Ingonyama Trust Board on its 2014/15 Annual Report

Rural Development and Land Reform

15 October 2015
Chairperson: Ms P Ngwenya-Mabila (ANC)
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Meeting Summary

The Ingonyama Trust Board (the Trust) presented its Annual Report for the 2014/2015 financial year. The Trust had committed R6 000 000 for the purchase of tractors to support production on communal land and noted that substantial sums of money were paid out for the benefit of 120 Learners. Employment, HR and vacancy figures were given. The Trust highlighted some performance statistics. In this year, the Board had approved 1 100 tenure rights, falling short of the target of 1 200. Thirty one traditional council workshops were held, but the Trust did not manage to target or review HR or legal policies as it had hoped. Assets of the Trust were over R436 million and liabilities R308 million. ITB had achieved a surplus of R17.1 million in the last financial year. Its expenditure had been R88 million, and employee costs were around R17 million. The figures for different categories of expenditure were outlined, including R2  210  901 for a motor vehicle for King Goodwill Zwelithini. Rental income accounted for around 70% of all income, and was R70 785 638. “Other” income comprised 18% and that came to R18 040 268. Finance income of 11% of the total was R111 357 283.Royalty income took up only 1% and came to R898 581. The ITB received a departmental transfer payment of R17.29 million. Although the Trust had received another qualified audit from the Auditor General South Africa, the Trust disagreed with its reasoning and disputed that the assets were not acquired at a cost and vested in the Trust.

Members were concerned that the Trust maintained a stance against the ruling of the AG and said that without full reports being presented it would be difficult to reach a conclusion. The Trust noted that it was prepared to go to arbitration and explained that this matter had dated back to pre-1994, and related to non-payment of amounts on land acquired. Members pointed out that in fact the audit reports had been getting steadily worse over the years, and the last one contained a recommendation that the Department of Rural Development and Land Reform must look very seriously into the position of the Trust. They pointed out that it was supposed to be working for the benefit of communities and should show prudent use of taxpayer money.  They were also disturbed at the quality of performance, pointed to the fact that the Trust was showing a surplus and wondered why it did not get more capacity. They asked about disabled representation on the staff, and questioned the purchase of the car for the King without following the proper procurement routes. Members questioned if it was indeed correct that the figures of R29 million generation of funds had remained consistent over the last three years. Members asked about where the tractors were. They were worried at the lack of policies to guide the educational support and wanted to emphasise the need to comply with all legislation. The Board stressed that despite public misperceptions, the Board did not own the funding and the Board members were quite aware of their fiduciary position. Members also asked for an update on the partnership with the Tsonga Sugar, querying if it was beneficial to both parties. They questioned the conversion of rights, were worried at the implication that the Board must act as the King wished and questioned if provincial government would be repaying money to the Board. Members suggested that a meeting must be arranged between the ITB and the AGSA, that the HR strategy must be presented, costs should be cut for travelling and accommodation, and the Board should try to have a more consistent approach.

Meeting report

Opening Remarks
The Chairperson noted the apology from the Minister of Rural Development and Land Reform, Mr Gugile Nkwinti, who was in China.

Judge Jerome Ngwenya, Chairperson, Ingonyama Trust Board, read apologies from the Deputy Chairperson, Ms Jabu Bhengu. He also noted that the Ingonyama Trust Board (ITB or the Board) wanted to apologise for not being in the meeting on the previous day; this was due to a communication problem around the dates.  as the ITB had sent its profuse apology for not being in the previous day’s meeting. He said there was an unfortunate communication problem as the original set date was changed.

Mr Mduduzi Shabane, Director General, Department of Rural Development and Land Reform, said that he would try to answer questions on behalf of the Minister. He was pleased to note that the ITB was able to attend today's meeting and said it was unfortunate that the ITB had missed the briefing by the Auditor General South Africa (AGSA) and did not benefit from the discussion on the previous day.

Ingonyama Trust Board 2014/15 Annual Report Briefing
Judge Ngwenya briefed the Portfolio Committee on the Ingonyama Trust Board's Annual Report for 2014/2015.The ITB had committed R6 000 000 for the purchase of tractors to support production on communal land. It had paid money to different educational institutions for the benefit of 120 learners for the period under review (see attached presentation for details). He then detailed the employment and vacancy figures for the ITB (see attached presentation for full details) noting that at the moment there were two vacant posts.

He then gave some highlights in performance for the period under review. In this financial year there were  1 100 tenure rights approved by the Board out of a target of 1 200. Thirty one traditional council workshops were held on land management issues, against the target of 43. Although there was a target to develop or review five human resources or legal policies, none were in fact developed.

