Budget Hearing

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Meeting Summary

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Meeting report


4 June 2004

Chairperson: Mr Masithela (ANC)

The Committee received presentations from Bala Farms, Ncera Farms and Khula Enterprise Finance Company.

Introduction by Chair
He reminded members that the next week would see the Budget votes for the Departments of Land Affairs and Agriculture being debated in the National Assembly. He noted that Nyala farms would not present at this meeting as the Board was not present and the issue should not be dealt with until after interacting with the Department. He referred to the issue of liquidation in this regard.

Bala Farms submission
Mr Meyer du Toit from Bala farms then made his presentation. He introduced Mr H Pienaar who was employed by the Department of Land Affairs and contracted to work with Bala Farms.

He said that the Annual report had been distributed the previous year. He distributed copies of the Financial statements for the year ending 31 March 2004, adding that they were not yet audited. There was also a copy of the financial statement for the previous 15 months ending 31 March 2003 available, as well as a copy of the corporate business plan.

He gave a short history of Bala farms, saying that they had been in existence before 1994, but after 1994 had really pretty much disappeared from the scene. The then Minister has asked Mr du Toit to wind up the company. In the process of doing this he discovered that there was a lot of land owned by the company. They were requested to dispose of it and drew up a register of the land and advertised it. The disposal of the land has taken some time however. They had done an analyis of why the disposal has taken so long and discovered that between 18 and 20% of time was spent on administrative tasks, the rest was spent allowing buyers to access funds. The properties were expected to go to the poor and previously disadvantaged and those with some farming background. The land was allocated on this basis but the buyers had problems accessing funds( There was no LRAD programme in place at this time). Bala farms then got permission for the farms to be valued at production value not commercial value to make it easier for them to access finance.

Currrently they have 7 units left which is a total of thirteen properties. Two of these are in the Deeds offices. Of the others one is in the hands of the beneficiary, trying to get a Guarantee. Another was offered to someone who passed away. It was then offered to his widow, but she could not take it as she worked for government. Her son also tried but he was blacklisted. There are also two properties in the hands of the Department, and one in the hands of the Land Bank.

He noted that Bala does not give grants. In terms of Bala farms future he said that the previous Minister had hoped that Bala farms could be a part of the process of land reform. However after a Cabinet reshuffle this idea was shelved. The company is supposed to have been wound up by the end of March but there have been some delays in disposing of land. If all remains on track it should happen in August/September 2004.

He quoted from the financial statements:
" The company is in the process of disposing of all its properties. On 6 September 2003 the Minister instructed that the remaining properties of the company must be disposed of before 31 March 2004 to historically disadvantaged persons in terms of the Government's Land Reform Policy. For various reasons this was not achieved, but the processing of all properties should be completed in the course of the next financial year. As a result the company will only continue as a going concern until the properties have been disposed of."
" As the final disposal of the properties depend on the DLA and the Land Bank to give the required financial assistance and other support to beneficiaries, the latest date set for the deregistration of the company is 31 March 2005. The company therfore cannot be considered as a going concern".

He added that they were planning to meet to discuss the closing of the company. By that time they should have R70 million which will go back into the Treasury.

He said that they had just recently participated in a Audit at the request of the Department Land Affairs. They had come through this with no irregularities found. He ended by saying that he had a concern about the sustainability of the land reform programme. He added that they had made submissions in this regard on ways to ensure that the properties are sustainable but these were turned down. He strongly recommended that there be closer cooperation between the Department Land and Department Agriculture to ensure sustainable development.

Adv Holomisa (ANC) asked if any of the properties were under the subject of restitution claims.

Mr Du Toit responded that none of the remaining properties are. In 2003 three properties in the NW Province were available and there were buyers but the land was reserved for a community displaced by the Madikwe reserve.

Mr Kotwal (ANC) asked whether residents on the land were considered as potential beneficiaries.

Mr Du Toit responded in the affirmative saying that a policy of compassion was adopted so people on the land were allowed to apply and were considered if they had paid outstanding leases.

Mr Kotwal clarified that he was not talking about farmers but the workers on the farms.

Mr Du Toit responded that it was a condition of the Deed of Sale that no people were to be dispossessed in the transfer of ownership of the land. There was one case where this had occurred that case was reported to the Legal Resources Centre. He noted however that the company has no obligations in this regard as their mandate was simply to dispose of land.

The Chair asked if they knew of any people who were dispossessed.

Mr Du Toit could not say for sure that there were none, but he knew of no cases.

A member asked about the rights to land of the people on the land.

Mr Du Toit responded that the farm workers and the buyers were informed of their rights.

The Chair commented that if Bala Farms was recommending that it was important to look beyond simply the disposal of farms but also to the viability of them then surely they should take account of issues such as those raised by the member.

