Committee Report on Annual Reports: consideration

Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
2 November 2005
COMMITTEE REPORT ON ANNUAL REPORTS: CONSIDERATION

Chairperson:

Committee Reports]
Report of the Portfolio Committee on Agriculture and Land Affairs on the Annual Reports and Financial Statements for 2004/05 of the Department of Land Affairs and its Public Entities

SUMMARY
The Committee discussed its report on the 2004/05 Annual Reports of the Departments of Agriculture and Land Affairs and their associated public institutions. The Committee did not have a quorum and the report would therefore be formally considered again at a future date.

Some of the major concerns raised by the Committee included the outbreak of animal diseases in the Eastern Cape, Western Cape, Limpopo and KwaZulu-Natal; the need for a follow-up meeting with the Department of Agriculture on the Comprehensive Agricultural Support Programme (CASP) funding; the lack of capacity in the Department of Land Affairs; high land prices and that expropriation for restitution purposes was not used often enough.

MINUTES

Committee Report on Department of Agriculture and its Public Entities
The Committee Secretary, Mr Jerry Biltina, gave an overview of the report. The presentations generally focused on 2004/05 targets, achievements and challenges, and audited Financial Statements ending 31 March 2005. The presentation included reports from the Department of Agriculture, the Land Bank, Khula Land Reform Credit Facility, Ncera Farms (Pty) Ltd, Primary Agriculture Education and Training Authority (PAETA), National Agricultural Marketing Council (NAMC), Onderstepoort Biological Products (OBP), Perishable Products Export Control Board (PPECB) and the Agricultural Research Council (ARC).

Having considered the above reports the Portfolio Committee reported:

Department of Agriculture
The main focus was on targets and achievements related to the programmes:

- Programme 1: Administration. Actual spending for the period under review was R169, 838 million, being
12.2% of the total budget.
- Programme 2: Farmer Support and Development. The programme developed policies in the agricultural
sector governing farmer settlement, food security, rural development, the registration of cooperatives
and agricultural risk and disaster management. Expenditure was R330, 044 million, being 23.8% of total
budget.
- Programme 3: Agricultural Trade and Business Development. The programme developed policies
governing access to national and international markets and promoted Black Economic Empowerment
(BEE) in the sector. Actual expenditure was R26, 759 million, being 1.9% of the total budget.
- Programme 4: Economic Research and Analysis. The programme provided accurate agricultural
economic and statistical information to relevant stakeholders to improve decision making. Expenditure
was R16, 108 million, being 1.2% of the total budget.
- Programme 5: Agricultural Production. The programme’s objective was to provide national leadership
for increased sustainable agricultural productivity, genetic resources management, research,
technology development and transfer. Expenditure was R368, 496 million, being 26.6% of the total
budget.
- Programme 6: Sustainable Resources Management and Use. The programme developed, implemented
and monitored policies for the management and use of land and water resources in agriculture.
Expenditure was R143, 219 million, being 10.3% of the total budget.
- Programme 7: National Regulatory Services. The programme developed and monitored risk
management strategies, policies and legislation for food safety and for the control of animal and plant
diseases. Expenditure was R246, 666 million, being 17.8% of the total budget.
- Programme 8: Communication and Information Management. The programme managed and
coordinated communication, education and international relations. Expenditure was R83, 405 million,
being 6.0% of the total budget.
- Programme 9: Programme Planning, Monitoring and Evaluation. Expenditure was R2, 306 million, being
0.2% of the total budget.

The total allocation to the Department for 2004/05 was R1, 449 billion. Actual spending was R1, 386 billion. The report reflected under-spending of R62, 550 million, being 4.3% of the total budget.

The Auditor-General found that the financial statements were fairly presented but drew attention to the control over fixed assets. The audit revealed various cases where assets could not be physically verified or traced to the asset register at the national office and other regional offices.

