The Committee met to receive the 2018/19 annual reports of six of the entities in the portfolio of the Department of Agriculture, Land Reform and Rural Development. They were the Ingonyama Trust Board (ITB), the Communal Property Association (CPA), Onderstepoort Biological Products (OBP), the National Agricultural Marketing Council (NAMC), the Agricultural Research Council (ARC) and the Perishable Products Export Control Board (PPECB).
Before proceeding to the main agenda items, the Chief Land Claims Commissioner responded to questions that had been raised by the Committee at a previous meeting. This had led to further discussion and questions from Members.
The Ingonyama Trust Board reported a decrease of R 3.79 billion in its net asset value, mainly due to reflecting a more accurate recording of the land values in the annual financial statements. An increase in expenditure had resulted in a decrease in cash flow from operating activities. The Committee asked what percentage of the income received the ITB was of actual benefit to the communities. Why had R600 000 earmarked for bursaries not been used? They also sought more information on “permission to occupy” (PTO) properties being converted to lease agreements.
The Committee was told there were 1 599 CPAs in the country, and most (400) were in Mpumalanga. The Association’s main challenges were that after registration, the CPAs did not always get ownership of land; some communities opted for financial compensation after registering the CPAs; and membership of restitution-based CPAs was generally so scattered that they did not attend meetings. Low levels of literacy also affected the effectiveness of the CPA committees. Members asked whether the Association used its lease income for assist communities, and questioned the lack of urgency in dealing with disciplinary cases.
Some of challenges encountered by OBP included loss of market share, production inefficiency, loss of expertise, outdated vaccine technology and mismanagement. Profit after taxation had fallen from R48.5 million the previous year, to R41.3 million. The organisation conceded that it had been sick for a long time. Infrastructure was a problem, but something was being done about it. Skills had been lost, but that was being remedied by attracting workers who had retired and would be brought back on a short term basis, as well as experts from abroad. Because the entity did not have the latest technology, it partnered with other manufacturers because they had infrastructure.
The NAMC said that to increase market access to all participants, 14 reports on smallholder market access had been produced. 20% of statutory levies were spent on transformation. One development scheme had been designed and four development farmer data base update reports were produced. Questions asked by Members included whether the NAMC was identifying an export market for farmers, and whether they were empowering farmers so they could trade.
The ARC received a qualified audit opinion for three consecutive years. It had provided training to no fewer than 1 500 farmers through more than 30 courses requested by the clients themselves. Such training was aimed at improving their skills, thus improving productivity. Courses ranged from grain crops, to vegetable and wine production, meat and dairy processing, sustainable water use, poultry and pig production, animal reproduction (artificial insemination) and animal health care. However, it was losing skilled professionals to the private sector because of salary differentials. Members asked if government was sourcing expertise from the ARC, rather than outside agencies, and wanted to know what progress was being made with its vaccine programmes.
The PPECB said 2.9 million pallets had been exported during the period under review – an increase of 11%. For equity certification, 303 185 containers had been inspected and 23 684 rejected due to being tainted or damaged. 145 481 certificates were processed and 5 745 were cancelled. R423 million had been received in income, and expenses had amounted to R398 million. 57 smallholder farmers were certified for export, and 238 small holder farmers had been trained. Training had taken place in all nine provinces covering good agricultural practices, food safety and responsible use of pesticides. Challenges included a lack of connectivity and information, and the entity was resource constrained.
Commission on Restitution of Land Rights (CRLR): Response to outstanding questions
Ms Nomfundo Gobodo, Chief Land Claims Commissioner, CRLR, answered questions that had been asked the previous day.
She said expenditure was higher at the national level compared to the provincial level because most experts sat at the national level, including all three commissioners, which the provinces did not have. The Special Investigating Unit (SIU) reports did not come to the officials -- they were commissioned by the President, so he received them. The Ramusa report to the land claims court had been tabled and would be made available.
On the number of claims that had been settled and finalised, and the slide that was not clear, the slide refers to what was on the financial and annual report from page 52, and that was a list of all of the claims that were finalised on both land restoration and financial compensation per province. It was not in the presentation because it would have been too bulky.
Regarding the three big provinces, the bigger portion of the budget goes to them, but that did not mean that sufficient money was not allocated to the smaller provinces. North West Province had a substantial amount and some money had to be shifted to it because they had already spent 77% of their budget. The smaller provinces did not have a lot of money because they did not have a lot of claims outstanding. For example, the Free State had only nine outstanding claims.
The next question was related to the total number of claims, as well as old order claims and how to deal with them, the amendment Act of 2014, and the autonomy of the institution. On the total number of claims and outstanding claims, and how they were dealt with, the Commission had battled to deal with the correct statistics in relation to the lodged claims. It was work that was engaged with aggressively, even with submissions to the land claims court. The Department was close to verifying the numbers that it had and once this is done, they would be audited externally, and could state for the record the correct verified number.
On the new order claims affected by the Constitutional Court judgment, it would require a policy position and political direction. The Commission was not allowed to touch new order claims until the old order claims had been finalised. There was a strategy in place on how to deal with older claims, and it would be reflected in the Ramusa report. These claims were identified per region, district and province.
On the amendment, the court had not allowed for the continuation of the amendment, but the question did not end there.
The Chairperson asked for clarity on what “deferred and untraceable claims” meant.
