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FINANCE SELECT COMMITTEE
24 January 2006
3RD QUARTER CONDITIONAL GRANTS HEARINGS: ENGAGEMENT WITH AGRICULTURE MEC’s
Documents handed out:
Free State Presentation on 3rd Quarter Conditional Grants
Eastern Cape Presentation on 3rd Quarter Conditional Grants
Limpopo: Dept. of Local Government and Housing Conditional Grants
Limpopo: Dept. of Agriculture Conditional Grants
Limpopo Grant Comprehensive Agricultural Support Progrgamme
North West Presentation on 3rd Quarter Conditional Grants – Part1
North West Presentation on 3rd Quarter Conditional Grants – Part2
Gauteng Presentation on 3rd Quarter Conditional Grants
The Departments of Agriculture for the Free State, the Eastern Cape, Limpopo and the North West Province gave the Committee an overview of their spending patterns for the third quarter.
Free State conceded that the province had not spent their Conditional Grants in a justifiable manner in the past. However, this financial year, the province had begun to ‘turn the ship around’ to assist emerging farmers and developing businesses. There were some problems with the financial procedures and delegations, and some of the tender and procurement procedures had to be refined as well.
Eastern Cape said that one of the weaknesses in the province was the ability to plan in advance. A big proportion of their budget was a rollover from last year, but the implementation of many of their plans was delayed by a failure to plan effectively. The injustice of under-spending was embarrassing.
Limpopo said that some of the constraints they faced were weaknesses in their engineering and project management capacity, the failure to receive building materials on time and the poor Demand Management capacity at district and municipal level.
North West said that the problem of the lack of capacity remained but as corrective measures, targets were set for the approval of business plans, the process of filling critical vacant posts was prioritised, support personnel was redeployed to augment supply chain staff and the procurement thresholds and delegations were revised.
Mr M Mokitlane, the MEC, conceded that the province had not spent their Conditional Grants in a justifiable manner in the past. However, this financial year the province had begun to ‘turn the ship around’ to assist emerging farmers and developing businesses. For the Comprehensive Agricultural Support Programme, (CASP) R21 088 000 had been budgeted, with a R12 375 000 rollover from the previous year. For the Land Care Programme, (LCP) R2 million had been budgeted with a rollover of R1.5 million. For the Agricultural Disaster Management Programme, (ADMP) R17 million was budgeted, with R16 million being added to this figure. For the Provincial Infrastructure Grant, (PIG) R16 569 000 was budgeted, with R7 739 000 rolled over from last year. Up to December 2005, 49% of the budget had been spent.
The province had monitoring programmes in place, such as the placing of extension officers on farms to monitor progress. Financial progress was monitored monthly with reports passed on to the MEC and the Provincial Treasury. Some constraints to the monitoring capacity of the province existed however. There were some problems with the financial procedures and delegations, and some of the tender and procurement procedures had to be refined as well. There were seasonal limitations to what the province could do, and there were problems with the internal staff capacity of the Department. To counter some of these problems, new financial delegations to the SCM and Regions had been implemented. There were SCM staff capacity improvements and the working capital was reprioritised.
Mr B Mkhaliphi (ANC, Mpumalanga) said that the Free State was severely drought-stricken so it was odd that more funds had not been spent to alleviate the effects of the drought. What were the constraints in spending the money and helping people?
Ms D Robinson (DA, Western Cape) asked why there were rollovers for CASP. The people in the Free State needed help, so there was no reason why there should be money left over.
Mr Mokitlane agreed that rollovers were unwarranted. The province had instituted some unsuccessful measures to curb them though. For example, a moratorium was placed on expenditure processes which led to under-expenditure that year. The supply management systems were too restrictive to allow the management to spend freely to help people. Once these problems were dealt with though, spending increased from July but the effects only began to be seen around October 2005. The refinement of the whole supply and delegation systems allowed a freer expenditure of money to assist those affected by the drought.
The Chairperson asked why their figures for the expenditure for CASP and the LCP differed from those in the report from their own Provincial Treasury. The province had to go back to their treasury, find out the reason(s) for the discrepancies and report back to the Committee within five days. Also, what caused the fluctuations in how the money for CASP was spent during the year? Was the province projecting over or under-spending, and what were they doing with their treasury to deal with this.
Mr Mokitlane said that the fluctuations in spending were a result of new innovations in the implementation of their delivery and supply systems. The province projected that they would spend about 98% of their Conditional Grants as a result of increased expenditure towards the end of the financial year.
Mr G Nkwinti, the MEC, said that they agreed with the figures provided by their Provincial Treasury in their report as they had consulted with them over the report. One of the weaknesses in the province was the ability to plan in advance. A big proportion of their budget was a rollover from last year, but the implementation of many of their plans was delayed by a failure to plan effectively. A programme had been put into place for the next financial year to address this problem and they were confident that it would work. The province also lacked management skills and they were addressing this problem. Many of the problems in implementation were a result of relying too much on emerging contractors who lacked the capacity to handle big projects. He said that the injustice of under-spending was embarrassing. He had not been happy with the budget given to agriculture particularly given the plans they had which needed a lot of capital such as building a dam.
The Chairperson said that he found it difficult to understand that all of the provinces failed to plan especially given the MTEF. The Conditional Grants were only granted after the production of business plans. The lack of adequate planning and the amendment of some of the business plans mid-stream affected service delivery as well.
Ms D Magadzi, the MEC, said that in this financial year, R41 million had been received for CASP, of which R30 million had been spent, R5 million for LCP, of which R3 million had been spent and R20 million for Drought Aid, all of which had been spent. Some of the constraints they faced were weaknesses in their engineering and project management capacity, the failure to receive building materials on time and the poor Demand Management capacity at district and municipal level. To address these constraints, there was restructuring of some of the municipal structures, term contracts were given for infrastructure development service providers and bursaries were awarded to agricultural engineering students to address the problem of shortages of engineers.
For monitoring, an overall project monitoring system was in place, district committees monitored individual projects and senior management at provincial level had to approve projects and monitor the performance of those projects. There was monthly reporting per project as well as reporting to the Provincial and National Treasuries.
The Chairperson noted that the figures in Limpopo’s presentation were different from what was provided by their Provincial Treasury. He gave the province five days to bring the correct figures before the Committee.
Mr Mkhaliphi was worried that since Limpopo had spent all of its Drought Aid allocation, how were they going to deal with land care programmes that were affected by the drought, and the drought also put pressure on CASP.
The Chairperson asked what the implications were of spending all of the Drought Aid at this stage. Were they going to ask for more money?
Ms Magadzi replied that all the money had been spent as it had to be used for a number of uses. Not only did it go to the people directly affected, but it had to be used to buy fodder for cattle and used to develop grazing pastures and other structures such as boreholes and revitalising irrigation schemes. The R20 million the province had been allocated was insufficient. The drought continued from last year and by the time the money arrived in September it had already been allocated for certain payments. In fact, the province had to use money from other projects for drought alleviation projects.
Mr M Mayisela, the MEC, said that for CASP, R33 million had been allocated with R12 million spent, for LCP R5 million had been received with R1.3 million spent and for drought relief, R16 million was received with no actual expenditure made. In its monitoring capacity, the organisational structure was realigned and the Provincial Project Register (ProMIS) was put in place to improve monitoring.
The problem of the lack of capacity remained but as corrective measures, targets were set for the approval of business plans, the process of filling critical vacant posts was prioritised, support personnel was redeployed to augment supply chain staff and the procurement thresholds and delegations were revised. This resulted in an increase in business plan approvals which led to better expenditure of Conditional Grants.
In terms of compliance with the Division of Revenue Act, quarterly and monthly financial reports and the business plans for the Conditional Grants had been submitted and presented to the Department of Agriculture, with the plans being approved. Despite the compliance of the province in submitting reports, experience had shown that the ‘built-in warning system’ was ineffectual. To remedy this, management initiated a system of ‘spot-checks,’ pre-audit reconciliations, monthly reporting at departmental management meetings and an organisational realignment. A funding agreement had been signed with the Department of Agriculture in May 2005 and service level agreements were signed with partners on high impact projects from ear-marked funds to ensure improved expenditure control.
The Chairperson said that the province painted a rosy picture about how they were dealing with the problem of lack of capacity but their own Provincial Treasury said that the province projected under-spending as a result of lack of capacity. The province had to take note of this of comment and interact further with its treasury.
The meeting was adjourned.
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