The Fiscal and Financial Commission (FCC) presented a summary of its report that evaluated the financial status of the Department of Rural Development and Land Reform (the Department), and made some recommendations for the forthcoming year. Members were reminded that the FFC's mandate was to make recommendations to Government according to Chapter 13 of the Constitution.
The FFC highlighted that the Department bore a responsibility to develop rural economic opportunities and ensure food security through: job creation, through land reform and agricultural development. In particular, emphasis was placed on promoting small scale irrigated farming, creating security of tenure for communal farmers, especially women and investing in infrastructure and support services. The 2011 census noted that 60.8% of people living in poverty were in the rural areas. By 2016, reduction of poverty in rural areas was 15%, and in urban areas it had reduced by 24%. Initiatives to combat poverty included the Agricultural Policy Action Plan (APAP) which was developed to implement the NDP, and the New Growth Path (NGP) which aimed to achieved decent employment. Another finding that surprised both the FFC and Members was that urban households spent around 10.7% of their income on food, whereas rural households spent 23.9%. The effects of the drought were summarised; the first to third quarters of 2015 had seen 18%, 19.7% and 12.6% respective contractions in production. A particular concern was the lack of coordinated implementation of programmes that undermined the sector; for instance the Comprehensive Rural Development Programme had poor links to land reform programmes.
78% of the Department's budget was spent in the Land Reform, Restitution and Rural Development programmes, with transfers and subsidies taking up the largest slice of the budget. The Department had received R10.1 billion in 2016, translating into real year on year growth of 3.4%. The public entities and the amounts received were listed. The Agricultural Land Holding Account, the Department's largest entity, was projected to receive R4.6 billion. The Registration of Deeds Trading Account had been strongly prioritised and was projected to grow by 33.7%. Other programmes would receive less funding because of cost cutting. Spending in the Department had dropped in comparison to the previous year, to 99.1%. It had been given an unqualified audit report, but with findings particularly on lack of daily and monthly controls that led to material misstatements, and weaknesses in information systems. The Department had not explained the under-spend and this was most prominent in the National Geomatics Management Services and Restitution programmes. Some of the agencies receiving transfers also did not spend their allocations fully. Overall, the Department achieved 63% of targets. FFC highlighted some worrying shortfalls in performance including non-finalisation of disciplinary cases, which impacted on performance.
An analysis of the projections for specific programmes was given. There had been significant growth in the Rural Infrastructure Development sub-programme, and the Rural Enterprise and Industrial Development sub-programme was the only one to project positive annual growth, and would contribute to the One Household One Hectare initiative. Although the National Rural Youth Services Corps programme had seen renewed emphasis of sustainable rural livelihood programes in 2016/17, it was likely to see a drop in allocations. Growth would be prioritised in the Restitution Programme and in the Agricultural Land Holding Account, which was responsible for buying/holding land until it is suitable for identified beneficiaries, and Land Reform Grants programme, which would grow at an annual average rate of 6.6% per year. The FFC felt that some of the indicators in the Rural Development and Land Reform programmes should be more specific; for instance the Department had not given information on land claims backlogs or explained why certain claims lodged prior to 1998 were still outstanding. There was no clarity on certain areas of under-performance in Land Reform, and it was not specified whether some allocations were leases or transfers. No explanation was given for underspend by agencies. It also noted the policy uncertainty around land reform which was hindering the stability and growth of the entire agriculture sector and rural economy. It thus recommended that a multi-sectoral policy approach was needed. The FFC suggested that the Committee should ask the Department to address human resources challenges, to give more specific deadlines and reasons on land claims backlogs, to explain poor performance indicators on land tenants and farm workers and to explain underspend by agencies.
Members expressed the view that it would have been useful to be able to engage with the FFC, Auditor-General and Department in one session, particularly since they wanted information on particular budgets and programme activity. They summarised that the real concerns related to the Department's inability to monitor the real outcomes in a timely way. Several Members asked the reasons why food expenditure was so high in rural areas, and the reasons why land reform beneficiaries were seen not to have benefitted. They asked for more clarity on some of the statistics and the need to have updated information, wondered if concessions to beneficiaries were included in projected growth and emphasised the need for all departments to work together on drought. However, another Member noted that part of the problem was that solutions such as extra dams did not take account of particular regions' needs or losses through evaporation from dams. Some Members were disappointed at the performance, asked what was being done to address policy uncertainty, whether specific details were available for those who had not benefitted from land reform, the reasons why farms were not evaluated , and criticised the poor reports given by the Department to the Committee. They wondered if food prices should be fixed but agreed that further investigation was needed into the pricing.