The Commissioner answered that if a claim was untraceable and deferred, it meant all processes had been done to find a claimant, but the claimant was not found. There was a policy to deal with them. The court was approached for a deferral when the claimant was untraceable. There were cases where the claimant was not found at all or the claimant no longer wanted to pursue the claim.
The Chairperson asked what was done to communicate to communities that some claimants were untraceable.
The Commissioner said there was a policy where tracing agents were appointed to ensure communication with communities. This could also be done through community radio stations, community hall posters and such. Compliance with the law was ensured for just administrative action/processes.
Ms A Steyn (DA) asked what was done when claimants say they have submitted the relevant claim, but the Department says it has no record.
The Commissioners replied that if the claimant had proof -- for example, a letter from the Commission that a claim had been lodged -- the claim was considered lodged and was dealt with. If there was no evidence from the claimant, then nothing could be done.
Ms N Mahlo (ANC) said that since the Department had a policy it used to inform claimants, what was happening in the rural areas? Did the policy allow it to take matters to the Houses of Traditional Leaders who could take it back to the community, because people could not get information?
The Chairperson asked for clarity on land claims that existed pre-19 June 1913. How many of those were brought to the attention of the land claims court?
Ms Gobodo said the majority of the Department’s stakeholders were in rural areas, so communication with them occurred via radio, mobile offices, posters, and sometimes officials went to various provinces. There was a variety of strategies. There were district-based communication strategies also. On the 1913 cut-off date, there was no data regarding that. Those who had lodged were made aware when their claims did not comply with section 2 of the Restitution Act.
Ms Steyn said that if there were corruption allegations around previous land claims, what had the Commission done to ensure that this did not recur? Would it fall under her department as commissioners, or the Director General (DG)?
The Chairperson said that at yesterday’s meeting, no one had presented on the Special Investigating Unit (SIU) report. Many people had asked for the report, so if it was available could it be made available to the Members so they could engage with it? Until then, any question that related to it should be parked.
Ms Gobodo said regarding the spatial reference of achievements, that information would be provided in future reports. Inputs relating to skills development and targets that small holder farmers should be allocated land would be taken into consideration. On targets, the input given by the Committee would be considered. On the high number of deeds that were registered, the deeds registry often gave feedback to councils and conveyancers.
There was a meeting that would be taking place where the Department would propose a demerit system. The demerit system encourages good work and discourages shabby work.
On the small holder farmer definition, he was defined as a farmer who farmed for subsistence purposes but sold some of his produce to the local market, but who had gained reasonable experience to farm commercially and was ready to graduate to the next level of being a commercial farmer.
Regarding the intention of rural development plans and what they entailed, they look at what exists in each district in terms of infrastructure, local economic development infrastructure, poverty pockets and land reform needs. They identify the commodities that have more opportunities within the district and could be utilised to ensure economic growth and deals with how the district could address spatial injustices of the past. District municipalities had adopted them and should be using them for planning purposes. The review was to make sure that they were updated and that councils were well versed in them.
On the number of hectares received through the Strengthening of Relative Rights (SRR) and/or the 50/50 programme, during the financial year an amendment to the APP was submitted to Parliament that requested that the hectares acquired through the SRR be removed because its controls were inefficient and inadequate. The LCC had requested an audit of the projects themselves, so the report did not have that information.
On land that was surveyed, there were plans in the current APP to survey the land, with accompanying targets.
The requirements to see to it that the Commission becomes autonomous were being complied with. There should be an amendment of the Restitution of Land Rights Act. Currently the act says the DG of the Department was the accounting officer of the Commission. Those two processes had to happen in tandem while the autonomy of the Commission was approved.
The Commission was engaging in a project that would deal with issue of autonomy and hopefully by the end of the financial year, the proposal would have been submitted. The issue of autonomy was also about the budget that was associated, as the challenge had always been that the core of it referred to the Department, and majority of the staff was seconded from the Department. A plan had been submitted to the DG on how that would be done.
Referring to the grievances, she said there were 101 grievances, and 59 of them had been finalised, 36 were pending and six had been escalated to higher authority. There 59 disputes, of which four had been resolved and 45 were still pending and under review. 34 disciplinary proceedings were pending, 35 had been finalised, five were in arbitration, two were awaiting sanction and 20 were still under investigation or request for acquittal. Nine employees were on suspension. It had been three months, but the matter was being dealt with.
Ms Steyn said that in 2001 the government had been taken to court by a non-governmental organisation (NGO) regarding the provision of legal support to farm dwellers, and there was an obligation to develop a mechanism to deal with them. However, they could not because there was no skill set.
Ingonyama Trust Board
Judge Jerome Ngwenya, Chairperson took the Committee through the presentation.
The Auditor General had audited three sets of financial statements – for the Ingonyama Trust, the Ingonyama Trust Board and the Ingonyama Trust Board-Consolidated. There was a decrease of R3.79 billion in thenet asset value from the previously reported annual report, mainly due to reflecting a more accurate recording of the land values in the annual financial statements. This was achieved with no additional cost to the Board or the state, as the correction was done internally by the secretariat. The 2017/2018 land valuation amount had to be amended to maintain a fair presentation, in compliance with accounting standards.
There was a decrease in cash flow from operating activities from 2017/2018 due to an increase in expenditure. The increase in cash flow from investing activities from 2017/2018 was mainly due to an increase in capital expenditure for 2018/2019. The decrease in cash and cash equivalents from 2017/2018 amounted to R21.6 million.
