Agriculture Provincial Conditional Grants 3rd Quarter 2007/8 spending

Meeting report

Provincial Spending:  National Treasury (NT) Briefing
The presentation covered provincial spending as at 31 December 2007 and was based on the Public Finance Management Act (PFMA) reports submitted by Provincial Treasuries (PT).

Dr Sandra Sooklal, Director: Provincial Budget Analysis, NT, informed the Committee that provincial spending was on track with 71.6% spent of their budgets. Six provinces were projecting to overspend in general while four provinces were projecting to overspend on their education budgets. Spending against budgets on conditional grants was lower than the total provincial spending average.

Dr Sooklal explained the objectives of the Agricultural Disaster Management Grant (ADMG), the Comprehensive Agricultural Support Programme Grant (CASP) and the Land Care Programme (LCP) Grant for poverty relief and infrastructure development. The NT had not received a response from departments concerning service delivery outcomes. 

With regard to Conditional Grant (CG) Spending, the rate of spending was encouraging and reflected improvement over previous financial years but the overall CG spending was still below total provincial spending.

Discussion
The Chairperson stated that he had a problem with the way in which CGs were subsumed in many programmes. CGs were tending to become like equitable shares when included in many programmes. He wanted to see the outcomes in the specific context of CG.

Eastern Cape Provincial Department of Agriculture (PDA) Presentation
Mr Gugile Nkwinti, MEC for Agriculture, Eastern Cape, informed the Committee that spending on the Comprehensive Agriculture Support Programme was going well.  The Infrastructure Grant to Provinces (IGP) spending was low at the end of December, at 24%, but with commitments made in January, spending increased to 71% of the allocated budget. Also, with commitments included in the amount for January, Land Care grant spending increased from 75% to 87%. 

With regard to performance outputs and deliverables, most projects were completed. Under Land Care, 129 projects were targeted and 88 projects were completed. 

All other projects were verified and assessed by various Committees and most were at the design stage. Dedicated staff were identified at Provincial and District level to ensure effective project planning, implementation, management as well as monitoring. It was projected that projects would be completed on time.

The MEC stated that reporting was strong and that the Department had developed a performance-based reporting method for all projects. Monthly reports were the solution to the problem with reporting and monitoring.

Communities were trained and included in the implementation of projects. The Provincial Department entered in to a joint venture with commercial farmers, with the understanding that these farmers would work with and train other village farmers. Community involvement was important for improvement in the agricultural sector.

Discussion
The Chairperson stated that the problem was that the NT was not providing the Committee with information. The NT needed to report on the provinces that were not spending their Disaster Management Fund, as discussions would shortly be held concerning the Division of Revenue Bill and Members would have to decide which provinces were most deserving of funding. The objectives were clear, but people were not spending in respect of disasters. If some provinces did not need money then the Committee would need to see where else it should be directed.

Mr E Sogoni (Gauteng, ANC) said that he had a problem with the commitments, which resulted in 100% spent on the CASP. Commitments did not equal spending. It was a challenge to convert commitments into actual delivery. The Committee would have to work with all the Departments of Agriculture in order to evaluate whether CASP objectives were accurate. The objectives would have to be synchronised, as the implementation sometimes differed from what the Committee would like to see.

Mr Sogoni stated that the report was difficult to read and that there was no information on ADMG.  As well as monitoring the reports, the Committee would also visit the Province to assess the service delivery, when it would be able to interact with the community. 

The Chairperson stated that the CASP was under performing, showing spending of 68%, which was far below the norm. The assumption was that spending would only increase by 12% at the end of March. The report projected that 100% of the budget would be spent.  He wanted to know what the actual spending was. The greater problem was that IGP spending was only at 56%. The Chairperson wanted to know why the Department was receiving money from the IGP when they were not supposed to.  Receipt of this money should be based on the ability to spend the CASP. Only the Departments of Health, Education and Roads were supposed to receive the funds. It was the Provincial Treasury’s (PT) duty to allocate funds based on the ability of the Department to spend it; therefore the Provincial Treasury (PT) had not complied with the PFMA.

There was a danger of under spending on the whole infrastructure budget. The Chairperson wanted to know what plans were implemented to deal with the issues that he mentioned. 

Mr D Botha (Limpopo: ANC) stated that he wanted to see more information included in the report that discussed challenges and reasons for low expenditure for nine months. 

The Chairperson hoped the commitments that were spoken of were not just transfers made to developers without any actual work being done. He warned the MEC that that ‘commitments’ could be a form of financial dumping.

Mr Nkwinti assured the Committee that the Department was not in the business of financial dumping, and that low expenditure was due to late planning. Commitments were linked to projects that were already set up and procured. CGs in the form of CASP were already over-spent as at 6 February 2008 but steps would be taken to prevent any further expenditure. With regard to the IGP spending, the report did not fully reflect what was happening, as spending was actually much higher. 

Mr Nkwinti spoke about the disasters that the province had experienced.  Swine fever was briefly mentioned. He said that even though funding was given for Disaster Management, more was still needed.

The Chairperson said that the Committee would need to discuss the issue with the NT at the Division of Revenue Hearings, as more money was needed.  He invited the MEC to a meeting that would be held on 6 March 2008 with the National Department of Agriculture (NDOA) to discuss the slowness of service delivery. 

Mr Sogoni commented that it was important for all Members and the Department to be involved, as the matter needed to be resolved. 

Mr Nkwinti addressed the CASP issue.  He informed members that the assessment of CASP was correct.  The initial distribution of the funds had been wrong but steps were taken to correct this problem.  More money was distributed from the Department’s own equitable share to those areas that were deprived in the past so that commitments would be met. 

The Department had entered into a joint venture with Department of Public Works (DPW) as well as Department of Roads and Transport (DRT) to find an unconventional way of constructing an agricultural road, but engineers did not want to participate because they felt that it was a sub-standard road. It was clear that the unconventional method worked but the challenge was to find engineers and technicians to supervise the construction. 

Infrastructure development was also a problem that resulted in capacity challenges. Discussions were held with the Department of Agriculture in Kwazulu-Natal to discuss alternative methods of infrastructure development. Challenges were identified and viewed as learning experiences. 

The Chairperson wanted to know what the Department was going to do about the under performing grants.  The Eastern Cape was given more money even though it did not have the capacity to use it.  This was a problem, as the Division of Revenue was clear about the distribution of money. The National Department would have to propose solutions to the problem of under spending. It was his opinion that money should not be given to departments that under performed for years. 

Mr Botha commented that planning should have been completed in November 2007. If plans were not in place, then the Department would not succeed in spending the allocated money. The Chairperson agreed and stated that the Department should have prioritised spending as the money was received from the Treasury.

Mr Nkwinti promised that future reports would indicate an improvement

Mpumalanga Provincial Department of Agriculture Briefing
Mr Moses Mathebula, Acting HOD: Mpumalanga Department of Agriculture, notified the Committee that there were no matters of urgency with regard to CG’s.

The Chairperson interrupted, pointing out that the Department only spent 53% of their CGs, and that this was indeed a problem.

Mr Mathebula admitted that spending on some grants was slow and he would explain why. Some projects such as the construction of houses and planting macadamia trees were slow but the Department was happy with the service providers. He admitted that that there were a few projects that would not reach completion, but that the Department would transfer the funds from those projects to other projects so that there would not be any rollovers. 

Most of the money allocated to Disaster Management was spent. Initially, the Department asked for R10 million but they received R45 million to be spent over two years.

Discussion
The Chairperson commented that the Province was lucky, as they received more than they wanted. He thought that this indicated financial dumping in advance and told Members that they had to discuss this issue and monitor it. He also told the Department that the report showed that Disaster Management was not performing. 

Mr Botha questioned the Department’s capacity. He wondered why the National Department had allocated money if the Provincial Department could not spend it.

Dr Sooklal explained that there was no system in place to allow the allocation of money over a certain number of years. Money was allocated through a process of rough assessment. She acknowledged that this was a problem that needed to be addressed, and added that Treasury needed the help of the Committee as well as other departments to find a solution to it.

Mr Sogoni wondered how the Department would spend R45 million.

Dr Sooklal informed him that it was assumed that a roll over of the funds would occur if the Department were not able to spend all the money in this financial year.

The Chairperson stated that he was not convinced, as there was an issue of inconsistency. Part of the problem was with accountability. He urged Members and the Department to assist the Accountant General so that money was allocated on the basis that a disaster occurred.

Mr Mathebula clarified that the Department had initially requested more than R45 million for veld fires and droughts but that it was allocated R45 million after the assessment by Treasury. Of the allocated amount, only R10.5 million would be spent and the remainder would be reflected as a roll over in the next financial year.

Mr Sogoni requested that non-financial information also be made available to the Committee. 

Mr Botha informed the Committee that only R4.9 million of the R45 million was spent at the end of February. This was not acceptable to the community. He wanted a commitment from the Department that the money would be paid out.  Mr Botha also requested that the Committee hold discussions with the people working in Disaster Management on the Committee’s visit to Mpumalanga.

Mr Sogoni proposed that the Committee allow a different province to present, as the HOD did not seem to know what was happening.

The Chairperson instructed Mr Mathebula to find out the amount of actual funds that were transferred. Figures shown in the report needed to be verified.

The HOD stated that he did not want to give the impression that the figures were not documented and that he was unsure of what was happening. According to him, the figures were tabled in a Treasury Report at the end of December. Mr Botha said that the challenges should have been indicated in the Report and not hidden away, as Members were to be informed of them. 

Limpopo Provincial Department of Agriculture Briefing
Mr Bigman Maloa, HOD: Limpopo Department of Agriculture, presented the Report to the Committee. According to the Report, 20% of the budget was actually spent while 32.5% of the budget was committed to projects.  Overall, 47% of the budget was not spent.  The HOD explained that this was because some invoices had not gone through and because 70% of the unspent budget was allocated to the Levubu value-adding facilities. The unspent money amounted to 15% of the budget.

The HOD also looked at the 2007/08 CASP progress report. Activities that were targeted included delivery of well planned and massified projects, resource auditing, and implementation of projects that were found to be feasible, farmer capacity building, and comprehensive planning for 2008/09.

Discussion
Dr Sooklal asked for an indication of the progress made with the Agricultural Rural Development Corporation (ARDC), as the corporation was used for service delivery.

Mr Maloa stated that the Department was still at the developmental phase. There were challenges in the form of legal and operational issues as well as financial obligations.

The Chairperson stated that the Committee would have to monitor the ARDC as well as many other development agencies across the country. If the agencies existed then their mandates would be evaluated.

Mr Botha noted that there was no spending on the Land Care Programme grant for the third quarter. Also, the Treasury Report indicated that the Department had not informed the Treasury of the expenditure on the Land Care grant.

Mr Maloa addressed the land care issue. Spending on land care was a challenge because the Department had lost valuable members of staff and it took months before they were replaced. Also, there was trouble concerning the community’s involvement, as they were not handing in invoices on time.

Mr Sogoni noted that there was no information contained in the report that concerned Disaster Management. Also, there was no information available about other grants that were spent. He wanted to know if the Department projected that there would be under expenditure and the reasons for it.

The Chairperson noted that one of the reports indicated that there was no expenditure while another report showed that there was. He also wanted to discuss disaster management.

Mr E Ramsamy, Chief Financial Officer, Limpopo PDOA, discussed disaster management. He admitted that there was no expenditure, as actual transfers of the money were only received in late November, at which time it was no longer applicable. A letter was written to the Provincial Treasury, which indicated that the money would be used during the financial year. 

Mr Botha asked for confirmation that the money that was allocated in November would be carried over to the financial year in preparation for other disasters that the Province would experience.

Mr Maloa indicated that funds would also be allocated to other projects.

Mr Sogoni requested a report that included information on the projects Mr Maloa had spoken about.

Mr Maloa stated that a report was already submitted to the Treasury but that they would send the report to the Committee as well.

Mr Ramsamy addressed the CASP issue. He informed the Committee that the bulk of the expenditure was attached to the purchase of the Levubu facilities. This restricted the movement of CASP. Once the project was completed, the money would move out of the Department’s accounts and be recorded as spent.

Western Cape Provincial Department of Agriculture Briefing
Ms Joyene Isaacs, HOD: Western Cape PDOA, addressed the challenges as they reflected on CASP and Land Care spending. She informed the Committee that there was a shortage of qualified people who were able to assess disasters. At the end of December, 44.3% of the CASP funds were spent. With regard to Land Care, 45% of the budget was spent.

The Department faced various challenges.  There were time constraints due to unresolved legal issues and staff availability, cash flow problems because funds were reallocated, alignment issues between land reform and CASP. The Department was also faced with many disasters, which meant that they were constantly on the defence and project implementation was delayed. They also suffered from a shortage of engineers, economists and subject matter specialists, which resulted in the technical staff having to do the verification of damages to farms as well as flood repairs and recovery work.

Drought, flood and hail relief money was received in December 2007 but could not be spent, as damages needed to be verified first. The Department had an agreement with the NT that the money would be rolled over and used in April.

Ms Isaacs informed the Committee that there was a correlation between the CASP Expenditure and Capital Expenditure. The Department was behind on its spending but as soon as the one increased in terms of expenditure, the other would follow.

Discussion
The Chairperson suggested that the Committee not discuss the Disaster Management issue now, as it appeared to be a great challenge. The Committee would attend workshops in order to fully understand the issue and then have discussions. 

Mr Botha suggested that Departments and Provinces react immediately when faced with a disaster.

The Chairperson noted that there was an issue of integration between Local Government and the Department. If the response was slow then people involved in the sector would become disgruntled and frustrated. This could result in many people exiting the sector, when the plan was to encourage people to join it. The Department also needed to find ways of ensuring that plans were implemented.

Ms Isaacs commented on the climate change issue. The Department was aware that certain areas would dry up and they were looking at setting up disaster management as well as farming practices. Also, the Department was instructed by Cabinet to form a small Provincial Departmental Disaster Unit to make sure that disaster assessment and management processes were more efficient and so that there was a better flow of information from the Provincial Disaster Management Unit to the Department.

Northern Cape Provincial Department of Agriculture Briefing
Mr V Mothibi, HOD: Northern Cape PDOA, presented the Report. According to the report, CASP expenditure amounted to 54%, Land Care expenditure amounted to 55% and IGP spending amounted to 41% of the budget. 80% of the budget for drought relief was spent. Overall, this resulted in 75% spending of the Conditional Grant expenditure.

There was one matter of urgency with regard to CASP. It was projected that one project’s budget would not be spent and therefore the project would not be implemented by the end of the year.

There was a concern that the Department might over spend on their IGP, but interventions would be put in place to prevent this.

With regard to monitoring and evaluation, teams were put in place to monitor progress daily and expenditure monthly.

The HOD briefly discussed the challenges they faced with Conditional Grants. Provisions were not made for Kgalagadi but the Department’s equitable share would be used to finance projects in that area. There were delays from service providers who did not deliver material punctually. Also, invoices were sometimes either incorrect or were not being issued on time. There were delays from Eskom in connecting electricity at project sites; therefore irrigation system testing was delayed as well as the payments. 

Discussion
The Chairperson advised the HOD to return to the Province and perform a proper audit, as it would be to the benefit of Kgalagadi as well as other areas that were transferred to the Northern Cape.

Mr Sogoni noted that some provinces reported on their Monitoring and Evaluation Committees yet most departments were under spending and experiencing other problems. If Departments’ spending was being monitored then provinces would be more aware of expenditure and would not be experiencing such challenges.

The Chairperson addressed the issue concerning delays from suppliers in delivering materials on time. He noted that it was a problem that impacted on performance. The issue of Eskom would be monitored.

The Chairperson suggested that the HOD and the Committee write a letter to the Department of Tourism, Environment and Conservation in the Northern Cape to ask them what the underlying factors were for the delays in project implementation. If there was not sufficient clarity given on the reasons for the delay then the two departments would have to meet and discuss the issues that the Province faced.

Mr Mothibi informed the Committee that discussions were held with the Department of Environmental Affairs and Tourism and they were able to identify the challenges that hindered their progress. Problems were found to be with the service providers and the consultants who performed the Environmental Impact Assessments (EIA). The Departments then decided that the project leaders would manage the consultants. The Department would have to be notified in advance of objections made to projects so that planning could be re-adjusted.

Mr Botha noted that, compared to the Western Cape, the Northern Cape had had to deal with drought relief only, and yet they spent 80% of their Disaster Management budget.

Mr Mothibi informed the Committee that the Department had only requested money for drought relief even though they had experienced veld fires. R45 million was allocated, although it had requested R63 million. Assessments would be performed in order to allocate proper amounts to different areas.

The Chairperson commented that there seemed to be a flat rate of how much provinces were receiving for Disaster Management. He wondered if the NT had performed the same assessment on both Mpumalanga and the Northern Cape.

Mr Mothibi addressed monitoring and evaluation. The strategy seemed to be working and meetings were being held with project leaders to assess the progress of projects.

The Chairperson stated that based on performance, monitoring and evaluation seemed that it was not working. Project Managers needed to assist the Department by bringing matters of urgency to their attention.

Mr Mothibi said that he had alerted the project managers as well as the supply chain management to the problem. He assured the Committee that there would be improvement and that projects would be completed in the financial year.

Kwazulu-Natal Provincial Department of Agriculture Briefing
The Chairperson informed the Committee that he had spoken to the HOD of the Department of Agriculture about the Province’s poor performance but the HOD denied that the Department was in trouble. He also commented that the report presented to the Committee was badly prepared.

Mr Modidima Mannya, HOD, Kwazulu Natal PDOA, told the Committee that he was only informed of the meeting a few days earlier.

The Chairperson stated that there seemed to be a lack of communication within the Department.

Mr Botha agreed, saying that if the MEC knew about the meeting but did not tell the HOD then there was a problem. He queried whether the report was rushed and whether it would give the Members an accurate picture of the Department’s position.

The Chairperson suggested that the Department present the report, as it would give the Committee an idea of the Department’s performance, even though the Provincial Treasury already reported on their position.

Mr Mannya stated that it was important that the Committee and the public knew their position. He planned on tabling a report with Cabinet that would inform people of the position that the Department was in, because he felt that serious intervention was needed to deal with the situations.

Mr Mannya addressed the issue of Conditional Grants and expenditure. He said that the situation was not very helpful and that a forensic investigation was performed in the Department as a result of the information shown in the Audit Report. The Department had not had funding from the beginning of the financial year until July, when money was transferred. At this point, even though the budget was available, there were no implementation plans in place. The Department looked at sorting out their organisational problems but realised that it would be against public policy to stop operations.

There had recently been improvement in the Departments performance if compared with previous months. The Department was now able to provide Members with business plans, whereas before there were none. Even though expenditure was low, every amount could be accounted for.

Mr Mannya discussed Conditional Grants. With regard to Land Care, the entire budget was committed which meant that business plans were already in place. However, the Department could not promise that all the targets would be achieved.

With the CASP in particular, there were issues between the Provincial and National Department, which resulted in the National Department withholding funds from the CASP allocation. However, the HOD was recently informed that the money was transferred. The current budget was committed which indicated that business plans were in place.

The money that was now available for CGs was being spent on mentorships and training. The HOD informed Members that the Department provided support in the form of procurement but this method proved to be a challenge at times.

Mr Mannya stated that he was not going to try to defend the system, as it was dysfunctional. There was a need to come up with solutions and interventions.  He suggested that all the necessary Departments and the Committee meet in one place to resolve the issues.

Discussion
The Chairperson admitted that the Province had experienced problems and pointed out to the Committee that the Department had just appointed both a new HOD as well as a new MEC. The Committee had previously convinced the Provincial Treasury to assist the Province, and they were trying to get the National Department to do the same.

The Chairperson noted that there was commitment and optimism within the Department but there were urgent matters that they still needed to sort out. The greater challenges needed to be evaluated and monitored. It was imperative that the National Department played its role. The Chairperson informed the HOD that the Committee would be monitoring the Department’s turn-around plan.

Mr Botha told the HOD that the Committee appreciated his honesty and that Members would assist the Department as much as they could. He also suggested that the Committee and the Department communicate on a daily basis.

Dr Sooklal commended the HOD for his ability to identify the problems that the Department faced as well as the solutions to those challenges. She informed him that the Treasury was communicating with the National Department on the issue of withheld funds, in particular the CASP funds.

Mr Mannya stated that the Treasury was very supportive. With regard to the National Department, disagreements were resolved and the CASP allocation was on track. He admitted that the situation was difficult but that it was made easier with the Committee’s support.

The Chairperson noted that service delivery seemed to be a constant issue in all provinces.

The Chairperson also informed the HOD of Section 45 in the Division of Revenue Act (DoRA). He told Mr Mannya that any serious or persistent non-compliance with the provisions of the Act would constitute financial misconduct. Financial misconduct was grounds for dismissal of officials. It was clear that there was a persistent problem within the Department and action needed to be taken.

The HOD informed the Committee that a Section 45 investigation was performed and that two officials were being prosecuted.

The meeting was adjourned.