Members then discussed the Budgetary Review and Recommendation Report draft, and specifically the recommendations which included that the Minister should coordinate and finalise the projects to create an integrated funding model, to avoid duplications, and formulate a funding model that covered all activity of the Department. It also recommended that a survey of all land reform farms must be done, and sustainability considered. The Department would be required to produce targets, plans and evidence of work when it presented.
The Chairperson noted apologies from the Minister and Deputy Minister of Rural Development and Land Reform
2016 Annual Report of Department of Rural Development and Land Reform (DRDLR)
Financial and Fiscal Commission (FFC) analysis
Dr Ramos Mbugu, Director: Research Unit, Financial and Fiscal Commission, said that he would be assisted in the analysis by Ms Sasha Peters, Programme Manager for the National Budget and Mr Ghalieb Dawood, Programme Manager for the Provincial Budget. Dr Ramos noted that the FFC would not go into exhaustive detail in this briefing as the current presentation was only part of the annual submission that the FFC would make, in which it had made detailed recommendations for the revenues and would give an analysis of what other spheres of Government should be doing.
The FFC had analysed the budget, in line with the constitutional parameters and functions of the Financial and Fiscal Commission Act. He reminded Members that the mandate of the FFC is primarily to make recommendations in line with Chapter 13 of the Constitution, with an emphasis on national revenue.
He noted that according to the 2011 Census, 68.8% of the poorest people in the country were located in rural areas while 30.9% lived in urban settlements. According to the most recent measurement in 2016, each of these groups had experienced reduction in poverty; 15% in rural areas and 24% in urban areas. There is a general commitment to the National Development Plan (2012-2030) and the Medium Term Strategic Framework (2014-2019) from the Department of Rural Development and Land Reform during main policy cycles.
Dr Mbugu presented statistics compiled by Statistics South Africa (StatsSA) in 2014, which indicated that on average urban households spent 10.7% of income on food, whilst rural households spent 23.9%. This was remarkable since most of the food was produced in the rural areas. Unemployment, and especially youth unemployment, is much higher in rural areas, at 44%, compared to urban areas at 33%. Access to basic services in rural areas had increased, but at a slower pace than it had in urban areas. Thus, for example, while sanitation backlogs had lessened since 1994 these still remained high in the rural areas, despite government interventions. In 2014, municipalities and districts had high sanitation backlogs up to 47% in rural areas and 31% for urban regions.
Dr Mbugu explained that the National Development Plan (NDP) aims to develop rural economic opportunities and ensure food security. It would do this through job creation, land reform and agricultural development, by promoting small scale irrigated farming, to create security of tenure for communal farmers, especially women; and to Invest in infrastructure and support services. Additionally, the Agricultural Policy Action Plan (APAP) which was developed to implement the NDP and the New Growth Path (NGP) aimed to achieved decent employment through inclusive growth, and comprehensive rural development and food security. In order to implement the APAP the DRDLR works closely with the Department of Agriculture, Forestry and Fisheries (DAFF).
The 2015’ drought had been the worst in South Africa in the last 30 years, and it had a very negative impact on the entire rural sector. In the first quarter of 2015 there was 18% contraction in production, and the second and third quarters recorded 19.7% and 12.6% contraction respectively. Obvious social effects included food insecurity and poverty.
He added that there were concerns about the land reform programme in South Africa; it might have not been successful mainly because of policy uncertainty that could have hindered growth and stability in the agricultural sector and its economy.
Dr Mbugu described the impact of land reform with respect to key rural outcomes of food and nutrition security, job creation and agricultural output. It was found that most land reform beneficiaries tended to be worse off than those who had not benefitted from land reform, particularly on food and nutrition security and household income. This had been a startling revelation emerging from the FFC ex post analysis in 2016. This led the FFC to assume that on recent policy proposals within the process of land reform, which are likely to require a substantial amount of funding to implement, there could be a lower than anticipated economic outlook, which in turn could have a negative impact on the medium term spending plans of DRDLR, as well as its strategy to achieve APAP goals. Proper coordination of implementation programmes was also lacking. This undermined the sector’s anticipated outcomes. He noted that one example was the Comprehensive Rural Development Programme (CRDP), which was found to have weak linkages with the land reform programme.