The accounting authority had noted that the irregular expenditure incurred had been for known goods and services in the ordinary course of business, without any financial risk to the Board. The Board was committed to ensure that irregular expenditure was closely monitored and would be at minimal levels in future years.
Communal Property Association (CPA)
Adv Vela Mngwengwe, Acting Deputy Director General (DDG): Land Tenure and Administration, CPA, took the Committee through the presentation, highlighting that there were 1 599 CPAs in total, and that the majority of them (400) were in Mpumalanga.
Some of the challenges experienced in the implementation of the CPA Act were:
- After registration of CPAs, they did not always get ownership of land;
- Some communities opted for financial compensation after registering CPAs;
- Membership of restitution-based CPAs was generally scattered across the country, and therefore they did not attend CPA meetings;
- Low levels of literacy affected the effectiveness of the CPA Committees;
- Some committees refused to vacate offices when their term expired;
- Unaccountability for the use of CPA resources;
- Consolidation of claims and the subsequent registration of a single CPA;
- Lack of human resources to adequately monitor and intervene in CPAs.
The first layer of intervention was to build capacity within CPAs to enable them to perform their functions. The Department had conducted six workshops on corporate governance for officials, district forum members and CPA members. The Department of Environmental Affairs, Forestry and Fisheries had conducted training for 24 CPAs on management and the operation of parks. The training had focused mostly on biodiversity and had reached 304 CPA members. The second layer of intervention was litigation. There were 13 litigation matters involving CPAs, and four CPAs were under judicial administration during the period under review.
Ms Masipa said the transfers from the government to the Ingonyama Trust Board were enough to cover the work of the board, and there was a shortfall of R4 million. What percentage of the received income was calculated to be to the real benefit of communities? During the fifth Parliament there was no base data -- could the board explain how that was being addressed? Could it also explain why the R600 000 for bursaries had not been used?
Mr M Montwedi (EFF) asked how much of the total land was leased to private businesses, and which private companies were leasing it. Had communities ever been evicted from land to allow for leasing? On conversions of permission to occupy (PTO) leased land, what was the process and how did that affect security of tenure? Did they evict people who could not service land?
For three years, there had been issues with the board until there was an adverse audit opinion. Did this mean the board did not comply with the Public Finance Management Act (PFMA) as an entity of the Department?
He said there were hectares of land under CPA control, but he was worried that there had been no institutional capacity for five years, and there was land that had not been used. What should be put in place to ensure proper governance?
Ms B Tshwete (ANC) asked the ITB about policies that had not been reviewed. When would they be finalised? For programme two, no targets have been met since 2017 -- how long would its strategy take? On proactive land planning, could it provide a detailed list of PTOs that had been converted to lease agreements, including the date of the lease, number of hectares, termination date and written consent form.
On HR, it was shocking that there had been no training. There were media rumours that any employee who disagreed with the Board was purged, and she wanted clarity on that. It was public knowledge that the former land tenure management head was still on special leave -- were they making progress? She also asked about the AG’s statement that the Trust had not been complying with Accounting Act since 2017.
Ms K Mahlatsi (ANC) said that there had been an outstanding meeting with the Trust, and asked what the progress was on policies that were not in place. Regarding slide 18 on financial management, she was concerned with all three reasons for the variance. One could not spot a problem only at the end of the year when one had indicators. Slide 30 showed a decrease of R3.79 billion, which was a lot of money. How did that happen? How could one have non-capacitated people do evaluations? On the deficit, how could one give an adjustment when they refused to be audited?
Ms Mahlo said the organogram showed that democracy should be taken into consideration and more women should be hired at the Trust. She asked for more details regarding the R300 000 spent on staff. On which area was training focused? Did they hire youth and disabled persons? Did the CPA use lease money to assist communities?
Ms M Thlaphe (ANC) said that the ITB report showed irregular of expenditure of R1.9 million which was not disclosed in terms of s55, and had contributed to the adverse opinion. Why was it written off without proper channels? Did they have the capacity to deal with an audit action plan? The CPA report had many mistakes.
MsT Mbabama (DA) said that the CPA had made mistakes, but fingers should not be pointed now. How should the matter be resolved? Instead of having CPAs, why did they not give people land individually because success was a pipe dream with CPAs. Would the Department ever have the capacity to look after CPAs? The Ingonyama Trust received very little money, and the Committee should not be vilifying it.
Ms Steyn said that people were governed by constitutional court cases. The CPA amendment had been received, and if the Committee did not deal with such issues, then what was its role? She did not believe the Trust was doing what it claimed to be doing, so the Committee we should have hearings in KZN to hear what the people were saying. What was it doing to ensure that people who had land were gaining economically from it?
What was Ingonyama doing about improving land administration and spatial planning? How was it adding value to communities?
Ms T Breedt (FF+) said that the CPA had been non-compliant. She feared that they could change its name, but it would remain the same. What could they do about it? On Ingonyama, what was the deadline for the new structure. Could the Committee get access to their organogram? What was the non-cash straight line leasing income? Why were they not complying with the PFMA?
Mr Montwedi said that the Trust had a legal opinion dated 13 June 2017, yet the issues remained unresolved. It showed that the Trust was unwilling to listen to anyone. The AG had offered a letter of recommendation saying that revenue must be raised, but that had not happened. Why was the Trust not complying with the PFMA? A moratorium had been put on the Trust by the fifth Parliament regarding the issuing of leases, but the Trust had continued to conclude leases. Why had they ignored the moratorium?
