KZN oversight visit: follow-up on matters raised; Blended Finance Model progress report

Agriculture, Land Reform and Rural Development

17 September 2019
Chairperson: Nkosi Z Mandela (ANC)
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Meeting Summary

The Portfolio Committee conducted an oversight visit to KZN in August. Members had raised a number of issues during the visit. The provincial department of Agriculture, Rural Development and Land Reforms was asked to give a report back on how it was addressing these matters.

The provincial department, amongst other things, informed the Committee it was contributing 4% to the provincial GDP and was amongst the top three provinces with significant contributions to the National Agricultural Gross Value Add owing to its position as an export destination for agricultural commodities.
It further stated it was offering accredited training and non-accredited skills development training courses to farmers, with specific priority given to smallholder producers. Both the Cedara and OSCA Colleges have got FET Units which offer training programmes. Every year, the department was issuing out a green book document which outlined the schedule of short courses offered by the department throughout the year. The colleges were offering NQF level 6 diplomas in agriculture for both plant and animal production and agro-processing. Four agricultural high schools (Weston, James Nxumalo, Shakas Kraal, and Vryheid Landbou) were feeding the two colleges.
Moreover, it indicated the R117m spent in Makhathini benefitted 312 individual farmers. Through the operations of the scheme, over 5000 people were receiving direct employment. Over 90 000 tons of farm produce has been produced, resulting in a revenue of over R100m. There were also other up and down stream industries such as cane cutting, loading, transport, mechanical and welding, and vegetable hawkers and vendors.

The province updated the Committee on the proposed solutions for farms or projects that were experiencing challenges.

Members were dissatisfied with the engagment and said that the responses that were given to the Committee on issues it raised on its oversight visit to the province were vague and not helping the Committee at all. The presentation did not address what Members observed when they were doing the oversight. As a result, the Committee was of the opinion the provincial department was experiencing serious problems which manifested themselves in the farming projects it was undertaking. There were no project managers and extension officers on the ground to monitor the work of the department.

Members remarked that the sugarcane industry was in need of transformation because black farmers have been forced through no circumstances of their own to move from sugarcane to macadamia nut farming as the sector was inhibiting them from participation and maintained there has not been any single Recap project that was successful in KZN, yet R16m was spent by the department on this.

In addition, the Committee received a brief oral presentation on the Blended Finance Model and commercialisation of black farmers. The Department admitted the Model has not yet come to fruition because a policy and strategy was being developed to make it sound. When the Model was introduced, it caught the attention of many smallholder farmers, but the problem arose because many people within the Department and government started to apply for it. That was when the Department decided to suspend it for a while until all the screws were tightened. Consequently, the commercialisation project would have to wait until the policy and strategy of the Blended Finance Model was finalised.

Members suggested the Model should be discussed when the Land Bank and the Department appeared next before the Committee, just to ascertain if the former was still interested in the project. They further noted that the Legacy Report had spoken about the slow pace of the Department’s policy development; pointed out that at some stage it was indicated the CASP, ILIMA, and MAFISA funds would be put in one bag for the development of the Blended Finance Model, but nothing has come to fruition; remarked they would not like to see the policies that were being developed to be a white elephant like the Comprehensive Rural Development Programme (CRDP); and requested the Department to forward the Committee details on the beef exportation to China, so that the Committee could know the people involved, quantity of exports, nature of red meat, etc. because this was a success story.