Ms Sasha Peters spoke to the budget and structure of the DRDLR. She noted that it operated under five programmes: Administration, National Geomatics Management Services, Rural Development, Restitution and Land Reform. Overall the DRDLR aimed to create and maintain an equitable and sustainable land dispensation and act to ensure sustainable rural development and livelihoods, as well as social and economic advancements.
In 2016, the Department had focused on recapitalising and redeveloping redistributed farms; establishing agri-parks; running the One Household, One Hectare programme (which promotes food security and rural livelihoods); extending the lodgment of land claims It also operated the National Rural Youth Service Corps (NARYSEC); promoted security of tenure and established the SA Geomatics Council. It aimed to strengthen the rights of people who work the land.
Ms Peters commented on the decline of the allocated budget to the Department between 2012/13 and 2015/16, by an annual average 4.5%. She explained that this meant that the Department's allocation of R10.1 billion in 2016/17 actually translated into a year on year growth of 3.4%.
By the end of the 2016s MTEF period the programmes of Land Reform, Restitution, and Rural Development had consumed the largest share of the Departmental budget (78%). In 2015 the Restitution programme had received strong focus from the Department as it was projected in the Budget Composition (Slide 13).
Ms Peters noted that transfers and subsidies had been up to R5.666 million in 2016 but during the 2016 MTEF period, transfers and subsidies was projected to show a real annual average decline of 0.8% per year. Similarly compensation to employees is expected to decline over the medium term, as a result of the Cabinet’s approved reduction to lower the aggregate expenditure ceiling while cost containment would force a decline in goods and services.
Ms Sasha Peters next highlighted the Rural Development Programme, with a focus on the Rural Infrastructure Development sub-programme, which had received an allocation of R1.9 billion in 2016/17. She assured that significant growth within Rural Infrastructure Development sub-programme had been achieved between 2012/13 and 2015/16 mainly due to reprioritisation of funds (R2.6 billion in 2014/15) to facilitate access to basic infrastructure for households.
The Rural Enterprise and Industrial Development sub-programme was the only programme over the 2016 MTEF period which projected positive annual average growth, registering a spike in growth that coincided with the introduction of agri-parks and was expected to contribute to the One Household, One Hectare initiative.
Significant growth in the National Rural Youth Services Corps sub-programme was noted in 2016/17 due to renewed emphasis on projects to promote sustainable rural livelihoods. However, allocations to this sub-programme were projected to decline by 0.2% in 2017 and 17.4% in 2018, due to cost containment measures.
Ms Peters said the overall growth of Restitution Programme in 2015 reflected slow spending on land restitution grants, because of Cabinet-approved reductions, although in 2016 there had been “strong real growth” of 14%. The increased spend in the National and Regional Offices sub-programme aimed to speed up the restitution process over the 2016 MTEF period. Growth in the Restitution Regional Offices sub-programme was prioritised and was projected to grow by a real annual average growth of 3% per year.
The largest sub-programme of the Land Reform programme is the Agricultural Land Holding Account, which was responsible for buying/holding land until it is suitable for identified beneficiaries. The budget is used for recapitalisation, development and land acquisition, she said. The Land Reform Grants sub-programme was also prioritized over the 2016 MTEF period, projecting to grow at an annual average rate of 6.6% per year.
Ms Peters then spoke to the public entities that report to the Minister of Rural Development and Land Reform, as follows:
- The Agricultural Land Holding Trust was established in 2009 to purchase strategically located land to further land redistribution process, and receives an annual transfer from DRDLR and is administered wholly by the Department
- The Ingonyama Trust Board manages communal land in KwaZulu-Natal on behalf of communities and receives annual transfers to augment expenditure
- The Registration Deeds Trading Account that contributes to land planning and land and property administration.
