DRDLR, Land Claims Commission, Valuer General Office, Ingonyama Trust Board 2017/18 Annual Reports; with Minister and Deputy Ministers

Meeting report

Briefing by Auditor-General Sourth Africa (AGSA)

Mr Rienk Grobler, Senior Manager, AGSA, said the purpose of the briefing was to take the Committee through the audit outcomes of the 2017/18 financial year and highlighting critical matters. The audit was done on financial and material statements to assist the Portfolio Committee with its oversight function. The three areas looked at are financials, pre-determined objectives as well as compliance.

Mr Grobler emphasised the need to assess the year end review audit outcomes thoroughly through planning, monitoring and evaluation. The Department of Rural Development and Land Reform obtained an unqualified opinion with material findings on compliance, rules and regulations. The Ingonyama Trust Board (ITB) regressed this year. It was also noted that performance information was presented late, and 60% did not have material findings on performance information. The irregular expenditure has been reduced in the current year and the majority is sitting in ALHA. Fruitless and wasteful expenditure increased through litigation cases and the majority came from travel claims within Rural Development and non-registered vendors and this was being investigated.

A breakdown of irregular expenditure was provided and there are currently investigations of R144 million by the Agricultural Land and Holding Account (ALHA) as supply chain management did not follow due processes and procedures. All fruitless and wasteful expenditure from previous years are being investigated. Major root causes are slow responses and vacancies in key positions, Rural Development has a number of acting positions which contributed to the outcomes in the current year. The Auditor-General mentioned that the Minister did resolve matters when the auditor requested information from her office and the Portfolio Committee is conducting its work accordingly. The AG noted that the deficiencies in ITB need to be fully addressed.

Key concerns identified on ALHA were settling creditors, bad debts on grants and beneficiaries providing inaccurate documents. The Office of the Valuer–General was listed as public entity from March 2018 and they are required to comply with all requirements of the PFMA in order for them to operate as a public entity. For the ITB, the Auditor-General noted that entity received an adverse opinion and management needs to resolve issues between the Trust and the Board in terms of expenditure which is impacting on the audit opinion in terms of accounting for the land. A lack of accountability will make sure that corruption will thrive, so all policies and procedures are to be followed accordingly

Discussion

Mr M Filtane (UDM), pointed out that fruitless and wasteful expenditure was a going concern and wanted to know what steps were taken by the Department to prevent wasteful expenditure. On the R144 million, he asked how can it can be prevented and what was the social impact of the wasteful expenditure was. He raised the concern of the impact of vacancies and wanted to know how far the Department was in filling the vacant positions.

The Chairperson then acknowledged the presence of the Minister.

Mr E Nchabeleng (ANC) asked what went wrong with ITB as it was the beacon of hope for the Department; and what measures in place to correct the negative perception of the ITB.

Mr A Madella (ANC asked if there had been any engagements with ITB to guide them in achieving a clean audit.

Ms N Magadla (ANC) sought clarity on the ITB’s financial status. The Portfolio Committee has requested a meeting with the Department to establish the financial health of the entity, and she asked if that meeting did assist the Auditor-General?

In response, Mr Grobler said ALHA was a first project of its kind. They did not follow all the proper processes and procedures and to prevent it happening again one needs to conduct a thorough feasibility study as well as make sure proper due diligence is performed.

To provide clarity on the R144 million, he said as at year end one could not conclude if all was fruitless or irregular expenditure; R38 million was disclosed as irregular expenditure for the current year under review. Some of the projects have already been signed off through agreements but additional controls would need to be put in place.

Ms Ntombifuthi Mhlongo, Business Executive, AGSA, clarified that the irregular expenditure of the ITB was not recognized between the Trust and the Board and that recommendations had been provided.  The first step is that the Trust has recognised the need for land to be acknowledged as an asset value. It was recommended that the ITB submit a plan to Treasury and that the Trust and the Board work together. ITB is regarded as a small entity and the number of accounts that it can deal with is mainly in the accounting for land and evaluation of the land

Mr  Filtane appreciated the comments and wanted to zoom in on the R144 million and wanted the Committee to be updated in terms of the investigation findings three months from now..

The Chairperson said it was the duty of the Department to update the Committee on the progress of various investigations taking place.

Mr Nchabeleng requested the Chairperson to make a follow up that the Department must brief the Committee about outstanding issues specifically linked to forensic investigations taking place.

The Chairperson thanked AGSA and said the Office must come to the Committee three to four times a year to be able to keep the Committee up to speed with issues under investigations.

 Briefing by Office of the Valuer-General (OVG)

Mr Thapelo Motsoeneng, COO, OVG, said the OVG was audited for the first time in the past financial year.

During that audit the entity received 6 findings and the OVG did not have an Annual Performance Plan. Of the six findings during the regulatory audit, the entity was able to resolve four. OVG is a going concern and will continue in this mode for the next 12 months.

The expenditure of R13.9 million was a 63% increase from the previous years whatever was not spent needed to be returned to Treasury as part of annual reporting. The OVG has spent time to get the office up and ready and the overwhelming majority of evaluations were outsourced. The OVG does not have capacity to do evaluations on its own internal capacity. In so far as the relationship with the Department, the COO noted the support from the supply chain management, finance and human resources. The OVG in process of putting the operational, finance and human resources policies to be finalised and enjoyed a healthy relationship with the Department in consolidating its task.

