Budget &Strategic Business Plan hearings 2006/07: Land Bank & Khula Land Reform Empowerment Facility

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
7 March 2006


BUDGET AND STRATEGIC BUSINESS PLAN HEARINGS 2006/07: LAND BANK; KHULA LAND REFORM; RESTITUTION OF LAND RIGHTS COMMISSION AND INGONYAMA TRUST

Chairperson
: Ms D Hlengethwa (ANC)

Documents handed out:
 

Landbank Powerpoint presentation
Khula Enterprise Finance Limited: PowerPoint presentation
Commission on Restitution of Land Rights Report 2006/2007
Slides from presentation on above document
Ingonyama Trust Board Strategic Review 2006/2007
Landbank Strategic Plan 2006/07: Part
1, 2, 3, 4, 5, 6

SUMMARY
Landbank presented its Corporate Plan and Budget for 2006/7, focusing in particular on the Turnaround Strategy which had formed the basis of previous presentations to the Portfolio Committee. Questions were raised by members about Land Bank’s status in the market, capitalization and, in particular, about the delivery which Land Bank was able to offer, especially to rural farmers. Members queried the bursary scheme. Clarity was sought on the position of Land Bank and co-operatives, in particular whether this alliance was beneficial.

Khula Enterprise Finance Ltd presented its Corporate Plan and Budget for 2006/7, and gave a report-back on the areas which had been queried at the last presentation – namely the distribution of funds per Province, the balance of the portfolio and capacity building. Khula was mandated to deal with exchange and transfer of shares, and exchange of land. It was currently limited to R37 million per annum and therefore tried to spread the limited funds among the provinces. By 2007 it aimed to grow its loan book to R190 million. Thus far, Khula’s disbursements had benefited 2 500 participants and created 3 500 permanent jobs . Members raised questions on funding and investment areas, the capping of the interest rates by banks, the relationship with Land Bank and the status of the projects funded.

The Chief Commissioner of the Commission on Restitution of Land Rights, Mr Tozi Gwanya, presented the Commission’s Budget and Business Plans for 2006/2007, and briefed the Committee on the progress that has been made to date. The Committee questioned Mr Gwanya on certain aspects of his presentation, with particular emphasis on delays in the process of land restitution. The Commission’s stance on the steps that needed to be taken to prevent delays was questioned, and Mr Gwanya stated that although expropriation of land was a last resort, it was one that would be called upon where a policy of willing buyer- willing seller was proving ineffective. The Committee also questioned aspects of bureaucracy that were causing delays, and the Commission stated that there was a move to decentralise the process in order that individual Provinces would be able to administer land restitution, thus speeding up the process.

The Committee was also briefed by the Kwa-Zulu Natal Ingonyama Trust Board on the Trust’s Budget and Business Plans for 2006/2007. Mr SJ Ngwenya, the Acting Chairperson of the Trust, outlined the budget and explained that 86.2% of the budget came from income from leases and royalties, while the remaining 13.8% came from Government. Money received from the Department of Land Affairs was to be used for operational expenses. The Deputy Minister of Land Affairs emphasised that the Ingonyama Trust was a unique project, where the Board would, over time, seamlessly evolve into a Communal Land Board. The Committee briefly questioned the Trust Board on the payment of royalties to the community, the question of privatisation of state-owned forests, and whether all land would be transferred over time.

MINUTES
Land Bank presentation
Mr Alan Mukoki, CEO of Land Bank, reported that Land Bank was mandated by the Land Bank Act to preserve the agricultural economy but also had development objectives. It was critical for Land Bank to turn around its commercial business, thereby increasing its capital, in order to deliver on its development mandate. Land Bank had previously performed poorly in the commercial role and had been unable to persuade National Treasury to support recapitalisation. Land Bank therefore had had to develop a strategy to turnaround its performance. The strategy focused on improving management capacity, enhancing the revenue and cost models, installing information systems and processes, managing risk, managing capital and improving the brand.

In the first area, management had been improved, an experienced and well-qualified Board appointed and a clear human resources (HR) strategy defined. Land Bank had already appointed senior managers, who understood the diverse and complex mandates of Land Bank, had good performance records, and had the necessary intellect and attitude to perform and lead their teams, and transformation throughout the Bank was being clearly addressed.