Meeting report

Briefing on the Feedback Report on Project visit by the Portfolio Committee on Agriculture, Land Reform and Rural Development
Ms Nelly Shezi, HOD, KZN Agriculture and Rural Development Department, responded to a number of questions the Committee raised during its oversight visit to KwaZulu-Natal. Some of the questions, for example, were around the 155 drop-outs of extension officers; reasons for deviation on CASP; incentives to attract young people to join the agricultural sector; support given to emerging sugarcane farmers; and involvement of the private sector in the upskilling of extension officers.
On incentives to attract young people to the agriculture sector, she informed the Committee the provincial department in partnership with the National Department of Agriculture, Land Reform and Rural Development was running a two-year work-placement programme for unemployed agricultural graduates, mainly benefiting young people. To this end, 173 graduates benefited from the placement programme and were placed across the different districts in the province. Furthermore, the department approved an Agricultural Development Funding Policy in 2018 which was promoting the development of designated groups which includes youth. Through the policy, there are special provisions and additional grant allocations for agricultural enterprises managed by youth.
She informed the Committee that the department had a memorandum of understanding (MoU) with the South African Sugar Association (SASA), which is the organisation that supports sugarcane development. Under this MoU, the department has signed a five year Service Level Agreement (SLA) where 33 agricultural advisors from the department have been assigned to work with 6 sugarcane specialists from SASRI (South African Research Institute) to render extension and advisory services to small-scale and land reform sugarcane growers. The department was also paying 50% of the costs of the sugarcane specialists. During the drought season, the department supplied small-scale growers with fertilisers for ratoon management and has further assisted with the implementation of the seed cane development for small-scale growers. The department has also supported land reform sugarcane farmers with R36.5 million worth of fertiliser in March 2019.
Ms Shezi explained that the CASP programme has been implemented under schedule 4 of the Division of Revenue Act (DORA), which was treated as a general-purpose grant. It has recently been moved to schedule 5 of DORA, which was now treated as a special purpose grant. Under schedule 4, the province was able to change from one project to another if there were challenges experienced. Under schedule 5, the department has to write to National Department to request even a minor change from the plan and the changes cannot be implemented without approval being granted by the National Department.  
On the 155 drop-outs of extension officers, she reported the department was generally implementing bursary programmes for its employees. In 2005, the National Department approved the Norms and Standards for Extension, which stipulated that agricultural advisors needed to have a minimum of a B.Sc. Agriculture degree or B. Tech in order for them to practice as agricultural advisors. Between 2009/10 to 2014/15, through the Extension Recovery Programme, bursaries were awarded to extension practitioners to upgrade their qualifications. Some of the employees who were being upgraded were approaching retirement age and were not willing to try again when they were offered another chance. Those who did not finish their qualifications were then referred to human resources to institute recovery of those fees.
Concerning private sector involvement, the department was implementing through the national conditional grants a mentorship programme which was delivered in partnership with the private sector. The department had an MOU with SAMAC and SA Wool Growers Association to upskill extension officers in the Macadamia production and sheep farming and wool production, respectively. Furthermore, the department was in the process of engaging in partnerships with South African Bureau of Standards (SABS) to improve on issues of quality of production by smallholder farmers and Perishable Product Export Control Board (PPECB) for improved access to export market.
Ms Shezi made it clear that the department has an approved policy for funding of projects. Each project was subjected to a vigorous screening exercise to ensure it was complying with the laws before funds were disbursed for implementation. Projects that were implemented also formed part of the Annual Performance Plans of the department. These were reported on a quarterly basis to ensure quality. On the implementation of infrastructure projects, engineers were issuing payment certificates when they are satisfied with compliance to specifications and quality of work performed. There was also an Internal Control Unit within the department, which has been performing an audit work to certain programmes of the department as well.
She further took the Committee through the challenges and interventions in farming projects that were being undertaken in the districts of uMkhanyakude, Zululand, and UMzinyathi. The department gave feedback on Ndumo B, Coastal Cashew, and Amandlentuthuko projects which were under the Umkhanyakude District.
The Ndumo B Project, which deals with crop and vegetable production, was facing a lack of formal market and high cost of electricity which was as high as R60 000 to R200 000 per month. The department has invested R1.5 million for this 2019/20 period to assist with irrigation maintenance and mechanisation support. The department has commissioned a team of engineers to investigate the use of solar as an alternative energy source. The report is expected in December 2019.