Judge Ngwenya said he got the impression that the AG may have misrepresented the situation by saying that the ITB was failing to comply with the Acts of the country. That was not true because the Trust complied with the Ingonyama Trust Act. It also provided guidance when it came to which accounting process to adhere to under the heading of financial regulations.
The Chairperson asked who owned the land and to whom the money was paid.
Judge Ngwenya answered that the community owned the land, and the registered owner got the money.
The Chairperson asked for clarity regarding the 10% rental fee that went to the board and the 90% that went back to the community. He asked the Trust to submit a five-year report that detailed what it had been giving back to communities and traditional councils.
Mr Mgwengwe answered questions relating to the CPA.
The question came down to whether there was a plan regarding CPA challenges. There was a need for the Department to provide a real report on the extent to which the objectives had been achieved. Next time it would provide the needed details. The things spoken of were to the extent that they appeared in the report.
On how much land was leased, the President had announced a plan to identify vacant land for distribution purposes, and if it was used by the CPA, this would be unlawful.
Comments by Department of Rural Development and Land Reform (DRDLR)
Ms Karen de la Rouviere, Chief Audit Executive, DRDLR, said that during the 2018/19 financial year there had been an internal audit from 21 August which had been reported to the Department’s audit committee and executive. At the end of the financial year, the audit had been used to inform an internal control assessment of the Department on all its programmes, based on a scale of high, medium or low risk. A high-risk control assessment implied a weakness in the process. A medium was a moderate weakness in the internal control system. Corporate government was medium risk and the risks they had identified were as follows;
On corporate government, ethics management needed to be improved, as it was not fully effective. Combined assurance also needed improvement.
Strategic and operational planning was identified as a medium risk, and referred to the alignment between expenditure and performance recognition. Due to that, one of them had new sub-programmes being introduced during the financial period, so the expenditure had changed.
Risk and compliance management was a medium risk, because risk management was not sufficiently embedded at a strategic level. Information Technology was a high internal control risk -- specifically network vulnerability, change management and inadequate user account management.
Record management was high risk. The security of paper-based and electronic records was not adequate. Contract management was not adequate, and as a result, poor performance of contracts was experienced. Human resources (HR) was medium risk, as misconduct and grievance cases were not timeously resolved, and there was an inability by the Department to defend itself against employees who were dismissed. Fraud and corruption was also a major risk in the Department.
On the resolution of findings, 1 118 findings had been issued over the past four years, and 16% of them had not been implemented by of May 2019. The majority of internal audit findings (84%) were implemented. The age analysis of findings was normally addressed within 12 months. Some findings were categorised as long-term findings, such as if a system development needed to be done. 183 findings were outstanding, of which 39% were four to six months old, 25% were seven to 12 months, and others were more than 12 months outstanding. On the outstanding audit findings, the risk classification was the same -- 86% were high risk,14% were medium risk, and 1% was low risk.
Onderstepoort Biological Products (OBP)
Dr Baptiste Dungu, Chief Executive Officer (CEO), OBP, said the entity had received an unqualified audit opinion. Ensuring financial sustainability by increasing sales revenue could not be achieved, and profitability could not be improved. The percentage of doses transferred to distribution did not meet the target of 75%, as only 48% was achieved. 49% of sales were aligned with the forecast. On improving customer satisfaction, 49% had been achieved. The number of distribution points had been increased to ensure accessibility to emerging farmers, and there were currently seven distribution channels.
On the financial performance, the income statement reflected that profits after taxation had decreased from R48 484 000 in the previous financial year, to R41 280 000. The balance sheet showed that the net asset value had increased from R230 773 000 to R272 053 000. The cash flow statement showed that the cash position at the end of the year was significantly higher in the previous financial year.
Challenges encountered included loss of market share, production inefficiency, loss of expertise, outdated vaccine technology and mismanagement.
Mr L Ntshayisa (AIC) asked for clarity on the entity’s expenditure.
Mr N Chapa (ANC) asked whether there was progress towards developing its international market.
Ms Breedt asked for the number of targets that were not met, and what deadlines they had set to meet them. How did they intend on getting a good audit outcome?
Ms Steyn asked what the Department was doing to strengthen audit findings. On disciplinary proceedings, there were cases that referred to interest on land payments and criminal procedures not being instituted. How would they ensure that there was a timeframe for disciplinary committee (DC) cases?
Mr Masipa asked OBP about its decline in sales and profitability and the unqualified findings. How many targets had been met?
Ms Montwedi asked OBP where the distribution points were for farmers to access.
Ms B Tshwete (ANC) asked the Department why they did not engage other entities like the State Information Technology Agency (Sita) to get help with networking. She asked why there were findings that had not been implemented for two years.
Ms Mahlatsi said action plans should be included to monitor departments. Did the Department have the capacity to deal with risk management? The OBP was not funded, but was doing better than other entities. The Committee must assist it by liaising with Treasury. Technology was evolving and they had to help them keep up. The amount on irregular expenditure was too high and concerning.
Ms Mahlo said the OBP organogram was impressive.
Ms Thlape asked the Department what plans it had to deal with internal controls and handle misconduct timeously? How had the decline in profits affected production efficiency? Was there an urgent need for assistance?
The Chairperson asked OBP asked what the role of the Department was. It was in a market where the private sector was producing the same things. How competitive were they? How could the government assist it in this regard?
Ms Rouviere said that disciplinary procedures and the related time plans had been looked into, and an action plan had been compiled to address capacity in the labour relations unit, and this would ensure that the DC was capacitated within a reasonable time frame. There were plans to address the short term objectives and capacity challenges. The Department had engaged with SITA to reduce its network vulnerability. On contractual agreements, there were plans to address all the identified weaknesses. For each component of risk management and internal audit there were three directors who were well capacitated.
Dr Dungu said the organisation had been sick for a long time. Infrastructure was a problem, but something was being done about it. Skills had been lost, but that was being remedied by attracting workers who had retired and would be brought back on a short term basis, as well as experts from abroad. Because the entity did not have the latest technology, it partnered with other manufacturers because they had infrastructure. On irregular expenditure, in the process of addressing the challenges faced, experts had uncovered irregularities over a couple of years in procurement and the design of specifications, and had asked the AG to audit. That was where the irregularities had come from. The entity had already put in place corrective measures and would present to the Committee
He said 16 targets were achieved and 11 were not. To achieve all of them, skilled workers were needed because OBP was technical, so over time those skills would be attracted. The government could help with making the entity more competent and engaging with Treasury to give the OBP a fair chance to compete.
Ms Steyn asked about claims against the Department regarding the R3 billion.
Dr Dungu responded that there were three different categories of amounts that made up that total. They included claims that were settled, where in some instances financial compensation was involved, and the commissioner could locate the people to whom the money had to be paid. Secondly, it relates to section 42 grants where the commission settles claims and the development money that was supposed to be made available to assist those committees. The last related to several court cases where land owners had won against the Department, and the Department had to settle.
Agricultural Research Council (ARC)
Mr Shadrack Moephuli, CEO and President of the Council, said the entity had received a qualified audit opinion for three consecutive years.
On employee demographics, the racial spread showed that 72% of employees were African, 1.43% were foreigners, 16.88% were white and 8.16% were coloured. The gender spread showed that 57.12% were male and 42.88% were female. In total, there were 2 719 employees.
Regarding professional development, 64 females had received PhDs, compared to by 42 males.
The ARC had incurred a loss of R22 million for the financial year. Section 53 of the PFMA did not allow the entity to incur a deficit. Personnel costs represented 61% of expenditure, while operating and administrative expenses took 28% of the budget.
The statement of the financial position showed that net assets had fallen to R807.4 million for the financial year, compared to R828.9 million for the previous financial year -- a variance of 2.6%. The cash flow statement showed that cash at the end of the year amounted to R76.3 million.
ARC had provided training to no fewer than 1 500 farmers through more than 30 courses requested by the clients themselves. Such training was aimed at improving their skills, thus improving productivity. Courses ranged from grain crops, to vegetable and wine production, meat and dairy processing, sustainable water use, poultry and pig production, animal reproduction (artificial insemination) and animal health care.
National Agricultural Marketing Council (NAMC)
Dr Simphiwe Ngqangweni, Acting CEO: NAMC, said that to increase market access to all participants, 14 reports on smallholder market access had been produced. 20% of statutory levies were spent on transformation. One development scheme was designed and four development farmer data base update reports were produced. A market facilitation report was produced and four industry transformation support reports were produced.
On efficiency of marketing, 40 agro food chains reports were produced, 100% of all statutory levy applications were investigated/facilitated, and two capacity development facilitations produced and two training evaluation reports were produced.
On sector viability, four Strategic Infrastructure Project (SIP) 11 reports were produced, and all registrations, records and returns applications were facilitated. One annual coordination report for the supply and demand committees and the crop estimates committee was produced, and a register of directly affected groups was compiled. The Council also produced a status report on agricultural trusts.
The entity had no vacancies. 49% of the staff were male and 51% were females, and 2% were people with disabilities.
There was a 102% increase in non-current assets due to additional assets bought for the National Red Meat Development Project. On receivables, there was a major decrease in the number of outstanding invoices at the year end. There was a 70% decrease in cash and cash equivalents due to funds for the Agricultural Information Management System (AIMS) project that were returned to National Treasury. There was a 70% decrease in liabilities as a result sponsorship funding utilised during the year.
Perishable Products Export Control Board (PPECB)
Mr Angelo Petersen, Chairperson: PPECB, said 2.9 million pallets had been exported during the period under review – an increase of 11%. For equity certification, 303 185 containers had been inspected and 23 684 rejected due to being tainted or damaged. 145 481 certificates were processed and 5 745 were cancelled.
R423 million had been received in income, and expenses had amounted to R398 million.
57 small holder farmers were certified for export; 82% customer satisfaction had been achieved, and 238 small holder farmers had been trained. Training had taken place in all nine provinces covering good agricultural practices, food safety and responsible use of pesticides. There were 39 Agri-Export Technologist Programme (AETP) students, and there was a 78% broad-based black economic empowerment (B-BBEE) spend.
Challenges included a lack of connectivity and information, and the entity was resource constrained.
Mr Ntshayisa referred to the PPECB’s assistance to 57 smallholder farmers, and asked what the target had been. As the ARC had had an unqualified audit for three years, what could it not resolve during that time? How successful was NAMC’s assistance to smallholder farmers? Why had there been a double salary for a single person? An unqualified audit opinion in finance meant that they were in a position to handle numbers and financials, so how did they get an adverse finding for performance?
