Ingonyama Trust Board 2020/21 Annual Report

Agriculture, Land Reform and Rural Development

16 November 2021
Chairperson: Nkosi Z Mandela (ANC)
Share this page:

Meeting Summary

Annual Reports 2020/21

Ingonyama Trust Board (ITB) is responsible for administering the three million hectares of land falling under traditional authorities on behalf of the Zulu monarch. It presented the ITB 2020/21 Annual Report and the Auditor-General South Africa (AGSA) discussed the ITB audit outcomes.

The Committee called for a forensic audit of the Ingonyama Trust Board (ITB) and for it to be placed under administration due to it not meeting Public Finance Management Act (PFMA) requirements. This is in spite of the ITB obtaining an unqualified audit opinion by the Auditor-General for the first time.

Committee members were dissatisfied with the Board's high costs and failure to meet financial reporting deadlines. ITB received R22 million in 2020/21 in funding from the Department but spend nearly double that. ITB is also allowed to use of 10% of the revenue it collects on behalf of Ingonyama Trust but it spent 46% of the Trust earnings in 2020/21. Questions were raised about the June 2021 High Court judgement that concluded that all lease agreements the Trust and Board concluded with people on communal land are unlawful and invalid and the rent money must be returned.

Meeting report

Chairperson opening remarks
The Chairperson welcomed the Auditor-General SA team, the Ingonyama Trust Board (ITB) and Ingonyama Trust (IT) and Acting Director General Dr Mooketsa Ramasodi of the Department of Rural Development and Land Reform (DRDLR). Apologies were noted from the Minister and Deputy Minister. Deputy Minister Zoleka Capa was due to join them but did not do so.

AGSA briefing on Ingonyama Trust Board (ITB) 2020/21 audit outcomes
Ms Michele Magerman, AGSA Deputy Business Unit Leader, introduced Ms Ntombifuthi Mhlongo, AGSA Business Executive of its Kwazulu Natal office, and KZN Senior Manager, Ms Adele Howard who would present. Mr Thabo Ditodi, AGSA Senior Manager was also attending.

Ms Ntombifuthi Mhlongo, AGSA Business Executive, explained that the Ingonyama Trust Board audit was still outstanding as they busy with the conclusion process for the audit. ITB had improved from a qualified audit in 2019/20 to financially unqualified with findings on compliance. ITB submitted its financial statements two months late on 31 July 2021 and the IT only on the 30 August 2021. There are complexities related to the treatment of land in the financial statements that we are currently dealing with.

Quality of submitted financial statements
• ITB submitted financial statements that contained material misstatements which were corrected.
• This was caused by inadequate review of the financial statements against supporting documentation due to a lack of regular reconciliations during the financial year.

Quality of performance reporting
• ITB had no material findings because they corrected all misstatements identified during the audit.
• Misstatements were caused by inadequate reviews of the annual performance report against supporting documentation to validate the reported performance.

Annual financial statements: material findings on compliance with legislation
• Financial statements were not submitted for auditing within the prescribed period as required by PFMA. Financial statements were received on 31 July 2021.
• The financial statements submitted for auditing were not prepared in accordance with PFMA. Material misstatement of revenue identified by the auditors in the financial statements was corrected, resulting in the financial statements receiving an unqualified audit opinion.

Expenditure management
• Effective and appropriate steps were not taken to prevent irregular expenditure to R7.02 million and fruitless and wasteful expenditure of R29 000 as disclosed in the annual financial statements. The majority of the irregular expenditure was caused by overspending of the approved budget. This was due to inadequate budget monitoring; the budget was submitted late to the executive authority and ultimately there was an insufficient budget to cover all expenses incurred

Consequence management
• AGSA could not obtain sufficient audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure as required by PFMA. This was because investigations into irregular expenditure were not performed.

Key root causes in the internal control environment
• Regular reporting and monitoring not implemented adequately throughout the year.
• The financial statements contained material misstatements. Leadership did not effectively review the financial statements and monitor compliance with laws and regulations. This was due to inadequate controls to prevent non-compliance.
• Inadequate review of performance information against supporting documentation.
• No SCM manager to monitor and ensure compliance with SCM legislation.
• Financial health is poor due to insufficient funds and poor controls over monitoring of budget processes.
• Senior management and employees did not have signed performance agreements.
• ITB did not approve the Information Technology Governance Framework and Strategic Plan.

Ms M Tlhape (ANC) welcomed the presentation by AGSA. When it comes to ITB matters, it is usually a challenge, first and foremost, the late submission of financial statements. Last year they were late by two months. This year, they were late again. It indicated that the Ingonyama Trust itself had outstanding financial statements. What is the impact of this on the Board's audit report?

AGSA noted it was dealing with complexities in the treatment of land in the financial statements. What are these complexities? What would be the impact of the court judgment and its order that people should be reimbursed?

Ms Tlhape noted there was no consequence management, the executive authority and accounting authority must investigate. This is a repeated finding. She asked AGSA's advice on the viability of Ingonyama Trust Board and the treatment of land.

Ms N Mahlo (ANC) heard AGSA say that the current improvement is to be sustained by the Board. What is the plan to assist the Board to sustain the current improvement?

Mr S Matiase (EFF) said the Auditor General confirmed last year that the ITB was listed as a Schedule 3 public entity but that the Trust itself was not listed and therefore there was no requirement in the PFMA for the Trust to submit its finances and make them public. He asked for a cogent answer from AGSA. There seems to be a legal disjuncture that the Trust has the option to report publicly. He asked for the opinion of the Auditor-General in addressing this legal loophole as one cannot have public finances unaccounted for. What legislation is needed to correct this?