The Agricultural Land Holding Account was the Departments largest entity, and it projected to receive R4.6 billion along the 2016 MTEF period. The rest of the Departmental entities were expected to experience annual declines in allocations over the 2016 MTEF period, with the exception of the Registration of Deeds Trading Account which was strongly prioritised by the Department, with an expected annual growth of 33.7% in 2016.
Mr Ghalieb Dawood described the Department’s spending performance, which had marginally declined from 99.4% (2014/15) to 99.1% in 2015/16. He stated that the Department did not provide an explanation. The least spending occurred in National Geomatics Management Services and Restitution.
The Department had received an unqualified audit with matters of emphasis. These included the lack of daily/monthly internal controls, which had led to material misstatements that were subsequently corrected. Weaknesses in the information system meant that there was not credible preparation of financial and performance information. 17 cases were being internal audit function and including cases related to allegations of corruption, fraudulent land claims, mismanagement of valuations and procurement irregularities. The financial impact of this was not yet known.
Mr Dawood noted that the DRDLR spent close to 99% of its total budget, and it had met or exceeded 63% of all its performance targets in 2015/16. The Auditor-General made no material findings on the usefulness and reliability of performance information. FCC concluded hat the Department’s performance indicators were well formulated and most indicators meet the SMART principles. However, it was concerned about specific performance on some indicators. He highlighted that only 40% of disciplinary cases were finalised within 90 days, compared to the target of 60%. This had financial implications because it translated into lost work days when staff were on suspension. Only 40% of vacancies were filled within 4 months. The target relating to “sets of solution modules deployed”, for the National Geomatics Management Services, was terminated owing to an investigation by the Special Investigating Unit (SIU).
FFC felt that some indicators in Rural Development could be more specific, especially those that relate to the Department’s role in facilitating and supporting various outputs, and he explained these with reference to the presentation. In the Restitution Programme, the Department over-achieved its target of settling 463 land claims, by reaching 617 processed land claims. However, no information on land claims backlogs were reported by the Department, and therefore, the FFC was unable to assess progress in settling land claims backlogs. Claims lodged by 1998 to be researched had not been achieved (target: 2660/achieved: 2542), largely due to poor research reports submitted by service providers.
In the Land Reform programme, only 11% of the total target of allocating hectares to farm dwellers and labour tenants was achieved. There was no clear explanation for the under-performance. Only 14% of labour tenants’ applications were settled. The Department had over-achieved by 33% the allocation of hectares to smallholder farmers, but it was unclear whether this was a lease or transfer of ownership rights.
Besides the public entities, the Department also made transfer payments to NGOs, universities and other agencies. Some of them had not spent their allocations. NO reasons had been provided and so the FFC recommended that the Committee should check whether the agencies had underspent for valid reasons, not because of late transfers.
Budget for 2016/17
Mr Dawood noted that the DRDLR had received an allocation of R10.1 billion which translated into a real year on year growth of 3.4%. This growth is being driven by a prioritisation of the Restitution programme. He repeated that the Land Reform, Restitution and Rural Development programmes consumed the largest share of the Department’s budget (78%). Concerns that policy about policy uncertainty around land reform, especially in light of the Constitutional Court judgments, served to hinder the growth and stability of the agricultural sector and, more generally, the rural economy. FFC felt that a multi-sectoral policy approach was needed in order to attain rural development objectives
Finally, he urged the Committee to ask the Department to explain the following:
- how it will address some of the human resource challenges that are highlighted in the Annual Report
- how long it will take to address the land claim backlogs and whether the Department is taking any measures to speed up the process
- the reasons are for the poor performance on indicators servicing land tenants and farm workers
- what measures are being taken to address the problem
- the underspending by agencies receiving transfer payments from the Department.
Dr Mbugu informed the Committee that the role of the FFC would be to assist the Committee when the Annual Report is released and also to make sure that the Department complies with the requirements set by the Minister of Finance. He clarified that the Appendix (Recommendations) would not be covered in the present briefing, as those recommendations were being addressed to the Department by the FFC.
Mr T Walters (DA) asked when the Committee would be able to interact directly with the Department, since the FFC could not answer questions around Departmental responsibilities.
The Chairperson suggested that questions about Departmental performance could be directed to the Director General of the Department.
