Department of Land Reform and Rural Development & Ingonyama Trust Board 2023/24 Annual Reports; with Minister

Meeting report

Minister's opening remarks

Mr Mzwanele Nyhontso, Minister of Land Reform and Rural Development, apologised for the late submission of the Ingonyama Trust annual report, assuring the Committee that the Board would ensure this did not happen again.

He said this was an important time as, since the democratic Parliament of South Africa, land rights had been a focus, starting with the Land Reform Act of 1994. This Act, passed on 17 November 1994 and came into effect on 2 December 1994, had helped restore land and provide financial compensation to South Africans for land taken from them many years ago. The Department of Land Reform and Rural Development (DLRRD) was preparing a ceremony in Pretoria to mark this Act. The Portfolio Committee was invited to join and celebrate the progress made.

He also talked about the Department’s current strategic plan, which aims to strengthen and focus on South Africa's medium-term development goals. The three key priorities of the plan are:

• Inclusive economic growth and job creation;
• Maintaining an effective approach; and
• Building an ethical and developmental state.

The Department was working on a new land reform plan, focusing on a comprehensive and inclusive approach. While progress had been made in land reform, challenges remained in areas like coordination, community involvement, monitoring, and sustainability. The Department was committed to addressing these challenges to fully achieve its goals.

The Minister also spoke about a meeting to discuss the relationship between the national and provincial departments. He mentioned the recent splitting of the Department of Agriculture, Land Reform, and Rural Development into two separate departments, which required new working relationships. He emphasised the need to avoid duplication and overlaps in government functions, especially with the financial challenges that the government faces.

Finally, the Minister celebrated the handover of title deeds at the Manyeleti Game Reserve in Mpumalanga. On Monday, over ten deeds had been handed to the Community Property Association (CPA), covering 25 000 hectares of land and benefiting 1 472 people, including 105 female-headed households. A tourism park agency in Mpumalanga would help the beneficiaries make use of the land.

Adv Linda Zama, Deputy Chairperson, Ingonyama Trust, said she wanted to ensure everyone understood their role as the accounting authority. She thanked the Minister for being present, and highlighted the importance of working together. She stressed that the Trust was always open to guidance, as it helped them be more effective in their work. She concluded by saying that they took their responsibilities seriously, especially in working with the Portfolio Committee.

Ingonyama Trust Board annual performance report

Mr Vela Mngwengwe, Chief Executive Officer, Ingonyama Trust Board (ITB), briefed the Committee on the Board's annual performance report. Referring to its overall performance, he said the ITB had achieved significant milestones in land management and corporate governance, but had fallen short of some targets. For example, only 61% of the external audit management action plan was implemented, and no internal audit function was established, leading to a 0% achievement in implementing the internal audit management action plan. However, 865 tenure rights were approved against a target of 800, reflecting an overachievement.

The ITB had achieved an unqualified external audit opinion, maintaining its performance from the previous financial year. However, challenges persist, such as unresolved irregular expenditure and compliance issues. Against an administration budget of R37.7 million, actual expenditure was R32.4 million, representing a R5.3 million under-expenditure. However, the land and tenure management budget of R78.8 million had been overspent by R18.7 million.

Challenges included an inadequate budget, leading to information technology (IT) governance and strategy delays, while irregularities in tender processes had affected internal audit and organisational structure revision. Highlights included the finalisation of two special projects -- the

conversion of short-term leases and state domestic facilities applications, and active collaboration with the Portfolio Committee on Agriculture, Land Reform and Rural Development, where six meetings had been held.

Mr Mngwengwe provided details of the ITB's performance by programme, pointing out areas of achievement or non-achievement, including human resources (HR) issues, the entity's compliance with the Public Finance Management Act (PFMA), and fruitless and wasteful expenditure.

Mr Siyamdumisa Vilakazi, Chief Financial Officer (CFO), ITB, presented the Board's annual financial statements, which showed that for the year ended 31 March 2024, its total assets stood at R2.389 million, slightly down from R2.527 million in 2023. He provided the Committee with details of the ITB's

current and non-current assets, and explanations for variances experienced during the year.

(See attached document for details)

Discussion

Mr M Nhanha (DA) said he welcomed the report, acknowledging that it had taken a long time to arrive. He raised a few observations and questions. Firstly, he questioned the reliability of the report, particularly in light of Ingonyama Holdings not being cooperative. He asked how the report could be considered legitimate when one of its key entities was uncomfortable with it. He also inquired about whether it was better to overspend or underspend in accounting terms, referencing Programme 1, which showed a reduction of R5.4 million in the following year, as well as reduced spending of R100 000. In contrast, Programme 2 reported overspending, which Mr Nhanha noted had increased significantly from R18.7 million in 2022/23, to R62.7 million in 2023/24. He requested a reconciliation of these figures. He also raised a concern about employees not being paid, depending on the mood of the chairperson, describing this as alarming and needing further explanation. He also requested a follow-up regarding the missing R1 million.