Mr N Capa (ANC) asked for clarity on the nature and implications of the R7 million irregular expenditure as well as what AGSA recommended to the Committee about the investigation.

Ms B Tshwete (ANC) asked about the irregular expenditure recommendation for the Committee.

The Chairperson asked AGSA to be explicit on what they were able to find out in the engagements with ITB to resolve the standing challenges, particularly on the audit process and the applicable statutes. Was there any progress?

AGSA response
Ms Mhlongo said Members would remember that previously the Board and the Trust were consolidated. With further evaluation of the statute applicable to the two entities, that consolidation was no longer relevant or applicable. The two entities now reported independently of each other.

There will be no direct impact caused by the delayed signing of the Trust audit on the ITB audit. On the complexities that were highlighted, this has been discussed when the ITB audit report was signed. Management has given the auditors the necessary responses.

Ms Mhlongo requested the Committee ask the Department and ITB about the court judgment because they would be in a better place to respond to that as they would have assessed the financial impact that the court judgment has brought to ITB. Ms Howard will reply about the viability of ITB financial health and how we have recommended that it be addressed.

On sustaining the ITB current improvement, AGSA has had engagements each week to address the audit findings as well as provide clarity. With those engagements, they have been able to get ITB to focus on financial, performance and compliance matters. They believe that going forward, it should not be an issue to sustain those improvements.

On the Ingonyama Trust not being listed as a public entity in the PFMA, AGSA notes that audits are not just limited to listed entities. It go beyond to unlisted entities that have a public interest or receive public funding. That is why they audit IT and they have continued to audit IT even this year.

About splitting the amounts for irregular expenditure, Ms Howard will reply to that specific question.

In reply to the question asked by Chairperson about the scheduled engagements to discuss ITB, this has taken place. The focus ITB has now put on allowing engagement and discussion of the audit process and accounting matters more openly, has given a way forward in dealing with specific matters that have been a challenge in the past and given them space to give meaningful recommendations to be taken forward by ITB.

KZN AGSA Senior Manager, Ms Adele Howard, emphasised that Ingonyama Trust Board and Ingonyama Trust are two separate entities. The fact that the audit of Ingonyama Trust is outstanding has no impact on the ITB audit outcome because they are two separate audits. About assisting ITB to maintain the improved audit outcome, AGSA does conduct status of records reviews at an engagement with management during the financial year and it serves as an early warning system.

On Ingonyama Trust not being listed in the PFMA schedules, what is important to note are the regulations of Ingonyama Trust as regulation 20 specifically states that its financial statements must be audited by the Auditor General. Section 4 of the Public Audit Act requires them to audit the Ingonyama Trust.

R4.1 million of the irregular expenditure was due to the budget being exceeded for general expenses and employee costs. The balance of R2.9 million was due to procurement where quotations or tax clearance certificates were not obtained and other compliance matters under procurement and contract management.

The recommendation to the Committee was for it to follow up that the investigations were completed. The last paragraph of the audit report mentions the investigations in progress. The recommendation was to follow up and ensure they do get completed. Once completed, it is to ensure that the investigation recommendations are implemented.

On audit challenges, Ms Ntombifuthi replied that through specific audit discussions, ITB has improved significantly this year. The focus has been on the audit process itself rather than on a discussion about audit finding disputes. ITB has taken time to understand the audit findings and their impact. They have held continuous weekly meetings throughout the audit, which assisted both teams to have constructive engagements. They have had a relationship improvement, and are hoping it would continue in the future.

The question referred to the Department would be responded to after ITB had presented.

Chairperson's comments on Ingonyama Trust financial statements
The Chairperson thanked AGSA and handed over to the Department and Ingonyama Trust Board and Ingonyama Trust. Today’s meeting would consider the Annual Report of IT and ITB, the Kwazulu Natal Ingonyama Trust Act 3 of 1994, financial regulations, IT Regulations 21 provides for the submission of written annual report on the activities of the Trust.

The annual report must include audited financial statements, reflecting the Trust's financial affairs consisting of at least a balance sheet and income statement and the audit report. Regulation 20 provides that the financial statements and the records of the Trust shall be audited annually by AGSA. It provides that AGSA must submit its audit report on the Trust to national Parliament.

Note that the report before the Portfolio Committee does not include the financial statements of the Trust. It thus limits the extent to which the Committee, as an extension of the National Assembly, can hold both the Trust to account. Without the audited financial statements of the Trust, this annual report which accounts for ITB finances only is incomplete.

The Chairperson said the Committee expects Deputy Minister Capa to inform the Committee about the reasons both the Minister and ITB decided to submit the annual report without the IT financial statements.

Parliament holds the executive to account and oversees the implementation of legislation. One of these is the Ingonyama Trust Act 3 KZ of 1994, as amended by the KwaZulu Natal Ingonyama Trust Amendment Act. Ingonyama Trust Amendment Act 9 of 1997, which provides in section 2(2) that the Trust shall be administered for the benefit, material welfare and social well-being of members of the tribes and communities contemplated in the KwaZulu Amakhosi and Iziphakanyiswa Act 9 of 1990.

In consideration of this report, key concerns raised were the implementation of the ITB annual performance plan and budget as considered and approved by this Portfolio Committee. The Minister and ITB account on the implementation of the KwaZulu Natal Ingonyama Trust Act as amended together with its regulations, the PFMA, and other legislation on the extent to which the administration of the Trust land has been executed for the benefit, material welfare and social well-being of members of the tribes and communities.

In the absence of the Minister and Deputy Ministers Skwatsha and Capa invited the Director General and ITB to present the report to the Committee.

Dr Ramasodi said the ITB engagement would be through the ITB Chairperson and CEO.

