Department of Agriculture Annual Report 2006/07

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

16 October 2007

Chairperson: Mr R Mohlaloga (ANC)

Documents handed out:
Department of Agriculture Annual Report 2006/07 [available at]

Audio recording of meeting [Part1]&[Part 2]

The Director General presented the Department of Agriculture’s Annual Report 2006/07, giving brief descriptions of each of their priority areas. The Department explained that the reason for the under-spending of 6,3% of the funding was a late claim of funds from the Eastern Cape. But for this, the under-spending would have been 2,5% - which was within the Treasury limit of 3%. The Department of Agriculture had received an unqualified audit report but the Agricultural Debt Account was given a qualified audit report.

The Committee had several concerns: particularly with the CASP and Mafisa programmes, the departmental vacancies and the lack of any visible changes as a result of the Sector Plan. The various trusts and schemes in place were not aligned and they seemed to be working against one another and not towards each other and a suggestion of re-alignment was made.

Annual Report 2006/07 presentation
Mr Masiphula Mbongwa (Director-General: Department of Agriculture) stated that this was the first report based on four quarterly reports made by the Department to Parliament. It was the first report that listed the new programmes of the Department: Livelihoods, Economics and Business Development; Biosecurity and Disaster Management; Production and Resources Management; Sector Services and Partnerships; Administration. The improvement process that the Department was undertaking would ensure that the next annual report would include a detailed report specifically geared toward these programmes.

The Department guided their activities primarily in terms of the Strategic Plan 2006. Quarterly reviews were held to assess the Department’s service delivery. Its organisational structure had been revised and reduced from five to nine provinces and functions were realigned.

Mr Mbongwa gave a list of their achievement in the following priority areas: African Agricultural Development Programme (AADP), Agricultural Broad Based Black Economic Empower (AgriBEE), Comprehensive Agricultural Support Programme (CASP), Integrated Food Security and Nutrition Programme (IFSNP), Knowledge and Information Management Systems (KIMS), Natural Resources Management (NRM), National Regulatory Services (NRS) and Research and Development (R&D).

With regard to the Agricultural Development Programme (AADP), the Department was pleased to confirm that the Animal Protocol document had been signed with Mozambique. The Director-General found this to be especially important, as the European Union were quite rigid around animal health and control. The Department were hoping to develop similar agreements with other bordering countries.

The AgriBEE Charter had been finalised and approved by the Minister and it was currently being gazetted. CASP had been established to expand the provision of post-land settlement support. Beneficiaries of land and agrarian reform projects were targeted. Thus far R750 million had been spent, with a wide range of areas being covered. The beneficiaries receive training and technical advice in knowledge management and market related business development. A small programme associated with CASP was the Micro Agricultural Finance Institutions for South Africa (Mafisa). This programme had now spread across the country. At the end of January 2007, the pilot project saw approximately 5170 small and micro-agro enterprises assisted to the tune of R41million. Many of the targets and objectives set had been exceeded during the pilot phase of Mafisa. Due to its success, it had spread throughout the country.

The Integrated Food Security and Nutrition Programme (IFSNP) was established to promote the Millennium Development Goals (MDG) of halving poverty and food insecurity by 2015. This programme had been expanded to all nine provinces. This programme was a collaboration between the Department of Agriculture and the Food and Agriculture Organisation (FAO). Over 66 000 households received agricultural production packages, in total ten per cent of the budget was allocated to these types of projects. The Department was working towards the objective of a knowledge-directed sector in terms of Knowledge and Information Management. The Agricultural Geo-referenced Information System (AGIS) provided access to comprehensive, integrated and current agricultural information and remained their most important electronic system. The Project Information Management System for Agriculture directly engaged with other projects and provided information that was easily accessible.

Mr Mbongwa explained that the Natural Resources Management (NRM) focus was on land care that concentrated on projects that implemented area-wide planning projects instead of small projects. This assisted in addressing problems with resources and could accommodate a wider range of beneficiaries. It also opened up community capacity building as well as raising awareness. The Department had initiated the Drought Management Plan. The National Regulatory Services (NRS) was a very decisive area of activity because it affected plants and animals as well as trade. Bilateral negotiations on citrus exports with China and the United States of America had just been concluded. After their visit to China, the Department had been informed that two of five containers exported to China were faulty. It had been discovered after an investigation that smuggling of illicit goods had taken place through those containers. China was important particularly when South Africa sought to diversify its trading lines from having 60 to 80% trading lines in the European Union. The Department’s quarantine and inspection services required refinements especially concerning the import and export of goods. It was vital to strengthen this area.

To ensure the success of agricultural productivity, the Department promoted its research agenda. After a consultation process with all the major stakeholders, a draft Research and Development Strategy had been developed. There were 41 research and development projects amounting to R42 million that had been commissioned in the financial year 2006/07.

Mr Mbongwa concluded that a new organisational structure had been implemented on 1 April 2006; this change had strengthened the Department’s capacity and enhanced its performance. This change had indicated areas where improvement was required, particularly in the NRS and their Chief Officers were to be held accountable to the Portfolio Committee.

Mr Thomas Marais (Chief Financial Officer: Department of Agriculture) gave an explanation on the spending for the year 2006/07. In total the Department had spent 93,7% of their total budget. This had resulted in an under spending of 6.3% of the total funds. As justification for the under spending, the CFO explained that the Department of Agriculture was responsible for combating diseases in animals. For instance, this year there was an outbreak of classic swine fever in the Eastern Cape. The Eastern Cape Department of Agriculture then became responsible for combating the disease and would later claim compensation from the national Department of Agriculture. However the amount of R88,7 million that was earmarked for the Eastern Cape was not claimed by the province by the time of financial year-end. Hence there was the under spending. If that amount was taken into account the total under spending would then amount to 2,5% which was well within the 3% limit prescribed by National Treasury.

The Department had also embarked on a reprioritisation exercise that meant if a specific programme under spent or under performed, their budget was then cut and the funds placed elsewhere within the Department. Mr Marais referred to the Auditor-General report. It was an unqualified report and, in his opinion, it was the best compiled report with only one matter of emphasis that dealt with the classification of capital assets. National Treasury had done that for all national departments and it was done according to the protocol set by Treasury.

Mr J Bici (UDM) assumed that expenditure reports would be included. He referred to Mafisa, and requested clarity on the alignment that was mentioned, in addition he asked about the expected objectives.

Mr A Nel (ANC) referred to Mafisa and thought that Mafisa provided funding to farmers at a low interest rate and on longer terms. However, he had noted that Mafisa was only providing small amounts and seemed to be in an experimental phase. There was mention of a short term production input.

Mr C Greyling (ANC) asked that the criteria of Mafisa and its allocation of loans be explained.

Mr Mbongwa proposed that the Department set up a meeting to present specifically on all aspects of Mafisa. The Chairperson accepted the proposal of the Director-General.

Mr Bici commented on land care and the fact that the Department was not a visible force on this matter and the conservation of land was lacking. In reference to CASP, he pointed out that when an application to CASP was made, a number of issues could be involved, such as water, fencing, and so forth. However, funds would only be available for one or two commodities. If all the issues were within the budget of CASP, he questioned the lack of proper fund allocation to see to all the needs of the applicants.

Ms Ntuli asked how CASP specifically worked.

Mr S Abraham (ANC) commented that there was the quantity versus quality issue. The resources were spread over a wider area and less successful results had occurred. He suggested that the people should be capacitated. The Department should provide assistance to those who have viable plans.

Mr Attie Swart (Chief Programmes Officer: DOA) responded that CASP provided funding to the provinces that was then applied to a particular applicant. CASP had a number of pillars, and it focussed on the infrastructure pillar, and most of the money went on infrastructure. Spending had improved since 2004/05 but on what the funds were spent on was of some concern to the Department. There was a comprehensive review of CASP and what was concluded was limited rollout and a lack of common vision between the DOA and the Department of Land Affairs (DLA). There was a trend of straying from the business plan. The approval and budgeting process was efficient but there was a lack of capacity. The DOA had formally worked with DLA and it came down to better alignment of CASP and Land Redistribution for Agricultural Development (LRAD). Paying for one item and not for others should be addressed at a project level.