Mr Chapa asked why the ARC had limited knowledge on diversity. Did it get the credit when students got degrees when it had contributed in helping them to graduate? What the progress had been made in research on hard water and drought resistance? Were they researching cannabis, and could the NAMC contribute to this?
Ms Breedt asked the PPECB whether the entity had failed at any of the food safety audits, and what steps had been taken to avoid failure. What was its staff component regarding its organogram, and why were salaries so high? What were the NAMC’s transformation projects? What was the app the ARC was developing? Why had its inputs decreased? To what extent could it generate its own income?
Ms Mbabama said that the Committee should do site visits for its own education, not just as an oversight measure. NAMC had a lot of audit findings on its performance plan, and that was concerning. What was its plan to mitigate these findings? She asked the ARC to explain the grant because some Members were not in the previous Parliament.
Mr Masipa said that on animal health production and improvement, the ARC had said targets had been 100% achieved and there were plans to register a patent under this property. This was contradictory, because it indicated that the company had developed a diagnostic tool for African Swine Fever (ASF) and Foot and Mouth Disease (FMD) that were trademarked. How was the marketing proceeding on that? He referred to the conditional grant the ARC had received in 2010 for infrastructure, and asked why it seemed this had not happened. Why could it not implement the agricultural marketing system?
Ms Montwedi said the NAMC should identify an export market for farmers, and asked whether it had done that. How were they empowering farmers so they could trade? How could the ARC help to lower input costs for farmers? Was it getting more support from the government, as opposed to the government sourcing its research from competitors?
Ms Mahlatsi said Committee should give itself time to interact with the ARC. The audit opinion had identified numerous issues, such as proper record keeping, financial management, and effective leadership, and the Committee needed to interact further. Since it had had these findings for the past three years, how did it plan to deal with them? The presentation was lacking, as it had not reflected an assessment of whether it had been able to achieve its targets both qualitatively and quantitively, so the Committee could not assess its progress. The professional development had been impressive in as far as building capacity was concerned, especially since the PhD holders were mostly female. He asked the PPECB to explain its wasteful expenditure.
Ms Mahlo said the PPECB needed more diversity, such as more young people and women.
Ms Tlhape said she supported the idea of a session with the ARC. The Committee understood their mandate and the Act that formed this institution, and it was here to help the Department. The ARC had a mandate to conduct research and promote agriculture, thereby alleviating poverty. The report said it had trained 1 500 people -- where were they? Where had its project with the SA Weather Service (SAWS) been implemented? Administration was not looking good. The Council needed to review its policies and weed out those that were not working for it. It appeared as if it had moved away from its mandate. Where were the 500 people that it had trained? Why did it have only 30 courses -- could it not try to increase them? She asked for details of its intergovernmental policies with regard to the Department of Trade and Industry.
Ms Mahlatsi said they had missed an opportunity to understand the ARC’s issues, and this had been captured in the overview of the Chairperson on the annual report. There was a paragraph that speaks to the ministry and the Committee, to strive towards having an entity dealing with agriculture and corruption. What discovery had it recently made? The Committee wanted to see the ARC thrive in other provinces and had to assist with that. As a marketing entity, did it have any working relationships with female entrepreneurs? The Department was trying to showcase women who were doing well.
The Chairperson said the PPECB board’s term was coming to an end, and the Committee hoped the composition of the new board reflected the demographics of the country with a proper 50/50 equity split. Of the 2.9 million pallets exported various destinations, including North America, how many contained produce from previously disadvantaged groups? What were they doing to partner with the Department of Forestry that was looking to expand its forestry plantations? At some point, they had been taking about 40 000 hectares in KZN and 100 000 hectares in the Eastern Cape. He understood that this had never been realised, so what was the Board’s role to help them realise the target and empower rural communities? How were they helping young black manufacturers in this regard? What was their target for the future? The presentation referred to containers which were inspected -- what did they consist of? What was the spread in terms of perishables, and what was the spread in terms of ownership? How often did they find issues of human trafficking regarding the containers? How was the wasteful expenditure incurred? What did its transformation programme through training smallholder farmers consist of? What qualification did the farmers get, and how long did it take?
As the NAMC the presentation was presented by the acting CEO, he asked where the CEO was. Was this entity still a retirement sector, or were young people participating now? Regarding the 35 women entrepreneurs trained, what where they trained on and what was the racial spread of these empowered women? What was the Buhle farmers’ academy, and where was it located?
The ARC had received a qualified audit opinion for the third consecutive year, and this was a serious concern. What were the plans to remedy this? It seemed they were doing assessments for audit purposes only. The findings were repeat findings of non-compliance with the PFMA and accounting practices, and there were deficiencies in internal control in respect of leadership and financial control and management. Why were they not addressing these issues with the urgency they required? The entity had been lamenting the decrease of its Parliamentary grant, and yet had done nothing to curb irregular expenditure. There were instances where irregular expenditure was not even investigated. It had not taken steps to collect revenue owed to it, and some of its debtors were government entities. Why were they failing to collect debt? The AG had highlighted that due to vacancies in key positions like the CFO, audit action or improvement plans were not being implemented. In 2018/19, the ARC had gone through three CFOs -- why were they not able to attract and hold a CFO on a permanent basis? How could one rectify findings that they neglected consistently? The ARC’s financial viability was under stress, as they were running at a loss. The deficit was driving their irregular expenditure and they could not perform optimally. How were they going to resolve those issues?