Ingonyama Trust Board 2020/21 Annual Report
Mr Sipho Jerome Ngwenya, ITB Deputy Chairperson, introduced the board members: ITB Deputy Chairperson Dr Nquta, Adv Zama, Inkosi Gumede, Inkosi Mavudla, and extended apologies from Inkosi Mbele and Inkosi Chabalala.

Mr Ngwenya stated that the Ingonyama Trust Board financial statements as well as the Ingonyama Trust were submitted late to AGSA not out of disrespect but due to various technical issues for which they needed advice. As a result, the financial reports were submitted late.

At the time they advised the Minister about the challenge and undertook to submit the 2020/21 Annual Report by 12 November. They were advised AGSA that the Trust's audit report was not yet ready. AGSA wanted to satisfy itself on due diligence and other items before it signed off. The Board opted to submit the completed financials of ITB which were submitted to the Minister as previously promised on 12 November.

The CEO, Adv Vela Mngwengwe, and Mr Siyamdumisa Vilakazi, Acting CFO, presented the Annual Report (see document).

Ms Tlhape welcomed the explanation by Mr Vilakazi on the impact that the non-submission of the Trust's financial statements has on the Board. She suspected there could be implications although the Auditor-General found otherwise.

Addressing the performance, she had tried to follow the Trust versus the Board performance. She complained that there was very little performance achieved against the performance indicators.

Ms Tlhape's concern was with the second programme, because that was the reason for its existence – the land and tenure. They mentioned that they could not achieve this because of the inability to connect with stakeholders due to Covid-19 lockdown regulations. ITB could not support or capacitate the traditional councillors because it could not connect with them. However, this Portfolio Committee managed to conduct public participation on Bills in the provinces during the lockdown. They could have 50 people in a room or 200 outside and capacitate them. She begged to differ on the stated reasons why several draft policies could not be approved as Covid-19 restrictions impacted on the ability to engage on the draft policies. Whether it was the beneficiaries of Ingonyama Trust or management drafting policies and engaging stakeholders, it is the same issue and both do not hold water.

She asked the Board that acts on behalf of the trustee, what the beneficiaries of Ingonyama Trust have gained or benefited from the Board in 2020/21. ITB said without more allocation of funding, Ingonyama Trust will have to close in the long run. She asked the Auditor General about its sustainability and viability.

The Portfolio Committee going forward would have to seek legal advice on the viability of Ingonyama Trust. They failed to achieve the targets for the two programmes. It is high time the Committee seeks legal advice.
Ms A Steyn (DA) agreed. When listening to the presentation she asked herself what is the purpose of the Board? Is it not the time to discuss dissolving the Board and giving the land to the people to manage and become the custodians of their land. The Committee, with the Minister and the Department, clearly need to discuss the information received today and understand what would be the best for the people living in KZN on IT land. Her question to the Board was if the rents have been paid back to the people so far. She read in the media that Ingonyama Holdings has been started for development. Will the Trust or the Board be responsible for that? How would the people living on the land benefit from that?
Mr Matiase said that it is obvious from the Annual Report that the horse has bolted and a lot of damage has happened. Failure of electronic or information management systems was blamed for the failure to comply. It would appear that it is not only a lack of an information management system that the Board is in the situation that it is today. Someone has been sleeping on duty. Someone has been condoning wrongdoing and wrong practices for years. It is blamed on the lack of ICT and all sorts of excuses. Members of Parliament who have been in this Committee for six to seven years, know they have been dealing with the same ongoing matters.

If it is not about abuse of land rights, sexism in the allocation of land, corruption, abuse, and maladministration in the use of resources, it is non-compliance with control systems. The non-compliance was deliberate, not by default, but by design, to hide the truth from the public and Parliament. The Committee has reached a point where they have to call for decisions that should have been taken before.

Those decisions are that a forensic audit needs to be undertaken into this Trust. Parliament must raise the concern that the Ingonyama Trust has become a sinking hole that takes all the resources that should have been used for the beneficiaries, for other purposes elsewhere. It must be placed under administration while a forensic audit is undertaken to get to the bottom of the crisis in the Trust. At some point, they have to call a spade a spade.

Mr Matiase called for two proposals: The Trust must be placed under administration, a forensic audit must be launched into the business of the Trust so those responsible for all this mess are held accountable over the next 12 months.

Ms Mahlo supported what Ms Tlhape said about the reason for the non-performance of the Ingonyama Trust. This entity could not blame Covid-19 regulations as all of government and its entities had to implement their duties regardless. There was technology in place which was there to help them perform.

The Trust also blamed non-capacity as one of the reasons it did not perform. She did not think this was a reason that the Committee could still tolerate. They should solve this problem of non-performance and non-capacity. Now was the time for the Portfolio Committee to look into the viability of this entity – whether they are keeping it in place or put it under Section 100 administration.

Ms Mahlo agreed with Ms Tlhape that the Committee needs legal advice on how they are going to deal with IT. Since they have been in Parliament, they have been talking to IT, and there is always a reason for non-performance. The Committee wants to see development, performance, and how the money given to them is utilised. Ms Mahlo could not support ITB until it has performed.

ITB is not doing well. It was failing the Committee and the Department. The Minister with the Department recently came up with an alternative for helping the Trust, but it was still talking about non-capacity.

Ms T Mbabama (DA) said she was delighted when listening to the presentation as they came from a different angle than the usual presentation given in the past. The problems were still the same. The Committee going forward has to decide if it is sheer negligence on the part of the people running ITB or are they incapable?

Ms Mbabama was concerned that Ingonyama Trust had a very high wage bill and expenditure but no performance. ITB said that some of the officers lack capacity. The question was how were those officers chosen to occupy those posts if they lacked capacity.