Mr Du Toit responded that he was not referring specifically to the role of Bala farms but more generally to the land reform process. However they did not have the mandate to take a more wholistic approach.

The Chair asked if they had approached the dept regarding taking a broader approach.

Mr Du Toit responded that they had not done so in the beginning as it was not the right time, but now with hindsight it is important to take a wholistic approach.

The Chair requested a list of the farms disposed of saying that they would visit them.

Mr Dlali (ANC) asked about the current state of the farms, why the Department took three years to hand over farms, the current productivity of the farms, and whether they had considered the possibility of increasing productivity.

Mr Du Toit responded that there were three categories of farms: Those in the Marico corridor - most of these farms were sold to black entrepreneurs and are in a good state. The three farms that have gone to pieces are those that were part of the restitution process. Those dry land farms used for maize - most of these farms have been leased to commercial farmers and are in a good state. The money generated by the leases are used to pay the loans. Irrigation farms in the Britz area which were sold to the poorest of the poor. These were not in a good condition when sold and are still not in a good condition. However there have been attempts to set up co-operatives (Mr Du Toit noted that he had been approached to assist in setting up a co-op).

The reason for taking three years to transfer the Tweekoppies farms was because they were involved in a restitution claim. And the Commission took three years to process the claim.

In terms of productivity the properties were grouped to form viable units, so all have the potential to be productive. He noted that one property was sold to a community of 70 people and this was not viable ( to support so many people).

In terms of future productivity he said that people need to be assisted and he noted that there are many private farmers who would be willing to help. He said that land reform is very important and the prospects of success are good but that private and public resources need to be put into it.

The Chair asked if Mr Du Toit was assisting farmers in his private capacity.

Mr Du Toit answered in the negative, but said that he had been approached, and would consider it when Bala farms had closed. He is currently not involved with any of the farmers in any way, but he has come to know them over the years, and is sometimes asked for advice.

Mrs Ntuli (ANC) asked if all the land had been given to historically disadvantaged people.

Mr Du Toit responded that the Minister of Land Affairs had appointed a Commission to identify the beneficiaries. One farm was sold to a white entrepreneur - it could not have been used for agricultural purposes so was sold to a Safari outfit. Another farm was sold to a white farmer - it was too small on its own so it was recommended that it be sold to the adjoining property. Another property was sold to the Indian farmer already on the land, and another was sold to an Indian woman recently. All the rest were sold to historically disadvantaged groups or individuals.

On the issue of staffing he said that it was administratively a hassle to start employing people so the Chair is paid by the Department and another staff member is employed by the Department but seconded to Bala Farms.

A member said that he understood that some people had a problem getting guarantors and he asked who was responsible for this. He also asked if Bala farms is training people who take over the farms.

The Chair noted that they should not answer the second question as it has already been answered.

Mr Du Toit responded that the disposal of the properties is a normal buy and sell process. Bala Farms tells people to go to the Land Bank or Department for advice on financial assistance.

Adv Holomisa asked why a property was in the hands of the Land Bank.

Mr Du Toit responded that it had not been given to them but was in their hands in the sense that they were being approached for a loan which must be approved before the land can be disposed of.

Adv Holomisa asked how many properties were in the hands of the Land Bank and what types of people had applied.

Mr Du Toit responded that there were 4 in the hands of the Land Bank. He was in possession of a document outlining them.

Adv Holomisa asked if there was a list of people who had applied for LRAD grants.

Mr Du Toit responded that the information would be found on the same list.

Mr Dlali asked, with regard to the property that was handed to a community of 70, which Mr Du Toit had indicated was not viable, what Mr Du Toit's recommendations were regarding the disposal of this property.

Mr Du Toit said that the Technical committee had evaluated the application. Bala farms had recommended that it was not suitable but the Commission had gone ahead and approved the application.

Khula submission
Mr Mothoa began by saying that Khula was the brainchild of the Department of Land Affairs. He went on to give the presentation. He noted that the DLA had signed the Agency Agreement with Khula in 1998. The purpose of Khula is to: leverage private sector funds into financing BEE projects in both agriculture and eco-tourism sectors.

Strategic focus:
Private Public partnerships arrangements to accelerate the Land Reform Delivery process
- Land Reform Empowerment Facility (LREF) is intended to support the private sector in the transformation process in both the agricultural and eco-tourism sectors.

The pre-requisite is that the projects deliver broad based black economic empowerment:

The LREF offers concessionary loans and complements LRAD grants. It can also negotiate to defer loans. It collaborates with PAETA to facilitate Project Skills Development and Capacity Building Intervention. Project assessment is on the basis of the BEE scorecard - in terms of direct empowerment, HR and capacity building and indirect empowerment. Mortgage loans are for land purchase and there is a maximum of R600k per PDI beneficiary. Equity share schemes are to enable PDIs to purchase shares, with a maximum of R400k per PDI beneficiary. Khula is governed by and Agency Agreement. The LREF Management Committee (DLA, EU, DEAT and Khula) drive strategy, and there are quarterly meetings and reports. Project Proposals are handled by a submissions committee (of Khula) and are presented to the Management Committee for Approval.

76% (19) of the projects are equity share agreements and the other 24% (6) are mortgages.

The vast manjority of projects (5) are in the Western Cape, followed by KZN (3), Mpumulanga (2), Eastern Cape (2), Limpopo (2) and North West Province (1). Other provinces are not represented. Projects in the pipeline are in the Western Cape (4), KZN (1), E Cape (1), North West (1) and Mpumulanga (1).

Challenges facing Khula:In order to achieve a fairly balanced provincial spread the LREF is currently developing a growth strategy that involves the partnering of other DFI's (IDC and Land Bank) to target under serviced provinces.

The LREF needs to strike a balance between equity share schemes and mortgage projects.

The Private sector still prefers to finance equity share schemes. The vision of the LREF is to promote mortgage schemes prioritising contract farming projects.

The Chair asked at what rates the money is loaned.

Mr Luthuli responded that it varies between 6 - 8%.

A member asked where their offices were located.

Mr Luthuli responded that they were in Rivonia (JHB) but were relocating to Pretoria.

A member asked how many staff they have and the cost of their overheads.

Mr Luthuli responded that they have four staff, and he was unsure of how much is spent on personnel but would make the information available.

The Chair thanked him.

Mr Luthuli added that they would also make available their financial statements to the end of March.

Mr Dlali asked regarding the strategic focus what their achievements so far are, whether they can waive the minimum wages for farm workers if the farm cannot afford it, and whether they are achieving their vision and if not what they are doing to improve this.

Mr Ntuli responded to the first question by listing the projects.

On the issue of minimum wages he said that they had not been confronted with such a situation. He added that the issue of repayment was not dependent on success.

The Chair asked for clarity on this in terms of whether the bank takes the risk. He asked what role Khula plays if people still needed to go to the Bank.

Mr Luthuli responded that Khula operates in a wholesale mandate so they cannot deal directly with the public. Their aim is to facilitate participation in the SMME arena by banks.

Mrs Ntuli referred to the speech by the President and the empowerment of the poor and the struggle against poverty and the first and second economies. She asked how they planned to achieve the objectives, and what their strategic plan was. She asked how they see themselves engaging with job creation.

Mr Luthuli said that in terms of their strategic plan they aim to become more visibile and more entrepreneurial. They have the endorsement of the DTI. Khula's focus will remain with the second economy.

Mrs Ntuli asked what the ceiling is when lending.

Mr Mothoa responded that the maximum is 10% of disbursable funds in any financial year to one project. So with 37m in total that amounts to 4m to any one project.

On the issue of achieving their vision, he noted that this is their vision going forward so they cannot yet talk about whether they have achieved it.

The chair asked how they planned to change the bias.

Mr Luthuli responded that the Western Cape is advanced, export oriented and lucrative which is why there is a bias to them, but Khula will be going on a roadshow to try and market themselves in other provinces.

The Chair asked what was meant by "advanced".

Mr Luthuli responded that the farmers in the Western Cape were prepared to share their farms.

The Chair responded that they would like to see statistics on this as they are not sure if it is true.

Mr Ngema asked about the issue of interest on soft loans, and whether the person taking a loan from the bank also gets to borrow at 6 - 8%.

Mr Mothoa responded that the 6% is charged to the bank. They do keep an eye on how much the banks charge to ensure it is reasonable. He added that they need to confirm that the BEE scorecard is being achieved.

The Chair noted that the banks do not loan at 6 - 8%.

Mr Mothoa responded that the banks are loaned money at 2 or 3% less than the Reserve Bank rate and this is passed on to the borrower.

The Chair asked about those disadvantaged people who could not approach the bank for loans, adding that they are the ones who need assistance.

He went on to say that there are provinces other than the W Cape that export - 80% of white maize from the Free State is exported.

Mrs Ntuli asked about the loans and credit guarantees.

Mr Dlali asked why they seem to have loans in only 5 provinces.

Mr Mothoa responded to Mrs Ntuli's question saying that you can get either a bank loan ot a credit guarantee, not both.

On Mr Dlali's question he noted that they are not lending directly to the market, so the focus on 5 provinces is partly a reflection of the interests of the banks. However they are trying to take the focus away from these provinces and increase representation of the underrepresented provinces.

The chair said that they should not deal with this any more at this meeting - Khula knows their views and must take this away with them.