The Committee expressed concerns over the outbreak of animal diseases in the Eastern Cape, Western Cape, Limpopo and KwaZulu-Natal; the intergovernmental relations challenges; information flow and management between the three spheres of government; training and lack of support for emerging farmers; the role played by Extension Officers in some areas was not visible; agricultural cooperatives and the registration process; and the implementation plans of Provincial departments and Districts.

It was recommended that a follow up meeting with the Department of Agriculture was necessary to discuss the Comprehensive Agricultural Support Programme (CASP) funding.

The Committee agreed to accept the report.

Discussion
Mr J Bici (UDP) referred to the under spending. The farmers were struggling and it was not good that the money was not being spent.

The Chairperson responded that the programme was very tight. Usually a Portfolio Committee, which included the opposition, dealt with the report and reached agreement before putting it to the meeting.

Mr P Ditshetelo (UCDP) asked what was the significance of not having a quorum but having to adopt the report.

The Chairperson responded that the report would only be discussed but not adopted. The Chairperson of the Chairpersons Committee would be approached for an extension.

Mr Biltina responded to Mr Bici that the programme for next year would have to be developed. When developing the programme for next year, he would take into consideration that his was one of the issues requiring urgent consideration by the Committee. The Department would brief the Committee when requested. The issue would appear on the Committee’s programme again.

The Chairperson agreed there was a need for a subcommittee to draft a report and submit it to the full Committee.

Land Bank
The main focus of the presentation was on vision, mission, evolution of the Bank since 1998, approach, external environment, operational review, loans to emerging farmers, AgriBEE support, financial review and turnaround points.

Recorded successes included raising levels of investment in the natural environment through agriculture and by adding value to the contributions of the rural, provincial and local government agricultural stakeholders; raising rural awareness levels and empowering communicates to provide new social business networks to facilitate productive partnerships amongst small scale farmers through the Step-Up product by creating credit histories for the unbankable; effective delivery on its undertakings; and fostering and strengthening a regional approach to delivery.

Challenges related to improving access for various categories of agricultural entrepreneur and meeting the challenges of limited access to land ownership and collateral; matching service capacity with outreach; maintaining sound performance and credit rating; balancing outreach and quality service with the imperatives of sustainability; and continuing to grow into the space created by the Agricultural Development Act and to make creative use of the opportunities created by the Act.

The Land Bank developed a Turnaround Strategy embracing its core activities.

The Auditor-General found that the statements were fairly presented but emphasised that with regard to the computer system there were deficiencies in the banking loan module and certain inadequacies in logical or manual mitigating controls which were still unresolved. Pay-as-you-earn (PAYE) tax had been incorrectly calculated and not recovered from employees and penalties and interest amounting to R13, 606 million were regarded as fruitless and wasteful expenditure.

The Committee deliberated on the report. Its concerns included bad debt provision and the capacity to move forward; the challenges in relation to farmers’ debt; the credibility of the bank amongst emerging farmers; borrowing and the ability to repay; the lack of training and development to land reform beneficiaries and access to information and products of the Bank.

The Committee accepted the report.

Khula Land Reform Credit Facility
Mr E Greeve (Parliamentary Officer: Department of Land Affairs) asked the Committee Clerk to change this report to the Department of Land Affairs, not Agriculture.

The Committee accepted the report.

Ncera Farms (Pty) Ltd
The Department was the sole shareholder of Ncera Farms (Pty) Ltd situated on State owned land in the Eastern Cape which were dedicated to assisting small and emerging farmers through various services to the surrounding rural communities in the form of advice, extension services and training.

The Auditor General found no problems with regard to internal control or cases of con-compliance with the requirements of the Public Finance Management Act, 1999.

The Portfolio Committee raised concerns that management fees were too high; the sustainability of farms where the Department was withdrawing; the welfare of workers in the project; the optimum utilisation of the Service Centre by surrounding communities, and effective transfer of skills to beneficiaries.

The Committee accepted the annual report and requested to be provided with a full report on the profitability and activities taking place at the farms.

Discussion
Mr Ditshetelo referred to the high management fees and asked what criteria were used to arrive at that observation.

Mr Biltina responded that when they presented their report they listed the budget and the Committee could see what amount of money was involved and queried why the management fees were so high. The explanation given by Ncera was that they were not actually on the farm but there were people managing the farm and those people had to be paid. The Committee asked for a breakdown of those fees.

Mr Ramphele related that a consulting firm had been appointed to manage the farm; that process was not final but the whole project would be turned into a service centre. Maybe the Member would be satisfied if it was stated that the Committee had raised concern about the continued payment of an exorbitant management fee. He also raised the issue of the workers and asked for feedback, and requested that the exorbitant fees for security be captured. An undertaking had been given that that was a once-off expense that would not again be as high the following year.

Primary Agriculture Education & Training Authority (PAETA)
Mr Biltina said this entity normally did not report to this Committee, but to the Portfolio Committee on Labour. However, because they were involved in agricultural activities, they had been asked to report to this Committee on their annual activities.

The primary objective of PAETA was to create and promote opportunities for social, economic and employment growth for farming communities, in conjunction with other stakeholders in primary agriculture, through relevant, quality and accessible education, training and development. Targets and key achievements included learnerships, skills programmes, adult basic education and training (ABET), HIV/Aids, quality assurance, and National Skills Fund (NSF) projects.

The Auditor-General reported nothing wrong with their financial statements.

Some of the key challenges for AgriSETA for 2005/06 and beyond were extensive support to the agricultural land reform processes; roll out of ABET programmes to at least 10 000 persons per annum; to capacitate learning centres (especially Agricultural Colleges) into Centres of Excellence; to produce high quality, and relevant and in-depth agricultural processing research.

The Committee raised concern that the allocation of Agricultural Colleges to the Department of Education should be seriously reconsidered.

The Committee accepted the report.

Members were asked for guidance as to whether the agricultural colleges should fall under the Department of Agriculture or remain with the Department of Education. It was felt it would be much better if these colleges fell under the Department of Agriculture. Mr Nel would follow up with the Minister and Mr Ditshetelo said the Department was still negotiating the possibility of re-positioning the agricultural colleges.

Mr Ramphele said the higher management levels of PAETA were not transformed and every effort should be made to ensure that there was transformation at those levels.

National Agricultural Marketing Council (NAMC)
The core mandate of the NAMC was to do investigations and advise the Minister of Agriculture and Land Affairs on agricultural marketing policies and their application, and to coordinate agricultural marketing policy in relation to national economic, social and development policies and international trends and developments.

The Auditor General found the Financial Statements to be fairly presented.

The Committee’s concerns were that the Council did not have a strategy to deal with enhancement of the first economy and responding to the challenges of the second economy; the lack of a proactive approach to ensure that South Africa was not used as a dumping zone; the Council should consider employing marketing officers to deal with domestic and international marketing; it was not clear why it took so long for the Council to disband the Meat Board; and there was no strategy in place for the Council to be accessed by emerging farmers.

The Committee further requested that the Council provide a report about the time taken to disband the Meat Board and that the Council provide a report on the breakdown of personnel expenditure.

Discussion
Mr Nel said the Meat Board referred to should read "Wool Board".

Mr Ramphele referred to ensuring that South Africa was not used as a dumping ground and asked that ‘to other countries’ be added to the sentence. He explained that dumping occurred when a country overproduced and the surplus was dumped on another. The Committee should see to it that South Africa did not become a victim of dumping.

A question was asked about crop estimates and Mr Nel felt that that was one of the main points the Committee should be concerned with. Inaccurate estimates could have grave consequences; especially on the grain crop.

Onderstepoort Biological Products (OBP)
OBP was a bio-technical company manufacturing vaccines and related products for the global animal health care industry.