Mr Bici mentioned the Large Stock Development Strategy and that there was a lack of application throughout the country, especially in the Eastern Cape.

Ms Emily Magajane (Deputy Director-General: Biosecurity and Disaster Management DOA) responded that within the Department there were three aspects that were focussed on: production improvement through genetic improvement, nutrition and health. With regard to wool production they were focussing on genetic production in order to produce better wool. It should be noted that production systems differ from province to province. They had started an animal identification programme, particularly cattle, that were used for the traceability or locating of animals.

Mr Bici commented that even though there was a Drought Relief plan, there was no follow up to those who had lost cattle and reported it. In addition to the R468 million budget, he wanted to know what was the Eastern Cape’s allocation.

Mr Marais responded that according to the budgeting principles of Treasury, the Department was not allowed to budget for something that only might happen. The Department had requested R450 million for disaster management, even thought they were not sure if it would be approved. Payment was always after the fact.

Ms B Ntuli (ANC) made mention of the fact that a knowledge-based program was used with AgriBEE. She asked for a structure on how knowledge was incorporated. In addition, she asked what the response was like from people towards this initiative.

Mr Swart commented that a Charter for AgriBEE had been created and was sent to the Department of Trade and Industry. It was also noted that the Charter was under Section Nine and therefore would not be considered as law.

Ms Ntuli noted that the Department had mentioned their lack of capacity and resources. She asked what steps were taken to address and alleviate these issues and what had been achieved thus far.

Ms B Thomson (ANC) expanded on the question presented by Ms Ntuli, and asked what were the human resources that were made available to training staff.

Ms Vangile Titi (Deputy Director-General: Sector Services and Partnerships: DOA) responded that they were dealing with capacity in three ways. First it was extension that included a country profile on extension and the Department was currently in the process of implementing the recommendations of that profile. Secondly there was experiential training and the provision of bursaries. Finally there was the FAO capacity building project that was in the process of implementation. It was targeted at emergencies and disaster in agriculture.

Dr A Van Niekerk (DA) referred to the Director-General’s introductory remarks that made reference to a ‘united and prosperous agricultural sector’, he wanted the Department to rate themselves on whether or not they were moving towards that goal. He commented that when looking at the interactions of organised agriculture and the Department, there are several arguments. In terms of food security there were a number of questions. In the interaction between the Departments of Agriculture and Land Affairs in terms of facilitating sustainable reform actions, there were also problems. He was recently at congresses, with direct interaction between the agricultural and commercial sectors and the Department regarding the sector plan that was agreed upon a number of years ago, yet there had been no progress.

Mr Abraham mentioned that there was recently a forum that was created between farmers and government. He made reference to the sector plan and asked whether it was working, if it was necessary to create another forum.

Mr Swart responded that the sector plan remained the focus of the Department. At the time of development of the sector plan, an analysis was done and 107 action points were taken and added to the action plan of the Department. Around March 2007, the Minister and the principle signatories had decided to do a five-year review of the sector plan and a facilitator had been appointed to assist the stakeholders to the review. It should be concluded by the end of the year. Thirteen industry plans were created in the image of the sector plan and there was one for poultry. Most of the plans were involved with the Department.

Mr Mbongwa responded that recently there was a meeting and the outcome of that meeting was that the sector plan had played a key role to bring all relevant stakeholders in agreement. The prosperity occurred in patches. There were several reports, specifically by the Harvard group of Economists which indicated that the sector had undergone transformation that had produced successful results. There were specific programmes geared towards the growth of the economy. The path that was currently being taken by South Africa, although very beneficial, had some long-term difficulties. The country’s demands were increasing faster than the capacity of production, however the country was responding by importing rather than producing. Furthermore the prosperity of this sector would only be noted in the long term, if the country shifted its focus from the way it was currently moving.

The Chairperson noted that the Director-General was not dealing with the issue of unity as comprehensively as he dealt with the issue of prosperity. He asked what were the issues with reference to the Working Committee on Agriculture and the events that had transpired in the media with respect to the Department and organised agriculture.

Mr Mbongwa responded to the issue of unity and the working relationship, the members had said that they were not adhering to their own rules. Restraint had to be employed with regard to statements made. It had also been agreed that the forums meet possibly bi-monthly to discuss progress with regard to the sector plan and this would also promote unity.

Dr Van Niekerk agreed that in terms of food security, 2006/07 has been a good year. However, the export figures that has been declining over the past years. From being every 1 unit that was imported, 2.4 units were exported, to every 1 unit imported, only 1.4 was now exported. Food security was an important problem. How did one find the balance between the need for establishing small farmers and having large commercial farms who were already producing? Currently 15 000 farmers were providing 80% of the production in South Africa, if the loss of commercial farmers continued, food security would diminish.

Mr Abraham asked for clarification on the increase of imports of agricultural products.

Mr Mbongewa responded that there had been a concern that the country’s production had not been able to produce fast enough. The issue of small versus large farmers had also been the subject of growing debate. Small farmers needed to be supported however government did not want to exclude the large farmers, as this would jeopardise the country’s food security.
The benefits that the country had been experiencing in economic growth had to be evenly distributed. Presently food security has not become problematic, however, he agreed with Dr Van Niekerk regarding the growing number of imports.

Ms Thomson referred to the key priorities of the Department, it looked like programmes of the Department and not the implementation of the priorities. For instance, with regard to IFNSP, and the provision of starter packs to farmers, in her opinion this was not service delivery. She asked what were the results of those starter packs that had been delivered.

Mr Marais responded that vacancies could point to an overextended establishment. That meant that there were too many posts in the establishment. They were attempting to derive a core establishment for the Department. They had implemented an organisational management committee whose main task was to manage vacancies. Over a three-month duration, all line managers submitted reports to the Committee, where it was found if there were vacancies where for three months there was not movement in terms of an attempt to fill those posts, then such posts were abolished. Since October 2006, it had abolished 443 posts, both unfunded and funded, but inactive. In their medium term expenditure framework the Department had requested R252 million from Treasury that would be allocated to the provinces to extend their extension management.

Mr Swart added that a company had been appointed to assist in project management capacity. There were other ways of filling that gap.

Mr Abraham asked about the progress in the mentorship plan and programmes.

Ms Titi responded that there were mentorship programmes in place that dealt with farmers themselves. Presently there were 10 000 individuals, 80% of whom were from previously disadvantaged areas. There was a major impact on people’s incomes.

Mr Abraham referred to a comment made by the SANLAM head, and asked for the Director-General’s opinion. The view expressed was that agriculture in South Africa should move from politics more towards sector and business-driven issues about the viability and sustainability of the agricultural sector.

Mr Mbongwa responded that what was said was noted and that such matters would be taken to the relevant levels.

Mr Abraham mentioned the South African Wine Industry Trust (SAWIT) and the fact that it was provided with funding. It had been claimed that problems had occurred with that trust and he asked the Director-General to provide insight so that the Committee could be made aware of what had occurred from a Departmental perspective.

Mr Mbongwa responded that the CEO of SAWIT had informed him of the views of the key stakeholders that were having cash flow problems. The issue that was worrisome was an amount of R135 million had been used to fund an empowerment grouping. This in general was not a problem as it attracted the Land Bank and others. However, it seemed that the trust fund had spent all their funds on one undertaking. Another issue of concern was that there was a sense of desperation from black shareholders to cash in.

Mr A Nel (DA) indicated that the Director-General said that it was intended for there to be Drought Management Plan in the broader terms of disaster relief and asked for further clarification. He stated the problem was not planning as much as readily available funds and asked that the Department explain how they were going to resolve this issue.

Mr Nel asked Mr Marais for an explanation on the debt account and the qualified opinion from the Auditor General.

Mr Marais explained that National Treasury had made the decision to classify the Department’s debt account as a trading account. The account was designed to accept payments from farmers on loans made from the government, there was not trading done. However, since the account was declared a trading account the General Recognised Accounting Principles (GRAP) had to be followed, which was impossible. Last year the department had a qualified audit and followed a three-pronged approach to prevent a reoccurrence. An exemption from GRAP was applied for and granted by Treasury. A model was developed to comply, in practice, with GRAP. The Agricultural Debt Management Act was the governing act over the debt account, and the Department was in process of repealing this Act and wanted to close this account, even though there was approximately R500million outstanding. The recovery of debt would now go directly into the Department’s accounting books as opposed to a separate account.