Mr Walters thought that the Director General may not be able to answer some of the more specific questions about programmes and budgets. In summary, it seemed that the key concerns were that the Department is unable to monitor real outcomes. Other challenges could be achieving the rapid and effective concession of property rights to previously disadvantaged individuals, the need to broaden and ensure aims for agriculture, given its links to rural development and generation of jobs for the sector, disciplinary issues, concerns with the targeted outcomes and the real outcomes that had been achieved, and how the Department is dealing with land claims.
Mr X Robertson (DA) asked if it was possible to request statistics on an annual basis from other institutions, not just Statistics SA data. He also how it could be possible that beneficiaries from land reform seem to be generally worse off than those that did not benefit. With regard to the Restitution Programme he questioned if the 3% projected growth per annum took into account the concessions to beneficiaries. In regard to drought, he suggested that all departments should be working more closely to provide better infrastructure that stored more water during raining season for future irrigation.
Mr M Filtane (UDM) expressed disappointment with the Department’s performance. He referred to slide 6 and asked why development was higher in urban areas than in rural areas and hoped the FFC should be able to answer his questions. He asked what had been done to address the policy uncertainty which is hindering growth and stability of the agricultural sector. He also questioned if the accounted 50 000 people who slipped into poverty due to droughts had been identified. It would be vital to identify why the beneficiaries of land reform had become poorer, and if this was due to skills somehow being lost that should be addressed. He asked what the Department was doing about the poor quality of reports being provided to the Committee and why targets have not been met.
The Chairperson reminded Members that the purpose of the meeting was to ask the FFC for clarity and in following meetings they would be able to ask such questions directly to the Department.
Mr M Nchabeleng (ANC) mentioned that it would have been more productive had the Committee heard presentations from the FFC, Auditor-General and Department on the same day, so that all issues could be addressed. He said that in Limpopo, many restitution cases did not continue, not because of lack of interest by beneficiaries but because assets in properties transferred were not evaluated prior to transfer, so that issues such as not being able to pump water emerged. No blame should be put on the claimers, but the Department should be asked what it was doing to process claims correctly.
Mr Robertson, on a point of order, asked if Mr Nchabeleng was expressing his professional view or a general understanding.
Mr Nchabeleng responded that his next point had to do with food security, and he would be referring to commercial rather than subsistence farmers. What people produced and what they ate was entirely different and he wondered if there should not be some policy limiting food prices. He suggested that the drought had had a great impact because strategies put in place did not always take account of the areas; for instance, in Limpopo even if more dams were built, the problem of evaporation was not addressed.
Mr P Mnguni (ANC) thanked the FFC for its excellent work, but requested that in future the Commissioners also attend the meeting as they were vital in communicating the messages. He emphasised the importance of the data presented in Slide 5 under the tittle “Dwellers living in poverty in 2011”, which he said he corroborates from his experience in the Eastern Cape. He believed there was a need to challenge government investment which was not paying enough attention to the disadvantaged. The Committee should also take into account the inadequate and damaging techniques of the private sector in rural areas. FFC fell short when compared to the Human Science Research Council's attention to rural development decline. He also agreed with the FFC's distinction between achieved and not achieved targets, as he thought partial achievement should not commended. The SMART principles were crucial for reaching a better quality of Departmental reporting. He too suggested that more clarity and investigation were needed around the costs of food processing and why basic foodstuffs were so expensive in rural areas. He wanted the Committee at some point to have a debate on taxation and the role of municipalities when supervising food security.
Mr Walters expressed concern that whilst Members could raise their opinions, most of the questions had not focused on the FFC report and it was important to focus on that. He asked the Chairperson when the Department would attend the Committee.
The Chairperson clarified that the Committee Members could raise different issues.
Mr Nchabaleng added that any debate would be positive and he pointed out that it was DA Members who had diverged on to the question of droughts.
Members briefly debated whether ideological issues could be raised at this meeting and feelings ran high when it was suggested that old ideologies could not be tolerated.
Mr Robertson asked that Members re-focus. He asked Dr Mbugu what negative patterns the FFC had deduced from slides 22, 25 and 26.
Dr Mbugu said that in relation to household food expenditure, the real problem was that rural citizens were now having to spend money on processed food whereas previously they had relied on non-processed food. He noted that there were more recent surveys than the 2011 Statistics SA survey, but FFC did not want to address poverty issues by relying on external and non-official data. He noted that Chapter 4 of the Annual Report still to be presented by the Department showed the current position of beneficiaries of land reform.