The Auditor-General found the financial statements to be fairly presented.

The Committee expressed appreciation with the good work done and encouraged the company to strengthen personal contacts with the emerging farmers; to continue visiting provinces on a regular basis to end the diseases; and to extend more services to the Southern African Development Community (SADC) region and the continent. It further recommended that the Committee should undertake an oversight visit to the Head Office of the company in 2006 to view its renovated facility.

Perishable Products Export Control Board (PPECB)
The purpose of the PPECB was to ensure that perishable products intended for export from South Africa met international quality standards. Activities included inspections and quality control and providing technical, development, and market intelligence and information services.

The Auditor General raised no issues.

The Committee’s concerns were that the Employment Equity Plan of the Board should be fast tracked; the bulk of the budget was used for personnel expenditure; and the Board should consider labelling products in for the second economy.

The Committee accepted the report and recommended that the transformation of the Board should provide for the inclusion of the National African Farmers’ Union (NAFU) and AgriSA.

Discussion
Mr Ramphele felt the recommendation should be left out and first discussed with the Minister. The Committee had asked that they should give their input on how they saw themselves going forward. The PPECB needed transformation.

The Chairperson responded that the challenge was that farmers needed information and the information on how to prevent diseases should be provided in all African indigenous languages. The Board should have interaction with provinces and discuss special prices with them.

Mr Ramphele agreed the Board was too customer-targeted and lost out when people in the second economy wanted to enter the export market. There was a need to assist these farmers with things like branding.

Agricultural Research Council (ARC)
The ARC provided a scientific base and technology transfer capacity to the national agricultural industry in South Africa. The mandate included conducting research, and developing and transferring technology; thus promoting the agricultural sector industry.

The Auditor-General raised non-compliance with the PFMA with regard to internal controls and submission of financial statements.

While the Committee accepted the annual report, it also expressed concerns with the ARC’s strategy in disseminating information, especially to emerging farmers (and in the rural areas); its state of readiness to combat bird flu; the transfer and development of technology; participation by the institution in NEPAD activities; the challenges posed by climate change and its readiness to respond; and the lack of repairs to its facilities.

The Committee agreed that the ARC should provide written responses to other questions and further requested the ARC to state the practical challenges that made the institution unable to fulfil its mandate. The Committee indicated it would do all it could to assist the institution.

Discussion
Mr Ramphele said the challenge was to be more competitive in the world today. The Committee needed some indication of what it could do about the practical and resource challenges.

The Chairperson agreed that the Committee should influence and strengthen the second economy and stressed the need to have pamphlets distributed in all eleven official languages.

Conclusion and Recommendations
Having considered the 2004/05 Annual Reports and Financial Statements of the Department of Agriculture and its Public Entities, the Committee recommended that a follow up meeting with the Department of Agriculture was required to discuss the Comprehensive Agricultural Support Programme (CASP) funding and the problems experienced at provincial levels. While the Committee agreed that during the past year the Department had made remarkable progress on various issues such as transformation of the sector at all levels by ensuring that agriculture was becoming inclusive, competitive and alleviated poverty; much more remained to be done to create an enabling environment to achieve the country’s strategic goals.

Committee Report on the Department of Land Affairs and its Public Entities
The Committee Secretary, Mr Jerry Biltina, gave an overview of the report. The Department of Land Affairs and associated entities had tabled their reports in terms of Section 65(1)(a) of the Public Finance Management Act. Upon referral by the National Assembly, the Portfolio Committee on Agriculture and Land Affairs scheduled extended briefing sessions with the Department of Land Affairs and associated public entities to present their reports and financial statements for 2004/05. The presentations focused on targets, achievements, challenges and audited financial statements ending 31 March 2005.

Department of Land Affairs
The main focus of the presentation was on strategic objectives, performance review highlights in relation to Land Restitution, Land Redistribution and Land Tenure, Land Planning and Information, improved governance of the Department, and financial review for 2004/05.