Mr Marais said that the Auditor-General had explained his decision to qualify the debt account by stating that besides the issues of securities not being charged on some of the older loans to farmers and the fact that the debt account was not created to comply with GRAP, the report of the Department was regarded as fair.

The Chairperson wanted further clarification on the repealing of the Agricultural Debt Management Act.

Mr Marais answered that previously loans to farmers were granted in terms of the Agricultural Credit Act 28 of 1966. Then in 1997 the Strauss Commission investigated the granting of loans to farmers and it was recommended that government stop its current portfolio of loans to farmers. In 1998 the Department used the Land Bank Amendment Bill to amend the Credit Act to take out the principle of the Department granting loans to farmers. In 2001 the Agricultural Debt Management Act was approved to recover loans granted pre-1997. The department proposed that the administrative action was amended as previously mentioned.

Mr A Botha (DA) referred to the proposed model of alignment for CASP and LRAD. He had issues with the sustainability and success of the model of alignment if the Department was going to develop that model. He pointed out that to create a viable mode,l the commercially successful bank sector should be used, in the same way that commercially successful farmers should be used as mentors, and asked why this was not happening.

Mr Swart responded that agricultural economists were looking at the models now. The intention was to bring in partners.

Mr Abrahams asked if the interest on the loan amounts made to farmers, was capitalised.

Mr Marais answered that they no longer capitalised interest.

Mr Abrahams asked with regard to some of the co-ops, if the amounts outstanding and interest were the same.

Mr Marais answered that according to accounting rules, they were not allowed to charge more interest than outstanding capital.

Ms Ntuli thought that all the programmes should address the challenges faced in the country. She asked if the objectives of the CASP programme were being reached.

Mr Swart responded that the review done on CASP stated that the stakeholders thought that CASP had made a positive contribution. The scheme used only about 15% of the total amount going to support farmers.

Ms Thomson wanted to know about the impact of the starter packs that had been distributed and how was this measured.

Adv S Holomisa (ANC) referred to the starter packs and wanted to know what was contained in them and the criteria to qualify for these packs.

Mr Mbongwa replied that there had been no study done to assess the impact of the starter packs. The packs were linked to the system developed by the Department of Social Development. For three months the vulnerable groups would be given income support. During these months it would be assessed who could be engaged in productive activity.

Mr Bici referred to the 1.4% decrease in maize income and asked if the Department thought that this would become a trend, and if so what were their plans to circumvent it.

Dr Van Niekerk asked if the Department would consider ‘rewriting’ the Agricultural Credit Act in order for it to comply with the new South Africa.

Mr Mbongwa responded that the President had used the exact words in saying the reintroduction of the Agricultural Credit Scheme, when introducing Mafisa, and it was read like that. What did differ was that it added a board that received applications and dealt with matters. It was extensive in recovering the areas of support. It also had immense powers of stopping the liquidation and any measures taken by creditors against the farmers. In part some of the modifications that were done to Mafisa was where their powers were concerned in Section 21, 28 and 34 of the old Credit Act. This allowed for government to come in and stop the creditors by paying them out and brought the farms into the books of the Department in order to ensure that the system was not changed. Some of the features were not brought in. Some features should have been brought in, such as the committees of experts that assessed those who applied, as well as schemes and trusts that provided support. Including in the event of a disaster, that was termed the Agriculture Credit Board (ACB) vehicle. They were now experiencing severe problems because they did not have that vehicle at hand to quickly move in. They now had 18 to 36 months to respond. These were the issues that would have to be brought on board. With the announcement of Mafisa, which was known as the agricultural credit scheme by the President, the Land Bank was taken out. The tone and orientation was indeed to go as far as one can. Immense gaps were left with the removal of that scheme.

Dr Van Niekerk was concerned with the fact that the EU was going to put up registries for phyto-sanitary and zoo-sanitary measures and how this would affect the trade of South Africa. He asked how the Department was going to pre-empt this as quarantine affected all trade.

