Appropriation Bill: Rural Development and Land Reform submission, with Minister

Meeting report

The Chairperson gave a warm welcome to the Minister of Rural Development and Land Reform. He noted that in dealing with the Appropriation Bill, the Money Bill Amendment Act required the Committee to hold hearings on the Bill to assess the readiness of government departments to spend their proposed budgets.
 
Minister’s opening remarks
Mr Gugile Nkwinti, Minister of Rural Development and Land Reform, noted that DRDLR had already presented its strategic plan and budget to the relevant portfolio committee. There is internal monitoring and evaluation that is meant to ensure that DRDLR was effective and was able to achieve its strategic objectives. The internal audit committee had done a good job and this proved that DRDLR was now moving from working in a silo to working with other institutions. DRDLR was also beginning to deal with the problem of fruitless, wasteful and irregular expenditure and there is specific report that had been provided to the Committee speaking about those solutions. The Committee could look at the report as make any necessary comments. DRDLR needs to be transparent and be assisted in continually improving on this matter. 

Department of Rural Development and Land Reform (DRDLR) briefing
Ms Leona Archary, Acting Director-General: DRDLR, indicated that the breakdown of  appropriation per programme in 2017/18 showed that 31.9% of the budget would go to restitution, 25.8% to land reform, 16.9% for administration and 6.6% to Ingonyama Trust. DRDLR had been allocated R10.1 billion for 2017/18. In terms of appropriation per economic classification, 46% of the budget would be going to Households, 21.5% for Compensation of Employees, 16.8% for Goods and Services and 14.7% would be for departmental agencies and accounts. R5.230 billion or 51.4 % of overall budget would be allocated for contractual commitments like salaries, transfers to entities and organisational needs. R2.215 billion would be dedicated for household projects commitments and was carried over from 2016/17.

Ms Archary said that in terms of state of readiness of the Department, the demand/procurement plans were linked to project registers and budget to ensure that procurement is at the right time, and at the right cost. The demand/procurement plans were reliably determined and appropriate sourcing strategies were developed. A breakdown of monthly anticipated expenditure was developed. The delivery of services were to be regularly monitored to ensure that scarce resources are efficiently and effectively used by regularly tracking, controlling and reporting on expenditure against performance. There is a continuation of the enforcement of cost cutting measures as ordered by Treasury in the previous financial year. There has been a slight decline in compliance with the 30 day period for the payment of service providers from 97% in 2015/16 to 94% in 2016/17. DRDLR paid 94% of total invoices submitted that reflects 6% non compliance with 30 days. The reasons for non compliance were invoice discrepancies, tax clearance certificates that expired and ex-post facto invoices.

Mr Eugene Southgate, DRDLR Deputy Director-General: Corporate Services, stated that DRDLR had the highest-ever Fourth Quarter and Annual performances of 94% and 97% respectively. The Medium Term Strategic Framework (MTSF) aims to increase percentage of ownership of productive land by previously disadvantaged individuals by acquiring 2 million hectares of land by 2019: For the period 2014/15 to 2016/17, DRDLR targeted 843 074ha, and acquired 798 788ha. This translates to 40% progress towards the 2 million hectare target. For the next Medium Term Expenditure Framework (MTEF), a total of 281 165 ha of land is planned for distribution. MTSF aims to allocate 1 million ha of land acquired to smallholder producers by 2019. For the period, 2014/15 to 2016/17, DRDLR targeted 226 492ha, and 384 132 ha was allocated and translates to 38% towards the 1 million ha MTSF target. Over the next MTEF, a total of 140 500 ha is planned for distribution to the previously disadvantaged individuals.

The MTSF aims to provide support to1 741 farms under RECAP programme by 2019 and for the period 2014/15 to 2016/17 DRDLR targeted 985 farms, and 994 farms were supported and this translates to 57% towards the 1 741 farms MTSF target. This performance indicator was moved to the Department of Agriculture Forestry and Fisheries (DAFF) as of 2017/18. In terms of claims settled, the Commission targeted 1 457 total settlements for the period 2014/15 to 2016/17, and they achieved 1 857. There are 3 331 projected claims to be settled over the next MTEF. The MTSF aims to have 90 000 skilled people by 2019. DRDLR targeted 28 900 (including 10 120 NARYSEC) skills opportunities, and 32 909 was achieved. The NARYSEC target amounts to 8 605 and overall, this translates to a contribution of 37% towards the 90 000 MTSF target.

Mr Southgate highlighted that DRDLR achieved 79% of its annual targets for 2016/17. Both the Internal Audit and the Audit Committee received MPAT scores of 4.0 for the last four years.  This is the highest MPAT score and indicates that the Internal Audit and the Audit Committee are fully compliant with legal/regulatory requirements and are doing things smartly.

Discussion
Ms M Manana (ANC) welcomed the presentation and asked about the procurement plans in place and breakdown of companies that were owned by women and black people in general. It was unclear how much money would be saved on the cost containment measures that would be implemented. What would be saved through cost containment measures in 2017/18? It must be commended that DRDLR seemed to be able to achieve the target for the settlement of claims. However, the Committee should be briefed on whether these settlements were mostly money or land. Where was DRDLR getting the money for the settlement of claims?