Ingonyama Trust knew about the groundbreaking court judgement that cancels all residential leases and asks for people to be reimbursed for their monies. What is the plan going forward? Is there a plan on how to repay these amounts? She was concerned as one of the targets ITB reached and exceeded was land tenure and the presenter referred to "our leases", what type of leases were these? Are these the leases the court has ruled they cannot continue?

With the passing of Isilo, “may his soul rest in peace“, the Trust is sitting without a trustee. She was wondering whom the Board was acting on behalf of right now. Were interim arrangements made either through the courts or the Trust Property Control Act to ensure ITB carries on its work legally going forward?

The ITB cannot have a vacuum, especially as Isilo was the sole trustee. What consequence management has been taken against the managers who have not complied with legislation or Treasury regulations?
She was concerned that performance agreements had not been signed, that was "Management 101". If there were no performance agreements, how could they have consequence management?

She asked for clarity on the regulation that limits using more than 10% of Trust income to augment covering the Board operational costs. Is there a need to increase this percentage going forward? The traditional councils seem to be a problem in the signing of the relationship agreements with stakeholders. The traditional council surely could not state that Covid-19 was responsible for this as there were different lockdown stages over the reporting period. Protocols can be used to ensure things get done even during Covid-19 restrictions. What was happening there? Lastly, she asked for clarity on the target number of human settlements plans not reached for the traditional councils.

Ms Tshwete appreciated and congratulated the ITB for obtaining an unqualified audit opinion. In the absence of Isilo, on what legal grounds is the Board operating? For the past two years, there is a continuing disregard for capacitating the traditional councils.

She did not remember a single ITB presentation to the Committee reporting they have achieved capacitating the traditional councils. Why do they keep on reporting nothing on the capacitating of traditional councils? They should zoom in on this matter of capacitating of traditional councils by Ingonyama Trust.

Ms Tshwete agreed about seeking legal advice on the viability of Ingonyama Trust. Another issue was that ITB has achieved only one of the performance indicators – the approval of land tenure rights that they exceeded. They approved land tenure rights; now there is a court order and judgement on the matter. What was their way forward in dealing with that judgement?

Ms Tshwete was not satisfied with the performance. The one programme that ITB says they have achieved is questionable. What exactly have they achieved? None of the policies that were supposed to be approved by the Board were achieved this year.

ITB has been unstable for all these years, with no permanent CFO, and no clear supply chain management policy. The Auditor General presented their audit findings and something there reflected a material irregularity. There will be material irregularities if there are no guiding policies. Her view from the presentation was that the Portfolio Committee needs to seek a forensic investigation on Ingonyama Trust. It is the responsibility of the Committee to ensure that entities are held accountable for every cent from the state.

Ms T Breedt (FF+) said since the beginning of the Sixth Parliament, the Committee has said to ITB multiple times it wants to see change and proper presentations. It wants to see service delivery. For the first time in two or three years, it got a real picture of what was going on. Members were worried and she was too. When they started the annual reports last week they agreed that the excuse of Covid-19 was discontinued as Ms Tshwete had mentioned.

To a large extent, Covid-19 has been life-changing and it has forced them to think out of the box. She did not think they should blame everything on Covid-19. How is ITB envisioning consequence management? Are they going to investigate certain persons and certain allegations? How are they going to do that? If they do not pull themselves together it will not be viable. They have net liabilities exceeding net assets. Although they depleted their budget, they have underachieved in most targets, how do they balance that out?

What was the turnaround strategy that the acting CFO envisions for this? They cannot continue running ITB with liabilities exceeding assets and assumes they would get assistance. Ms Breedt was impressed with the presentation. They came to the Committee honestly and showed them what the current stance is. She said they needed to note that and acknowledge them for that.

Mr Capa asked for clarity about the Trust and the Board as the Members referred to them interchangeably. What is the relation between these two? There was a constant reference to lack of resources. If there were no resources, what was the reason for its existence? In the understanding of the Board, what is its reason for existence? There was no reason for existence if there were no funds. The poor performance due to Covid-19 in some areas, yet extreme over-performance in another area despite Covid-19 was questionable.
Ms K Mahlatsi (ANC) said that the Sixth Term Committee has heard these challenges since its beginning and the situation has not become any better. It seemed to be getting much worse. She asked CEO Mngwengwe, the Department official seconded to ITB, looking with fresh eyes at the situation, what his observations are about the Ingonyama Trust challenges? What is it that can be done better? Is there hope of a turnaround? What should be the immediate intervention? The Annual Report shows no correlation between finances 100% spent and majority of targets unmet so on what were the finances spent? The Department's response is they do not have performance indicators to correlate with the finances. But the finances would be determined by their performance plan. Therefore, there should be some correlation between the two.

Ms Mahlatsi asked the ITB Chairperson, given the dire situation ITB is in, what his views are. Is he happy with what he sees?

The Chairperson welcomed and appreciated the ITB presentation. He noted that the office of the Trustee has become vacant. Assuming that the appointment of Trustee is in terms of the Trust Property Control Act, there are clear processes that need to be followed to fill the vacancy. Can ITB advise the Committee about the current state of affairs according to the Trust deed or relevant statute on this matter? The concern was that in the absence of the Trustee, and given that the Board acts on behalf of the Trustee, ITB may be in a situation where no one can enter into a binding transaction on behalf of the Trust.

The Chairperson said that on 3 July 2019, Minister Thoko Didiza acknowledged that there were challenges within ITB and requested to be given time to address these. The Minister advised the Portfolio Committee about the work being done through the Inter-Ministerial Task Team appointed to look at the Ingonyama Trust Board in response to the recommendations made by the Presidential Advisory Panel on Land Reform. He asked for a progress report on the interventions made and insights on the intervention outcomes.