The entity received R64.8 million in the 2017/18 financial year. The OVG received a clean audit on the financial part of the annual performance plan. The COO noted that valuers in private practice are trained to determine market value, but the Property Valuation Act (PVA) requires more from a valuer to conduct evaluations in line with PVA. There was a five day course that rained valuers to do valuations in line with the PVA and this is done in conjunction with the University of Cape Town (UCT). The OVG requires all its professional valuers to be trained to ensure they conduct evaluations for land reform and expropriation. The OVG has a total of 10 valuers at the moment and it is a development branch of the Department to conduct land expropriations and the OVG is allowed to do evaluations on other government departments.

The OVG has developed standardised guidelines for acquisition and land disposal process, and the entity now has its own office accommodation in Pretoria. The OVG has produced the strategic document for the entity to support the business processes as well as the organisational structures as well as guiding policies.

Targets that have not being achieved in quarter 1 and 2 will be reviewed for quarter 3 and 4. The budgetary alignment will be considered in the new budget cycle, and OVG has requested retention of surplus from Treasury. The Valuer-General noted that the office did not have a structure when it was implemented, so when the Auditor-General was auditing the books it found that it did not comply fully will all legislative frameworks and have observed that even though targets were achieved, the purchase of properties by branches was not enough for the lead time.

Discussion

Mr Madella mentioned that there was a going concern with too many vacancies that need to be filled in, If the course is 5 days then there ought to be more valuers that have completed the course. He asked whether they meet the employment equity targets. He asked if the objective of valuing land has been reached through the Office in conducting evaluations with the price ranges that the branches can execute. He asked clarity if the OVG is aware that the expropriation of the land is to be done without compensation.

Ms Magadla asked if the policy on expropriation without compensation is passed by Parliament, how relevant the office of the OVG would be. What is the employment equity of this office?

Mr Filtane asked when the valuations of land will be ready to be presented to the Committee with timeframes of the business operating model. Land is a priority and he asked why there was not much research on land development. Is it because of procurement delays?

Ms S Mbabama (DA), had a clarity seeking question in terms of the allocation received from the fiscus in terms of grants and asked if it could be reflected on the graphs. Page 11 spoke about having helped the Department to meet its target, yet the COO was saying you need to meet targets. What are you going to do to ensure you reach targets?

She said that the OVG had spent R2.4 million for compensation of employees, but seemed to have spend more in previous year. She asked for an explanation.  She referred to the independent quality review committee and asked if this will this be considered as outside or people within the entity?

Mr Filtane (asked a question based on slide 8 and asked when the OVG will have their own fully fledged team of internal valuers. Slide 10 talk of market value. What impact that has on the budget of the Department? He also asked on what consideration the OVG would find zero value on a property. Committee has not yet seen the long term strategy of the OVG and the Committee would like to see the long term strategy to ensure all entities are aware of the direction taken by the entity.

Mr Nchabeleng asked if the OVG ‘has any teeth’ to impact on land issues in the country and how many successful evaluations had been made. Has the OVG followed processes in concluding land evaluations and what lessons have been learnt from using outsourced valuers? The Restitution Commission had under performed in previous year because of delays from the OVG to do work on their behalf. What are your plans to speed up land issues through the Commission? The Chairperson then indicated that the OVG submitted a request for R57.7 million, what was it for? Why the delay in the appointment of the independent quality reviewer? The difficulty is that the OVG did not submit the APP as the performance must be aligned to the plan. According to the staff establishment the entity is meant to have six valuers, but the entity is talking of 10 and he asked for clarity.

Mr Christopher Gavor, Valuer-General, said vacancies was a key concern and the structure of the organogram was being filled. The training has always been done as a private practice. In total, the OVG has trained about 120 valuators in the last three years.The training has not met equity targets as traditionally the valuers profession was still predominantly white and in private practice. In collaboration with the Council for Valuers, the OVG will conduct a study on the profession as a whole to be relooked at in terms of what the programme offers in terms of the developmental needs of the country.

The OVG as an entity was still in its infancy stage. It has not yet met all targets as the formative stages require lead time. The OVG will be relevant even if section 25 of the Constitution has been passed, because the role of the OVG continued and also did valuations evaluations requested by other departments. The regulations will be sent to the Committee as a matter of urgency. The timeframes for the development of the business model has been completed and the Minister has signed it off and that has informed the new structure. The establishment of a quality assurance and review committee consists of people outside the OVG, e.g. academics, valuers in private practice, chartered accountants and an agricultural economist to be in place from quarter 3 as an independent body to review valuations that have been performed by the OVG and advise the OVG on the quality of work. So far the market value has been the basis for evaluation for land reform till 2016. Since 2016 the regulations have reflected valuers to find market value. In terms of the Property Valuation Act, the OVG applies the principles of valuation on properties for acquisition by the Commission.

The OVG has also done work in the Department of Water and Sanitation.  The Property Valuation Act only allows the OVG to work for the State and not the private sector. The Commission would have presented to not achieve their targets because the OVG unintentionally did not consider lead timeframes; there were challenges in terms of the composition of the team. Training amounted to  around R8 000 per person to be trained over the five days. The cost of employees system has not closed until accountants finalise their work for quarter 2 and the spend on goods and services in the main is what is paid to valuers in private practice. The spend mainly was for technical work and office equipment, training and so forth. The issue of the staff establishment has been resolved through a new structure: six 6 junior valuers; three senior managers and the Valuer-General. This will be made available to the committee.

