they were currently under review due to reprioritization of Agri Parks; Payments to colleges were processed when they were received from institutions and the expenditure was expected to increase once these invoices were received and paid.
  • Restitution: R70 000 spent against current budget of R312 321 (22.4%). Filled positions,735. The branch spending trend was below the linear target due to delays in the approval of S42D submissions; transfers of properties to state instead of Communal Property Association (CPAs); delays in finalising the transfer of properties due to conveyancing issues; the slow pace of appointing a panel of researchers for the claims lodged; the roll-out of mobile units was delayed, which affected the projected expenditure in terms of maintenance, traveling and fuel costs.
  • Land Reform: R91 599 spent against the current budget of R362 029 (25.3%). Filled positions,196. The branch spending trend was below the linear target due to the realignment of projects to Agri-Parks and consequent budget reprioritization; realignment of the goods & services to DMPs took longer than anticipated; delays in the submission of quotations and delivery of goods and services by the service provider.

A comparison of the DRDLR’s first quarter spending to budget in the first quarter of 2015/15 against the same period last year, showed the following:

Administration: 2014/15: 19%; 2015/16: 19.8%

Geo-spatial & Cadastral Services: 2014/15:17.8%; 2015/16: 17.5%

Rural Development: 2014/15: 18.9%; 2015/16: 10.1%

Restitution: 2014/15: 24.9%; 2015/16: 12.6%

Land Reform: 2014/15: 25.1%; 2015/16: 20.7%

Agricultural Land Holding Account

As at 30 June 2015, spending amounted to R105.9 million, representing 6,9% of the annual appropriation of R1.5 billion. Spending to date consisted mainly of land acquisition, amounting to R62.2 million, representing 7.3% of the land acquisition budget. This was followed by recapitalization and development spending of R35.1 million, representing 5.2% of budget, while expenditure on planning amounted to R8.5 million, representing 52.4% of the budget. The delay in spending had been due to the reprioritisation of the 2015/2016 budget and the reviewing of projects within the branch Land Redistribution and Development (LRD) to align to the Agri-Parks programme. Remedial action taken to address material variances in spending versus the budget was the development of recovery plans to ensure the implementation of the projects as a matter of priority.

Registration of Deeds Trading Account

The Deeds Trading Account generated R149.7 million for the first quarter, representing 21% of the projected revenue of R735.6 million. Spending to date amounted to R114.8 million, representing 17% of the budget of R672.7 million. The under spending was due to a timing difference on invoices for services that had been rendered

E-Cadastre Project

The projected grant amount of R103.6 million for the E-cadastre project’s operational costs had not been received from the Department. R81.5 million was the balance brought forward from the previous year’s unspent grant. Spending amounted to R10.4 million, or 7% of the total of R166.2 million for the current year. Compensation of employees cost R4.2 million, representing 25% of the projected spending of R17,4 million for the year. Goods and services spending amounted to R6.2 million, or 0.5 % of the projected R148.8 million for the year. The above figures reflected that the E-Cadastre projected to spend funds, including the grant of R103.6 million still to be transferred from Department.

First Quarter Performance Report: Briefing by DRDLR

Mr Eugene Southgate, Deputy Director General (DDG): DRDLR, briefed the Committee onn the first quarter actual performance report 2015/16 financial year.

The Department to date had achieved 33% of the planned targets for quarter one 2015/16. 19% had been partially achieved, and 48% were not achieved during the period under review. This was the lowest first quarter achievement compared to the previous three financial years. The Department had been able to achieve above 51% in both 2013/14 and 2014/15. Its performance against target was tabled:

Programme 1: Administration

Seven targets were planned for implementation in the period under review: Three were achieved, two partially achieved, and two not achieved. The Administration programme had achieved 43% of the targets planned for implementation in quarter one.

Programme 2: Geospatial and Cadastral Services

13 targets were planned for implementation. Six were achieved, two were partially achieved, and five were not achieved. The programme achieved 46% of the planned targets.

Programme 3: Rural Development

Six targets were planned for implementation. Three targets were achieved, one was partially achieved, and two were not achieved. The programme achieved 50% of the planned targets.

Programme 4: Restitution

Five targets were planned for implementation. No targets were achieved, two were partially achieved, and three were not achieved. The programme achieved none of the planned targets.

Programme 5: Land Reform (LRD)

Seven targets were planned for implementation. One target was achieved, one was partially achieved, and five were not achieved. The programme achieved 14% of the planned targets.

Programme 5: Land Reform (LTA)

Five targets were planned for implementation. One target was achieved, none was partially achieved, and four were not achieved. The programme achieved 20% of the planned targets.

Mr Southgate said 12 land reform targets were planned for implementation in the period under review. Two were achieved, and ten were not achieved. The remaining targets had not been reported by the branch. The Land Reform programme had achieved 20% of the targets planned for implementation in the quarter.

In summary, the Department had not performed well in the period under review. The target achieved was 33%, indicating a variance of 67%.

Discussion

The Chairperson commented that the overall assessment of the first quarter report was that there had been an underperformance compared to the previous financial years. The first quarter spending of 16% was not in line with the Treasury regulations, adding that if the Department spent in the last quarter what should have been spent in the first quarter, there would be hiccups. The Committee expected the Department to spend according to the 25% Treasury Regulations, so the under-spending would involve a lot of replanning, making the oversight work difficult.

Ms N Magadla (ANC) said there had been under-spending in some provinces and the people there were suffering. She asked how the Department intended to deal with the situation, adding that the land restitution figures did not look good.

Mr Nchabeleng commented that the Department had done very well in the last seven years without a CFO. The Department was going down and he wondered what had gone wrong.

Mr Mnguni said the 16% level of spending was not acceptable, adding that it was the responsibility of the executive to give account to Parliament. There would have to be a revision so that expenditure could catch up with what had been unspent in the first quarter. People living in the rural areas were being compromised. The Committee had demanded and had expected the Extension of Security of Tenure Act (ESTA) amendment, adding that the Department had promised to present it to the Committee in June 2015 for processing and adoption.

The Chairperson said there had been a decrease in spending, which was linked to underperformance. She hoped the Department had developed a plan to address the issues. In the second quarter, the Committee would like to see improvement, and the challenges should be addressed. When the Department failed to spend its allocations, the Treasury could not be engaged for more money. She asked how the Department was going to improve on its performance. The bottom line was that the Committee was not happy with the performance of the Department.

Mr Nchabeleng noted that part of the job of the Committee was to assist the Department, and not only to play an oversight role.

The Chairperson thanked the Members and the officials of the Department.

Amendment to Minutes

Amendments were made to the draft minutes of the Committee meeting held on 12 August 2015. Clarification was required for item 5.4 (E), “Committee” was substituted for “Department” on page 3, and there were interventions to highlight the Rama Communal Property Association (CPA) and Riemvasmaak Trust on page 4.9 (2). A visit to the Rama CPA and a workshop to be held on 21 and 22 August were brought up under matters arising.

The Committee adopted the minutes. with amendments.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: