Ingonyama Trust Board, Ncera Farm, Perishable Products Export Control Board Budget & Strategic Plans 2008/09

Agriculture, Land Reform and Rural Development

13 May 2008
Chairperson: Mr M Mohlaloga (ANC)
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Meeting Summary

The Ingonyama Trust Board noted that its strategic planning was informed by the governing legislative framework, which recognised the role of traditional leadership in the administration of the communal land. The strategic plan was prepared with the budget to achieve the vision of the Board. The plan focused on those issues that needed to be resolved over the next five years and that were part of government APEX priorities, such as alleviation of poverty, provision of housing and infrastructural development, black economic empowerment and security of tenure. The Board further focused on implementation of the Communal Land Rights Act and integrated the changes brought about under the Mineral and Petroleum Resources Development Act. The strategic plan sought to extend security of tenure in accordance with both customary and statutory law. The budget income for 2008/09 was anticipated to be R24.4 million by way of leases, royalties and investments, and R5.4 million from Department of Land Affairs (DLA). There was a 63.7% increase on the budget from last year. The expenditure would be funded from this. Internal administration was funded by a grant-in-aid from Department of Land Affairs. Questions by Members addressed the relationship with municipalities, whether the Board was alive to the possibilities of exploitation, and had introduced mitigating measures against soil erosion so that the land was productive, the membership of the Board, and clarity on individual titles. The relationship with the Commission on Restitution of Land Rights, the duration of leases, the difference between permission to occupy and leases, royalties received in respect of mining and the charging of rates, and development programmes were further questioned.
 
Ncera Farms, a farm project located in the Eastern Cape, reported on the status of the project and the social role the project played in the community. Ncera were supporting ten farmers who were part of the Department of Agriculture development programme, had opened a service centre and were running training for the community at no cost. There were good achievements including the  erection of a reservoir, drilling of a borehole, setting up of a workshop for vehicle mechanical services and various training programmes. All the economic transactions for the surrounding communities were facilitated by Ncera. The income and expenditure showed only a break-even situation, with the Department of Agriculture transferring R2.3 million and own revenue of R789 000 being earned. A breakdown was given of the cost centres. Members queried the sustainability of the project, asked about accreditation of training, asked for further details of the cost centres and expenditure, believed that the Department should attend to the problems of the farmers and ensure development of an exit strategy because it should not be the role of the State to manage such a project. They heard the experiences of a newly established farmer, who complained that in fact little support was offered by the Department and no leases had yet been signed.

The Perishable Products Export Control Board reported that its statutory mandate was to provide controls and conduct quality inspections over the agricultural perishable products intended for export. International marketing and trading forces affecting perishable products had significant impact in the exports trading, and the Board had to be well informed of and responsive to such international requirements, to ensure that South African perishable exports remained competitive in the global economy. The budget was separated out into the three main activities of the Board. The value added services for customers were budgeted to have a surplus of R1.6 million, whereas development services was budgeting for a shortfall of R1.8 million. The impact of this shortfall on levies was 1.6%. The challenges to the mandate were summarised as outdated legislation and the fragmentation of the legislation because health assurance and quality assurance were being undertaken by different institutions and at different points. Members asked questions on the relevance of deregulation, the calculation of the levy, what would happen to products rejected by the international markets, whether the Board was actively involved in empowerment, its succession plan, and what should be done to close policy gaps. Questions were also asked around the benchmarking, the main competitors to South Africa, the sources of external funding, whether South Africa was visible in the World Trade Organisation negotiations, and  whether the Board undertook inspection of imports. 

Meeting report

 

Ingonyama Trust Board (ITB) Budget and Strategic Plan 2008/9
Judge Jerome Ngwenya, Acting Chairperson, Ingonyama Trust Board, noted that the Trust was governed by the Ingonyama Trust Act, in terms of which the King was the sole trustee and the Board was established on 2 October 1997. The core business of the Trust was to manage the trust land for the “material benefit and social well-being of the individual members of the tribes. The Trust sought to provide an effective land administration system, to create a climate encouraging development and to extend security of tenure in accordance with customary and statutory law. He indicated that the strategic plan had been prepared in conjunction with the budget in order to achieve the Board’s vision. The plan focused on the issues that needed to be resolved over the next five years and that were part of government APEX priorities, such as alleviation of poverty, provision of housing and infrastructural development, black economic empowerment (BEE) and security of tenure. Central  to the Board’s work was the implementation of Communal Land Rights Act (ClaRA) and integration of the changes brought about by the introduction of the Mineral and Petroleum Resources Development Act (MPRDA). Furthermore, the strategic plan extended security of tenure in accordance with both customary and statutory law.

The plan was guided by the land management objectives, which ensured that certain outputs were undertaken in terms of the legislative framework. These included to update and maintain the land tenure information systems, consolidation of titles, transfer of KwaZulu Natal  towns to local municipalities, transfer of State domestic properties, allocation of land for housing and infrastructure purposes, monitoring of legislation that was impacting on the operation of the ITB and disbursement to beneficiary communities.

The budget income for 2008/09 was anticipated to be R24.4 million by way of leases, royalties and investments, and R5.4 million from Department of Land Affairs (DLA). The total budget of R29.8 million was a 63.7% increase on the budget from last year. The expenditure would be funded from this. Internal administration was funded by a grant-in-aid from DLA.

Discussion
Ms C Nkuna (ANC) expressed her gratitude to the ITB for the presentation and for their work in the province. She sought clarification on the working relation between the ITB and other State departments, including municipalities.

Judge Ngwenya indicated that the Board had a good relationship with municipalities and other departments, except that the were various pieces of legislation whose wording effectively made the mandate of the Board and other local government departments overlap. This had caused some tensions initially with municipalities, but they have since smoothened out, with the due transfer of land being one reason. 

Mr S Abram (ANC) commended ITB for operating on such a small budget and said that other state organs should learn from ITB as it set a good example. He also expressed concerns at the fact that multinational companies were interested in profit maximisation and often they exploited natural resources that were located in communities without investing back in the communities. ITB should guard against such behaviour and they should protect the interest of the community when assigning leases to investors. He sought clarification on whether the board had introduced mitigating measures against soil erosion so that the land was productive.

Judge Ngwenya indicated that the Board consisted of people well versed in such issues and they were on their guard against exploitation. The Board ensured that the interest of the community was prioritised and this was reflected in the policy of the Board. As result, the Board did not put the land on sale, but rather leased the land to potential investors.

Mr B Holomisa (UDM) sought clarification on the acting appointment of Judge Ngwenya, and the fact that the King was the sole trustee of the Board. He further sought clarification on the individual titles and whether people in rural areas would have to sign a lease and pay rates. He also remarked that the perception was that the customary law did not provide security of tenure particularly to women and child. He sought the Board’s view on this. He also asked whether the Board had a working relationship with the Commission on Restitution of Land Rights.

Judge Ngwenya indicated that the Zulu King was the chairperson of the board and the Minister could appoint the Deputy Chairperson. Judge Ngwenya was described as acting, because the King was not available sometimes to attend meetings, hence there was an acting incumbent. IN regard to the individual title deeds he indicated that the combination of various title deeds was technically referred to as individual title deeds. The land was still referred to as communal land. The Board had a sound relationship with the Land Restitution Commission and there were no claims that the Board was aware of that lodged against the land that the Board was managing. Even if there were claims, the Board would not oppose them as long as they were compliant with the law. Regarding the security of tenure, this was a prime consideration for the Board, and they would not compromise the standards or accommodate non adherence to the law.

Ms M Ngwenya (ANC) sought clarification on the duration of the leases and the difference between Permission to Occupy (PTO) and lease. She also enquired whether the rural people would be charged rates, and, if so, what services were being provided by the Board or municipality – such as collection of garbage.  She requested information on the nature of development projects that were undertaken by communities.

Judge Ngwenya responded that the PTO system did not generate much funding for the Board; instead the Board was a liability to the State in terms of its running cost. However, since the shift from PTO system to lease, the revenue of the Board had gradually increased. There was no regulatory framework that governed PTO. There was also no final agreement as to the amount that should be charged to communities in respect of rates and the nature of service the municipalities would render.

Mr N Singh (IFP) sought clarification on the amount of royalties that were paid to communities in cases where there was mining of natural resources or mineral activities. He also sought the Board’s view on why it was not facilitating equity for communities, and that the mining companies were enriching themselves with resources located in the communities instead of leasing. He enquired whether there were land claims in respect of the land that was managed by the Board and whether the R293 townships had been transferred to their respective municipal jurisdictions.

Judge Ngwenya replied that 90% of the generated funds were payable to communities and the Board had not facilitated equities for communities, other than ensuring that the communities remained the owners of the land irrespective of the economic activities that were undertaken in the land. He also indicated that he was not aware of any claims against land within the Board’s jurisdiction. Regarding R293 townships, he indicated that initially the municipalities were reluctant to take over the management of R293 township because they perceived them as a liability due to the hostel dwelling systems. However, over time they had changed their attitude because they noticed prospects for growth through available land.

The Chairperson enquired the nature of the development programmes by the Board.

Judge Ngwenya indicated that the development programmes were left at the discretion of the communities. Some communities chose to build a school or run a job creation project. The communities received 90% of the funds generated while the Board retained 10% for the running costs.

Ncera Farm Briefing
Mr Tommie Marais, Chairperson of the Board, Ncera Farms, reported on the status of the company Ncera and listed the Members of the Board. He noted that there was a managing agent and audit committee. He reported on the status of the project and the social role the project played in the community. He indicated that currently Ncera Farms were supporting ten farmers who were part of the Department of Agriculture (DOA) development programme, had opened a service centre and were running training for the community at no cost. There were good achievements in the financial year under review, including the erection of a reservoir, drilling of a borehole, setting up a workshop for vehicle mechanical services and various training programmes. Ncera Farms were very instrumental in the community because they facilitated all the economic transactions that were taking place in the communities, who would have their livelihood effectively destroyed if the Farms were to close.

The budget for Ncera Farms was then tabled. It showed a transfer from DOA of R2.3 million, and own revenue of R789 000, giving a total of R3.1 million. The expenditure was budgeted at the same figure, and a breakdown was given of the cost centres. 

Discussion
Ms Nkuna enquired whether the training that Ncera Farms provided was accredited by any academic institution or training institution. She also sought clarification on the nature of the relations that Ncera Farm had with
Onderstepoort Biological Products (OBP).  

Mr Marais indicated that the training that was provided in the Farm was in-house accredited, as it was not attached to any institution. However, its success rate had been commended by various institutions like the Sector Education and Training Authority for the farming industry. The teaching staff consisted of highly qualified people who had taught at tertiary institutions. The Farm had a good relationship with OBP.  

Mr Abrams commented that the project was not generating sufficient revenue to sustain itself and it seemed to be depended on the transfer from the Department of Agriculture. He requested a detailed breakdown of information on the cost centres, personnel cost, and the number of the cattle being bred on the farm.

Mr Singh concurred with Mr Abram’s concerns over funding, and asked also for a breakdown of the Farms’ own revenue.

Mr Marais concurred with the concern of the members in relation to the dependency on the Department of Agriculture. However, he noted that this was a new project that was still finding its feet. Part of the long term strategy was to ensure that the project was self sustaining. The sector was planning a massive food programme to assist with the increase in food prices.

Ms Ngwenya sought clarification on the farmers that were assisted by Ncera Farms and whether the Farms were subsidising farmers.

Mr Marais indicated that the Farm assisted community members or families with ploughing, but that the Farms were not subsidising any one in the community.

Mr Holomisa commented that the project should be handed over to the beneficiaries because it was not the role of the State to fund or manage such community projects. He sought clarification on whether Ncera Farms had an exit strategy, so that the State could allow the beneficiaries to generate their own revenue and run the project in a way they perceived to be appropriate for the community. 

Mr Marais indicated that the project had a social or non monetary value to the community because the community collected their postage at the Farms and the project helped families who could not afford to pay fees for ploughing or hire of tractor. He stressed that in the short term the project should be left to run with the support of the DOA and suggested that at least another two years would be appropriate.

Mr Holomisa requested that Members hear the first hand experiences of a newly settled farmer in the area.

Mr Matinise was therefore requested to make a statement regarding his perspective of Ncera Farms. He was a beneficiary and a farmer who had newly settled in the area. Mr Matinise indicated that the farmers who had settled in the surrounding areas and were supposed to be benefiting from the Ncera Farms were not getting sufficient support from the Department of Agriculture. The farmers were often interacting with junior staff who had no authority to make decisions. Currently the farmers were waiting for their leases from the Department and they had been staying in the farms without paying or using the land in a productive way.

In response to the Mr Matinise’s concerns,
Dr Kgabi Mogajane, Acting Director-General, Department of Agriculture, indicated that she would investigate the real problem and fast track the completion of the lease agreements. She gave a commitment to keep the Portfolio Committee advised of developments. 

The Chairperson sought clarification on the amount charged to the newly settled farmers, asking whether it was 10% of the land value.

Mr Matinise indicated that the farmers were not yet paying for the land because the leases had not been signed with the government yet.

Perishable Product Export Control Board (PPECB) Briefing
Mr Maxwell Hawes, Chairperson, PPECB, noted that the Board derived its mandate from the controlling Act No 119 of 1990, which was to provide control over and conduct quality inspections on agricultural perishable products destined for export. He indicated that the international marketing and trading forces affecting perishable products – such as  product, price and place –had significant impact in the export trading. This required PPECB to be closely informed of the developments so that it could be better responsive to such international requirements or needs. Central to the work of PPECB was to ensure that it kept abreast with developments in the World Trade Organisation (WTO) and Organisation for Economic Cooperation and Development (OECD) countries, including business intelligence in the international perishable product trade, so that South African perishable exports remained competitive in the global economy.

The service and product categories, the current operating environment and the office locations of PPECB were tabled.

Mr Hawes went on to describe the strategy in more detail. He said that this was in part the outcome from a series of engagements with the DOA on the role of PPECB. Within 12 months both institutions should finalise the policy environment for the future role of the Board. There had to be recognition of the significant role that the Board played in the industry. He set out how the Board sought to benchmark itself with international good practice. He set out the strategic objectives and key performance areas, which included policy development, legislation and integration of food safety, product quality, and cold chain requirements. He set out the workforce profile, with breakdowns by race and gender, and occupation levels, as well as the plans for skills development from 2008 to 2010.

Turning to the budget, Mr Hawes noted that the operating model separated the activities of the Board into statutory services, value added services responsive to customer needs and development services. The value added services budgeted for income of R9.3 million and expenditure of R7.7 million, with a surplus of R1.6 million. Development services did receive funding from various sources, and this was anticipated at R2.2 million income as against R3.9 million expenditure, leaving a shortfall of R1.8 million. The impact of this shortfall on levies was 1.6%.

Mr Hawes concluded that a major  challenge in the execution of the mandate was that the policy or legislative framework was fragmented because the health assurance and quality assurance were being undertaken by different institutions and at different points.
 
Discussions
Mr Singh sought clarification on the relevance of the deregulation in the current operation of PPECB. He queried the basis of the levy that PPECB charged for the services rendered to exporters. He also enquired whether inspection of fresh produce products also included source products like wine, and the plan for the products that were not suitable for the international market. He asked whether such products were routed elsewhere to other destinations or were brought back to the national market.

Mr
Luvuyo Mabombo, CEO, PPECB, indicated that the organisation had a formula for calculating the levy. The inspection did not include the source products. In regard to policy, he said that the current legislative framework was fragmented and not relevant for the South Africa government to execute its inspection work properly and ensure compliance to quality standards. In a nutshell, the legislation was outdated and the Board would assist with the crafting of a new legislative framework through the Department of Agriculture. In cases where the exported products were perceived by the importer to be of low standard, the exporting company often would re-route the goods or products to destinations where the product standards were acceptable, such as China.

Mr Holomisa enquired whether the Board was involved in the empowerment of previously disadvantaged people. He enquired which countries were the main competitors to South Africa. He also solicited the views of Board on what should be done to close the policy gap. He asked about the source of the external funding for the Board.

Mr Mabombo indicated that the Board was involved in empowerment  programmes at three levels; skilled development, where the Board recruited previously disadvantaged students with tertiary qualifications to undergo a intensive technical training; support for emerging farmers to export their products; and procurement of services. Currently 35% of the Board’s services were procured from Black Economic Empowerment service providers.

Ms Nkuna sought the views of the Board as to whether South Africa was visible in the WTO negotiations, or whether their effective participation was hampered by lack of capacity to engage at high levels. She further enquired whether Board had a plan for skills transfer.

Mr Mabombo indicated that South Africa was a critical partner in the global economic order and this had been reflected by the increase in bilateral trade agreements that South Africa had with other countries. The Board was on course with skills transfer, because it had recruited 46 young graduates and they would be training on technical aspects of the Board work.

The Chairperson expressed a concern in regard to the demographic profile of the workforce of the Board and he sought information on whether the Board had developed an equity plan.

Mr Mabombo indicated that the Board was working on diversifying the demographic profile of the workforce through the internship programme and was actively recruiting previously disadvantaged candidates.

Mr Singh sought clarification on how South Africa benchmarked itself, and who was used for comparison in terms of exports. He also enquired whether PPECB was also doing the inspection of imports.

Mr Mabombo, indicated that the organisation was re-establishing a link with countries like Netherlands because many of the exports destined for Europe landed in Rotterdam in the Netherlands. Israel was another benchmark, because it was known for its security consciousness and compliance to standards. Australia was the natural competitor to South Africa on almost everything. After the governing legislation in South Africa was enacted, the representatives from South Africa in those countries were recalled, and now the Board was re-establishing the links. In regard to imports, he noted that the government did the health assurance inspection, but not quality inspection. The Board was thus proposing the integration of policy so that the inspection of both exports and imports was undertaken by one government institution instead of by differing bodies.

The meeting was adjourned.

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