In terms of the R57.7 million, OVG informed the Committee that OVG is getting cited more and more in court papers so the money is to manage the flow of valuations. It funded the valuation system, set up of the project and programme management office and stakeholder engagement for the OVG as it is envisaged to grow the office of the Valuer-General exponentially. Some of the money is to acquire office equipment. One of the mandates of the OVG is to generate income, and it will do so through conducting more valuations. On the impact of the valuation process by the OVG, he said in 2016/17 the land reform branch saved over R200 million in terms of payments on acquisition of land compared to previous years.

Mr Filtane asked when the office would be fully capacitated and wanted to also know if there is provision in regulations for a zero valuation on land.

Mr Gavor responded to say that capacitating the OVG needs to be phased in over the next two financial years. Expropriation without compensation is a going concern and will be addressed by the OVG. The zero value of land will be the result of the valuation process and cannot be determined upfront prior to conducting the evaluation. The intention of establishing the review committee is to assist the work of the Valuer-General to execute his duties in reviewing work done by OVG and produce reports with findings and recommendations. It is a structure independent of the OVG.

The Chairperson noted that there was a question of the graph which the delegation was asked to comment on.

Mr Motsoeneng replied that the number is accurate it was just not reflected in the graph.

Mr P Mngunu (ANC), said training of valuers is not the role of the OVG.  If fallow land is valued at zero it will have serious consequences. The Restitution Commission is performing less because the Valuer-General is delaying the process. The OVG needs to speed up work and white collar crime is committed by unscrupulous private seller with collusion and this affects the OVG. The whole debate on land in the country rests on valuations and the entity needs to be a catalyst.

Deputy Minister, Ms Candith Mashego-Dlamini then clarified the zero market value issue. Since 1994 the land was scattered to the spheres of government. If a municipality identifies land it can inform the national government to use it even though there is zero value. The exchange of ownership from one sphere of government to the next is R1. The OVG identifies land in terms of economic activity and it can be valued at zero as there is no person who is occupying that land.

The Valuer-General noted the agreement with the Department to work together to accelerate land reform and that there are regular meetings to ensure that the work is aligned to the works of the other branches within the Department. The misconduct role of valuers in private practice has been reported and currently investigations are going on with four valuators being investigated. The VG is now a member of the International Valuation Standard Council, this is part of becoming a member is to influence what goes onto those standards in that Council.

Briefing by the Commission of Restitution on Land Rights (CRLR)

Ms Mokote Mokono, said the Commission support the broader mandate of the DRDLR, the Commission contributes towards land restitution in the country and redress land rights lost after 1913 Land Act. There is also a responsibility to improve governance and service delivery and ensuring that entity is dedicated, result orientated and professional. The Phakisa mini labs have given the entity more leverage to influence policy and have since set up strategies to ensure the Commission is effective and efficient.

The Commission has rolled out its claims electronically to improve reporting and responsiveness and promotes service delivery. For 2017/18 financial year, in terms of financial expenditure the Commission spent 99.9% of its budget. The summary in terms of service delivery achievements: settled 63 00 hectors of land which benefitted 12 000 households and this relates to an overall of 3.4 million hectors settled since 1994 overall. The Commission further wanted to fast track settlement of older claims to be settled with communities. However there has been slow turnaround from the OVG and once valuations have been made, there still needed to be offers made to land owners. The delay leads to land owners rejecting the offers and this means the matter will go to court.

Ms Mokono indicated that the entities need to work together more closely and avoid court settlements. The Commission does not have the mandate to negotiate on the land value, and if the issues are not resolved the land owner can request the Valuer-General to submit a report on the land to be acquired. In terms of settlements, the Commission finalised as many cases as possible including the phased projects, The research reports are currently being finalised as the database is being cleaned up. Slide 14 provides the breakdown of performance per quarter beneficiaries and hectors awarded.

Ms Maria Francis, CFO, CRLR, noted that the entity spent 99.9% of budget; all in all R2.5 billion spent on finalisation of settled claims. As the Auditor-General reported, in terms of the Restitution Act, the entity has to produce separate financial statements and the entity has agreed to do that process as it is now an autonomous entity. The entity deals with financial settlement claims as it is paying less for land as opposed to the past years. People now want financial compensation thus the entity gives people more in terms of financial compensation.

Ms Nomfundo Gobodo, Chief land Claims Commissioner, CRLR, then proceeded with the presentation noting the litigation monitor, said a contingent liability is required to avoid litigation. The trend is that the bigger provinces have more number of court cases. The entity is sitting at a total of 714 personnel in terms of human resource capacity and the vacancy rate in terms of the calculations is at 37.3% and hoping for improvement in view of the approvals received from the Department.

Discussion

The Chairpersons sought clarity on the outstanding research claims, i.e. where the number of 1 197 comes from or are the figures not an accurate reflection of the status quo. The entity was requested to provide answers to the grant procedure especially for the people that have been given land but are awaiting the post settlement support.

Ms Magadla asked when the Commission would be autonomous and become independent from the Department; what the status of the Land Restitution Amendment Bill was; and what type of amendment might be needed by LAMOSA to the Constitutional Court.

Mr Filtane said one of the major reasons people prefer cash over land is because of the depressed economic situation. Has there been research done to understand why people prefer cash over land?

Ms Mbabama requested an explanation on the non-acceptance of offers from claimants and land owners, and the historic valuations conducted by the appointed valuers. She asked why a recap grant would be required. The statement of commitments is not reflected in the presentation and she asked what the 42D was the Minister needs to sign. There needs to understanding in which cases would you use a just and equitable compensation and who would decide on it. Is there a timeframe for disputes between the land owner and the buyer, as it cannot remain open ended?

