Department, Land Bank, and Khula Land Reform Empowerment Facility: Annual Report briefings

Meeting report

AGRICULTURE PORTFOLIO COMMITTEE
12 October 2005
DEPARTMENT, LAND BANK, AND KHULA LAND REFORM EMPOWERMENT FACILITY: ANNUAL REPORT BRIEFINGS

Chairperson:

Department of Agriculture Annual Report: PowerPoint presentation
Department of Agriculture Annual Report 2004-05 (available at www.agriculture.gov.za)
Land Bank Annual Report 2004-05 (available at www.landbank.co.za)
Land Bank Annual Report Power-point Presentation
Land Bank Media Statement
Khula Land Reform Empowerment Annual Financial report 31 March 2003 (please email [email protected])
Khula Land Reform Empowerment Power-Point Presentation

SUMMARY
The Committee heard briefings on the Annual Reports of the Department of Agriculture, the Land Bank, and the Khula Land Reform Empowerment Facility.

The Land Bank was in a much better financial position than it was in 2003. Members concerns included the fact that the Land Bank and Khula were not visible enough in rural areas. The Department was not training enough emerging farmers. Most of their training seemed to have been concentrated at the Grootfontein facility. Members were concerned that after ten years of democratic rule, the Department still had vacant posts. Funds earmarked for helping the emerging farmers had been diverted to other projects in certain regions. Members also wanted to know more about the body responsible for setting standards in butcheries.

MINUTES

Department briefing
Mr Malatjie, Assistant Department Director-General, briefed the Committee on the various programmes’ performance. Department action was divided among administration and governance; financial management; farmer support and development; agricultural trade and business development; economic research; and sustainable resources management. He also related the report of the internal audit committee regarding the annual financial statements and human resource management.

Mr E Rademeyer, Acting Department Assistant Director, further focussed on National Regulatory Services. Mr Ralane, Department Senior Manager: Information Services, then said that that his unit had managed to publicise the Department's work and programmes through community radio and other media. He also spoke about programme planning, monitoring and evaluation.

Discussion
The Chairperson commented that the absence of the Director-General showed that the Department did not appreciate the Constitutional obligation of the Department to account to the Committee.

Mr A Nel (DA) asked for clarity on what was meant by ‘alien species’. Ms B Ntuli said that most of the projects announced by the Department were not visible on the ground. She asked the number of black farmers that had been empowered per province. What was the relationship between the Department and Agri-SA? What measures were in place to ensure that provinces did extension work? She wanted to know whether the emerging farmers were really farming. She could not understand the reason that the Department still had many vacancies, and asked the underlying problems.

Dr S Moephuli, Department Assistant Director-General: Scientific Research and Development, replied that his division had found that provinces were not consistent in the receipt of advisory and extension services. For instance, veterinarians were advisory and extension officers because they treated animals and advised farmers on issues such as artificial insemination. Norms and standards had been developed by the Department to balance delivery in provinces, but it had proved difficult to force the provinces to comply. The Department could not dictate the number of extension services, but they used the number of farmers per area as an allocation criterion. On staff vacancies, he said that some applicants’ CV looked very good, but they had not been able to answer questions related to their jobs during interviews.

Mr L Mabombo, Department Chief Operating Officer: Management and Governance, explained that vacant posts had been reduced from 26% to 9%. Capacity problems were not only affecting the national Department, but also provinces. Richer provinces poached from one another by offering better salaries. When filling vacancies, the Department had started by recruiting veterinarians and soil scientists, then engineers and agricultural economists

Dr E Schoeman asked which crop estimates were closest to actual crop output. He wanted to know the measures in place to curb Foot and Mouth Disease, and Avian Flu. Did the antigen found in Western Cape ostriches differ from the one found in the Eastern Cape? He wondered whether the culling of the ostriches had been done too hastilly. He asked the number of farmers trained at Grootfontein Agricultural College. Was the facility big enough to accommodate large numbers?

Mr E Rademeyer, Department Acting Assistant Director-General, National Regulatory Services, said that Swine Fever had been investigated by the Western Cape Agriculture Department. A ‘paper trail’ from Portnet had found it originated from ships from the Far East. The Avian Flu antigen in the Western Cape had not been identified. The Eastern Cape variant had been identified as the most dangerous known to date, hence the culling. On crop estimates, he said the Department was using satellite images. Agri-SA had their own estimates, market potential and crop sizes. Official estimates had been developed using a variety of instruments, and they had proven to be very reliable.