Land Bank had appointed consultants to assist in developing new cost and revenue models. Previous problems had arisen through losses in the retail operations, poor development performance, failure to meet the standards of competitors, decline of income, and poor organisational strategy. It was decided that Land Bank should retain its corporate banking business under all scenarios but build an agri-focused investment banking business. It should retain its retail presence, but set up joint ventures with co-operatives who had a large number of distribution points, to improve access. The non-performing loans department should be centralised. Over a period of 24 months Land Bank would aim to increase revenue through new loans and new products, by pricing loans better and adjusting for risk, and by building its brand. It aimed to achieve a ratio of 5% on non-performing loans.

Systems had been reviewed and Land Bank was currently implementing a new software system, which would be launched within the next six months. A new general manager had been hired to deal with information technology (IT) issues. The objectives and progress made to date were summarised.

Risk management was previously a weak area. The Board had now approved a new framework of enterprise-wide risk management. Six Risk Board committees had been established, and a chief Risk Officer appointed. Land Bank was now investigating the quality of its assets, such as loans to customers, and all credit policies and procedures were being updated. Part of Land Bank’s problems related to the large number of loans written off and Land Bank had run with a default of 15% as opposed to a commercial bank which averaged a 2% default. Land Bank had worked closely with the external auditors in preparing its new model and once again had hired skilled and experienced personnel in that area.

Branding and image improvement had also been identified as an area requiring work, and would be addressed in various parts of the turnaround strategy.

Mr George Oricho (General Manager, Operations, Land Bank) reported that Land Bank had also identified development target markets, including micro finance, small-scale farming and new commercial opportunities. It would try to establish relevant products in all sectors. It had established an Equity Fund in support of AgriBEE. It would continue to support and collaborate with the various programmes of the National Department of Agriculture, including the MAFISA project, which was still being piloted. Land Bank hoped to develop its own infrastructure to roll out new models throughout the country. It would build capacity through Chairs of Agriculture and bursaries and participate in opportunities, including the franchise model and AgriBEE contract opportunities. It would ensure BEE participation, particularly through franchising models, and a successful project had already been implemented in KwaZulu Natal, transporting sugar cane.

Mr Zolile Ncame (CFO: Land Bank) presented budget figures. He reminded Members of the forecast previously presented, when a loss of R2.6 million had been projected. The current figure was considerably less, but he explained that this related to delays in expenses being incurred, particularly in appointments. Impairments had risen from the previously budgeted figure (although he explained that this was calculated in a way no longer in use) and this rise was due to a decline in farming income. Mr Mukoki added that impairments related to bad debt. In 2002 Land Bank had calculated a figure, but the auditors were unable to verify it owing to inadequacy of the data. External auditors reported in 2004 that they estimated the figure, to be R600 million. This figure did not reflect debtors currently in default but included those expected to fall into default. Land Bank had subsequently adopted International Accounting Statement principles that would in future reflect only the amounts actually in default. The main focus of the turnaround system would be to ensure that the impairments did not reach such a high figure, and Land Bank was attempting to ensure that they amounted to no more than 5% of the total loans.

Mr Ncame stated that Land Bank had previously reported that it was expecting to recover bad debts of R290 million. A large percentage of that had proved unrecoverable and would influence the non-operating income in future. Mr Ncame presented a summarised income statement showing a budgeted net loss of R21 million. The operating profit position had improved, and there had been a large reduction in the previous year’s losses. The budget made allowance for retail growth of 7.6%, for a wholesale budget growth of 10.8%, excluding a new property division which should earn a further R1 billion, and the total portfolio was expected to grow by 15.7% to R19.3 billion.

Mr Mukoki stressed that the turnaround strategy was based squarely on figures. In summary, this strategy addressed:
-The amount that Land Bank would earn on each loan, with a view to improving recovery to around 95% of all loans issued
-The amount that Land Bank would pay for money loaned to it. Less than ten percent of Land Bank’s funds belonged to shareholders, which was usual in financial institutions, but Land Bank was now looking to self-fund, and was examining loans made to it very carefully
-The amount of "non-interest" revenue. Commercial banks were on about a 50/50 ratio but one of Land Bank’s weaknesses had arisen from the nature of its business, which had less than 12% in non-interest revenue. Land Bank was hoping to increase this to around 40%.
-Overall costs in relation to the income produced, which related closely to the default rate, which Land Bank aimed to reduce from its current levels of 55% to around 40%. Land Bank was taking steps to ensure that the value of its security did not deteriorate through more proactive management of possible defaulters.

Discussion
Mr V Ngema (NADECO) queried whether Land Bank’s customers were using Land Bank as their bank of first preference and believed that this aspect should be investigated along with building the brand, and that a more aggressive strategy should be adopted in attracting new business.

Mr Mukoki concurred that customers were often using Land Bank as a second option, but that the branding would address that issue.

Mr A Nel (DA) questioned whether Land Bank should have more than 10% capitalised, and asked how this figure compared with other development facilities. He asked for further clarity on the joint ventures with co-operatives, in particular whether Land Bank capped the additional interest charged to consumers. Finally he reported on a problem in his area, where Land Bank had apparently taken over a year to approve funding for a venture where there was an experienced and able purchaser, and a good risk since the value of the farm exceeded the loan applied for. Mr Mukoki replied, on the capitalisation issue, that other development facilities had around 20% and Land Bank were aiming to raise to that figure. In relation to co-operatives, he pointed out that co-operatives were currently the Bank’s largest customers, and ideally Land Bank’s exposure should be reduced, or the rates increased. Land Bank was currently limited to lending only 25% of its funds to one venture. Commercial banks were able to increase this, but had strict "recordal" rules. The Land Bank Act did not restrict the Bank to agriculture, and the Bank could therefore address this issue through diversifying its porfolio. Although the co-operatives would lend on, they would do so to a number of different customers, and there was little danger of a total default. The Bank also took cessions as security. Mr Mukoki undertook to investigate the case raised by Mr Nel, and agreed that this turnaround time was unacceptable – this was one of the issues to be addressed by the agency who would be developing the brand.

Ms Ngaleka and Mr Abram commented that the documents from Land Bank had reached her only that morning and it was impossible for her to address the issues properly without prior knowledge.

Mr Mukoki apologised and assured the Committee that every effort would be made to ensure that all parties did receive documentation in advance.

Ms E Ngaleka (ANC) commented that the loan book had been raised for a number of years. She queried whether any date had been fixed for its finalisation. She commented that the Land Bank was apparently writing off 50% of loans, as opposed to approximately 30% by other banks, and queried what Land Bank was doing to minimise the risk. She asked whether Land Bank was fulfilling its mandate, specifically in relation to providing assistance to those most needing it.

Mr Mukoki replied that the fixing of the R600 million figure was the first stage in finalising the loan book; there was little doubt that this was the final figure. Mr Mukoki clarified that the 50% figure was in fact half of the 25% bad debt ratio. Other banks wrote off about 30% of their total debt. New measures were in place to try to reverse deterioration by evaluating production and assist with management.

Mr S Abram (ANC) believed that Land Bank was still not performing in the way it should. Although he noted the new appointments, he was worried that this would create a top-heavy structure, and he queried what percentage of operational expenditure related to salaries. He queried what interventions Land Bank planned in order to increase productivity in the agricultural sector. He asked for an explanation of what the new property division would do. He asked for details of the exposure of Land Bank to BEE projects, and an indication of how successfully they were operating.

Mr Mukoki replied that Land Bank was not fulfilling its true mandate as it had not yet reached its objectives. Until Land Bank’s commercial business was running competitively and properly, it would not generate sufficient funding to apply to development. Treasury had agreed that for a period Land Bank would be exempt from paying tax and dividends on any profit, so that the profit could be applied to drive the business properly. He conceded that it would be a fair question to ask why, with that advantage, Land Bank was not showing profits, but stated that the turnaround aimed to fix the core commercial business, to generate profits to drive the development, and indeed to convince Treasury that Land Bank was viable and worthy of support. Land Bank therefore aimed, within a period of eighteen months, to drive development and had already identified other low risk business, such as BEE procurement. Mr Mukoki believed that it was important to put the loans in perspective. Loans that had been repaid not only returned value to Land Bank, but had served to created businesses which were now providing revenue, cash flow to the community, and permanent employment.

Mr Oricho reported that about 50% of the Land Bank operational expenses were salaries, which was comparable to other banking institutions. He further explained that the Bank’s current position arose in part through its high exposure to agricultural risk. The new property division aimed to diversify the risk by investing in land with a high level of potential for re-zoning. In future more of the financing would be equity based, with quicker returns.

In the past many of the BEE transactions had merely taken the form of loans, because of lack of capacity. He detailed and explained some of the current projects, stating that they attempted to address a combination of a land transaction and related business, thus reducing the risk. Land Bank aimed to participate in growth, rather than merely in funding, and in profit.

Mr D Dlali (ANC) asked how soon the turnaround would improve the finances of Land Bank, and how soon the recommendations of the consultants would be able to be implemented. He asked what steps Land Bank had taken to ensure delivery was made in return for the tax and dividend exemptions. He queried whether Land Bank was encouraging commercial farming. He asked what steps had been put in place to ensure that no more amounts were being written off.

Mr Mukoki replied that indeed the Land Bank had been trying to improve its position for the past ten years, but that not enough attention was given to timelines. The Board of Land Bank had now set a period of 36 months for significant improvement, with a timeframe of 18 months for development of the various sectors of the plan. Land Bank had in the past tried to address too many issues at the same time, instead of concentrating on those with the greatest impact. Improvements had already been seen, although the loan book quality was still poor. This had arisen in part through the unreliability of past data. Land Bank now had new targets in respect of any loans made.

The Chairperson asked for further clarity on the bursaries; in particular how many students were benefiting and an indication of the numbers per province.

Mr Moeketsi (General Manager: Marketing, Land Bank) reported that he would have to send through the detailed figures, but there were currently 120 beneficiaries of bursaries targeting previously disadvantaged learning institutions.

Ms B Ntuli (ANC) asked whether Land Bank was also giving sufficient support to farmers in the rural areas, both in terms of direct assistance and addressing unemployment. She asked for further clarity on non-performance loans.

Mr Mukoki replied that the rural economy was clearly mentioned in the Land Bank Act and although the focus at present was on commercial operations, clearly rural communities would be addressed as part of the development phase.

Mr V Ngema asked for further clarity on the position of co-operatives, most of which were based in affluent communities, and asked whether Land Bank were addressing skills shortages within the co-operatives to strengthen the alliances. He also asked for clarity on the Maphisa project and whether the intended beneficiaries had direct access to Land Bank.

Mr Oricho replied that Land Bank had only 28 branches and therefore needed to use co-operatives to increase its "footprint" or visibility. Delivery was specifically addressed in the corporate plan. Maphisa would be launched and driven in conjunction with a number of other institutions, including the Post Office. Land Bank needed to work with the co-operatives but did work closely with them on the lending and on their performance.

Mr Mukoki summarised that Land Bank had numerous plans for development and engagement but could not presently implement them because of a lack of finance. Treasury had made it clear that no further funding would be given until Land Bank had improved its commercial business. Although Land Bank clearly had to address the inequities of the past, it would continue to strive for development.

Presentation Khula Enterprise Finance Ltd
Mr S Luthuli (General Manager) reported that the Committee had previously queried Khula’s inequitable provincial spread of funds, portfolio mix, and capacity building. He tabled a graph showing the developments of these points over the past three years. 75% of Khula’s portfolio had previously been concentrated in the Western Cape and KwaZulu Natal. This would reduce to 50% by March 2007. During the past financial year the bulk of investment had been placed in the Northern Cape and Mpumulanga, and the Eastern Cape and Free State had been targeted for March 2007, thus balancing the previous inequitable spread.

Mr Luthuli reported that Khula dealt with two types of transactions; the exchange and transfer of shares and the exchange of land. Land based transactions accounted for one third of the funds and there had been a conscious effort to balance the portfolio, so that these transactions would increase to 45%, with 55% in equity.

Khula was limited in its disbursable funds to the sum of R37 million, and was therefore hampered in its attempts to achieve a better spread. It was currently in discussion with Mafisa to source part of their funds to cater for production inputs. Khula had submitted a proposal for Kuwait funding and had approached CASP. By 2007 it aimed to grow its loan book to R190 million. Thus far, Khula’s disbursements had benefited 2 500 participants and created 3 500 permanent jobs (in addition to the seasonal jobs), each of which averaged around R55 000. It would be concluding R8 million transactions before the financial year end, with other projects set for conclusion by May.

Khula had suffered erosions in funding in the past due to pricing facilities, but had now managed to arrest this trend. It had investigated linking interest rates to banks to profiles of the loans themselves. It had been agreed that banks would cap their interest rates to their end user at 3% above the cost from Khula.

On the area of skills training, no budget had been allocated for capacity building. However, Khula had engaged funders to allocate R300 thousand for this year, had targeted ten projects for skills training, and would carry out the training with Khula Mentorship Scheme and the Agriseta.