In the recent matter involving CASAC, Ingonyama Trust, and the Trust Board, the court ruled that all the residential leases are invalid, and has ordered the Trusts to refund all the monies received through the lessees. The court also declared that the Minister has breached her duty to respect, protect and promote the constitutional rights to property of trust land residents.

The Chairperson asked DRDLR to provide an update on what it is doing about the court order, the alternative system of recording customary and informal land rights, the court's view on permission to occupy (PTO) rights, and the Minister required to report back to the court on the progress made.

He asked ITB to update them on the paying back of rent monies as ordered by the court? What was the total amount of money to be paid? What were the timelines for implementation of the court order? Over the past two years, the Committee has asked ITB how much of the monies was levied from the residents that reside on IT land. They have understood that 10% was utilised for administration purposes in ITB; 90% was utilised to support those communities in their applications.

He noted that ITB Chairperson, Mr Ngwenya, had committed to giving them a detailed report on the monies spent in these communities and the projects. The Committee has not received anything to date. What is the status of that? What is the ITB doing in those communities? The Committee has to make a call if this entity over the past 27 years of the democratic dispensation, has been able to be a success story. It has failed in its mandate and duty in servicing the needs of our people and empowering rural communities on traditional authority land. The Committee should seek a legal opinion as suggested by Ms Tlhape.

Ingonyama Trust Board Chairperson response
Mr Jerome Ngwenya, ITB Chairperson, said Ms Mbabama described the CASAC judgement about paying back communities as groundbreaking. Their view about the judgement is they do not see it as ground-breaking and it has created confusion. They were continuing with the appeal against the judgement. Consequently, the implementation of that judgement was currently suspended.

Mr Ngwenya referred the Committee to Section 2A(2) of the Kwazulu-Natal Ingonyama Trust Act: " The Board shall administer the affairs of the Trust and the trust land and without detracting from the generality of the aforegoing the Board may decide on and implement any encumbrance, pledge, lease, alienation or other disposal of any trust land, or of any interest or real right in such land." Nowhere in this Act – which the court did not find invalid – does it say that residential leases were excluded from being administered by the Board. They do not debate with the court outside the court. ITB believed another court would interpret this section and would come to the same conclusion as the Board. There are over 20 grounds of appeal set out. What ITB did out of respect to the court judgement was that it was not processing residential leases until the final judgement of the appeal court was pronounced.

They have asked the staff to identify the residential leases, put them aside, and also quantify what had been paid as added by the judgement of the court. That was work in progress. As soon as it was finalised, they will report to the executive authority and if the directive of the Committee is it wants the information, it shall be available. Mr Ngwenya emphasised that the court action was initiated in December 2018, but was only argued in December 2019.

The court judgement in June 2021 has certain implications in accounting, which he would deal with as they go along. On the question from three or four Members, that in the absence of a Trustee, the Board cannot function according to the Trust Property Control Act of 1988. Mr Ngwenya read Section 2(6) of the KZN Ingonyama Trust Act 3KZ of 1994: "In dealing with any trust property the Ingonyama, as trustee, shall be exempted from furnishing any form of security and the provisions of the Trust Moneys Protection Act, 1934 (), and the Trust Property Control Act, 1988 (Act No. 57 of 1988), shall not apply to the Ingonyama as
trustee or to the Ingonyama Trust established by section 2 (1)."

It is not expected of anybody to even refer to the Trust Property Control Act which is specifically excluded by this Act. Ingonyama Trust is governed by Ingonyama Trust Act as amended. The absence of the Sole Trustee is a challenge, but not to the extent of invalidating any actions taken by the Board with its Chairperson, who was appointed by the Trustee. The Act is clear in section 2A that the Ingonyama or his nominee shall be the chairperson of the Board".

As long as the person that sits as the chairperson of the Board is the one appointed by Ingonyama, all transactions executed by the Board are valid and it can continue to do so. They are not allowed to do any interim arrangement, because they all know that Ingonyama is a title of a person, which at this stage is hampered by the dispute in the royal family. The Board did not believe it was failing in any way with the law, or that it was expected of the Board to do anything while the issues of who the next CEO should be had been sorted out.

Mr Ngwenya said that it was important at this stage to highlight the metrics of this legislation were clear. They had beneficiaries who were clearly defined, and who needed to be consulted in a decision that was taken. As far as the Trustee or the Trust was concerned, the appointment of the Board is the prerogative and the obligation of the Minister responsible for land, subject to the provisions of the Act which required consultation in two fold with Isilo, the Premier in council, and with the chairperson in the council of the provincial house of traditional leaders. The beneficiaries were no less than any other stakeholders as far as the metrics of this legislation were concerned. This Committee, among other representatives of Parliament, every year approves a budget that is less than what the Board needs.

On the question of what they do with the money, they had obligations such as salaries and board meetings. Ingonyama Trust was the only institution that he knew was expected to perform without any income. It is not granted a cent by the state. The Portfolio Committee wanted to know what they did with the money Parliament approved. The monies given to them were accounted for by the CFO. The Board was not created to generate income. It is not a business entity. If there was an audit finding, as it was suggested to Members that there should be a forensic investigation, they would leave that to the Committee; they did not find any suggestion of financial misappropriation. On the contrary, they found that it would be noted the budget of the Trust was R40 million. The transfer that Parliament approved was R22 000 192. The monies that should have been utilised for communities had to meet the shortfall.

On consequence management, Mr Ngwenya pointed out that the year under review was where the media reported that the organisation was unstable – while that was the year where there was an improvement. Mr Ngwenya reminded the Committee that in 2020 they reported about consequence management, indicating that some of the senior managers were placed on special leave from the beginning of 2020. They returned in July 2020. As a result, an investigation reported by AGSA was initiated. In the process, most of those managers resigned. Most importantly, consequence management entails that if somebody has done wrong, there is evidence presented to that person. That person is allowed to respond, and a verdict will come. Mr Ngwenya said that they were still awaiting a report, which would advise if there should be consequence management. If so, they would act accordingly whether those people were still there.