The Coastal Cashew Project was concentrating on nuts. Its challenges were on the lack of capital for farm operations; inability to pay good salaries resulted in the farm loosing experienced workers; poor management of cashew trees resulted on yield decline; and the farm was annually receiving financial support while it was still being owned by IDC (former owner). The department indicated it would prepare a comprehensive business plan which was hoped to be finalised by October 2019, in order to secure funding for improvements through the Development Financial Institutions within the province.
The Amandlentuthuko Project was focusing on the feedlot. The challenge was around the mining project in the area which has resulted in the operations being put on hold. The Community Development Officer at iTendele Mine has been engaged with and a meeting was pencilled for October 2019. The department would raise the issue of being involved in community developments with relevant structures. A business plan has been prepared and would be presented during the month of September to the District Project Steering Committee and would also be tabled before the Provincial Project Steering Committee.
The Zululand District was hosting the Empangisweni Citrus Project. The production activities that have been undertaken included the citrus establishment, vegetables and grains. The infrastructure development included the purchase of farm equipment and machinery, irrigation infrastructure, and construction of a pack-house for citrus. Its challenges were on institutional arrangement of the project since inception; poor project governance; lack of project and business management skills; and inefficient use of financial resources. The project has received a total of R37, 000, 000 million over the years for implementation since 2010/11.
The department indicated a strict management and funding condition would be in place, so that beneficiaries, including Inkosi Zondo, could be prohibited from direct involvement with technical, financial, and day to day management of the business. The forensic investigation has been commissioned at Empangisweni Project following allegations of corruption and maladministration of project funds. A forensic service provider was appointed and has been given four weeks to complete the investigation. The department would be given the findings once the investigation has been concluded. The forensic investigation would be conducted under the new leadership of the Agribusiness Development Agency (ADA).
The Jabula Zondi Trading was falling under the UMzinyathi District. Its focal point has been on cropping; livestock farming; and establishment of pasture. It does not have enough arable land for cropping and vegetable production; there was no baler-making; and the area was too dry. The department has prepared the business plan which would be presented to relevant structures for consideration of funding during 2020/21, and the farm would be supported through the mechanisation services.
Briefing on the KwaZulu-Natal Provincial Report on Oversight of the Portfolio Committee to KZN
Mr Nhlanhla Mndaweni, Chief Director: KZN Agriculture and Rural Development Department, updated the Committee on the proposed solutions for farms or projects that were experiencing challenges. The presentation was on some of the following projects: Green Iland Farm, Boardmans, Tasma Estates, Spitskop, Zamokuhle, and Vryheid Wards 5 & 7.
Green Iland Farm
The farm was facing the following challenges: high electricity tariffs, diversification of sugarcane with macadamia trees, dilapidating irrigation infrastructure, option to purchase the farm, and legal action on rent payments. It was proposed the branch of the Land Reform Department would clarify the rental matter with ALHA and then issue a communiqué to the farmers. The department would also exercise an option to purchase farms to keen and interested beneficiaries. The current irrigation system would be replaced with centre pivots. The farmer was further considering replacing Eskom with renewable energy like solar. A business plan would be compiled by the department in order to check the viability of diversifying sugarcane with macadamia trees.
The farm had challenges of accessing resources from financial institutions; high theft; and no succession plan. It was proposed the farmer owner, Mr Mbuyazi, should extend his applications and requests to the Land Bank and SAFDA for support. He was also advised to maintain a consistent cash flow record that commercial banks would recognise. Mr Mbuyazi, indicated he was involving his son in farming, particularly on accounts management. The involvement of his son was part of his succession plan. There was also a development plan for staff houses that needed funding. It was also proposed Mr Mbuyazi and neighbouring farmers should jointly contract a security company and reduce the number of employment of undocumented persons. Theft has resulted in the farm not having irrigation equipment.
 Tasma Estates
The farmer has requested permission from the DRDLR to plant macadamia because the farm soil was predominantly sandy; it was experiencing cable theft; facing legal action for non-payment of rent; the price of sugar was gradually on the decrease, while production costs were on the increase. The diversification from sugarcane to macadamia was supported because macadamia was well suited for sandy soil and the department has agreed to assist the farmer. The farm has already got a plan to diversify from sugar and plant vegetables under hydroponics. The branch of LRD would clarify the rental matter with ALHA.