Khula aimed to increase the loan book and portfolio balance, reduce the operational income and reinvest profit in programmes that would produce disbursable funds.

Discussion
The Chairperson queried why there seemed to be discrepancies in certain figures presented for the current year.

Mr Luthuli reported that figures were reflected as at the end of December but that some of the transactions had not been captured because no disbursements had yet been made, despite the fact that they had been approved. He also reported that the nature of the transactions was changing. Fewer people would be registered as owners in land-based transactions as opposed to trusts.

Mr S Abram (ANC) asked how Khula determined where the funds would be placed and asked for details on some of the enterprises. He asked whether Khula made funding available to the bank, and the bank would then pass on to the beneficiaries. He asked whether any projects had failed, and, if so, why. He also asked about the cost implications of monitoring. He asked for clarity on the capping of the interest rates and whether the additional 3% would bring the rates above the prime lending rate. He queried whether Khula wished to access additional funding from CASP in order to grow its funding or target Mafisa funds to cater for product inputs.

Mr Luthuli responded that 38 projects had been funded, and two had failed. Both instances involved farming of table grapes. One venture had fallen into currency speculation and had failed when the rand fluctuated. The other was under forensic investigation as there appeared to be irregularities. Mr Luthuli clarified that the average lending rate was around 4.6% so that the banks were not permitted to lend at more than 8%.

Ms Ntuli asked whether clients had direct access to funding. She queried the relationship of Khula to Land Bank, and the continuing engagement with CASP in terms of capacity building and how the CASP fund was managed.

Mr Luthuli reported that no funds had been set aside for capacity building although Khula regarded this as a critical element. Khula had approached Mafisa as they wished to ensure that their clients, who had already accessed funding from Khula for land transfers, would then be able to approach Mafisa for development of that land. He clarified that Khula was not in competition with Land Bank, as its role was to encourage private sector institutions into the agricultural sector, and thereby to make additional resources available, particularly to target black farmers.

Mr Dlali asked for an explanation why the Western Cape allocation was still so high and what criteria were used.

Mr Ngema asked why Khula had not requested extra funding, as the purpose of the programme was surely to boost all provinces.

Mr Luthuli responded that Khula had a finite amount only to disburse and therefore had to make a decision that provinces who had benefited in past years should be limited, but not excluded. Mr Lithuli took Mr Ngema’s point but reported that Khula had already asked National Treasury for additional funding. Many of the funds were only available for targeted purposes. Only the Kuwait funds matched Khula’s objectives. Khula’s programme was jointly funded by the European Union and the Department of Land Affairs (as junior partner) and the European Union restricted Khula from seeking funding elsewhere, whilst advising that no additional funding would be provided at present as the EU had identified other priorities.

The meeting broke for lunch.

Presentation by the Commission on Restitution of Land Rights (CRLR)
Mr T Gwanya, the Chief Commissioner, explained that the function of the Commission on Restitution of Land Rights was to restore the rights of those individuals who were victims of land dispossession. Mr Gwanya stated that 89% of claims had been settled to date. He added that in Germany 80% of claims had been settled, while in Australia and New Zealand the figure is around 6%. In the two years remaining, the Commission has 8107 claims to process. Mr Gwanya stated that the Commission’s plan to deal with these claims has been informed by President Thabo Mbeki’s State of Nation Address earlier this year, and that the Commission plans to fast track these claims.

Mr Gwanya said that Trevor Manuel, the Minister of Finance, has increased the Commission’s budget by 16%, bringing this year’s budget to R3, 1 billion. This showed government’s commitment to the process of land restitution. Up to date 1 million hectares of land have been restored. The Commission aims to ensure that the remaining claims are settled in such ways as to ensure sustainable development. Mr Gwanya commented that the Commission aims to improve service delivery, and to enhance interaction with the community through good communication with claimants, and responsiveness to enquiries. Mr Gwanya also stated the Commission’s intention to develop province-specific communication strategies. The Commission is working with the Department of Land Affairs for policy and resource allocation. Mr Gwanya stated that the Commission intends to fast track land claims through decentralisation of the process from a national to a provincial level.

Mr Gwanya acknowledged that a challenge to land restitution is that different valuations of land are given. This can lead to disputes with owners around prices, and these protracted discussions delay the process.