On a turnaround strategy, Mr Vilakazi and Adv Mngwengwe pointed out that the analysis of the organisation is part of the process of a turnaround strategy. It is the intervention by the Minister by seconding people and by the Board sourcing and getting a finalised turnaround strategy.

Ingonyama Holdings came about as a result of realization back in 2017/18 that the Trust and the Board are not business enterprises. No matter what was done, in the absence of financial grant or revenue, it would not meet its aspirations as dictated by legislation. The Board advised the Trustee that it would be better to have an independent profit-driven company to ensure they met all the requirements. They followed the PFMA in that context; it was the Trust that seeks to establish a company.

They advised the executive authority of the details after obtaining a legal opinion, which was attached to the submission. Then Ingonyama Holdings Ltd was established, which would be a commercial arm of IT. They were still at the early stages of that enterprise. They believed that it could assist the Trust and Board to optimize and extract value from the assets of the Trust. He noted that the Chairperson said Mr Ngwenya was reluctant to provide certain information. Mr Ngwenya responded that he had provided a thick file. Even as late as yesterday, they sent it to the Committee. The file contained legislation, background legislation to the Board, and the systems of tenure allocation. The file was detailed and if it was not received, he would check with his office for the exact date and how it was sent.

Ingonyama Trust Board CEO response
Adv Vela Mngwengwe, ITB CEO, admitted that they were not proud but embarrassed by the lack of performance that the Annual Report demonstrated. He wanted to add to what Mr Ngwenya indicated in response to a different question. From the beginning of 2020 until July 2020, they had managers suspended from this organization which impacted the level of monitoring that would have been expected on ITB activities.

The lack of support seen was as important to them. Mr Vilakazi in his presentation said that there are a variety of stakeholders that need to play a part in what the organisation does. This applied to the lack of support seen. They had a very strong relationship with the provincial government because traditional councils were regulated by them. The provincial government had a direct relationship with ITB because they represented beneficiaries in the form of the communities.

On performance, during 2020/21, ITB could not conduct training. It was only in August 2020, that someone was contracted to conduct traditional council training, which was one person. It began with the process of developing training material which also led to the delay in training.

Adv Mngwengwe said when he introduced Performance Information in the presentation, he rather focused on the reasons projects did not happen. There were a variety of factors that impacted performance, and lack of capacity was one of them. Committee members were becoming irritated about lack of capacity. That was the assessment ITB made and the conclusions it reached.

The organisation cannot perform at the level it should. Traditional council support was affected by that. They had a hard lockdown from the beginning of the financial year until the end of June 2020. At the start of the second quarter in July, managers come back. In August they start recruiting someone to conduct training. The trainer first had to familiarise themselves with the environment and start developing training materials. This takes time, it is a capacity issue and the reality of the ITB situation.

About beneficiary benefits from the Trust, that was not part of the Annual Performance Plan (APP). As a result, that information was not prepared for purposes of this presentation. As stated, the Board administers land that belongs to beneficiaries, who were represented by traditional councils. The utilisation of Trust funds emanate from a request by a traditional council to get their money. Those requests continue to happen and expenditure occurs as a consequence of those requests. Money was getting to the Trust beneficiaries. Due to its level of capacity, ITB was not able to help the communities plan how to utilise the money better to their advantage. The councils were guided by what they believed was the need. Those types of needs sometimes did not appear to be well informed, but one appreciated it was their money, and it got released.

Adv Mngwengwe noted that Ms Steyn had asked why not dissolve the Board and give the land to the people. She had said this was a discussion that required to be taken up with the Minister. On that matter, he did not have answers and asked to be forgiven for not responding.

Adv Mngwengwe noted Mr Matiase had raised the ITB failure to comply with systems and that someone was sleeping on the job. He replied that when an organisation is setup, you first look at how it is going to operate and the minimum resources required for it to operate and deliver appropriately. These are historical issues and it is unfortunate that they are being addressed so many years later. The conclusions reached are basic. An organisation needs financial systems that enable you to properly administer your processes and to obtain management information as quickly as possible. The organization does not have this. This was the reason they said ITB does need a little bit of investment, just to place it at the level where it can operate as a normal organisation. There was not just a failure to comply with systems; there was a total absence of systems. Unless they put that into place, then they are compromising the organisation. It was unfortunate that this not addressed from the very beginning. As a result, they appear to be making excuses, and they were not. It is a reality that needs to be corrected if the organization will continue to exist. Of course he cannot comment on the forensic audit suggestion by Mr Matiase.

ITB had limited leadership capacity on the administration level. That leadership was not there for the bulk of 2020/21. At the same time, there was the emergence of a pandemic disease that nobody knew how to control. It was bound to have a greater impact on ITB than what the normal organization would have managed to shoulder. The ITB was not a normal organisation without the administrative capacity in place. As a consequence, the effects are a bit exaggerated. It was only for that reason that they had reflected that as a reason.

In addition, they have provided more information about why the organization was not performing. It would have been expected in this day and age, the organisation should have functioned even in the context of limitations. The ITB was unable to do so. Adv Mngwengwe agreed that it was management and capability issues they were currently dealing with, with the view of getting ITB to function normally.

ITB was sitting at a difficult disadvantage. They were working in an environment that was extremely polluted by the bad relationship between Parliament and ITB. The perceptions were negative against the organisation. This past baggage means they have experienced difficulties everywhere they go including in the House today as they have to justify themselves based on how ITB's previous behaviour is perceived.