Mr Nchabeleng referred to Generally Recognised Accounting Principles (GRAP) and Generally Accepted Accounting Principles (GAAP) and asked what the difference was. He noted the strained relationship between the Commission and the OVG and wanted to know how well the two entities are talking to each other.  According to the findings the Northern Cape, had about six claims and two of the claims were rejected and research was conducted but no outcomes were achieved. Why would you need to redo the research and at what cost? Were the claimants informed of the dismissed claims, and what is the way forward for claimants, and could you please update the Committee on the settlement of the Free State project in Qwa-Qwa?

The Chairperson said there were still challenges in terms of listing the entity. There is also a policy developed on untraceable claims and she asked what  the progress on the implementation of that policy was. The Commission said it would prioritise state land to fast track the restitution process under operation Phakisa. How far is the entity with regards to that? The entity indicated an under spending on vacant posts and she shaid these are posts that needed to be filled.

On autonomy, Ms Gobodothen responded that it has been a challenge for a number of years because on one Treasury says the entity is not autonomous while the Auditor-General acknowledged its autonomy. The entity is experiencing challenges in terms of implementation as the Commission currently gets its back office support from the Department. There is a plan for human resource capacity and if the Commission was to move forward on its autonomy,  the Commission can be audited independently.

Mr Kgotso Rameleng, KZN Regional Commissioner, CRLR, noted that the Commission has started the process to being a Chapter 9 institution, and internally the entity engaged on a mini Phakisa in coming with improved systems and that is how the five outcomes were realised in order to fast-track the alignment of the Commission to the people that need assistance. The Auditor-General helped to interpret that the Commission is an entity and it will define the business process of the Commission and the Commission will engage with National Treasury for guidance in terms of being autonomous. The only delay is whether to be a Schedule 3 or Chapter 9 Institution. The mini Phakisa document will highlight the challenges faced by the Commission.

There were a high number of untraceables and the number will keep increasing until the research process is completed. The research is done in collaboration with the claimants and if people are not located it becomes difficult to trace them.

The Chairperson then interjected and asked if the untraceable claims are claims that had been finalised. 

Mr  Rameleng responded and said in terms of the outstanding claim an analysis was done and realised many claims were lost prior to 1998 and out of that analysis it was discovered that the 916 were claims found, however a tracing agency was outsourced to trace all other claims that are untraceable, the number provided to the committee as 1197 is because there are additional researched claims as part of the collective, untraceables in this instance are not settled claims they are original claim forms that were logged prior 1994.

The Chairperson of the Land Commission said that some claims do not necessarily meet all requirements and that claim cannot be claimed under the restitution process, however the parties can approach the Minister to be granted land to be processed. The tracing agents work with the commission to locate the beneficiaries. Section 42D approval means the Minister has looked at the claim as valid then approves the commission to pay through financial compensation or transfer the land, once the land is transferred then the claim is finalised.

 The 42C grant is a prerogative of the Minister and before 2009 there was a percentage to each claim as a grant, because they were not all finalised over the years the grants still remain in some instances. On the cash versus land issue, perhaps the political principals may answer that question, however in communal areas where communities have land as they were moved from one village to another they rather opt for financial compensation in this regard. The just and equitable compensation relates to the question of Expropriation talks to the Expropriation Act of 1975 Section 42E speaks to expropriation and Section 33 of Promotion of Just Administration Act talks to the 5 principles highglighted in the presentation and one of them is market value, the Department has moved away from market value and is now in terms of Section 12 Property Valution Act is based on a just and equitable value of the land, the timeframes when there are disputes is still on-going and the Auditor-General is to advise the entity. The commission is trying to fast track progress with the office of the Valuer-General, there will be a report to be submitted on the untraceables.

 The commission has prioritised state land, however most of it would require bureaucratic process to coordinate work to be done by all stakeholders involved. Operation Phakisa rests on the question of autonomy and all strategic policy framework is in place and we need to submit it to the committee.

Ms Maria Francis then responded on the commitment register, noting that currently R5.8 billion was available and the development grant prior to 2009 consists of R2.4 billion, this money was based on the value of the land not because of the business case, communities need sufficient development grant and this needs to be based on a proper business plan. There are still projects under recap that need to be finalised, the commission needs to ensure that the money is properly introduced for sustainable development on the ground, hence support required from other related departments.

 There was also a follow up response on the issue of the autonomy of the commission by the Deputy Minister Ms Mashego-Dlamini noting that the commission declared a dispute with the Auditor-General as a department and a decision was taken that because the commission cannot stand alone as it does not have the necessary budget, so treasury could not do a separate allocation and have therefore work it as an unregistered entity until all teething problems have been sorted out. The entity is accounting under the department separately.

The Minister Nkoana-Mashabane was noted and said that the department is trying to achieve land reform and space in the economy for all South Africans, therefore the creation of entities and how they account to parliament is necessary yet the concern more from the department is providing access to land for the landless, the creation of entities can be autonomous but does not mean it is totally independent.

 The landless are interested in accessing land, so we need to quicken the steps as the President had noted during this years’ State of the Nation Address (SONA) and post the SONA, the Department requested each entity to show us how they can quicken their steps in helping people on the ground. Section 42C based on an understanding that support must go with the release of land, example the project in Northern Cape requires post allocation support from the department. Section 42E where there is a disagreement between the land owner and beneficiary, the Minister can issue a notice of expropriation, in some instances the valuer-general will value the property at a different rate to the land owner, these challenges should not delay work as we need to quicken our steps in providing access to our people.