Mr Gwanya also highlighted that individuals who had been given land should not sell that land as the aim is to restore land for sustainable development.

Land that was lost before 1913 is not included in the Land Restitution Act and as such these claimants need to deal with the Department of Land Affairs.

Discussion
Mr Abram (ANC) commended the Commission on their well-presented outline. However, he put three questions to the Commission. Firstly, he raised the example of a farm in the Eastern Cape, and stated that, as far as he was aware, the claim had been verified for two years yet no transfer had taken place. He questioned whether claims were always this slow. He also queried a comment by the Chief Commissioner regarding all urban claims being finalised by the 31st of March. Mr Abram questioned whether this meant all claims would be verified or whether compensation would come through by this date. Finally, Mr Abram asked Mr Gwanya to explain the bottleneck that is occurring in rural claims. He commented that if this bottleneck is to be resolved expropriation might be necessary.

Ms L Faleni (Land Claims Commission, Eastern Cape) responded to Mr Abram’s first question. She noted that the delay in this claim was caused by differing valuations of the land in question. Verification was also difficult as the family of claimants had argued, and a lawyer had been brought in. All negotiations thus had to take place through this lawyer, and thus took longer. Mr Gwanya added that differing valuations was a problem.

Mr Gwanya clarified the meaning of finalised claims. He stated that where the Commission referred to settled claims, this meant the deed had been signed. By finalised claims, the Commission referred to the file being closed as the land and deeds had been transferred.

Mr Gwanya responded to Mr Abram’s question about rural claims that one of the challenges facing these claims was that farms were being valued in terms of their potential use rather than their actual use. For example, a farm that is currently used for livestock would be valued by its current owners as a game farm. This changes the value from R800 per hectare to R3000 per hectare. He stated that there are 425 farms facing these sorts of challenges, and this causes delays.

Mr Radebe (ANC) commented that it was surprising that one of the challenges facing the Commission was bureaucratic processes within the Department, and asked Mr Gwanya to unpack this. He also queried what the problem was around the issue of internal procurement processes.

Mr Gwanya stated that the Commission is paying attention to bureaucratic problems, and is in talks with the Department of Land Affairs to decentralise the process so that individual Provinces are able to process claims.

Mr Nel (DA) commented that good intentions do not always happen on the ground, and referred back to Mr Abram’s earlier comment. Mr Nel stated that he wished to address the question of the review of the willing buyer-willing seller strategy. He commented that originally it was said that this strategy would be reviewed, and within two days Mr Gwanya had publicly commented that this strategy would no longer be applied. Mr Nel wished to know if Mr Gwanye spoke for the Minister of Land Affairs when he said this. Mr Nel wished it to be known that the good will of the public with regard to land restitution would be lost if statements such as this were made. Mr Nel also queried the R800 million of the Commission’s budget that had not been spent last year.

Mr Gwanya responded to Mr Nel’s and to Mr Abram’s queries on expropriation of land versus the willing buyer-willing seller strategy. He stated that he reports to the Minister and to the President. His statement had been reported to the Minister. In some cases where sellers were not willing, this strategy was not sufficient, and legislation was in place to force sellers to enter negotiations. He added that the willing buyer-willing seller model was based upon a market where there were many buyers and many sellers. In the case of land restitution, there can only be one seller as only one parcel of land is being claimed, and the only buyer is the Government. He commented that he felt very strongly that restitution was a forced sale, and Section 42(e) of the Restitution Act provides for this. Given that the President had indicated that all claims must be finalised by 2008, the model being used will have to change.

In terms of Mr Nel’s query with regard to unspent funds, Mr Gwanya responded that this is a reflection of delays in the process rather than unspent money. In terms of claims that are in the pipeline, the Commission had almost exceeded its R2, 7 billion budget.

Mr Dlali (ANC) queried how far the Commission had progressed with rural claims, as the forecasts mentioned dealt with urban claims. He also noted that, although in comparison to European countries, South Africa is doing well with regard to restitution, the land is still in the hands of the minority. He wished it to be emphasised that claimants should not be persuaded to accept financial compensation. If that was the end result, then the work done by the Commission was worthless as the aim is to return land.