Mr Moephuli said pivotal issues had been raised. The idea that ARC should have a full session with the Committee was welcomed. They had engaged with the AG on a number of the matters that had been discussed. The chairperson of their audit committee had to be kept informed by the AG on the critical issues, and met with the AG on a quarterly basis. The Minister was being engaged, as well as the Minister of Finance. The Department had tried to create a turnaround strategy to deal with the issues. The ARC was competing with the private agricultural sector. Other challenges had to do with the advances in technology in light of the fourth industrial revolution.
The right person had been found to fill the position of CFO, and was playing a critical role. They were open to the notion of consequence management. The grant was their main source of income, and they got “soft money” here and there.
The employees who cost the ARC the most were the ones who attracted money. The entity was stuck in a conundrum of training young people, but had no one to carry them through. The way the ARC was constructed, for every cent the private sector puts in, it expected the public sector to respond in kind. It was a downward spiral, not an upward one. The minute the government cut the funding, the problems started going up.
The ARC operates in rural areas, and this causes delays. The entity was not immune to crime. In 2018 one of the campuses experienced no fewer than 10 instances of cable theft. Some of it happened a kilometre away, where it had no jurisdiction. When there was cable theft, the place where the dangerous viruses were stored needed emergency power. Generators were used, and they consume diesel, failing which the viruses would be released into the environment. A lot of money was also spent on security that looks after the assets of the entity, so a significant chunk of the Parliamentary grant goes to that.
Due to liberalisation of markets, commercial fruit farmers no longer have to wait on the ARC to provide fruit cultivars. They now liaise with private international organisations. In the year under review, there had been a legal challenge with another company over one of the fruit cultivars infringing on the entity’s intellectual property. The royalties that it would ordinarily get from those farmers no longer comes to it. Due to the underfunding, the ARC had lost the ability to compete with those organisations. There was also a misconception that the ARC was firing white workers, and that was not true. Broadly speaking, 60 % of the revenue was government revenue.
The organisation accepted responsibility for the qualified audits. Management had tried to resolve the issues, but some could not be resolved in time. With the CFO issue, people had resigned and this had left a mark on the organisation, as their replacements were too junior to handle the work properly. The internal audit service provider’s term of office had ended. The ARC had then got a new service provider, which had subsequently been bought out by a new company, so they had had to cede its contract -- and that was not allowed by the Act. An experienced CFO had been appointed, but he resigned 30 days later. His replacement had started on September 1. There was a new audit improvement plan for the current year which had been approved by the committee.
When employees travel, they get a travel advance to pay for their accommodation, and bring back receipts to be reconciled with their travel claims. No fewer than 200 employees had not done this, so the outstanding money was being subtracted from their salaries. Because of this, they had taken the entity to court because they had not authorised the employer to do so.
On the vaccine, the organisation had done the research and was working with OBP with regard to further development for production and marketing. An agreement had been signed, as OBP would now be the manufacturer. A presentation on that could be given.
The only province that had purchased the drought resistant seed was Limpopo. The other provinces had not, even in the midst of the drought.
The ARC had been involved with cannabis for many years. It had partnered with the Netherlands and had developed new varieties of the herb, and trialed it in the Eastern Cape and other provinces. The herb had a much lower polyhydroxybutyrate (PHB) content than the cannabis plant. The Department of Health was planning to release it as a commercial plant variety for large scale production. The ARC had been looking for approval. Most of the approvals that had been granted by the Department of Health were for large scale commercialisation. As of last week, the ARC had been informed that it had been appointed to serve on the advisory Committee dealing with the framework and regulations for cannabis.
The app developed by the ARC was in nine languages, and was called “R4A,” which was short for “Rain for Africa.” It was not found on iPhone, because it had to be accessible for android users. It was accessible even on the cheapest phone. One could enter one’s global positioning system (GPS) location, and it would tell one the weather details around one’s farm for the next ten days.
The cost of employees takes up about 88% of the Parliamentary grant, which constitutes 60% of the ARC’s total revenue.
Regarding government purchases from the ARC, this had been discussed with the Minister of Agriculture, to encourage the government to procure from governmental entities.
There had not been just 30 courses. The presentation stated that there were no fewer than 30 courses which were credited through the Agri Seta.
The mandate had not been changed. The ARC had a fairly broad mandate and all the things that had been done were within it. The ARC was not a government department, and therefore it could not have intergovernmental policies.
Supply chain misconduct had been a challenge, and some individuals had been subjected to disciplinary action.
The challenge with vacancies was that the ARC was losing scientists to competing organisations such as universities, because of salaries.
On policies, one of the audit improvements plans was to ensure that auditing and control was improved. A process of continuously reviewing the policies that were in place had been implemented.
Before a vaccine could be used by the general public, the ARC had to make sure it was safe – for instance, whether it could be used by pregnant animals and those that were nursing. It took a long time to gather all that information and release the vaccine.
On the conditional grant of R188 million, the ARC had given a proposal on the capability of the ARC to develop the Foot and Mouth Disease (FMD) vaccine. National Treasury had allocated it a grant to develop new technology for the vaccine, as well as for the necessary skills that would go through to production.
Regarding the development of skills, young people were being trained to post-graduate level.