The chairperson thanked the Minister and emphasised that we cannot make laws and break them, there was a recommendation that the Restitution Commission should seek to be autonomous and act accordingly, and henceforth compliance cannot be compromised in favour of other programmes. However, there is a need from the department to meet with the Auditor-General, restitution commission and national treasury so that it can report as an autonomus structure.

Mr M Filtane (UDM) then noted that centuries ago a famous writer said To be or not to be is the question, that is appropriate for today, thus recommended that this matter of an autonomous entity, set aside a special committee meeting to give it the necessary attention it deserves, the proposal is to defer the matter of the autonomy, then invite the Department, National Treasury, Restitution Commission and the Auditor-General, the Chairperson then suggested rather that the entities meet first then will meet the portfolio committee.

The acting Director General then explained that the department is reporting to the Department using modified cash standards versus the Commission that is using Generally Recognised Accounting Principles (GRAP), the prioritization of the state land to accelerate restitution work is ongoing and approval from Public Works for the land has been released, there are over 278 claims that are dependent on approval from Department of Public Works and the implementation plan is in place to try and accelerate restitution for all claims from different departments, the decision taken is to ensure that all entities need to sit around the table to unlock restitution. The issue of post settlement development has made strides, restitution is packaging approval of R500 million to do work of restitution with the Land Bank in order to accelerate restitution.

The chairperson then thanked the Department for the responses and noted members for follow up, and noted that restitution had completed their presentation and the portfolio committee would be making recommendations that it will then send to the Department. The Chairperson then amended the agenda to provide the Ingonyama Trust Board (ITB) with an opportunity to present.

Briefing by the Ingonyama Trust Board (ITB)

Ms Thembeka Ndlovu, Acting CEO, ITB, took the Committee through the  to take the committee through the presentation. She began presenting the annual report for 2017/2018. The presentation outline depicts the vision, mission and values and the Ingonyama Trust, the legal context and organizational structure and the analysis of the performance report and the land management services report and human resource as well as the Auditor-General report on financial management. Ms T Ndlovu noted that the ITB is not proud of the report, but will still present it to ensure that the ITB meets all its targets as expected. She began the performance review, the strategic outcome 7 and 8 are key. The Acting CEO, then proceeded to note that the performance of the ITB has gone from bad to worse since the last sitting. The strategic plan of Ingonyama Trust Board (ITB) performance indicator increased from 6 in 2017/2018 suddenly increased to 18, this is indicative of why the Ingonyama Trust Board (ITB) performance is not satisfactory and in that the entity is not proud.

The Acting CEO began by introducing the first strategic objective is to provide effective monitoring and evaluation system in terms of staff training and this was not achieved, skills audit to be undertaken, strategic objective two ensure stakeholder engagement and communication the target was one, but not achieved as the draft implementation plan in place and draft organogram review is affecting completion of the task. The strategic objective four was to ensure that there is efficient internal resources used aligned to legislative requirements based on the number of policies reviewed by the board, the target was 6 but only 1 was achieved, reason for variance was because of the specialized nature on some of the land policies outlined in the strategic framework, the Board took a decision to outsource. Going forward the percentage of posts filled in vacancies, there was a target of 100% but only achieved 93%, the variance of 7% was lack of candidates that understand the workings of the Ingonyama Trust Board as it is a problem. Performance agreements could not be finalised reason being there was a challenge around the absence of senior managers.

The Acting CEO continued to present the 2017/2018 annual report by stating that performance agreements were set at 100% target and the challenge was on the absence of senior managers to conduct performance reviews, there was only 1 senior manager. Training needs not aligned with skills required so did not achieve training of personnel. The capacity constraints were highlighted as a key area of concern; the Ingonyama Trust Board (ITB) had a target of 100% to pay service providers within 30 days of receipt that turnaround time that was achieved. The number of MOA’s with traditional councils approved by the Board, out of 10 only achieved 4 due to the finalization of the new organogram, variance is 6.

Programme 2 is the real estate (land tenure management services) and the strategic objective is to secure tenure rights, the land tenure policy was developed and approved, only 1 was to be drafted however was not achieved and, the draft is still in comment and it has not yet been finalised as the entity had to finalise tenure procedures, the other performance indicator was the research to be conducted, this requires specialized skill, the database of land tenure rights approved by the Board 1400 was projected, the entity could only meet 715, with 675 variance because of change of policy, given time prior to financial year the entity will work on rectifying work.

The land tenure rights need to be updated according to the register on a quarterly basis, this is done with Department of Rural Development and Land Reform and updating of the land register. The number of commercial land evaluated, had a target of 9 and achieved 1. The strategic objective of increasing traditional councils with development plans, the number was 4 and achieved negative 4, not achieved.

The number of spatial development plans target was 3, only 1 was achieved as the process is ongoing but not yet complete, the entity has draft plans ready for three areas in KZN. Development plans with municipalities out of 4 only achieved 1, the engagement with the municipalities is slow as no feedback has been received. In terms of support to beneficiaries to improve food security, 1 was targeted and 1 was met, potential projects with high commercial value 1 was achieved and met, the number of agricultural projects identified by the Board, the target was 12 and 12 was achieved.

On sustainable development ITB developed a strategic objective to create a workstream for the mining forum. Monitoring compliance and adherence to policies for commercial developments, new target for 2017/18 only 3 were targeted and 1 was met, scorecard was being reviewed due to its relevancy. Development rights applications submitted, target was 3 actual was zero it was not achieved. Strategic objective to train traditional councils, the target was 1 and could not meet the target; reason could not be achieved in current year as it was not in line with the strategic objectives of the Ingonyama Trust Board.