A member of the Commission responded to Mr Dlali’s first query by saying that in order to compare the rural and the urban situation it is necessary to contextualise. He noted that out of all the claims that had been unsuccessful, 80% were urban, and for this reason it appears that urban claims had been finalised more quickly than rural claims. In response to Mr Dlali’s comment on financial compensation, he emphasised that it is not the position of the Commission to encourage claimants to accept financial compensation as it is not sustainable. He added, however, that Section 2 of the Restitution Act provides for people asking for equitable redress, and the economic situation in South Africa means claimants may make this choice. As the majority of claims lodged are urban, claimants may have been provided with housing by Government and so are more interested in financial compensation than in land.

Mr Gwanya added that claims made by Non-Governmental Organisations (NGOs) that government commissioners were urging people to accept financial compensation were not true.

A member of the ANC noted that the Commission must review the entire process of land restitution when considering the issue of willing buyer-willing seller, and must identify problems everywhere. He emphasised that it is dangerous to pick up on one area as problematic and ignore the rest. He also noted that Mr Gwanya’s presentation referred to the Bambatha uprising, and commented that it is a contradiction to celebrate this as the people who were driven off their land at this time are not eligible for compensation as it occurred before the 1913 cut-off date.

Mr Bici (ANC) questioned the Commission on their position on those claimants who did not make the deadline for lodging a claim. Mr Bici acknowledged that this was not part of the day’s presentation, and so was aware the Chief Commissioner may not be able to comment on it. Mr Bici also questioned the figure of 30% of agricultural land to be redistributed by 2014. Mr Bici wondered why in areas of restitution precise figures were used, but in this case a percentage was given. He wished to know how much of the initial amount of land to be returned had in fact been.

A member of the Commission noted that this issue arose as a result of restitution versus redistribution. The figure to which Mr Bici referred was to do with the land redistribution programme, but the Commission is concerned with restitution.

Mr Gwanya responded to Mr Bici’s question with regard to claimants missing the deadline that those claims will not be looked at by the Commission.

A Member of the Committee noted that the issue of bureaucratic delays was one that should be avoided. She referred to an incident where the President asked the Department of Home Affairs to provide an Identity Document (ID) for a member of the public who was unable to claim a pension as she did not have an ID. The document arrived within a week. The Member then commented that if people in the bureaucracy want to fast track things it is possible, and so bureaucratic delays should not occur. The Member also wished to question the issue of support provided to claimants. She emphasised that you cannot simply place people on land, but that there must be practical policies in place to provide support.

The Deputy Minister of Land Affairs responded that it is imperative that people must have support when receiving land in order to be able to make a success of it, and that various policies are in place.

Ms B Ntuli (ANC) queried the issue of foreigners buying land.

The Deputy Minister replied that in terms of foreign involvement where land restitution is at stake, there should be measures in place.

The Chair then asked the Deputy Minister to conclude the discussion around land restitution.

The Deputy Minister commented that the delays in the process were not acceptable. He stated that six months should be the maximum amount of time, and that a stricter line needs to be taken to ensure this.

The Deputy Minister then outlined the notion of ‘opportunity price’. By this he meant that market pricing could be arbitrary as it is based on subjective factors in terms of what has been done with the land. This is the opportunity price, and for Government to have to pay this price was not acceptable. He also noted that the variations in valuations given on land could not continue.

The Deputy Minister commented that the lagging of payment to beneficiaries reflects a complicated process, and is part of the problem with regard to the lagging of the Commission’s expenditure. This problem must be addressed.

The Deputy Minister also commented that problems on an administrative level such as files going missing are unacceptable.

The Deputy Minister concluded with the observation that Commissioners and the Chief Commissioner are very dedicated.

Ingonyama Trust Board Presentation
Mr S Ngwenya (Acting Chairperson, Ingonyama Trust Board) gave a brief background to the Ingonyama Trust. Mr Ngwenya indicated that he would keep his presentation to a minimum as time was short, and as all details are available in the Ingonyama Trust Board Strategic Review 2006/2007 document. The Trust was formed in 1994 as a result of the KwaZulu Ingonyama Trust Act of 1994, which was subsequently amended to cater for the needs of people occupying communal land.

Mr Ngwenya stated that the purpose of the Trust Board is for the Board as landowner to administer land for the benefit of the community. The people occupying the land fall under the administration of the traditional authorities, and the Board does not get involved in the allocation of land. Instead, the Board generates income through entering into leases and mining leases for communal land.

Among other objectives, the Board is concerned with generating an asset register. The Board administers approximately 3 million hectares of land, and there is also land that is in "transit" between the Department of Land Affairs and the Ingonyama Trust.

Mr Ngwenya explained that when the former KwaZulu homeland ceased to exist, the land was given over to the administration of Ingonyama. This land included areas where townships had been built, but Ingonyama does not administer the townships and is in the process of passing townships on to the local authorities. This had caused some hostility as the townships had to be upgraded.

In addition, Ingonyama needed to cede those assets used for state domestic purposes such as schools and hospitals to the relevant state department. The finalisation of this process has been delayed as title deeds are difficult to find, and need to first be transferred to the former KwaZulu homeland, and then to Ingonyama.

Mr Ngwenya went on to address the issue of the privatisation of state-owned forests. Mr Ngwenya explained that the situation is anomalous in that the land is owned by the Trust, while the actual forests are owned by the State, and the community is claiming restitution. For this reason it can take three years or longer to privatise state forests.

Mr Ngwenya explained that in terms of the implementation of the Communal Land Rights Act (CLARA), the land owned by Ingonyama is better prepared as it has been surveyed.

He emphasised that people who live on communal land are as entitled to state subsidised housing as are people in urban areas. The Ingonyama Trust is in the process of trying to facilitate this through the allocation and provision of land for housing for individuals who do not qualify for state grants. Mr Ngwenya also pointed out that people living on communal land are unable to access loans as the land is not considered secure tenure. A recent judgement issued in the Mthatha High Court may change this.

Mr Ngwenya stated that the granting of leases by the Ingonyama Trust Board is an ongoing process. These leases include mineral leases, and leases of land to other businesses. The leases are administered by the Trust Board, and the royalties paid by companies go to the community, minus ten per cent which goes to the Ingonyama Trust to cover administrative costs.

Mr Ngwenya indicated that the budget was available in the Strategic Review document.

The Chairperson requested that Mr Ngwenya give a breakdown of the budget.

Mr Ngwenya indicated that income from leases and royalties accounts for 86.2% of the Ingwenya Trust Board Operating and Capital Budget for 2006/2007. This amounts to
R 14, 1 million.

The remaining 13.8% of the budget comes from Department of Land Affairs funding. This amounts to R2, 2 million. Mr Nwgwenya indicated that this part of the budget is used for operational expenses.

The Chairperson then asked the Deputy Minister of Land Affairs to make inputs.

The Deputy Minister stated that in the Ministry the general attitude is that the Ingonyama Trust Board reflects a prudent approach. He outlined the myth of Prudentia, who looked both forwards and backwards at the same time, and indicated that the Ingonyama Trust Board fulfils the same function. He stated that the ultimate aim was for the Trust Board to evolve seamlessly into a Communal Land Board, and as such is a pilot project. The Minister added that he wishes the Board well.

Discussion
An ANC Member asked whether the mining royalties are paid to the Board or to community leaders or traditional authorities. He asked that if royalties are paid to the Board, then could Mr Ngwenya explain how they are distributed.

Mr Ngwenya replied that royalties are paid to the Board. He stated that in the past communities did not receive any money from royalties that were paid directly to the KwaZulu government. In 2004, Ingonyama distributed R25 million to the community. Mr Ngwenya explained that royalties are paid to the Board as the traditional community does not have the capacity or knowledge for negotiation with big business, and may be taken advantage of.

In terms of distribution of royalties, Mr Ngwenya explained that the Trust Board engages surveyors, and uses a percentage to distribute income back to the communities. Traditional authorities are required to come up with business plans before the money is released in order to ensure that funding goes towards sustainable projects.

Mr Radebe (ANC) queried whether studies have been done to show whether privatisation of state-owned forests is a useful exercise.

Mr Ngwenya replied that the notion of privatisation of forests is complex, and is part of a learning curve. Studies have been done in New Zealand and Australia. The Board have dispensed resources to engage experts on the subject. Local people have been given preference in terms of employment. The Trust has also facilitated workshops in order that local people might understand the process.

An ANC Member then commended the presenters for the articulate way in which the Board made their presentation, and said it indicated they were well versed in their subject. He questioned whether, as land was being transferred in some areas to traditional authorities, the ultimate aim was to transfer all land over time.

Mr Ngwenya stated that it was hard to judge, as Ingonyama was a unique project. He estimated that it would be likely that an entity like the Trust Board would be in place for at least the next thirty years.

The meeting was adjourned.












 

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