Adv Holomisa said that there were various corporations in other provinces and asked why Khula did not deal with them.

Mr Mothoa responded that they would visit different provinces.

The Chair emphasised that there was still a bias and that the bias should be towards the rural poor.

Mr Mothoa responded that the roadshows are not only informed by Khula's interest but also the availability of partners etc.

The Chair noted that the Committee could assist in making sure that people are available in the provinces to meet with Khula.

The Chair ended saying that the Committee could make its views on these matters made public if they felt they should, and Khula now knows their concerns.

Ncera Farms submission
Mr v d Heerden from Ncera farms introduced himself and his colleague. He apologised on behalf of Mr Burger who was unable to attend. He noted that the company had been existence for the last 10 years. The company has been involved in the resettlement of Chief Jongilanga's people. Currently the company has control of 3 000 ha of land, with a further 9 000ha already having been handed over.

The land in question is state owned land (3000 ha). This is the remaining land that was purchased by the State to resettle the followers of Chief Jongilanga. 9 000ha has already been handed over the the Imidushane People in 1997

The objectives of the company are: To undertake farmer settlement on state land under the control of the company within the framework of LRAD and at the same time take cognizance of certain commitments to stakeholders.To establish a service centre at Welcome Home farm from where support services will be given to the newly established farmers as well as the groups falling under the Imidushane Tribal Trust Land.The Centre will provide training in various skills, capacity building, mechanical training, seedling production, livestock improvement schemes and others.Infrastructure will be erected for these services and the water reticulation systems upgraded.The long term objective is that the centre will be taken over by the stakeholders.

Mr v d Heerden noted that they hoped that the resettlement would be completed by the end of the year. There is a remaining problem of the disposal of capital equipment. He added that it could be provided to the farmers on a cost recovery basis. He emphasised that the people needed support.

He went on to say that they hoped to continue with the training for 3 years and then hand the training centre over. They were working towards the centre being sustainable.

Mr Dlali asked for a breakdown of the number of people trained and how many were successful. He also asked if the training was available only to the Imidushane people or others in the surrounding areas. He asked what they would do once they had trained all the people in the area.

He asked if the assets belonged to the company or if they would stay with the farmers.

Mr vd Heerden responded that they could provide a list of those trained. He added that anyone is welcome to the training and there is no charge. Some people walk up to 12km to come for training. However they have limited resources so they can only train 14 people at a time. He said that you could never saturate the need for training - it will always exist as times change and people grow up.

The assets would be offered to those in the area.

Adv Holomisa asked for the value of the properties listed. He asked the status of the proposal to the Board of Directors on the training centre.

Mr v d Heerden responded that the properties have been valued and he is aware of the value although he has not received the official letter.

The Board has approved the training centre plan but it still needs to be signed off by the DG.

Mr Zulu asked if they assist in home based care (in terms of HIV).

Mr v d Heerden responded that this was part of the training offered.

Mr Ngema asked the the company was independent or created by the Department.

Mr v d Heever responded that the company was part of the SA Development Trust, but once this was dissolved it was transferred to the Department Agriculture.

Adv Holomisa asked if there was a time frame for the company withdrawal from the training Centre.

Mr v d Heerden responded that the programem is expected to take 3 years to hand over.

Mrs Ntuli asked if there was production taking place on the farm.

Mr v d Heerden responded that farming had stopped in 2002.

The Chair asked why it was recommended that the Dairy be part of a joint venture - why it was not simply handed over to the community.

Mr v d Heerden responded that the Dairy infrastructure is on the tribal land, but it is too small to sustain a dairy herd. Land opposite it perfect for a dairy herd, but it would be too expensive to transfer the equipment across so a joint venture seems sensible.

The Chair asked if the trainers are paid.

Mr v d Heerden responded that there is only one trainer - Mrs Stylianou. However trainers are brought in when they are needed.

With specific reference to black trainers the Chair asked what criteria are used to identify trainers.

Mr v d Heerden responded that they had found a number of good black trainers, but there had been uncertainty about employment as the project was temporary. Thus the trainers were encouraged to take up other positions if they were offered them. Now that the project is more certain they hope to be able to get some trainers back.

Mrs Ntuli asked if the certificates they received after the training could be used in any province. In other words if it was a recognised qualification.

Mr v d Heerden responded that it was not but the people who have completed the programmes have been found to be competent in their work.

Mr Zulu asked if the workers who completed the training were paid.

Mr v d Heerden responded that they are paid their usual salary, and often get promoted.

The Chair thanked the presenter, saying that they were serious about training African people. He referred to the issue of procurement (in terms of encouraging BEE) as important. He also talked about the second economy.



This report is produced by the Contact Trust - www.contacttrust.org.za


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