The Acting CEO then mentioned that some of the performance key indicators were not in line with the strategic objectives and the training plan was targeted of 1 and was not achieved, because it was dependent on the finalization of trainer process. Traditional councils to be trained were targeted at 12 and not one was achieved due to capacity constraints. The facilitation of skills development for young people living on communal land and educational grants to be provided was 120 target and only met 43, with 77 outstanding as the indicator depended on traditional councils for bursaries but this did not happen, the promotion of social cohesion and cultural values was targeted at 1 and could not meet that 1, the Board requested it to be outsourced, in terms of Human Resource management total expenditure was R81 million and personnel expenditure is 27% of total expenditure. Acting CEO mentioned that in 2017/2018 27 approved posts there are currently 3 vacancies within the Ingonyama Trust Board which is 5%. Employment and vacancies schedule speaks to the different levels occupied and not occupied and employment statistics are provided, The acting CEO then handed over the presentation to Chief Financial Officer Mr Singh, on the financial statements and the report by the Auditor-General.

The Auditor-General had audited the entity on three levels, the Ingonyama Trust Board, The Ingonyama Trust and the Ingonyama Trust Board Consolidated, the report by the Auditor-General is based on the consolidated report. The entity needs to report on its ASSETS AND expenditure and income and liabilities for the 2017/2018 R28 billion annual report, was achieved due to disclosure on financial statements. Total assets R28.9 billion and total liabilities R18.2 million and net assets increased by 0.21% due to increase in cash incentives and property market rates.

The cash flows statement of operating activities for 2017/2018 was R11.47 million and the total year-end cash equivalent was R205.4 million. There was an increase in net assets refer to on slide 35, it was an increase with no additional expenses added to the board the 2016/2017 amount had to be amended to comply with accounting standards. It also reported to the committee that the entity complied to all accounting standards and there was an increase in cash flow from operating activities due to an increase in cash received for 2016/2017 amounted to R6.5 million.

The statement of financial performance was then presented by the Chief Financial Officer Mr Dishaaan Singh, the total income revenue for 2017/2018 was R145.097 million, total expenditure excluding capital was R81.87 million and was transferred to the ITB account for financial accounting purposes. There was rental revenue of R64 million, not receivable for current year needs to reflect in financial statements to comply with accounting standards as required by the accounting standards in relation to this income statement.

The financial performance compensation of employees was R31.97 million and goods and services was R59.9 million and  total expenditure R81.88 million, capital expenditure was R4.98 million, total expenditure for the year R86.86 million. On the expenditure per programme were reflected as follows; Administration total budget R95.56 million, actual spend R77 million, variance of R18.5 million, Real Estate programme total budget was R15,.98 million actual R4.8 million variance R11.4 million and the Board had spent 80% of budget for the year under review for the administration programme and under spending was due to nonpayment of municipal rates from, the side of the trust.

There was also under spending on the real estate programme due to its under performance , operating expenditure trends current year total expenditure increased by 61.6%  and compensation of employees increased by 0.92%, and the transfer payment received was R19.7 million was fully utilised for the year. The capital expenditure for agricultural machinery and equipment for 2017/2018 R1 million spent, computer, furniture and motor vehicles all included in the  total expenditure of R4.9 million.

The determination of land value, no value was recorded in the 2016/2017 financial year, significant amount of work needs to be done to determine land value. Employee costs have increased over the past three year and the detailed schedule of goods and services excluding salaries are on page 48 of the presentation for the committee to review in more detail. The transfer payment received was utilised R98.7 million the full amount was utilised, the capital expenditure was through the Ingonyama Board and not through the payments received from the Ingonyama Trust. The transfer payment since 2013 from state funding has not had a huge increase in terms of funding and the shortfall of the transfer payment is paid for by the Ingonyama Trust Board fund.

Regarding the Auditor-General report, the AG gave an adverse opinion based on land valuation, income entitlement, receivables on exchanged transactions, loans and incorrect recognition of expenditure and expenditure from Ingonyama Trust Board with the Ingonyama Trust, comments from the Board note that the Trust made every attempt to comply with requests raised by the Auditor-General and thus the entity needs to disclose to the committee the reasons as to the audit methodology used. This is a key issue as reflected by the CFO Mr D Singh, mentioning that the ITB is committed to ensure that the financial records of the Ingonyama Trust Board are in line with the regulations of the Auditor-General, however the value of R28 million was reflected based on adverse opinion. The Auditor-General noted the ownership and existence of trust land the Auditor-General requested that 667 land values and 19 title deeds to be provided for the community before the audit opinion, the ITB requested an extension to July 2018, however there was no sufficient time to provide all relevant information to the AG, however it was not practical to submit all information to the Auditor-General from the Ingonyama Trust Board and the Ingonyama Trust.

The Board was requested by Department of Mineral Resources to provide a 5 year plan and the plan was not finalised as it still awaits approval from the Izinkosi in traditional areas. The trust money property that is held by the institution on behalf of the Trust, the Trust keeps royalties of the trust and all mining operators on the trust land have been notified to increase surface rentals as a sustainable income stream . The Auditor-General also raised an issue of the provision for debts, the Board requested an organogram from the Ingonyama Trust and adequate policies in place to undertake the strategic framework of the two entities, the Board will ensure the reduction of debts. The incorrect recognition of expenditure was noted on the expenditure between the Ingonyama Trust and the Ingonyama Trust Board . Trust property and money is issued in terms of regulation 14 as in the presentation.

The Trust money is for benefiting the communities and the Department of Rural Development and Land Reform is the overarching shareholder of the Trust. Trust expenditure relates to non operational issues, the expenditure has been disclosed in all financial statements during the budgetary process. With regards to remedial action to be taken the Acting CEO noted that there would be a meeting with the Department of Rural Development and Land Reform internal auditors to address all the audit findings, however internally some remedial action has been taken by the ITB in dealing with the audit findings.

 In terms of land evaluation the Board has obtained the title deeds available for audit purposes, all diagrams and title deeds from 1840 and in terms of royalties, the Board is developing a 5 year plan to determine over 307 traditional councils which require input from the communities. The provision of debts, the Board is focusing on commercial studies and staff capacity to cater for internal debts collection process, the Board will also involve service providers to maintain software systems, as they need to be user friendly. The entity maintains the payroll system which is to be upgraded before the end of third quarter. There were 4 audit committee members present as at 31 March 2018 on the Board, 4 meetings were held and the report is available. 

Discussion

The chairperson had a few remarks to raise with regards to the submission of the annual report which was signed by the Minister on the 5th October, but the Committee secretary only received it on the 9th October while the matter needed to be discussed on the 10th this is a concern, the Ingonyama Trust Board presentation format is not visible to the committee members and that needs to be taken into consideration.

Mr E Nchabeleng (ANC) thanked the ITB input, however raised a concern that the Ministers voice in the Ingonyama Trust Board is not vocal as opposed to the other entities that have reported on their annual performance. The Minister’s voice has always been vocal in the ITB but lately the Board is not representing the Minister well, and in all meetings the Minister was not invited to the meetings and this is worrying and it will be difficult to engage with the ITB.

Mr Nchabeleng (ANC) wanted clarity on R2.6 million just for workshops alone and Travelling and accommodation including Board members R4.21 million, how much of the expenses were spent on Board members? The increase in provision for doubtful debt of R16 million is a concern and the legal fees of R5.28 million, what were these fees for? As well as if there are litigations, cases pending, what is the entity paying so much legal fees for? But to re-emphesise that the Ingonyama Trust Board needs to involve the Department more and get the Minister more involved as her absence in the entity is a going concern. The chairperson then asked about R12 000 for students, how realistic is that amount for 3 year courses.

Mr A Madella (ANC) welcomed the annual report which he noted as not being a very good one and worried about the lack of capacity as a challenge for the entity which has been there for quite some time and the organogram is there, however of concern is that the report is presented by the Auditor-General findings are quite serious, the impression is that the Auditor-General was not open for extensions when it engaged with the entity and thus led to an adverse findings. The remedial actions should find consequences from within the Board internally taking decisions that will ensure that the Ingonyama Trust Board is adequately positioned to assist in fast tracking land rights.

He said that there needs to be a positive wayforward for the meeting with the Department so that these issues could be responded to, hoping that the remedial actions must be focused on issues that can be directed to the Board, in relation to training and skills development to boost the entity, there is too much outsourcing within the entity as a general comment. Ms Magadla (ANC) then began by congratulating the Department of Rural Development and Land Reforms for organizing a meeting with the Ingonyama Trust Board to resolve their issues on the adverse findings by the Auditor-General , and wanted to emphasise the deficiencies in financial statements as it is key for the ITB to get improved audit findings.

Mr M Filtane (UDM) began by saying that the committee had conducted this exercise by the Ingonyama Trust Board but there seems to be no improvement as the entity has a failure rate of 71% in terms of achieving its target, calculating it based on scoring out of the total targets presented, the Trust has no mentioned externally sourced reasons, and all the reasons are internal mainly by failing to plan on the implementation.

The major problem in South Africa is that of food security; however there is no mention of people who were assisted in food security and dedication towards assisting social needs of the communities.

Mr M Filtane (UDM) asked the entity if it was doing much in fighting food insecurity as it is a major challenge, StatsSA annual report Department of Labour is estimated at 7 million people are in poverty; the committee notes that not much is achieved when you set the target without ascertaining that you have the necessary tools to execute plans. The reasons for the 71% failure is about planning as no due diligence is conducted by the Ingonyama Trust Board, and what has been done to assist the traditional councils to draft their development plans? This question was highlighted to be on slide 25 of the presentation as an example. Then there was a note on valuation of the Trust to be worth R28 Billion, based on municipal valuations, does the ITB have a practical, meaningful, working relationship with local government? This leads one to question where the secretariat has technical capacity, politically these valuations was to strengthen the the Ingonyama Trust Board on expropriation without compensation position and on slide 55. Lastly; who do you regard as the land owner in terms of the Mineral and Petroleum Resources Development Act 28 of 2002? According to the act the owner is defined as the owner and the occupier of the land through a title deed.

The chairperson asked a question on who is the occupier of the land if the owner is under the state, is it the people on the land, is it the Trustee in terms of land that belongs to royalties. There should be a mediator appointed and the committee should take a position on who occupies the land. The chairperson then added a few issues raised by the members, looking at goods and services for the year slide 47 the issue of the bursaries was raised vies a vie the 44 students reflected, so how much did each student receive for the 1st year, 2nd year and 3rd year?

Why do you combine Human Resource with Communication expenses, what is the rationale behind that? Motor vehicle expenses for the land tenure staff, how many vehicles and make? The other issue about the remuneration of the board and meeting expense is close to R8 million when combined. How often does the Board sit? The other issue raised by the chairperson about the under performance of the entity as reflected by Mr M Filtane (UDM) of 71%, and looking at all the programmes from the Ingonyama Trust Board there is under performance in almost all the programmes.

 Looking at the issue of vacancies positions that need to be filled, he said you cannot calculate percentages for human resources, what is 93% vacancy rate? The performance agreements were not achieved and this is worrying because of the absence of senior managers, is there any alignment between your key performance indicators with the variance on your human capacity? There was a note on training needs not meeting the skills requirement of the entity, was the entity not aware of mismatch of skills requirement in the first place?

There was a note on slide 19, the number of Memorandum of Agreements approved by the Board out of 10 only 4 were achieved the varience is minus 6 reason is pending the new organogram, why were the other agreements not signed with traditional councils? On slide 22 the number of development with local municipalities, the variance should be minus 4 not minus 1, there has been an under achievement on most of the programmes and the reasons for varience do not talk to the key performance indicators. What is the difference between an educational award and a bursary because of the target 120 only 44 were catered for, there is a demand for bursaries across the country, yet the ITB cannot fulfill its mandate to provide bursaries for needy students?

There was a question as to how many professionals working for ITB are on leave, working full time, as there is a high rate of people who resigned, what are the reasons for the resignations, did the CEO resign or did the contract end. The chairperson also made mention of the issue of royalties which has been an ongoing concern for three financial years, what is the view of the entity on royalties for the land? However, there was confusion on agricultural equipment as to what that line item really contained in detail and requested the CEO and CFO to share the responses to the committee members and the Department as well as the Auditor-General.

The CEO asked to be pardoned for her infancy in the entity in respect of the financial year under review as she has recently joined the organisation and there are crucial questions that need to be responded to, she highlighted that the assistance of the chairperson of the Board would be key in responding to some of the questions. The CEO Mr Dishaan Singh responded initially about legal cases and responded that a schedule had been provided to the committee and that the CEO would send it through to the committee secretary.

On motor vehicles, the CFO responded that 4 vehicles were purchased, on capital expenditure on agricultural expenses the allocation had been made and the information would be submitted to the committee. On the issue of travelling for Board members it would be provided separately to the committee, howvere there are currently 8 board members and most are from outside PMB and travelling costs are affected and some izinkosi live in the far rural areas. The question of provision for doubtful debts, the entity acknowledged the debt and responded to mention that when the Auditor-General did a review they were not satisfied with the provision hence had to increase the provision and thought the Auditor-General would accept the provisions.

It is clear that a lot of the debts of the entity are not paid in time, they are currently reviewing all policies and amending the organogram. The number of leases that the entity has is relatively good to receive income, on human resource and communication expenses the intention is to spend the money separately but provide a consolidated report for accounting purposes. The R28 billion concern is an issue, and there has been no interaction with the municipalities we used valuation rules to determine value of properties owned by the Ingonyama Trust, so there was not much communication with municipalities, however there had to be a verification process with the information contained in the land register.

The CFO noted that the process of verification and valuing of the properties took the entity three months to collect the information; however the Auditor-General used his own accounting methodology to give the entity an adverse finding. The acting CEO responded that challenges have been with tabling the reports to the board because of date changes, and a memo was sent to change the names as the people appearing on the registration form were not the correct ones. The Minister Nkoana-Mashabane was not prepared to talk much about the Ingonyama Trust Board only to say it is in trouble, because of accounting irregularities and the main issue being accountability. The Deputy Minister Ms Mashego-Dlaminin indicated that in terms of the executive authority of the Minister there has not been financial assistance to the Board, whatever has been reported is because the participation levels are not the same and the financial performance of the Trust is a concern for the Department. The chairperson asked if the Department of Rural Development and Land Reform is required to do oversight of entities, why the Department not engaged the ITB on its finances on time, so that we can all have an understanding. The Deputy Minister then responded to say the Ingonyama Trust Board is only received by the Minister, and it needs to be discussed with the portfolio committee first, the management is changing in the board and the Department is willing to assist the entity in ensuring that it complies in terms of the PFMA.

The chairperson requested the Minister to please intervene in the financial performance of the Ingonyama Trust Board and not for discussion, the Department should give itself time to submit the report with the speaker’s office to sit and present it to the Department before they come to the portfolio committee. T

The Deputy Minister responded to say they sit as a Department monthly to look at expenditure and put corrective measures and it is submitted to the Minister and all heads of entities meet with the Minister on a quarterly basis. However, this exercise has not been done with the Ingonyama Trust Board The acting CEO then provided a platform for Judge Phakamani Ngwenya, the chairperson of the Ingonyama Trust Board to respond to some of the issues. Mr P Ngwenya began by noting that the final annual report for 2017/2018 needs a particular focus to be read from page 25 to page 28 is a list of traditional councils and the beneficiaries is available and the costs are qualified for each Board member in the report. The Ingonyama Trust Board is 20 years this year and some of the comments are misplaced by the committee. The board came into existence 2 October 1998 and in April 1999 the board issued a invitation to find a minerals expert as an independent person to collect the royalties, the then Minister of Mineral Resources Mr Penuel Maduna.

The Ingonyama Trust Board responded to the committee by indicating that some of the issues would need to be responded to once the meeting takes place between the Department of Rural Development and Land Reform, the office of the Auditor-General and the Ingonyama Trust Board.

PMG left the meeting at this point. The Department briefed the Committee afterwards.