Mr Z Mthethwa (MK) said that as an AbaThethwa, the representative from KwaZulu-Natal (KZN), and a major shareholder in Ingonyama Trust, he had concerns regarding the management of the Trust. He recalled his involvement with the traditional councils and the efforts to remedy the Ingonyama Trust’s affairs, particularly during the coronation of the new King. He raised concerns about the funds being mismanaged and not reaching the intended beneficiaries, such as the traditional councils.

He criticised mining companies operating on traditional land, claiming they were not fulfilling their promises regarding corporate social responsibility, infrastructure development, and local economic benefits. He questioned why the Trust was not recovering the money owed by mining companies, particularly as they had promised to contribute to developing enterprises and community infrastructure in exchange for mining rights. He further expressed concerns about the land being labelled as private by businesses, and whether it could be recovered for the benefit of traditional councils and the kingdom. He also commented on the lack of accountability and transparency, noting that traditional councils were not receiving the money owed to them.

The Chairperson instructed Mr Mthethwa to avoid creating conflict by mentioning specific regional matters.

Mr Mthethwa continued by highlighting the need for greater control over the land by traditional councils, as well as improved management and accountability for the land and mining activities. He stressed that traditional councils were not benefiting as they should, given the size and potential of Ingonyama Trust land.

Mr B Madikizela (DA) questioned the Trust’s ability to account for land under traditional councils, asking for clarification on whether this land was included in the report. He also referred to a court ruling in June 2021, which stated that the Trust must reimburse the rightful owners of the land. He pointed out that this ruling did not seem to be reflected in the annual report, and sought clarification on the financial implications of the ruling. He also asked how the disbursement of funds occurred and whether the actual beneficiaries of the Trust were receiving the benefits.

He expressed concern that, despite the Trust’s large landholding potential, it was still heavily reliant on state funding, which he felt was insufficient. He noted the importance of the Communal Land Tenure Bill (CLTB) in unlocking the economic potential of land. He asked about the Board’s position on it, particularly regarding the opposition from traditional leaders. He further emphasised that the court judgment in June 2021 was aimed at correcting the situation for the beneficiaries. He hoped the Trust would comply with this ruling, benefiting ordinary landowners.

Ms R Adams (ANC) raised concerns about the legitimacy of the annual report, noting that it was signed by the Vice Chairman instead of the Chairperson. She asked for clarification on whether the report was from the Board or from the Ingonyama Trust itself. She also commented on the alignment of the report with government priorities and the progress on establishing an IT governance framework. She requested further details on the structure of the Trust, the number of employees, and the skills required to achieve its mandate. She also noted that under Programme 2, the Board had exceeded its target by 65, having approved 865 land rights instead of the target of 800. She inquired how this achievement aligned with the five-year plan. She also highlighted the need for the Trust to provide updates on litigation regarding Ingonyama Holdings, as had been advised previously.

Ms S Lucas (ANC) talked about the relationship between Ingonyama Holdings and the governance arrangements of the Trust. She asked for further clarification on the total asset value, including traditional land, and the Trust’s control over these assets. She said that despite the land being classified as traditional, revenue was still being paid to traditional leaders, and she sought further explanation on the Trust’s revenue sources. She also raised concerns about mining companies’ responsibilities under their corporate social responsibility agreements, and how these were being monitored. She questioned whether critical HR positions had been filled within the Trust and whether the staff complement was sufficient to provide the necessary services.

Mr M Mrara (ANC) said it was important to understand the scope of Ingonyama Trust, particularly in terms of investments and governance. He agreed with Ms Adams on the need for further updates on the issue of Ingonyama Holdings, which he described as being “hijacked” for personal use. He also commented on the financial accountability of the Trust, highlighting confusion over the definition of the Trust and its financial responsibilities. He commented that the Board had not provided information on how many meetings had been held in the 2023/24 financial year, as required by policy.

He questioned the desirability of the King chairing the Board, as it blurred the lines of accountability and ownership. He suggested that the King should focus on interventions in the Trust’s affairs without directly overseeing the Board’s operations. He also emphasised the need for the Board to present its achievements clearly, particularly regarding the court judgment, which he believed was intended to benefit ordinary landowners. He suggested that the Board should take a more proactive approach to improve perceptions of the Trust.

Mr A Mngxitama (MK ) said that the success of Ingonyama Trust was crucial for land reform and the African majority’s right to land. He praised the clarity of the presentation and encouraged better communication regarding the Trust’s achievements. He strongly rejected the notion of private land ownership, advocating instead for the protection of communal land systems. He also emphasised the importance of defending the Trust from external criticisms, and expressed support for the leadership shown by the Board. He concluded by stating that the legacy programs should end, and the Board should take full responsibility for the new dispensation, ensuring transparent financial reporting in the next period.

The Chairperson said he appreciated the contributions made, particularly highlighting the problem statement that encapsulated the Committee’s shared vision for the success of the Ingonyama Trust. He acknowledged the significance of the Committee’s commitment to ensuring the Trust’s success, albeit with caution, as it was a matter of great responsibility.

The Chairperson strongly agreed with Mr Mrara's assertion that the focus should be on benefiting ordinary people. He said the Committee's understanding of the project was still evolving, and its journey had not yet reached its logical conclusion. The ultimate goal was to positively impact the lives of the people.

He also revisited the issue of the Council for the Advancement of the South African Constitution (CASAC) court judgment, pointing out that the court had specifically noted that the then Minister had failed in her duty to respect, protect, promote and fulfil the constitutional right to property of holders of the Inland Property Rights Act (IPRA) rights invested in the Trust. He stressed that this protection of rights was required under Sections 25(1) and 26(1) of the Constitution. The court had directed the Minister to ensure the necessary administrative capacity was in place, in line with Chapter 10 of the KwaZulu Land Affairs Act of 1992, and to reinstate the KwaZulu Land Regulations. In addition, the Minister was instructed to report back on the steps taken to comply with the court order, first by a specified date, and subsequently every three months thereafter. The Chairperson expressed a keen interest in knowing whether the Minister had complied with these obligations, and if reports had been submitted. He requested that the Committee be furnished with these reports to better understand the situation.

ITB's response

Adv Zama said that the current situation and ongoing issues stemmed from a lack of understanding of how government functioned at the Ingonyama Trust. She pointed out the conflict between traditional authorities, royalties, and the Ingonyama Trust within government. She explained that, from her previous experience in provincial government, a budget was like a household budget that could not be tampered with, and must follow the correct procedures.

She then referred to the CASAC case, explaining that continuing with the appeal was not an option. The Kings, including her own family, had not been consulted when the Ingonyama Trust Board (ITB) leases were converted, despite their right to be consulted about land matters. She stressed that communal land was a reality that could not be overlooked. On the issue of the R4 million mentioned in the case, she said that they had decided to work together with the lawyers of those who had raised legitimate concerns about the ITB. She emphasised the importance of using reliable, untainted information, particularly in financial matters.

She also discussed the confusion between the Ingonyama Trust Board and the Ingonyama Trust itself, attributing this confusion to politicians. She expressed frustration with the contradictory provisions in the relevant laws, and stressed the need for resolutions and actions to ensure that the organisation did not fail.

In conclusion, she stated that the Board needed to communicate more effectively, as many positive developments were not being shared. She highlighted the importance of protecting both the organisation and the King’s integrity. Despite the political challenges, she expressed confidence that the Board was giving its best effort and should focus on sharing the positive story of the Ingonyama Trust.

Mr Vilakazi said all legitimate reports were being submitted, even though the consolidation was missing. He commented that if one read the audit report, it showed how important the audit was. The audit gave an opinion, and in this case, it said they were happy with what the Ingonyama Trust had presented, except for Ingonyama Holdings. While the rest of the portfolio was fine, the missing Ingonyama Holdings had affected the completeness of the report. He added that audits sometimes highlighted certain issues to show the report was mostly accurate, with a few exceptions.

On government spending, he insisted that there was no clear answer about whether spending was "good" or not. It depended on one's view. In line with the PFMA, government overspending was generally avoided. However, he pointed out that accountants needed to understand why overspending happens and how it compares to what was planned versus what was happening. He also explained that the statement comparing the budget to actual spending helped to show the financial statements were complete, and explained over or underspending. While overspending was discouraged, checking if spending matches the plan was important.

Regarding governance, he insisted that according to the chairperson’s model, problems arise when an organisation operates without proper checks. He said the lack of oversight had caused governance issues. The Board had been acting as both administrator and executive, which was not ideal. There should be a clear separation between those overseeing the work, those making decisions, and those doing the work. He mentioned that the Board’s fees were sometimes equal to, or higher than, a CEO’s salary, suggesting the Board was acting as an executive. This meant decisions were being made by those in those positions, without proper governance. Finally, he said that because the organisation had been left unchecked for so long, the chairperson and Board had been able to make decisions like withholding employees' pay to control them.

Mr Mngwengwe explained that the confusion surrounding the Ingonyama Trust stemmed from the way the Trust and its Board were structured. The Ingonyama Trust, as a corporate entity, was established in April 1994, with the King as the sole trustee and administrator. However, he pointed out the administrative problems this had caused, which had led Parliament to create a board to manage the Trust in 1997. The intention was to relieve the King of the direct management responsibilities.

He explained that while the provision establishing the Board was poorly drafted (specifically Section 2A), it caused confusion because it implied the existence of two entities -- the Ingonyama Trust and the Ingonyama Trust Board. However, upon closer inspection, it was clear that the Board was not endowed with the same powers or authority as the Trust itself. He mentioned that the provision only said the Board would administer the Trust, without fully clarifying its authority.

He continued that in 2001, due to the PFMA, the Ingonyama Trust and the Ingonyama Trust Board were both listed as public entities. He said that the responsibility for listing entities under the PFMA lay with the Minister of Finance, and either the Minister or the accounting authority should have ensured the entities were listed correctly. However, in 2003, the Ingonyama Trust was removed from the PFMA list, leaving only the Ingonyama Trust Board, which caused further confusion about the status of the Trust. This led to a situation where the Ingonyama Trust Board was seen as the primary entity receiving funding, while the Trust itself, which held the land, was not directly receiving government appropriations. This forced the Board to manage its finances separately from the Trust, leading to financial mismanagement.

He said that due to the Department's inability to provide sufficient administrative capacity, the ITB had struggled with staffing issues. Over time, employees were promoted within the Department and not replaced, which created further strain. By 2007/08, the Department had decided to give money directly to the Board to address these staffing issues. However, this did not solve the long-term capacity problem, as the Board began to hire people on contracts, but the funding it received was insufficient to cover these costs, resulting in deficits. In 2016, following an audit by the Auditor-General (AG), it was confirmed that the Ingonyama Trust and the Trust Board were two distinct entities. This led to a formal separation of their finances. He pointed out that the Board had continued to draw from the Trust’s funds to meet its expenses, further exacerbating the financial difficulties. He also mentioned that by 2021, the Board had run out of money and had been forced to approach the Trust for additional funds to pay salaries. Although efforts had been made to get more funding from the Department, these were unsuccessful.

He also highlighted the need to correct the legal and financial structure, stating that the Ingonyama Trust should be reinstated as a public entity under the PFMA, and the Trust Board should be removed. He argued that without this change, there would continue to be confusion over the ownership and management of funds, particularly as the Trust was meant to manage land for the benefit of communities, not for its benefit. He commented that while there were clear financial and capacity issues within the Trust, the broader problem also stemmed from the failure of other entities, such as the Department of Mineral Resources, to ensure that mining companies adhered to their social responsibility commitments, which further impacted the communities the Ingonyama Trust was supposed to serve.

Mr Vilakazi said they lacked a mechanism to build strategic discussions effectively. He emphasised that these discussions would ultimately lead to certain outcomes, but the disbursement itself would be governed by a policy that required approval from a TC Committee authority. This authority was not granted to individuals, but to the relevant authorities. Once the authority made a request and submitted a resolution, it would be registered. He added that although the Board could theoretically pay directly, they would discourage this approach. For example, if a car was bought for the TC, the agent would expect verification, but it would be processed through their standard disbursement policy. He further noted that the King was entitled to 10%, and would make a direct request on his letterhead. However, this request would be subject to whether funds were available, as the total value of Ingonyama land was estimated at R24 billion. He said that while they disclosed what they controlled, other land portions adding up to R28 million were also mentioned, but these were not directly controlled. The valuation of land was done based on evaluations.

Regarding the Ingonyama Trust Board’s annual report, Mr Vilakazi mentioned the issue with Section 55, which stipulated that reports should be submitted by 30 September. However, the Trust Board had discretion over their timelines, and there was no strict tendering requirement. He explained that previous efforts to comply with the PFMA had been hindered due to capacity issues. Sometimes, multiple audits were running simultaneously, which caused delays. Currently, they were struggling with a two-month delay, and the Board had needed to decide whether to consolidate their annual report or wait for the finalisation of the Ingonyama Trust audit.