Spitskop / Plain Trading
The farm was abandoned; the project’s bank account was not a business account; there was unauthorised use of grant funding and unlawful removal of project assets from the farm by Plain Trading 4cc. The department indicated it would enter into a caretaker arrangement with the recommended lessee for a period of 6 months, so that issues relating to the previous lessee were finalised. A document would be provided with approved terms of reference that guide selection of lessees for leasing of state farms. The matter concerning unauthoriesd use of grant funding would be referred to Internal Audit and Legal Services, and legal action would be taken where necessary.
The community raised a matter there were other households that were relocated from another farm to join them. Project Chairperson, Mr Zulu, also mentioned they had arable lands that they used to plough, but due to no fencing they were not planting anymore. The department stated an investigation would be done to get the status of those households and the reason of the relocation. The community would be prioritised to be supported with programmes within the department to assist them.
Vryheid Wards 5 & 7
The current state of the crèche was not acceptable because it had loose floorboards and damaged walls, windows, railings, etc. A decision was taken to construct a structure from prefabricated material.
The other CRDP benefits the community should have received included projects related to enterprise development. The department has made commitments to provide solar panels, paving of internal roads, etc. Other departments like Social Services have been invited to come to the party for purposes of providing regular maintenance to the facility. The department would consider construction of a new crèche over the next two financial years. The first year would be for planning and design and construction would be completed in the second year.
In addition, Mr Mndaweni presented responses to matters raised by the Committee during the oversight visit. On a concern there was no access to markets for the FPSUs, the department was reconnecting the FPSU to supply school nutrition programme that was put on hold by assisting them to register on the RASET supplier database. The department was finalising the planned SANDF visit for their assessment of the FPSUs’ capacity to supply the Pongola Military Base through their Kopa Tlala Programme; and to let the FPSUs work with the National Agricultural Marketing Council (NAMC) to obtain agreements with potential markets like DSD for food parcels.
About FPSU members not getting training or not working as a collective, the department has scheduled training on cooperative governance, business management, and marketing by the Durban Coastal TVET College for 12 members in leadership positions. This was including their transport, accommodation, and meals. An internal training and organisation would be provided at the FPSUs’ sites for all members. The department has scheduled technical training for 62 members on pest control, calibration, maintenance of implements, and animal disease control at FPSUs’ sites.
Regarding the unavailability of trucks for delivery and mechanisation, it was reported REID was in the process of procuring a truck for a youth cooperative dedicated to provide the logistics for the FPSU. REID and members would need to approach Techno Serve to transfer ownership of the truck. Mechanisation would be procured and provided by different stakeholders like DARDLR, REID, and Peace Foundation.
Mr Mndaweni, in his conclusion, spoke on tenure models. He said 30-year leases were going to be generated. Lessees who had contracts pre-2013 would be categorised. The value of land would be established to determine rental amounts. Illegal sub-leasing would be addressed; and new compliant applications would be processed by LRD. Reversal transfers would be effected. For example, townships would be transferred to the municipalities, and canals and dams would be taken back to the state. Lastly, there would be possible formalisation of the villages.
Oral briefing on Blended Finance Model and Commercialisation of Black Farmers
Mr Mike Mlengana, Director-General, DARDLR, stated that the Blended Finance Model had not seen the light of the day. It had been suspended for a while until a policy and a strategy around it was developed. The Blended Finance Model came as a result of a major challenge facing emerging famers who were struggling to get finance. Then when it was introduced, it became an attraction to many smallholder farmers. But the problem arose because people from within the Department and government started to apply. The qualifying criteria was not clearly defined to the body that was responsible for the approval of applications. That was why the Department decided to put it on hold for a while, and develop a policy and strategy to close all the loopholes. The Department was looking for genuine famers and people from the rural areas and villages of this country to benefit from the Model. The R172m from the former DAFF and R150m from the former DRDLR that have been ring-fenced for this Blended Finance Model were still with the Land Bank. The Department was going to propose a short term intervention to deal with the matter because there were farmers that made applications. As a result, the commercialisation programme of Black farmers would only come to fruition once the policy and strategy for the Blended Finance Model were finalised.

Deliberations on the Feedback Report on Project visit by the Portfolio Committee on Agriculture, Land Reform and Rural Development
Mr M Montwedi (EFF) remarked that the sugarcane industry was in need of transformation because black farmers have been forced through no circumstances of their own to move from sugarcane to macadamia nut farming as the sector was inhibiting them from participation. Black farmers have been complaining of a heavy levy they had to pay when taking their products to the market. He noted that the report on Empangisweni Project had said nothing about the salaries for people who would be working there. There needs to be an investigation into the farm because it did not look like things were going well there. Lastly, he asked how much money was lost in the extension officers’ programme that experienced 155 drop-outs.
Ms Shezi requested her department to make a separate submission to the Committee in terms of what the province was doing to assist the sugarcane industry. She accepted the concerns of the Committee regarding Empangisweni and indicated a thorough forensic investigation would look into the matter because there were lots of funds that came from other departments, but the project was not moving forward. She added that there was money that was being recovered from the 155 drop-outs. The rand value would be forwarded to the Committee because money was collected monthly.
Mr Mdu Shabane, Director-General, DALRRD, explained it was important for the Department to analyse the situation about the emerging farmers in the sugarcane industry. The transport subsidy was not going to be stopped soon because if it could be halted, then something urgently needed to be done.
Mr R Cebekhulu (IFP) wondered why the Jabula Zondi Farm was frequently raided by jackals when black farmers were now in charge because the previous white farmers never experienced this problem before, even though the provincial department has engaged Ezemvelo KZN Wildlife.
Ms T Breedt (FF Plus) said it was not fair for the department to say it would be going back to the old farms. The department has to ensure all farmers who were experiencing farming challenges should get assistance from the department, so that they continue practicing farming. She further pointed out she was not seeing the impact of the current budget on the ground. The shifting of funds by Rural Development did not translate into anything on the ground.
Ms A Steyn (DA) remarked there was something seriously wrong with the projects undertaken by the KZN Agriculture Department. The Empangisweni Citrus Project was a good example of things that were terribly going wrong. She maintained there has not been any single Recap project that has been successful in KZN, yet R16m was spent on Recap by the department. She felt ADA was the one creating problems for the department because its role has not been defined, including the projects it was handling.
Ms K Mahlatsi (ANC) felt there was a need for a comprehensive analysis of all projects that were funded and find out what went wrong. She pointed out there were many things that have been presented by the department, but no clarity has been given for anomalies in these projects. For example, on the Green Island Project, water was extracted from a neighbouring stream; the Westwood Project was operating with water that was from a dam that did not belong to the benefitting farm; and no remedial action has been explained for the Spitskop displaced community.
Mr Shabane stated the Department needed to make an assessment on what made a particular farm not viable after a lot of money has been pumped into it.
Mr N Capa (ANC) observed that the responses that were given by the department were vague and not helping the Committee. What the department wanted to improve on and achieve was not concrete and coming through clearly. Communication about leases was very important and the obligations of the Department should have been made known. The Department was not open to the Committee about what it was doing to help regressing farmers, and there was no MOU in place between the Department and farmers to ensure farms were looked after because the presentation was talking of overgrown farms and dilapidated farmsteads.
Mr Shabane said leases were a big issue. National Treasury gave the Department leeway to let the farmers not to pay the rent. It was a moratorium that was put by the former Minister Nkwinti. The matter of leases was an internal departmental issue.
Ms B Tshwete (ANC) remarked that the KZN Agriculture Department appeared to experience serious problems. Mentors were not doing their work of helping struggling emerging farmers. Officials were not taking their projects seriously on Vryheid Ward 5 and 7 regarding the Comprehensive Rural Development Project, and it was not acceptable for children who were attending a dilapidated crèche in Ward 7 to wait for two years for renovations because their lives were at risk.
Ms M Tlhape (ANC) remarked that the responses given to the Committee said nothing of what the Members saw during the oversight visit. There was a lack of monitoring by the department. There were no project managers and extension officers on the ground to monitor the work of the department. This was an indication there was no commitment from the department to better things. Successful farmers were those who have been in the farming business for a long time.