Mr M Figg (DA) appreciated the format of the presentation that had been used by DRDLR as this was clear and easy to follow. It would be important for the Committee to be briefed as to why the amount for Administration was so high and costly for the Department. Why was DRDLR moving funds to DAFF? The Committee should be furnished with an updated asset register. It was not clear whether the targets set by DRDLR were based on a needs assessment as they seemed to be low and easily achieved. It was concerning to see that DRDLR was speaking about cost-cutting measures while it had overspent.   

Mr A McLaughlin (DA) congratulated the Minister for the work that had been done as DRDLR was one of the best performing departments in the country. DRDLR should provide detailed information as to what was contained in the Household projects as this was confusing. It would be important to know if part of the Administration cost included those administration costs of the Department’s entities. There should be clarity as to whether the vacant posts were funded or frozen posts as it was essential to make the distinction between the two. Who was the person that was responsible for the transfer of funds? 

Ms S Shope-Sithole (ANC) also appreciated the simplicity of the presentation by DRDLR and wondered whether this format could not be shared with other government departments and entities. The Committee should be briefed about the number of farming support units and where they are located in terms of wards. The Committee would hope that the cost containment measures are not turned into austerity as the government needed to intervene when the economy is sluggish.

Mr N Gcwabaza (ANC) asked why the RECAP programme was moved to DAFF. Was this programme moved with its own allocated budget? It would be important to know if there are plans in place for DRDLR to reach the target of employment for the Medium Term Strategic Framework for 2019. It would be nice to hear from DRDLR whether its budget reflected a shift towards radical economic transformation.

The Chairperson commended DRDLR for the succinct presentation. DRDLR should provide a clear breakdown plan per programme on how it intended to implement the 2017/18 budget allocation. It was concerning to see non-compliance in a number of areas in corporate governance, particularly on Information and Communications Technology (ICT) and Promotion of Administrative Justice (PAJA). What is the turnaround plan to deal with the concerns flagged in these areas? The focus should be on the impact for the people on the ground and this including fast-tracking land restitution. What was the impact on the projects that were carrying over? Was there a way of dealing with the duplication of programmes? The other concern of the Committee was on the value for money in each programme undertaken. Was there a way of scaling-up Agri-parks as this programme was beneficial for young people and women in rural areas?

Ms Archary responded that DRDLR targets are closely aligned to the allocated budget and those targets that were not achieved are mostly related to projects that were not completed for various reasons. DRDLR was not counting partially achieved targets; it was either achieved or not achieved. There is certainly an updated asset register and this was also being audited by Auditor-General South Africa (AGSA). The asset register could be made available to the Committee.    

Ms Rendani Sadiki, Chief Financial Officer: DRDLR, said there is no procurement plan as yet for 2017/18 but the Committee could be provided this for the previous financial years. The Committee should note that Treasury implements the cost-cutting measures before the budget allocation. Therefore, the cost-cutting measures had already been implemented but DRDLR also implements additional cost-cutting measures such as for travel. The Committee could also be furnished with the report on cost-cutting measures that had been implemented. In the RECAP programme, every recapitalisation grant that is awarded to a farmer usually runs for five years. On the overachievement on the restitution target, DRDLR was trying to use all the other savings from all the other branches to push for restitution. The budget allocation from Treasury was very small for restitution, especially when one considered the DRDLR commitments for this.

Ms Sadiki said the administration costs are very high because everything that DRDLR was doing was centralised within Administration. The Committee should be aware that things like communication costs, accommodation, transport, rates and taxes for the municipalities are centralised within Administration. DRDLR was also busy with the construction of a new head office and therefore Administration would continue to be higher until 2020. DRDLR did not have any over-expenditure and this had been the case for a number of years. The priority is to spend within the allocated budget. The targets are not set very low and the integrated operational plan showed that DRDLR targets were actually very high. The overachievement is not because the targets were low but rather that DRDLR was working very hard.

Mr Southgate added that DRDLR targets are aligned to budget allocation and DRDLR would rather set very high targets than low. DRDLR was carefully monitoring the set targets and the achievement of those targets. There would be a case where DRDLR would have achieved 100% if partially achieved targets were counted.    

Ms Archary explained that the Committee should be aware that DRDLR was working with multiyear projects and this was planned this way. There are projects that are still ongoing and would be completed in the third and fourth quarter. In essence, the projects that are still ongoing are not eating-up the budget of the current financial year.    

Ms Nomfundo Gobodo, Chief Land Claims Commissioner, DRDLR, replied that DRDLR usually had more work than the budget that had been allocated by the Treasury. There are projects that are always in the pipeline. DRDLR was also aware of the enormous pressure that is out there and requiring DRDLR to fast-track land restitution.