Commission on Restitution of Land Rights
The main focus was on providing equitable redress to victims of racial land dispossession in terms of the Restitution of Land Rights Act (No. 22 of 1994); providing access to rights in land, including land ownership and sustainable development; fostering of national reconciliation and stability; improving household welfare, underpinning economic growth and contributing to poverty alleviation.

Bala Farms (Pty) Ltd
Bala Farms was a State owned company created by the former Bophuthatswana Administration. The company was being deregistered and properties not disposed of by 31 March 2006 would be transferred to the Department of Land Affairs for disposal.

KwaZulu-Natal Ingonyama Trust Board
The Board was established in terms of the KwaZulu-Natal Ingonyama Trust Act (1994) and was chaired by the Zulu King (or his nominee) and eight other members appointed by the Minister of Agriculture and Land Affairs. It was established in 1998 to administer the affairs of the Ingonyama Trust.

The Committee made general observations and noted that the Auditor-General had raised no issues.

Annual Report of the Department of Land Affairs
The Committee completed its oversight work on the reports of the Department of Land Affairs and the associated entities. The Department had the responsibility of providing access to land and to extend rights in land, with particular emphasis on the previously disadvantaged communities.

- Programme 1: Administration. Strategic and logistical support. Expenditure was R192, 018 million, being
97% of total budget.
- Programme 2: Surveys and Mapping. Planning and monitoring of land reform, national infrastructure and
sustainable development by providing accurate, up to date and accessible maps and other information.
Expenditure was R65, 597 million, being 95% of total budget.
- Programme 3: Cadastral Surveys. The development and maintenance of a high quality cadastral survey
system to support and facilitate all land development, including land reform. Expenditure was R79, 044 million, being 98% of total budget.
- Programme 4: Restitution. The key objective was to have persons or communities dispossessed of
property after 19 June 1913, as a result of past discriminatory laws and practices, restored to such
property or receive just and equitable compensation. Expenditure was R1, 182 billion, being 99.8%
of total budget.
- Programme 5: Land Reform. The focus was to ensure that the sustainable benefits of economic growth
accrued to previously disadvantaged communities, groups and individuals. Expenditure was R453, 653
million, being 96% of total budget.
- Programme 6: Spatial Planning and Information. The objective was the establishment of an effective and efficient system of spatial planning, land use management and spatial information to support development and land reform in South Africa. Expenditure was R15, 180 million, being 86% of total budget.
- Programme 7: Auxiliary and Associated Services. Expenditure was R2, 624 million, being 32% of total
budget.

The total expenditure of the Department was R2 031 882 billion, being 98% of a total budget of R1 990 889. The report reflected under spending of 2%. [Special Note: Please see below for discussion of apparent contradiction in figures]

The Auditor General did not raise any fundamental issues.

The Portfolio Committee raised the following concerns:

a) Lack of sufficient capacity within the Department;
b) Relations between the spheres of government in relation to planning and implementation;
c) The challenges posed by implementation of the Comprehensive Agricultural Support Programme;
d) High land prices, especially when government was a willing buyer;
e) There was no mechanism in place to monitor farm evictions;
f) The non-application of expropriation as a means to acquire land;
g) Municipalities selling land to foreigners;
h) Amalgamation of the Extension of Security of Tenure Act and Labour Tenants Act presented challenges.

The Committee accepted the report and recommended that the Department table the implementation plan for the Land Summit recommendations.

Discussion
The Chairperson asked that data be compiled in order to monitor farm evictions.

Mr Nel said point (h) was being expedited and would be more secure in future.

Mr Bici referred to the figures quoted as being a R1, 9 billion allocation and R2, 0 billion expenditure; representing 2% under spending. These were contradictory and he asked that they be checked.

Mr Greeve responded that this 2% was due to projects still being negotiated so the money had not actually been spent, but had been committed to projects where negotiation was continuing.