Judge Ngwenya then summarised the financial position for the year ended 31 March 2015. The total assets of the ITB amounted to R436 750 659. Total Liabilities came to R308 841 774. Total Net Assets were thus R127 908 885. The ITB had achieved a surplus in this year, of R17 115 960. Its total expenditure for the year amounted to R88 699 061. Employee costs to the company were R17 115 352.

He broke down the expenditure as follows: Capital expenditure at cost:
Motor vehicles - R2  210  901.Buildings and other fixed structure - R1 335 675. Software and other intangible assets - R503 544. Computer equipment - R575 088. Furniture and equipment-R108 043.

He then noted that the total revenue for the year 2014/2015 was derived from different sources. Rental income accounted for around 70% of all income, and was R70 785 638. “Other” income comprised 18% and that came to R18 040 268. Finance income of 11% of the total was R111 357 283.Royalty income took up only 1% and came to R898 581. The ITB received a departmental transfer payment of R17.29 million.

On the previous day, the report of the Auditor-General South Africa in relation to the ITB had been presented. Judge Ngwenya noted that the Trust did not agree with the assessment of the AGSA and said that the assets in question were not acquired at a cost and vested in the Trust.

The Chairperson thanked the ITB for its presentation. She was concerned that the Board had denied all the audit findings and challenged the opinion of the AGSA.

Mr E Nchabeleng (ANC) said it was hard to comment on the findings of the AGSA until there was further information on why the ITB was challenging the last five years of reports. He pointed out that the audit opinions had been worsening over the years.

Mr Ngwenya replied that ITB was bound by the Public Finance Management Act (PFMA). He said there was a view that the AGSA's interpretation was always impeccable, but it must be remembered that this was an institution still being run by human beings subject to human error. The ITB's audit reports had been qualified for at least the last five years because it did not pay rents on land purchased in 1994. He said that the Constitution said ITB was not liable to do this but the AGSA wanted the laws to apply retroactively .He added that ITB was not persuaded by the negative reports and would go to arbitration for the resolution of the matter.

Mr A Madella(ANC) said the issue of performance was disturbing and asked why capacity was not increased to meet targets. He noted that there were more contract staff than permanent staff. He asked how many learners and staff were disabled, pointing out that this was not specified in the Report.

Mr Ngwenya replied that the performance targets were estimates. When the ITB was incorporated the Trust was already in place under the then-named Department of Traditional Affairs (DTA). The Chief Executive Officer had been in place for only three months but he was confident that she would be able to improve performance. He added that the legislation had been amended to include the drawing up of an organogram, and this would be an incentive to get more permanent staff appointed.

Dr Fikiswe Madlopha, Chief Executive Officer, ITB, noted that the salary package being offered to employees at the Trust was not particularly good. The permanent staff were usually graduates and they moved on soon as they had obtained some post-graduating experience. She said that ITB was serious about hiring people with disability, and that it would link up with the relevant associations to ask for details of likely candidates who were disabled.

Mr S Matiase (ANC) said there were adverse report from the AGSA on the operation and mandate of the ITB. He said the AGSA reported that ITB had been financially qualified, and had also added that the Department of Rural Development and Land Reform (DRDLR) should review the whole of the ITB, as it should be emphasised to the Traditional Leaders that land must be held in trust to benefit communities. He said ITB should be addressed in the same way as any other entity that reported to the State, as the Report said there were changes in royalty revenue. He questioned other sources from which royalty was accrued “other” than the government. He also said there should be prudence in the use of the taxpayers' money, as it would be unethical for the Trust to act otherwise.

Mr P Mnguni (ANC) appreciated the apology from ITB for missing out in the meeting of the previous day. Oversight of a Trust came with its own problems of understanding. He asked about the value of the rural land. He questioned the irregular expenditure of R2 025 000 for the procurement of the “car for the King”. He questioned why ITB did not go the route of procurement.

The Chairperson of the Committee said the limit of the powers of the Board should be clarified. She pointed out that all public funds should be used for the benefit of the community. She asked if ITB was generating the same amount each year, pointing to the fact that the same figure of R29 million had appeared as generated in 2013/14 and also in 2014/15. She said reports should assist the Committee to have a good understanding.

She noted that R6 million was spent on tractors. She questioned where these tractors were and in whose name they were registered.

The Chairperson noted that there were no policies to guide the implementation of the educational support. She also asked if the learners were performing well as the figures seemed to be low and did not assist in that regard. The Chairperson asked why it was difficult to fill the two vacant posts, particularly since the Board was reported to have a surplus of R17 115 960. She questioned who had drafted the policies as there was no clarity on that. Finally, she stressed that all laws should be implemented.

Mr Amir Mia, Chief Financial Officer, ITB, said the Board was in process of redesigning the website and filling the vacancies.

Judge Ngwenya added that there was a perception that ITB had a lot of money whereas people on the ground were suffering. The Board was not the owner of the funds. The Trustees were aware that they were to manage the surplus and the Board was there to assist. He noted that the ITB was a creature of statute and bound by the legislation. The tenure of the Board members had been  extended until end of March 2016, and the reason for that was that legislation was pending. The newly appointed board would actually come into office at the start of the next financial year. ITB was  fully aware that money generated was for the beneficiaries. There had been a view that suggested that the ITB should not forego the royalties.

In relation to the Annual Report, he commented that the PFMA dictated how the Annual Report should appear.  He said the ITB reports was submitted to the Department of Rural Development and Land Reform and not directly to the Committee. He had asked the Portfolio Committee what should be the approach in relation to the ITB reports and the Board was told to take a cue from the Department.

The Chairperson said partnerships were made to benefit people, but in the case of the 50 year contract with Tsonga Sugar, it was making the people poorer. She asked what ITB was doing to intervene.

Judge  Ngwenya replied that the contract with Tsonga Sugar was supposed to help black people acquire sugar cane land. It was being reviewed, so that people could exit the contract earlier than 50 years. He said Tsonga Sugar had a contract with ITB and not with individuals, as ITB was the lessor and Tsonga Sugar the lessee, while the community members were beneficiaries. He said the Chief Financial Officer was working on streamlining the clause and reflecting the reduction in the time periods. In relation to the benefits that ITB offered to the community, he noted that it was improving on benefits by score card.  Apart from job creation ITB wanted to promote economic advancement. It firmly believed that AGSA was there to assist the ITB and not just to report when when things are not working.

Mr Matiase said procurement policies were flouted when a car was purchased for the  King at a cost of R2 025 000.He remarked that the AGSA could not be dismissed as being unfair and unreasonable. He said there were glaring violations of a range of policies and legislation that ITB was supposed to uphold and comply with. He fully accepted that the media reports may not always be fair but such reports were useful because they did reflect a societal conscience, and they were critical tools that the Committee could also tap into for effective scrutiny. He said ITB converted people’s land rights into lease agreements, but he felt that the Board should avoid going back to the 1970s situation, where lands were constituted in the hands of traditional leaders

Judge Ngwenya replied that it was not quite correct that the Board converted people’s land rights. He said that on the contrary ITB had protected the rights of the people, especially against mining houses. ITB assisted people in court who had no proof or written evidence of entitlement to land, only oral evidence, and ITB would help such people in putting together the necessary documentation. It did not condone the violation of any legislation but there were a lot of overlaps. He added that the Act said King Goodwill Zwelithini was entitled to remuneration from ITB, and the car was a way of showing appreciation to the King for his positive role in the relationship between ITB and traditional rulers. The car was registered with ITB.

Mr Mnguni commented that it would be a difficult precedent if one entity were to believe itself above compliance with the PFMA.  He was concerned that the King preferred to have a car worth this large sum, and that there had been no supply chain process followed.

Judge Ngwenya replied that the car was befitting of the King;s status, although he did concede that ITB erred by not following the supply chain prescripts.

Mr Madella said he was concerned that the Board had to do the bidding of the King and questioned if  the provincial government would pay back the money to the Board.

Judge Ngwenya replied that Board was satisfied that it was not budgeted for by the Provincial Government, adding that some of the issues should be raised with the trustees and not the Board.

Mr Nchabeleng proposed a meeting between the ITB and AGSA, with a view to resolving the impasse. He noted that the policies should cover and define the issues and should be signed and adopted quickly. He asked for the make of the car that was purchased for the King.

The Chief Financial Officer replied that it was a BMW 7 Series.

Judge Ngwenya said the trustees should be engaged in defining policies.

The Chairperson said money generated was to be used for the benefit of all, and not one person , and said that the policies to be developed must pave the way for consistency. She asked that the Board should provide its strategy on Human Resources to the Committee, and it must endeavour to cut cost on travel and accommodation. She felt the Board was doing well on management of strategic training. However, it was not consistent; it had been under spending in some areas and overspending in others. She asked the Chief Executive Officer to address the anomalies.

The meeting was adjourned.


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