Ms Archary responded that DRDLR prioritised Agri-parks as this was seen as a catalyst for job creation in rural areas. DRDLR was now moving towards aligning the work that is done in Agri-parks to the work that would be done in terms of turning South Africa into a construction site. It was working in the 44 districts of the country and the Committee would be provided with a video that shows a snapshot of the work done by DRDLR around Agri-parks in each district.  The video would also show how DRDLR was targeting young people for the work on Agri-parks. The farmer production units that Department was working on are the ones that are closely aligned to the Agri-park programmes. On the challenges highlighted by Department of Planning, Monitoring and Evaluation (DPME), DRDLR had introduced the Office of the Valuator General and this was to deal with saving on land prices. It would continue to capacitate this Office to perform optimally.

Ms Archary clarified that DRDLR had used Outcome 7 to foster coordination with other government departments. DRDLR was working very closely with DAFF and this is to avoid duplication when providing support to farmers.  DRDLR has created a mechanism between national, district and local municipalities to streamline a governance system that would allow for integration between government departments to happen. The nature of the work being done in rural development means that DRDLR was dealing with over 20 government departments. DRDLR needs to ensure that its work is a catalyst for other departments to perform well. It had signed Memorandum of Understanding (MoUs) with various government departments like Department of Human Settlements. The role of DRDLR is not to be building houses but pulling together relevant departments. DRDLR has been conducting service delivery workshops across the country to ensure that there was an understanding of the challenges under Outcome 7 and the requirement of the sector departments that DRDLR was working with.

Ms Archary mentioned that DRDLR had set the target of delivering 24 million hectares of land and had already delivered 8 million hectares so far. This was a huge target that required a significant budget allocation. It was settling the maximum amounts of settlements per year against the budget that had been allocated. It was in constant contact with Treasury in order to address this issue understanding very well the current budget constraints. It was looking at ways to bring in black farmers in the commercial sector and this could be done with less money if DRDLR prioritise partnering with other government departments. There is a 19.1% decline in households involved in agriculture and agricultural support was the responsibility of DAFF. However, DRDLR was also fully aware that agriculture was the core part of rural development and some of the programmes are meant to get more households involved in agriculture and increase the level of food security. The Committee would be provided with progress that had been made on Outcome 7. There are available statistics on the number of young people, people with disabilities and women that had been assisted by DRDLR in terms of the rural development programme.

Ms Archary explained that DRDLR had taken note of the areas of non-compliance and this was being addressed by management. There are action plans in place that are aimed at addressing these. It would provide the Committee with a clear breakdown plan per programme on how it intended to implement the 2017/18 budget allocation. It had submitted an integrated plan that details budget allocation per province and this would assist the Committee in conducting oversight. In terms of radical economic transformation, the budget allocation was talking to all the important elements of radical economic transformation. It was certainly working towards institutionalising radical economic transformation. In essence, its budget speaks directly to radical economic transformation. Access to land was the priority of DRDLR and was seen as promoting radical economic transformation. The 924 000 jobs was a collaborative target with other sector departments and it was not the sole responsibility of the Department. DRDLR was slightly above its target in terms of employment creation. The Committee would be provided with a detailed report on the job opportunities that had been created.

Ms Archary stated that the RECAP programme was not given a starting budget when it started within the Department. There were challenges in terms of the land reform fund within the Department. Therefore, DRDLR had to take from its budget to fund the RECAP and this was costly. After discussions with both Treasury and DAFF, the decision was taken to move the RECAP to DAFF. The money that was being used for RECAP was finally taken back and used for land access by DRDLR as was intended. DAFF is going to include the RECAP within its support programmes for farmers and decide on the budget allocation. It is indeed true that if DRDLR moves towards austerity then it would be unlikely to do its mandate properly as a developmental state. The Committee would be provided with detailed information on the farmer support programme.  The amount that is reflected now for RECAP belonged to DRDLR and there was an agreement with DAFF that the money would be used to close the gaps on funding land access.

Minister Gugile Nkwinti responded that indeed DRDLR was afraid of the cost containment measures as they could negatively impact on the work that being done so far. The implementation of austerity could mean that the Department would not be able to deliver on its mandate and this was the biggest threat that was facing the Department. The research by the Human Sciences Research Council (HSRC) pointed out that 65% of the land that had been redistributed was productive land and this was based on three sampled provinces (KwaZulu-Natal, Free State and Western Cape). This was encouraging as this was exactly why DRDLR dedicated 25% of the baseline budget for land RECAP. The farmers are saying that DRDLR should not be handing over the RECAP to DAFF and DRDLR was in agreement with this sentiment as there is a structural challenge within DAFF. The main concern was the fact that DAFF had no control of the money once it is disbursed to the provinces and this was the biggest challenge. DRDLR was lucky as it was still able to make decisions on the money even after this had been distributed to the provinces.

The Minister highlighted that DRDLR had just gone through Operation Phakisa for agriculture, rural development and land reform.  Programmes had been introduced to ensure this had an impact on the ground. In relation to Agri-parks, DRDLR had met with municipalities and district mayors and this was to ensure that they would be the political champions of Agri-parks. This is to emphasise that the provinces and district municipalities should work towards supporting local municipalities to promote Agri-parks. The district municipalities were responding very well to this and this was something that was encouraging. The local municipalities should set up land rights management committees to deal with problems of land claims.

The minutes of 16, 17, 19, 23 and 24 May 2017 were adopted.

The meeting was adjourned.