Mr Nel said you could not under spend, if you had spent more than allocated.

Mr Biltina would verify the figures.

Commission on Restitution of Land Rights
The report outlined the strategic objective and mandate of the Commission, the Financial Statements and details of expenditure; total financial commitments for claims settled to date, and how the Restitution Programme was funded.

Critical issues were that financial compensation was attractive to the poor to address poverty related needs but they did not offer lasting solutions to poverty and it did not contribute to resolving the problem of skewed ownership and led to family disputes and fraud.

The Committee noted the progress made and agreed to adopt the annual report. It further agreed that in the provinces there were still many practical challenges that needed to be addressed.

Bala Farms (Pty) Ltd
Mr Nel was not happy that the Committee had noted ‘the uncooperative role played by organised agriculture in the restitution process’. AgriSA’s congress had been very positive and had put plans on the table to achieve this. He had spoken to a lot of farmers in Northern Natal and while there were a lot of problems, they were positive and knew there was a need for land reform. In Dundee, the Chairman of the local branch said there were 600 claims. They had met officials of the Commission and between them had resolved all claims in Dundee. Claimants and farmers should be working together. He felt item (g) of the Committee’s observations was not a valid point.

Mr Ngema (NADECO) sympathised with Mr Nel. The Committee had observed the need for more collaboration and cooperation. The point should be reconstructed without apportioning blame.

Mr Nel suggested that the Committee should invite the Chairman of AgriWestern Cape next year to inform the Committee of its observations and how they could assist the restitution process.

Mr Ramphele agreed with Mr Nel and wondered whether the Transvaal Agricultural Union (TAU) would also be interested in such a meeting.

Mr Nel encouraged the Committee to meet with the TAU. The Union was slightly more aggressive, but it accepted that there had to be land reform in this country. He had found understanding and concrete plans to co-operate. This was very positive for South Africa.

Mr Ramphele agreed that the Committee should ask the TAU to cooperate and expedite land reform. The Commission would be asked to clarify the statement about lack of co-operation by organised agriculture. When on oversight tours, the Committee had requested information from the Commission on the Zebedele and Limpopo projects. The Committee had requested that the Commission should look at the strategic partners and ensure they were empowered for land restitution co-settlement issues that were always raised as a concept.

Bala Farms (Pty) Ltd
The report had been presented to the Committee on 5 April. The Committee accepted the report and briefing on deregistration of the company.

The Auditor-General had raised no issues.

KwaZulu-Natal Ingonyama Trust Board
The Auditor-General did not express an opinion on the financial statements. Without qualifying the audit opinion, attention was drawn to the contingent liability for arrear rates owed to municipalities, the internal audit and audit committee, weaknesses in internal control, and non-compliance with the PFMA.

While the Committee accepted the report, it was concerned about the issues raised by the Auditor-General and recommended that these issues be referred to the Standing Committee on Public Accounts (SCOPA) for further interrogation.

Mr Ngema asked whether that was common procedure.

Mr Nel said there were special circumstances in this case. In principle anything that came before this Committee as a qualified opinion from the Auditor-General should follow this route.

Mr P Ditshetelo (UCDP) agreed that the strict route should be followed. In future it could be used as a vehicle for creating a support mechanism to aid the Trust to resolve its problems. However, it first had to obtain a "clean slate".

The Chairperson said that the observation would be retained and the Committee would make its own recommendation to the Department.

It was noted that the report of Inala Farm was not before the Committee as it was in liquidation.

Mr Bici expressed concern that the Committee had not intervened before the liquidation as previous reports would have showed weaknesses.

The Chairperson ruled that due to the lack of a quorum, the report would have to come before the Committee again. The amendments discussed at this meeting would be made and the final report would be circulated to Members.

The Chairperson announced that the Departments of Health and Environmental Affairs and Tourism would brief the Committee on the Genetically-Modified Organisms Amendment Bill on 8 November.

The meeting was adjourned.