Mr J Bici (UDP) asked the number of farmers that still relied financially on the state. He also asked for clarity on whether the autonomy of the provinces was affecting delivery. He could not understand the reason the Department had incurred debt.

Mr T Marais, Acting Department Chief Financial Officer, replied that the Agriculture Amendment Act had abolished the granting of credit to farmers. The current debt was a rollover from the previous Agriculture Credit Act.

Mr T Ramphele said that the Committee and the Department needed a common understanding for oversight purposes. Huge sums of money had been transferred to provinces. What monitoring purposes were in place to ensure that money was spent properly? He wanted to know how the Department solved the problem of under-spending. Municipalities would sometimes say they could not help emerging farmers. He therefore wanted to know whether the cause was ineffective flow of information between government spheres. He also wondered whether farmer support programmes were helpful to land reform beneficiaries. He asked what had been done to help farmworkers. South African black African farmers were still lagging behind their African counterparts in terms of development. He wanted to know more about development programmes to rectify the situation.

Mr Ramphele continued that this regime could not take credit for the achievements of white commercial farmers. The Eastern Cape Provincial Department of Agriculture had spent only 38% of their budget allocation. He wanted to know the reasons and what could be done to fix the problem. Who determined the standards of the slaughterhouses? Most agricultural training facilities were closing down due to lack of funds. He could not understand that only one facility could train about 4 000 people and not share students with other facilities. He asked who was responsible for maintaining standards at the abattoirs and butcheries.

Mr Mabombo admitted that there were challenges to intergovernmental relations. An initiative by the Department of Provincial and Local Government known as ‘Project Consolidate’ had enabled the Department to get first-hand information on services needed in at local government level. The Intergovernmental Relations Bill did not detail relations between the Department and the provincial government. There had been under-spending on the Comprehensive Agricultural Support Programme. The accounting system used by the departments was such that they only paid service providers when the task had already been performed. Some of the service providers were not yet paid for work done during the auditing of the books. Grootfontein was regarded as a Centre of Excellence, and it was the only training facility owned by the government.

Mr S Ralane, Department Senior Manager: Information Services, replied that emerging livestock farmers were coming along well. On 13 September 2005, the Minister of Education had announced the alignment of all agricultural training institutions. This would enable trainees to obtain common qualifications and enable horizontal movement of people between institutions.

Mr T Marais replied that some of the 4 000 trainees at Grootfontein were on three-month training programme.

Mr Rademeyer added that the certification and the setting of standards for all food products was done by the Department of Health.

Mr Bici said that officials in the Chris Hani region of the Eastern Cape had diverted funds allocated to help emerging farmers to other projects, so it might seem that they had underspent.

Mr Mabombo replied that they were not aware of the problem in Chris Hani region, but the Department would investigate the matter. They were grateful to the Committee for informing them of such matters. Treasury had been formulating guidelines that would help provinces to spend their allocations judiciously and on time.

Ms Ntuli asked the amount of state land that could be distributed to the former homeland areas, and how many irrigation schemes had been rehabilitated to date. Mr Mabombo replied that the Government had been holding on to the land while the beneficiaries were undergoing training. The information on the rehabilitated irrigation schemes would be forwarded later to the Committee.

Mr P Holomisa (ANC) enquired about the size of the debt that had been transferred to the Land Bank and how much was left for the Department. He wanted to know if the Department had been using traditional leadership for dissemination of information. If they had been doing so, what problems had been encountered? He then asked what kind of steps had been taken to provide extension officers with resources, such as cars.

Mr Mabombo replied that the Department had been hoping that traditional leaders would help in disseminating the information. Intergovernmental Protocol dictated that the Department should go through the provinces. The norms and standards were meant to address issues such as the resources needed by extension officers, and a common approach for all provinces.

Mr Marais replied that no part of the dept had been handed to the Land Bank.

Dr Schoeman said that the Department should make a distinction between the training of farmers and extension officers.

Mr Ramphela cited an example of a project they had visited in Venda. Members had seen a very successful rural development project. He then asked the Department to consider aligning development co-operatives with issues like farmer support and the Comprehensive Agricultural Support Programme (CASP). Members would like an assurance that all butcheries were operating according to equal health standards.

Mr Mabombo suggested that perhaps the Department should arrange a special briefing for the Committee on CASP.

Mr Ralane said that the Department had been working very closely with the Government Communication Information System on the challenge of information distribution

Land Bank briefing
Mr Mukoki, Land Bank CEO, told the Committee that the Bank was the only financial institution devoted entirely to agriculture. The Bank’s performance was also influenced by the external environment, such as a strong Rand, commodity prices, and competition from other financial institutions. The developmental mandate of the Bank necessitated that they lend to emerging farmers, support Black Economic Empowerment in agriculture, and empower women through initiatives such as the Female Farmer of the Year Award. Additional contributions to transformation included support for the youth farm project, supported by the Department heads of Agriculture in tertiary institutions.

Discussion
Mr P Nefholovhodwe (AZAPO) enquired whether provision had been made for the bad debt. What other methods were used for credit ratings by the lending institutions? Mr A Mukoki replied that credit rating were influenced by a number of factors, such as bad debt and even employer image

Dr Schoeman said that over a R1 billion had been written off as bad debt and a new accounting system had been introduced to ensure efficiency. He was amazed that the Land Bank had continued to rely on government grants. He wanted to know who received the highest percentage - the emerging or commercial farmers?

Mr A Mukoki replied that their usual procedure was to borrow from the markets and rely on organic growth rather than the government grants.

Mr Bici asked how lending to previously disadvantaged people affected the profits of the Bank, and about overlaps with Micro Agricultural Finance Scheme for South Africa (MAFISA). He wanted to know the type of benefits that would be accrued by offering bursaries, and conditions attached to the bursaries.

Mr A Mukoki, CEO, replied that the management and the board had had to "do a complete surgery once and for all", and had embarked on an advertising campaign to turn sceptics into supporters. It was in the Bank’s interest to build the capacity of lenders by providing training and referring them to business advisers. The Bank and MAFISA were not clashing but complimenting each other. There were two kinds of bursaries. One was granted to people who would work for the Bank after studying. The other kind was offered to any deserving, needy student irrespective of the field of study. It was granted as part of corporate social responsibility.

Mr Bici asked the response of the Bank when a lender was listed by a credit bureau. Ms P Ramphele, Land Bank General Manager: Credit, replied that the bank ‘s policy was not to turn people away according to credit history. The fact that they were paying their debt showed that they were willing to change.

Mr Mukoki asked for clarification on ‘fruitless expenditure’. Mr Mukoki replied that the fruitless expenditure was a result of car allowances offered to desk-bound employees. The bank was then left with the debt because some those employees were working somewhere else. The SA Revenue Services had informed their management that it was not necessary to give allowances to every employee.

Mr Bici wanted to know how the interest rate was calculated. Mr G Oricho replied that the interest rate depended on the product that a client applied for at a particular time. Ms Ramphele added replied that it depended on the amount borrowed. For example, a loan for property would charge a different rate than one for production.

Mr Mukoki replied that the interest rates of the Land Bank were highly competitive, but they were charging slightly more than "high street banks". Mainstream banks profited from service charges on current accounts, which Land Bank did not offer.

Mr Ramphele thanked the delegation on behalf of the Committee, and cautioned that they would be watching them very closely.

Khula Land Reform Empowerment Facility briefing
Mr S Luthuli, Khula Chief Operating Officer, briefed the Committee on the responsibility of its Board of Directors and the Report of Independent Auditors. See presentation attached.

Discussion
Mr Holomisa enquired about the wisdom of channelling funds through commercial banks. He felt that it would disadvantage the poor due to high interest rates.

Mr S Luthuli replied that Khula lent to commercial banks at 7% and the Banks add 2.7% - 3%. Khula had been negotiating with banks to cap their interest rates.

Ms Zikalala (IFP) said that Khula had a poor image on the ground.

Mr Mothoua replied that Khula had neglected rural areas in the past. As a result, Khula had now made a conscious decision to concentrate on provinces other that the Western Cape, Gauteng and KwaZulu-Natal. By 2008, 80% of the funds would be going to the other six provinces.

Mr Ramphela suggested that Khula should strengthen the Land Bank and the Development Bank. Mr Luthuli replied that Khula could not not fund the Land Bank because the loan book of Land Bank was R18 billion while Khula’s loan book was less than R1 billion.

Ms Ntuli asked about the type of projects funded by Khula, and whether the training by the Small Enterprise Development Agency (SEDA) was monitored by Khula. Who was responsible for capacity building? If the SETAs provided capacity, who monitored them? She reiterated Ms Zikalala’s position that organisations such as Khula were not adequately visible in rural areas.

Mr Mothoa replied that SEDA had been set up specifically to address the challenges that faced Ntsika. There had been no money allocated for capacity building and the Agriculture SETA had been responsible for capacity. Mr Luthuli said they should tap into the expertise of Land Bank and work on improving their services.

The meeting was adjourned.