Dr Ngqangweni responded on helping smallholder farmers, and said the purpose of the Smallholder Market Access Tracker (SMAT) was to come up with a measure of market access for these farmers. If there was a challenge in marketing a given commodity, such as citrus, the aim was to come up with a measure of what form of market access was in question. A survey had therefore been conducted in the case of citrus. It was still at the baseline stage, so after a number of years one could go back to the baseline to see how much progress had been made. This assisted in the making of decisions by those who implement programmes to improve the situation. It would be rolled out in the next few years in other commodities as well. The NAMC had a problem with data, and it would also assist with that.
On the percentage of achievements of targets -- specifically food chain research targets -- these were planned and scheduled in advance to be actioned on a monthly or quarterly basis. In this case, the plan was to achieve 100%, so a rigorous plan was in place to achieve targets as scheduled.
On examples of specific reports, we work on supply and demand and on a monthly basis NAMC had a Committee that sits to estimate the level of stock. This was done every month, and helps with decision making and monitoring the food security situation. There was also monitoring of food prices on a quarterly and monthly basis, and a report that looks at the farm-to-market price.
On the linkage between the capacity development programme for the women entrepreneur award, a group of women was chosen from the nominees and each province would have three farmers to participate and be helped to improve their business. Training was offered on business and financial aspects.
The Agribiz for Women racial spread for 2019 was comprised of 32 African women and 3 coloureds. The Buhle farmers academy was a training service provider in Gauteng.
Regarding the double salary payment, there had been a claim that was submitted through payroll and the Department. Currently the recovery of the double payment was being considered.
The adverse audit opinion meant the NAMC did not meet its targets as per the annual plan. The targets were not crafted according to the Treasury framework, but the NAMC was working on getting assistance to ensure that it follows the framework. It was investigating irregular expenditure on the National Treasury framework and would review all the expenditure before findings by the AG. Thus far there was no irregular expenditure. All the contracts that had resulted in irregular expenditure were being reviewed in order to address the AG’s findings.
On risk management, the entity did not have a fraud risk register. It was looking at that and a register that was presented to the management committee on Monday would be tabled at the risk management and audit risk committees. A combined assurance plan had been developed which would be tabled at these committees.
There were HR many issues related to the entity’s performance management policy. What was being done in practice was not reflected in the policy. The policy was being renewed.
Regarding the marketing of cannabis, this industry had a market. It had to move from being an underground operation. It would be more innovative when the legalities around it were cleared up. The licence to produce would be a barrier, because to be registered one needed about R150 000. The marketing opportunities were there, but the industry had been operating under cover for many years.
One of the conditions of statutory levies was that 20% had to be spent on transformation. The transformation business plans that are submitted to the NAMC as a condition of approval must align with sector codes through an internal document called Transformation Guidelines. The transformation money did not go to the NAMC, but it monitored the implementation of the transformation commitment.
The Department of Agriculture had had a workshop for farmers, which was more aligned with the China protocol. Two forms had been communicated to the farmers, the first of which was for farmers who wanted to be registered as potential suppliers of goods that go to China, as per the protocol. The response from the Department had not been given.
The grading equipment that was available now was expensive, and was not accessible to many smallholder farmers. A cheaper version was being considered, but NAMC was waiting for recommendations from the research committee.
The idea for the Agricultural Information Management System (AIMS) had been conceived in 2009 by the Minister. It would enable the NAMC, at the click of the button, to zoom into a farm and obtain details on the farm, such as the name, its produce and size. It had been agreed that each province would contribute a certain amount of money towards this system, as it would affect the whole sector. The provinces had done that, and in implementing the system the NAMC had advertised a tender, but unfortunately it did not go well. It had been cancelled based on technicalities, such as the funds that had been contributed had amounted to almost R80 million, and the system’s cost was estimated at around R120 million. The company that was to implement the system had quoted almost R20 million, and that had raised questions on the complete functionality of the system. Ultimately it had been cancelled, and by the time it was to be re advertised, Treasury had changed the rules. The new rule stated that if one used a public entity where services had to be procured from outside, competitive bidding had to be followed. Ultimately, Treasury had instructed that the funds should be returned to it.
Mr Petersen said that the PPECB was a regulator. It guarded the quality of the products that leave South Africa’s shores. Any other duty was secondary to this. Regarding the board composition, the existing board was appointed via a stakeholder process and was also guided by the Act, so there was a nomination and the entity sometimes had to accept what it received. Hopefully the new board would get the balance right on diversity, skills and gender.
On the target for farmer certification, 57 farmers had been certified, but the target was 10 so the target was exceeded. Regarding what happens when audits fail, they were given three months to rectify and then the organisation audits again.
The TITAN software platform had been conceived to bring about efficiencies in the supply chain.
With regard to the organogram, more inspectors had to be appointed, but at the same time the Board was looking at new ways of work to reduce processing times.
The pallets that were being exported were not empty -- they had fruit in them. The containers mostly contained fruit, seafood, and sometimes chocolate. Human trafficking had not been encountered, but drugs were found two years ago.
The meeting was adjourned.
- PPECB 2018-19 Annual Report presentation
- OBP 2018-19 Annual Report presentation
- National Agricultural Marketing Council 2018-19 Annual Report presentation
- Ingonyama Trust Board Quarter 1 performance presentation
- Ingonyama Trust Board 2018-19 Annual Report presentation
- Agricultural Research Council 2018-19 Annual Report presentation
- CPA Annual Report:2018-2019 presentation
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