Ms Magajane responded that there were lessons learnt from the outbreaks that South Africa had experienced. A code of conduct should be developed with regard to farmers as outbreaks result from the importation of other animals. Risks should also be reduced. There was speculation around global warming that could lead to the mutation of viruses. She added that she did think the country was ready as animal and plant health was vital to the country.

Mr Greyling suggested that perhaps there should be an alignment of CASP, LRAD and Mafisa as opposed to just CASP and LRAD.

Mr Swart responded that the process had the intent to ensure that decision-making was as close as possible to the programme. Partners should also be brought on board. Mr Mbongwa added that there were a series of activities taking place to align CASP and LRAD and reduce the gap between the two projects.

The Chairperson referred to the issues of human resources and capital and noted that Page 24 of the Annual Report made reference to the fact that Programme Two: Livelihood, Economics and Business Development had a surplus. He was confused as it was described as a surplus yet it was under expenditure, and asked for further clarification.

Mr Marais referred to the R58 million surrender of under spent funds. As far as vacancies stood right now, there were 400 posts vacant.

The Chairperson referred to Asset Management and the reported losses as a result of theft to the value of R1,51 million. He wanted to know what the Department was going to do to recover these losses.

Mr Marais asked if he could respond in writing.

The Chairperson referred to the Programme: Administration that stated that its purpose was to provide political and strategic leadership. He asked what political leadership meant.

Mr Mbongwa answered that it was referring to the Minister and the Deputy Minister. Mr Marais clarified that Programme One had accommodated the Minister.

The Chairperson moved on to biofuels and the reference to a document that was compiled on the production of feedstock for biofuels, he asked for further elaboration.

Mr Abrahams referring to the Annual Report that said that the DOA involved stakeholders in the discussions on biofuels, asked why the PC was not involved in such discussions. In addition he wanted to know if the Department had done a study to investigate the impact of biofuels on food prices, if so what were the findings.

Mr Mbongwa responded that the compilation had been done successfully with partnerships with commodity groups such as AgriBusiness and farming organisations to complete the tasks given to the Department. The suitability of the land had to be identified in terms of growing the feedstock, crops had to be identified and farmer mobilisation and organisation, all of those had documents with research. In terms of land there was an approximately 4 million hectares available. What was required was 2 million to supply 1billion litres of the fuel needed. The farming community needed to be mobilised. It was an ongoing process initiated by the Department of Minerals and Energy. He remarked that the Department would come to the Portfolio Committee and address them on the issue of biofuels, however right now they were awaiting the final phase from the lead Department of Minerals and Energy. The DME advised modest beginnings for the crops that was in line with their capacity.

The Chairperson referred to the Auditor-General’s report that stated that the AG found a ‘lack of sufficient appropriate audit evidence’, and asked for an explanation.

Mr Marais responded that it was more of an administrative shortcoming than anything else.

Adv S Holomisa (ANC) referred to the fact that the audit committee was not appointed for almost a year and wanted to know the consequences of this delay in appointing a committee.

Mr Marais responded that the new committee picked up on the slack, since the Department continued to do their job.

Adv Holomisa commented that if the Portfolio Committee required a separate meeting to better understand Mafisa, would the beneficiaries understand the role of Mafisa.

Mr Greyling asked why 714 CASP projects were completed instead of the 874 approved for the financial year. He referred to the Agriculture Pest Act that was supposed to be approved by Cabinet at the end of March and asked what was the progress on the Act.

Mr Abraham mentioned that the National School Egg and Milk programme had tried to get the Department of Education to include milk in the National School Nutrition Programme. As there was a problem with milk production in the country and this would negatively impact on the already dwindling supply, he wanted to know what programmes the Department of Agriculture had in place to ensure there was enough milk for the School Nutrition programme and the country. Were there programmes in place to create emerging farmers that could supply milk commercially.

Mr Abraham was specifically interested in the fact that it was less expensive to buy chicken than to buy red meat. He asked why the Department did not utilise the funding available and aggressively look at the possibility of creating small trusts for the purposes of creating broiler farmers.

These questions by Mr greyling and Mr Abraham were not answered by the Department in its group response to all the questions.

The Chairperson made closing remarks that the trusts had not come before the Committee and some kind of accountability needed to be ensured.

The Chairperson adjourned the meeting.





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