In relation to development in rural and urban areas, he noted that it was necessary to look more deeply into how areas were categorised, which would show that an area generally considered to be rural might be categorised in another way if there was little agricultural activity ongoing in that area. Statistics relied heavily on the classifications and it might be pertinent to consider re-classification.
In relation to the drought, Dr Mbugu said an index must be created to allocate citizens affected by the drought, and also to enable specific recommendations to be drafted.
He also noted that here was still a possibility of implementing food price controls; this had been considered in relation to eradicating food insecurity. He also spoke to the role of cooperative businesses, and the problems they faced around competition.
Ms Peters noted that the Restitution Act cast certain obligations on the Department in relation to budgeting (but the remainder of her answer was not audible). She noted that the FFC merely gave an analysis of the budget for rural development and had projected a reduction in the upcoming years. He agreed that the previous year's performance figures had been used to project conclusions for this year.
Dr Mbugu agreed that Chapter 4 of the Annual Report did comment that many of the farms allocated to land reform beneficiaries had been transferred in a non-operational state, which meant that there was a decline in agricultural activity and increased unemployment. This had been found in Limpopo, Kwazulu-Natal and the Eastern Cape.
He confirmed that most of the concerns around lack of internal controls that were mentioned in the previous year had been acted upon, with new practices put in place.
Mr M Filtane asked how FFC had determined that beneficiaries of land reform were worse off than those that did not benefit.
Mr Dawood responded that the FFC compared their income before and after the land reform process.
The Chairperson agreed that in future it would be beneficial if the FFC and Auditor-General could present on the same day.
Rural Development and Land Reform Portfolio Committee: Budgetary Review and Recommendations Report
The Chairperson asked that the Committee Secretary inform the Committee what recommendations had been included in the Committee's Budgetary Review and Recommendations Report (BRRR or the Report).
The Committee Secretary referred Members to page 23 of the draft Report. The national commitment for the allocation of resources on grants was maintained, but the Committee did not yet know exactly what would be the total amount. The 2009 legislation had not set a specific goal in this regard. The Committee recommended that the Minister must coordinate and finalise the project to create an integrated funding model, to avoid duplications. He covered last year’s recommendations related to the commitments that should be paid, and the answers the Minister had provided, namely that the unfavorable economic conditions did not allow the Department to meet all commitments. In regard to the establishment of an integrated funding model, the Department expected to create a new branch which would effect redistribution and development, with other institutions such as Land Bank. However, the current recommendation related to formalising a funding model that affected all activity of the Department.
On page 24, the Committee recommended, in relation to the Rural Development programme, that a survey of all land reform farms must be done, to get insight into the socio-economic impact of implementation, and that survey must be considered and approved by the Minister.
Mr T Walters asked for clarity what exactly was meant by “assessing socio-economic impact of land reform” and wondered about the sustainability of the Department’s project. He would like to know more about the actual assessment, not only the pilot project.
The Secretary said that there had been a revised program of implementation, which was what the Committee had asked the Department to provide.
Mr Walters said that although information had been given about the policy in the media, that did not necessarily refer to development of policy aspects updated. It was necessary for the Committee to get the document in order to assess the success or otherwise of the implementation.
The Committee Secretary responded that the Committee was recommending that clearly stated targets, and a report of achievement, would be required when the Department reported on progress.
A recommendation in section 7.2.3 was that DRDLR must continue to engage and coordinate with the Department of Agriculture, Fishery and Forestry, in order to maximize resources and avoid duplications during public intervention.
Mr Filtane asked when this coordination had started and wondered if the word “continue” was necessary.
The Committee Secretary clarified that “continue” was included because this had been mentioned before and because the Committee had hosted a joint session when DAFF was present.
Mr Mnguni noted the time constraints and suggested that specific points be highlighted rather than reading the entire draft.
Mr Walters supported Mr Mnguni’s proposal, and Mr Filtane quipped that it was interesting to see the two Members aligning their views.
The Committee Secretary summarised the arrangements for public hearings in Eastern and Northern Cape.
The meeting was adjourned.
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