On the question about delinquency, they had every intention to be compliant. They had raised issues that not even the AGSA had raised with them. They were redefining the relationship between the Trust, the Board, and other parties so that they could place accountability in the right place and communicate clearly on what they do and why they do what they do. There was no space for delinquency going forward, and they were going to see compliance.

The Department would attest to the fact that the level of compliance by ITB, at least from the beginning of 2021/22 has been at a level it had never seen before. DRDLR has received everything required even what they had never received before and what they never asked for in the documentation. They were trying to demonstrate that ITB wishes to be compliant and do things in the way it is expected to be done.

Adv Mngwengwe apologised to Members that the Committee may have perceived what has been happening as a certain degree of delinquency. They were moving away from that and trying to do things that Members would see and their beneficiaries would acknowledge has an impact. They have to sort out the ITB systems, administration, and operations so they can properly service their beneficiaries. And unfortunately, they could not do so without resources.

There was an issue about whether the 10% provided by Regulation 10(2) of the financial regulations should be increased. They have had this discussion with the CFO. The Board exists to administer the affairs and the land of the Trust. Without the Trust, land and beneficiaries, there was no need for the Board. Whatever it does, the expenses occurred, in the process of attempting to deliver on its mandate, which was the administration of the affairs of the Trust. Naturally, the Trust should in some way fund the Board if there is insufficient funding from the fiscus. They could do so according to the limits provided in law, and in this case, that limit was 10%.

The moment the Board does anything above that, it gets into an area that might be difficult to justify. His direct answer would be there might be a consideration for that to be increased. They had to balance this because they do not want to spend more money on the Board than on the actual beneficiaries. Adv Mngwengwe said it was easy for him in the context of suffocated by lack of resources and the fiscus not coming through, perhaps to increase the percentage of what comes from the Trust. The reality was if they do so, they were greatly impacting on what needed to go to the beneficiaries. It was a consideration they had to look at and balance. They are conscious that the Board exists for the beneficiaries and not for itself.

On the Human Settlement Plans, Adv Mngwengwe replied that the Annual Report explained that the Human Supplement Plans were developed and came before the Board. When the Board looked at the content of these plans, it concluded that they were insufficient. As a result, they were not approved. This was why they stated that there was a need to expand the scope of the content of each Human Settlement Plan which impacted delivery timelines. The officials did do the work but it was not up to the standard required by the Board, and the plans were not approved. As a result, there was underperformance in this indicator.

On the relationship between the Trust and Board, Adv Mngwengwe noted that the Trust was established with a Sole Trustee on 24 April 1994. There are a variety of things that must be done and the Sole Trustee cannot do with a board. In 1997, an amendment was passed and the Board was established as an administrative arm to help the Trustee manage the affairs of this Trust. The Trustee continues to exist, and the Board exists to assist the Trustee. As a result, there was a certain degree of joint management of the Trust, between the Trustee and the Board.

The Act reveals that there is an element of joint management between the Trust and the Board. The base assets, which created the necessity for the Trust itself was the land, and the land was sitting in the Trust and not the Board. All that the Board does is administer, and it is doing that in the interest of beneficiaries. That was how he could best characterise the relationship. The Trustee, Isilo, appoints a nominee to sit on the Board; Isilo ceased to be a member of the Board. The Act says Isilo was the Chairperson, but could nominate someone. The moment he nominates someone, he ceases to be a member of the Board. As a result there will be a Trust and Trustee, the Board with the nominee as Chairperson

Ingonyama Trust Board Acting CFO response
Mr Siyamdumisa Vilakazi was disheartened by the reaction of the Members towards the presentation. He said that they should take a step back, and start realizing that it was a lot of people in ITB that had a role to play in ensuring effective operational success of the organisation. This was a prelude in his response to Ms Mahlatsi. There was a common thread in the media, some members of the public, the Auditor General, and everyone involved had some form of preconceived notion of what this body should be.

Whether they were re-baselining or getting closed, it was important that everyone involved take a step back and move from a place of understanding what this was. He emphasised that it takes a lot of time to get the information to make effective decisions on ITB. That was the main root cause from where he stands – the inability to make an informed decision has resulted in this.

Looking at the involvement of the Department, the old Department of Land Reform had about four public entities such as Deeds and Office of the Valuer General. He sat in three of them and the treatment was not the same. Thus it becomes an important need for the Department to centralise the function of monitoring compliance when it comes to the public entities especially now because the entities were increasing in numbers. That kind of capacity had not existed in the Department. That was the priority area which needed immediate attention.

Mr Vilakazi said they cannot run away from how the organisation was created, into what it was now in resources and capacity. If he were to continue as CFO and the Committee asked him what was needed immediately as an intervention, he would simply say money. They need money to be able to do what is required to be done.

Another quick fix that could be achieved was to ensure capacity develops and people are trained. This is because one expects people in the organization to have a certain level of knowledge, and there has not been a skills development budget and training of employees. One has to start from the beginning and teach them about the amendments, with a guide that no longer exists to watch the current irregular expenditure framework. It becomes a problem; and it has been created to be that way. The Department, together with the Auditor-General and Committee, did not hear them speak of the value add. Their value add on activities and organizations like this becomes paramount because the reports they give get taken literally. If they had made an assessment and concluded incorrectly, that incorrect information is what goes out and informs public perception. Everyone involved including AGSA and the Committee needs to take a step back and seek to understand what from an informed point of view.

Mr Vilikazi replied about the liabilities exceeding assets saying they had a couple of things running parallel to try and address this. Amongst them was the financial recovery plan which looked into resources. They had participated in the Department's adjustment estimates process and made submissions on how they align the ITB financing with its objectives that need to be achieved. Without aligning and creating the organization within that structure, they would never justify what they are doing and contributing to government objectives at a global level, let alone at a granular level. The financial recovery plan involves a large element of that and dependencies come in, and they come in heavily.