He also explained that capacity was the main challenge. For example, the information communication technology (ICT) framework required technical expertise, which was lacking. He was in the process of drafting a strategy to address this, with a strong focus on capacity building.

There were no strict regulations on the number of board meetings, though they did list meeting frequencies in their annual report. Board members’ remuneration was based on levels determined by the National Treasury, with the vice chairperson currently earning R572 per hour of attendance.

Mr Mngwengwe said that they had delayed taking action against Ingonyama Holdings because of the protocols in place. The Board had reported their findings, and after board approval, they had decided to take legal steps against the company’s directors. He said these individuals had been presenting themselves as active directors, promising projects, and soliciting investments without the Board’s consent. The decision was made to go public, but it required informing His Majesty first, which created further delays as His Majesty was unavailable. Even now, efforts to facilitate communication with the King were ongoing. Since they could not wait, the Board had attempted to hire attorneys to take legal action. However, the Board had decided they could not go public without the King’s approval. The interaction between His Majesty and the Board had become a major difficulty. They had had to proceed with legal action, including reporting the matter to the police for a criminal investigation. He said there had been financial diversions from Ingonyama Holdings between March and October 2022, which had been discovered by the Board. They could not ignore these issues, as failing to address them would result in the Board being held responsible for material irregularities.

Ms Adams asked about the reinstatement of Mr Lucas, Mr Mkhwanazi, and Mr Madondo.

Mr Mngwengwe explained that the process of establishing or changing a company's directorship was done electronically through the Companies and Intellectual Property Commission (CIPC) system, but anyone with access could submit documents. He said that after the Ingonyama Holdings' Board had made the necessary decisions, including removing certain directors and appointing new ones, there had been interference from external parties. They had manipulated the CIPC system to reinstate these directors, including adding Mr Madondo as a director. He emphasised that this was considered fraud, and the matter was being investigated as a criminal case. The Board was also considering whether to keep the company, or rebrand it due to these fraudulent activities.

Minister's remarks

Minister Nyhontso said the Deputy Director-General (DDG) had stated that the concern was not about compliance with reports, but rather the relationship between the Board and the King, who was the chairperson and sole trustee. He emphasised that he remained neutral, and did not involve himself in local politics, whether ANC or IFP. His primary concern was the functionality of the Board, and he had raised these concerns with both the Board and the King. The DDG had indicated that the King was open to resigning as the board chairperson, but would not work with the current Board. The Board had indicated a willingness for mediation, and they were waiting for the King's response. The DDG stated that he was not interested in political interference and was focused solely on resolving the issues at hand.

Mr Mooketsa Ramasodi, Director-General (DG), Department of Agriculture, Land Reform, and Rural Development (DALRRD), said that there were several orders related to the CASAC matter. The Minister had been complying with the court order by reporting every quarter, which had been done since 2022.

The Chairperson said that at some point, Members would appreciate receiving a report on compliance with the court order. They did not want to be caught off guard later for non-compliance. He also noted that two individuals had indicated they might seek a second opportunity to address the issue.

Mr Nhanha addressed the issue of Ingonyama Holdings, stating that the claim that there was no material impact on the report was unacceptable. He pointed out that reports were suggesting R71 million had been loaned to Ingonyama Holdings, which would have an impact on the annual report. He emphasised that an oversight visit to KwaZulu-Natal was urgent, as Parliament could not ignore allegations of misdirected funds. Someone had to be held accountable for the situation.

Mr Mrara said he was satisfied that the Minister shared his concerns about the King’s leadership of the Board. He hoped the ongoing discussions would be productive. He found the responses helpful and stressed the importance of receiving a report on the audit of land and properties within the Ingonyama Trust, including both public and private institutions and investments, such as mining. This would allow them to quantify the benefits for the people, particularly the local population. He said he would not respond to Mr Mngxitama’s remarks at that moment, as it would take him into a broader discussion about the historical development of societies, which he hoped to address during a future portfolio Committee meeting.

Mr Mrara said he had an interest in comparing the operations of the Department around CPAs and the Ingonyama Trust. He said the Ingonyama Trust was a complex entity that needed deeper attention and analysis, as it seemed to have deep-rooted challenges. He acknowledged that there appeared to be political dynamics within the Trust, which made it difficult to get a full understanding of the issues from the general financial reports. He expressed his understanding of Mr Mngxitama’s support for the King’s initiative to revitalise the system, but believed it needed to be addressed in a more structured and developed manner.

The Chairperson thanked everyone for their comprehensive reports, and expressed satisfaction with the information provided.

The meeting was adjourned.