The Chairperson observed there were no strict funding conditions in place for the farming projects under the department. It was not clear what was being done in some projects, and he was unsure why the department was not getting rid of the model. In some projects like Empangisweni, beneficiaries were being prohibited from being involved in the work, yet the project was in theirs in their own piece of land. He further revealed that R203m was spent on drought relief in KZN, but there has been no explanation on how the money was spent. On the sugarcane matter, he pointed out black farmers were at an entry level and were moving from sugarcane to macadamia nuts. The farmers were not helped to cultivate other markets. There was no rationale given behind the Westcliff Project and what the role of the provincial office was in this regard. The non-payment of leases by farmers was another matter that has not been addressed properly.
Mr Shabane informed the Committee he had requested the SIU to investigate all cases of corruption and maladministration on all matters related to land restitution. Already there were people who have been charged and imprisoned. He also indicated the department has done an assessment on all PLAAS farms. He stated, it was hoped, the merger of the two departments would provide better monitoring on all projects carried out by the Department.
The Chairperson stated it was important the Committee was furnished with the findings of the SIU report, particularly in the KZN. The Committee had to be informed of the amount of money that has been retrieved or recovered, names of people who have been suspended, charged, imprisoned, and the nature of charges. He requested the Department to respond to the concerns raised by the Members within six months. Some of the concerns were around Spitskop relocated communities, Mjindi irrigation, Empangisweni, and role of ADA.
Deliberations on the Blended Finance Model and Commercialisation of black farmers
Ms Tlhape acknowledged the work that has been done by the Department, and she understood nothing would be ready overnight because it takes time to develop a policy.
Ms Mahlatsi stated the assessment that was being done by the Land Bank would take six months to assist the farmers. She wondered whether the Department was anticipating under-expenditure or if money would be spent by the end of the financial year.
Mr Capa supported the idea of a policy development, and said he would engage with the Department once the policy has been finalised.
Mr Montwedi suggested the Blended Finance Model should be discussed when the Land Bank and the Department were in the next Committee meeting, just to ascertain if the former was still interested in the project. He pointed out that the Legacy Report had spoken about the slow pace of the Department’s policy development.
Ms Breedt said the Committee has not heard anything tangible on blended finance and commercialisation. The only thing that’s been communicated was that the policy was still being developed.
Ms Steyn mentioned that R100m was allocated for CASP during 2017/18 and it was earmarked for farmers. The number of farmers that were to be funded was not clearly stated. At some stage, it was indicated the CASP, ILIMA, and MAFISA funds would be put in one bag for the development of the Blended Finance Model. But nothing has been brought to life.
Mr Mlengana informed the Committee the Blended Finance Model has got nothing to do with CASP / ILIMA / MAFISA. CASP was a project aimed at vulnerable smallholder farmers. He said the Comprehensive Producer Development Policy was presented to the Committee, but has not yet been passed because Parliament has not made comments on it. He reported commercialisation came because the Department was trying to look for emerging black farmers. There were initiatives the Department has pushed for in order to achieve export-led agriculture. For instance, the country was exporting wheat and beef to China. The Department would like to take the emerging farmers to the next level, just like what was happening in other countries. That was why the Department was developing sound policies. No good policy would be developed in two weeks.
The Chairperson remarked that he would not like to see the policies that were being developed to be “a white elephant” like the Comprehensive Rural Development Programme (CRDP). He noted that the One Hectare One Household Project had never materialised. It was just a fencing programme. Nothing else was done. He further requested the Department to forward the Committee details on the beef exportation to China, so it could know the people involved, quantity of exports, nature of red meat, etc. because this was a success story. The Committee soon would be embarking on a study tour to China. The Department should communicate its success stories and tell SA what it was doing because real work on the ground was not visible.
Adoption of Minutes
10 September 2019 minutes
The Chairperson took the Committee through the document, page by page.
Ms Steyn moved for the adoption of the minutes.
Ms Mahlo seconded the motion.
The minutes were adopted with minor technical amendments.
The meeting was adjourned.

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