The other important thing was fixing the financial reporting framework. If one had the correct structure and framework, whatever information is given, spits out what is needed. Since the framework was upside down, whatever gets recorded and presented would never give the truest picture. Again, everyone involved needs to go back to the drawing board. This involved National Treasury as it was the custodian of the financial reporting frameworks, together with the Accounting Standards Board.

That was another big part of what they were seeking – to fix things in the long term, they had to ask the question how did this happen in order to come to the root causes of those problems.

Mr Vilakazi stated that there was a document which they could circulate to assist with information. It described what ITB wrote to the Office of the Accountant General explaining the split between the Trust and Trust Board as individual entities and their symbiotic relationship created by their specific mandates.

Adv Mngwengwe added that the current financial reporting framework was inappropriate as the Board found itself with no capacity to perform its functions. With no funding coming, what began to occur was the Board started funding the administrative capacity through the Trust money. ITB reached this position because it does not have funding for salaries. The Department gives it less than what it needs for salaries. Every quarterly tranche, they run out of funding to pay salaries by the third month. Where were they supposed to get that money? It meant they had to get it from the Trust. Therefore they had to fix the reporting framework and acknowledge that the money perceived to be the income of the Trust was the money for beneficiaries. It meant that ITB contradicted its objectives when its funding ran out and it used Trust money. By December, they will not have any money. Circumstances forced the organisation to commit financial misconduct every third month of the year. That put them in an uncomfortable situation. It was not something he understood when he was in the Department. It was only when he moved to ITB in mid-July 2020. This had to be addressed. If they continue this way, next time the Committee could charge the Board with financial misconduct. The position was untenable. It had to be sorted out one way or the other.

Mr Ngwenya replied to the Chairperson about the requested information that this was sent to the Committee. Firstly, on 7 July 2019, arising out of the directive of the Committee, ITB sent a bulky file via Skynet. Secondly, at the 9 February 2021 meeting, the Committee requested the annual financial statements and the ITB list of leases. They forwarded this on 19 February via the Office of the Ministry as they believed it was the route through which to report.

During the hard lockdown, Ingonyama Trust was not defined in the Covid-19 regulations as an essential service. For a month, he could not access the office and had to force his way through. He even wrote to the Minister to seek exemption. He was able with the king's authority to travel to the office to facilitate the payment of staff salaries.

In reply to Ms Mahlatsi who asked for Mr Ngwenya’s views, he pointed out that the Board was dealing with a situation where the Committee would take legal opinion on a matter that was self-evident. The Department was only providing R22 million for a R40 million budget. ITB was told to recover with R22 million. The Department’s average income from the Trust was R40 million. When ITB took more than half of that to supplement its shortfall that resulted in the Board being labelled.

Mr Ngwenya believed that there was a future potential for IT whether many people understood it. What were the current flaws and their causes to be addressed? As the Chairperson stated, if this was a success, it needed to be replicated. The Ingonyama Trust was not established to be a pilot project, and it is not financially dependent. It was formed because it owns the land and intends to keep it that way. Mr Ngwenya praised the Committee's role in assuring the South African and global public that the questions were not malicious. They were sincere, but the Trust and Board should be allowed to add information based on how the Committee interacts with them.

The Chairperson thanked Ingonyama Trust Board for the presentation and applauded the KZN AGSA female team for the stunning work they were doing. The discussion today reminded the Committee of the 2017 legal opinion sought by the Department with the Trust and the Board. Following a thorough examination, JJ Gauntlett and FB Pelser concluded that the Act vests in all material rights. The PFMA imposes all public finance obligations on the ITB, as well as all relevant responsibilities on IT. His Majesty, the Zulu King, was the sole trustee and also a member of the Board. According to the Act, the Board serves as Ingonyama. Financial accountability is vested in the Board under the PFMA and the Act.

This simply meant that the ITB existed as a result of the Ingonyama Trust. The ITB has no role to play if Ingonyama Trust does not exist. ITB and IT failed to submit financial statements on time for 2020/21. As a result, the Annual Report does not include the IT financial statements. In his opinion, the Committee would in its duty if it agreed that ITB could table a report without Ingonyama Trust's financial statements. They was a procedure it should have followed for an Annual Report submission extension. An attempt to submit a report without financial statements could be interpreted as a complete disregard for accountability and the oversight function of the Committee.

The recent court decisions indicated that ITB had overstepped its boundary in land administration. This begged the question if the Ingonyama Trust and ITB model could be replicated across the country. Given the ITB track record of accountability before this Committee and its predecessors, this model left a lot to be desired. The Committee needed to deliberate and make a clear decision on this matter.

Members had two options. One was to review and amend the KwaZulu Natal Ingonyama Trust Act to ensure that the ITB and Trust function in a way that empowers communities and households living on communally owned land who are led by traditional leaders and traditional authorities or traditional councils. The second option was to repeal the Ingonyama Trust Act and enact the Communal Land Tenure Bill which established a tenure regime that applied across the country.

The Chairperson asked the Committee if they could reach an agreement on this. They should have gotten a legal opinion before making any decisions. During the presentation, the Chairperson had proposed to the Committee not to accept the Annual Report until the Ingonyama Trust returned with a comprehensive report that included its audited financial statements.

The Chairperson asked for a mover and the seconder. Ms Steyn and Ms Tshwete supported the move.

The Chairperson said the Secretariat would seek the necessary assistance and legal advice in guiding the Committee on how to move forward. He thanked AGSA, the Department and the ITB officials. They would get back to them on the legal advice the Committee received.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: