Hearings on the 4th Quarter Conditional Grant Report: Agriculture

Meeting report

FINANCE SELECT COMMITTEE
4 MAY 2006
HEARINGS ON THE 4^TH QUARTER CONDITIONAL GRANT REPORT: AGRICULTURE

Chairperson: Mr T Ralane (ANC) (Free State)

Documents handed out:
National Treasury Report on the 4th Quarter Conditional Grants
Northern Cape Report on the 4th Quarter Conditional Grants
North West Report on the 4th Quarter Conditional Grants
Western Cape Report on the 4th Quarter Conditional Grants
Free State Report on the 4th Quarter Conditional Grants
Gauteng Report on the 4th Quarter Conditional Grants
Limpopo Report on the 4th Quarter Conditional Grants
Eastern Cape on the 4th Quarter Conditional Grants

SUMMARY
National Treasury said that in general, spending on these grants had improved since last year. However, the question that remained was: what was this money actually buying, and were newly settled farmers receiving the support they needed? For the Comprehensive Agricultural Support Programme (CASP), R308 million was available, with R265 million being spent.

The Northern Cape said that they had spent R81 million of their equitable share of R83 million. Their earmarked funds were R13 million and they had spent R10 million of that. However, they had only spent R38 million of their conditional grant allocation of R58 million. This represented their biggest problem area. The quality of project leaders had been a problem in the past. This problem was being addressed. Also, the implementation of projects according to business plans had been a serious problem. Intervention was needed and this was being done.

North West said that in the past the Provincial Department of Agriculture used a public entity to deal with project funding and management. This created problems for the monitoring and evaluation of projects. This unit was disbanded and all of its work transferred to the Department itself. The Department also did not have the mechanisms in place that allowed for buying in bulk. It was also difficult to change plans mid-stream. They were simply not flexible.

The Western Cape said that for CASP they had received R19.26 million with R19.38 million being spent. An amount of R121 000 had to be transferred from their equitable share to make up the short-fall. He said that this showed that the Department did have the capacity to spend. Some of the challenges that they still faced were that conditional grants did not allow for the appointment of technical or additional staff. The budget was simply not big enough to appoint such staff. Secondly, there was a disparity between the needs of the clients and the conditions of the grant.

The Free State said that there were large spikes in spending in the third and fourth quarters due to a problem in the work-ethic in the organisation and the fact that some of their implementation systems were not up to standard. The province as a whole also suffered from a lack of working capital.

Gauteng said that some of the issues they had to deal with were mobilising civil society and aligning their local and provincial processes. There were delays caused by the non-signing of memorandums of agreement. There main problem was service providers who wanted payment before they delivered. Gauteng also lacked sufficient numbers of service providers for agricultural activities.

Limpopo said that the Department lacked the capacity to plan effectively. In the past they also lacked management capacity. They had implemented a system where they could trace each project to its specific locality. This improved monitoring and accountability.

MINUTES
National Treasury Presentation
Dr. M Blecher from the Treasury said that in general, spending on these grants had improved since last year. However, the question that remained was: what was this money actually buying, and were newly settled farmers receiving the support they needed? The overall spending amount was R4.8 billion or 95% of the adjusted budget. Kwa-Zulu Natal, Gauteng and Free State spent the most, while the North West and the Northern Cape spent the least. Capital spend was also positive at 94% of R614 million.

For the Comprehensive Agricultural Support Programme (CASP), R308 million was available, with R265 million being spent. The weakest province was the North West which under-spent by R29 million. He said that R112 million of the once-off Disaster Management Fund grant of R120 million had been spent, with the North West not spending anything all here.

Northern Cape Presentation
MEC Joemat said that of they had spent R81 million of their equitable share of R83 million. Their earmarked funds were R13 million and they had spent R10 million of that. However, they had only spent R38 million of their conditional grant allocation of R58 million. This represented their biggest problem area. They had forecasted under-expenditure as early as in the third quarter and had sought intervention from the Treasury. On capital expenditure, they had overspent because the Department constructed a new office block.

The province was allocated R22 million as its infrastructural grant and had spent R14 million. For monitoring and evaluation, a Project Co-ordination Committee was established, where recommendations for approval were made and projects were co-ordinated quarterly. The quality of project leaders had been a problem in the past. This problem was being addressed. Also, the implementation of projects according to business plans had been a serious problem. Intervention was needed and this was being done.

The province had over-estimated its capacity to deliver and implement projects. Because of the high demand, they had increased the number of projects they were going to try to implement. This over-stretched the Department, so this financial year they were cutting down on the number of projects they were to implement. The sustainability of the projects was also a problem and affected how money was spent.

Conflict management was an area that the Department was investing in to ensure that all conflicts were resolved before any money was spent. Some of the remaining challenges were the retention of skills and they had too few field officials to provide after-care and implement new projects. In the past they only started spending in the second quarter, but this year they could not afford to fall behind as they could not catch up. They also suffered from the late delivery of materials and the delivery of materials that were not up to South African Bureau of Standards levels. To improve things, they had realigned their authority structures, had implemented a scarce skills analysis and the province as a whole had a strategy to attract these skills, and they had employed new field officials.

North West Presentation
MEC Mayisela began by confirming the expenditure figures that the Treasury had presented. He said that in the past the Provincial Department of Agriculture used a public entity to deal with project funding and management. This created problems for the monitoring and evaluation of projects. This unit was disbanded and all of its work transferred to the Department itself. The Department also did not have the mechanisms in place that allowed for buying in bulk. It was also difficult to change plans mid-stream. They were simply not flexible. This meant that money was sometimes being spent on projects that were not viable. They also had problems with their supply chain management system and the training that went along with this.

To rectify these problems, specifications for bulk procurement had been approved to improve spending. Also, specifications to outsource specialist skills were approved. Projects that were affected by unforeseen circumstances would now be reviewed with money being shifted to those projects that were working. The supply chain management system was being reconstituted and streamlined. Two meetings were held with their National Department of Education about roll-overs.

Western Cape Presentation
MEC Dowry began by saying that for CASP they had received R19.26 million with R19.38 million being spent. An amount of R121 000 had to be transferred from their equitable share to make up the short-fall. He said that this showed that the Department did have the capacity to spend. For the Land Care Grant, R2.5 million was received along with a roll-over from the previous year. The whole amount of 3.17 million was spent on capital.

The Drought Relief Grant was allocated to support livestock farmers through serious droughts. A drought affected the province over an extended period and a number of districts were still affected. Due to the technical prescripts and the ceiling on the amount of support for 30 large-scale livestock units, spending was limited. An additional amount of R18 million was received in December 2005 for ongoing support. Of this amount, R7.8 million was spent between December 2005 and March 2006. The total amount spent was R16.34 million, and remaining amount of R10 million was going to be rolled over to this financial year after receiving permission from the Treasury.

About 56% of CASP had been spent in the fourth quarter. The reason for this was the restructuring of the farmer support and Development Programme where the bulk of the funds could only be spent in the second half of the year. This situation could not be repeated as it caused too many problems. For Land Care, 34% was spent in the fourth quarter. The spending was relatively even with a slight spike in the last quarter. About 33% of the Drought Relief Grant was spent in the fourth quarter with a relatively even spending pattern.

Some of the challenges that they still faced were that conditional grants did not allow for the appointment of technical or additional staff. The budget was simply not big enough to appoint such staff. Secondly, there was a disparity between the needs of the clients and the conditions of the grant. Sometimes farmers needed help, but the fact that the CASP could only be used for specific things, meant that even if the Department had money, they were precluded from helping by the conditions attached to the money. More discretionary powers were needed. There were also excessive reporting arrangements regardless of the amount in question. Agriculture in general also suffered from a lack of adequately skilled people.

Free State Presentation
MEC Mokitlane said that they were given R36 million for the CASP, R3.5 for Land Care, R33 million for the Drought Relief and R24 million for their Provincial Infrastructure Grant. There were large spikes in spending in the third and fourth quarters due to a problem in the work-ethic in the organisation and the fact that some of their implementation systems were not up to standard. The province as a whole also suffered from a lack of working capital. Financial management and record-keeping on the farms was a problem that they were still dealing with. They had rectified some of their financial procedures and delegations and had also worked on their tendering and procurement measures.

The Free State was mainly an agricultural province. This meant that the amount of funding they received and the grants they were allocated had to be directed mainly to this industry. They also lacked many necessary skills so their capacity was reduced.

Gauteng Presentation
Dr. S Cornelius, the Head of Department, said that R2 million was allocated for Land Care and they managed to spend 100% of it. Some of the issues they had to deal with were mobilising civil society and aligning their local and provincial processes. There were delays caused by the non-signing of memorandums of agreement.

In 2004/05 they had capacity constraints since the Agricultural Department was only a small unit Gauteng. Since then they had increased their capacity by 25%. There main problem was service providers who wanted payment before they delivered. Gauteng also lacked sufficient numbers of service providers for agricultural activities. To remedy some of these problems, the Department had bought its own trucks to help the delivery of materials. They were also looking outside of the province for service providers that had the expertise to assist them.

Limpopo Presentation
Mr Maloa, the Head of Department, said that their roll-overs for this year were for the CASP was R10.4 million, R2.2 million for Land Care and R1.9 for Drought Relief. In the fourth, total spending was almost at 100%. However, the Department lacked the capacity to plan effectively. In the past they also lacked management capacity but they had now appointed Agricultural Managers in each of their 26 municipalities with Agricultural Economists to assist them.

He said that they had whittled down the number of projects they were tackling from over 400 to around 200. They were still too many however as they simply did not have the capacity to manage and implement them. They had implemented a system where they could trace each project to its specific locality. This improved monitoring and accountability. They made sure that their managers had performance management instruments to indicate the level of their responsibility in a specific municipality.

Discussion
Mr M Robertson (ANC) (Eastern Cape) said that it was unfortunate that after ten years of democracy delivery was still so slow. There was a lack of management ability and not necessarily a lack of capacity. These excuses were starting to get a bit worn out.

Mr B Mkhaliphi (ANC) (Mpumalanga) said that this was not the forum for the Departments to complain that they had too many projects to implement and manage. In any case, at some point they must have indicated that they had enough capacity to implement all of the plans. They were not simply foisted upon them.

Mr E Sogoni (ANC) (Gauteng) said that many of the Departments’ problems were caused by an inability to plan effectively. He asked what the Free State MEC meant when he said that they had a lack of working capital.

MEC Mokitlane replied that there was an element of administration and compliance to procedures that were related to the implementation of their plans. These had costs, but this was not catered for in the allocations they recieved.

Mr Z Kolweni (ANC) (North-West) said that the fact the North West was having meetings with its National Department about roll-overs indicated that there was going to be more under-spending there. He did not get a sense that things had entirely improved there.

The Chairperson asked why there was a need for the North West to change plans mid-stream, after business plans had been approved and the projects started. This reinforced the claim that the Departments did not have the ability to plan.

MEC Mayisela said that the North West’s allocation was R430 million. Changes had to be made to plans mid-stream due to a lack of quality assurance of the business plans themselves. They did not have enough capacity to interrogate the plans and ensure that they did what the Department wanted them to do.

The meeting was adjourned.