ATC130618: Report of Select Committee on Appropriations on Hearing on Third and Fourth Quarter Expenditure Report on Ilima/Letsema Project Grant in 2012/13

NCOP Appropriations

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE HEARING ON THE THIRD AND FOURTH QUARTER EXPENDITURE REPORT ON THE ILIMA/LETSEMA PROJECT GRANT IN THE 2012/13 FINANCIAL YEAR, DATED 18 JUNE 2013

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE HEARING ON THE THIRD AND FOURTH QUARTER EXPENDITURE REPORT ON THE ILIMA/LETSEMA PROJECT GRANT IN THE 2012/13 FINANCIAL YEAR, DATED 18 JUNE 2013
 

 

1. Introduction

 

The purpose of the Ilima/Letsema Project Grant is to assist vulnerable South African farming communities to achieve an increase in agricultural production and income, invest in infrastructure that unlocks agricultural production and supply government markets with agricultural products thus releasing beneficiaries from the poverty trap. The key outputs of the Grant include:

· Planting of land (hectares);

· Supporting beneficiaries/entrepreneurs;

· Establishment of new infrastructure;

· Rehabilitating and expanding irrigation schemes; and

· Production within the agricultural corridors e.g. maize.

 

 

1.1 Terms of reference

 

Provinces were requested to make oral presentations on their expenditure report on the third and fourth quarter of the 2012/13 financial year on the Ilima/Letsema Project Grant, and to take into consideration the following:

• Data trends in allocations, transfers and actual expenditure on the Grant;
• Assessment of department’s monitoring capacity for the 2012/13 financial year and indicate under/over-spending and what capacity constraints impacted on these outcomes;
• Whether monthly reports are received from receiving departments or municipalities, and if not, what the department is doing in order to ensure compliance with monthly reporting; and
• Whether or not the department deviated from its 2012/13 business plans on the Grant.

 

The Committee invited the Department of Agriculture, Forestry and Fisheries (DAFF) and the National Treasury (NT) to a meeting on 21 May 2013 to report on the provincial third and fourth quarter spending on the Grant. In addition, the following provincial Members of the Executive Council (MECs) and their departments were invited to the meeting to report on their third and fourth quarter spending on the Grant:

· Eastern Cape MEC for Rural Development and Agrarian Reform;

· Free State MEC for Agriculture and Rural Development;

· KwaZulu-Natal MEC for Agriculture and Environmental Affairs; and

· Northern Cape MEC for Agriculture and Land.

 

However, the MEC for Agriculture and Land of the Northern Cape did not attend and was represented by officials. There was no notification that the MEC was not going to attend.

 

 

 

 

2. Presentations

 

The National Treasury, National Department of Agriculture, Forestry and Fisheries (DAFF) and the provinces of Eastern Cape , Free State and KwaZulu-Natal reported as follows:

 

2.1 Presentation by National Treasury

 

National Treasury presented the provincial spending on the Grant for the third and fourth quarter of the 2012/13 financial year as follows:

 

 

Table1. Grant’s allocation per province and expenditure outline

 

Province	2012/13 adjusted budget             ‘000	Projected outcome at 31 March 2013           ‘000	Actual payments and percentage spent as at 31 December 2012   ‘000	Actual payments and percentage as at 31 March 2013     ‘000	Audited under-spending as at 31 March 2013           ‘000
Eastern Cape	43 980	43 981	13 345 (30.3%)	38 891 (88.4%)	5 368
Free State	54 600	46 457	12 606 (23.1%)	49 232 (90.2%)	5 368
Gauteng	28 334	28 334	15 004 (53 %)	17 221 (60%)	11 113
KwaZulu-Natal	63 000	63 000	13 550 (21.5 %)	63 000 (100%)
Limpopo	52 801	52 801	29 713 (56.3 %)	49 025 (92.8%)	3 776
Mpumalanga	42 000	42 000	40 262 (95.9%)	42 000 (100%)
Northern Cape	63 000	63 000	22 777 (36.2%)	48 651 (77.2)	14 349
North West	42 000	42 000	38 903 (92.6%)	41 800 (99.5)	200
Western Cape	50 400	50 400	42 405 (84.1%)	50 400 (100%)
Total:	440 115	431 973	228 575 (51.9%)	400 220 (90.9%)	39 895

 

 

National Treasury reported that the Ilima/Letsema Project Grant was allocated R440.115 million in the 2012/13 financial year. The provinces had projected to spend R431.973 million by the end of the 2012/13 financial year. At the end of the third quarter of the 2012/13 financial year, the provinces had spent R228.575 million (51.9%). However, at the end of the 2012/13 financial year the provinces had spent only R400.220 million (90.9%) as compared to the R431.973 million which they had projected to spend. The provinces that had spent below 50 per cent of their allocated grant funds were the Eastern Cape (30.3 percent), Free State (23 per cent), KwaZulu-Natal (21.5 per cent), and the Northern Cape (36.2 per cent).

 

National Treasury reported that generally provinces lacked early and sound planning capacity. Projects were rolled out late due to slow Supply Chain Management processes. The late delivery of inputs resulted in many farmers deciding not to plant as the window period for planting crops had passed. National Treasury further reported that poor performance by contractors and loss of capacity in the provinces had resulted in poor implementation of Grant projects. Poor monitoring of service providers led to late or non-provision of services as per required standards. National Treasury proposed that performance information reporting be improved.

 

 

2.2 Presentation by National Department of Agriculture, Forestry and Fisheries (DAFF)

 

The National Department of Agriculture, Forestry and Fisheries (DAFF) reported that the Grant was introduced in the 2008/9 financial year and since its inception a sum of R1.2 billion has been spent by provinces.

 

 

Table 2: Ilima /Letsema Grant since inception

 

Year	Allocation	Transferred	Withheld	Expenditure	% Spent
	‘000	‘000	‘000	‘000
2008/9	171,750	171,750	0	146,695	86%
2009/10	50,000	50,000	0	47,006	94%
2010/11	200,000	192.500	7,500	191,671	99,6%
2011/12	400,000	400,000	0	400,066	100%
2012/13	415,798	415,798	0	400,220	96.3%
Total	1,237,548	1,237,548	7,500	1,205,658	97.4%

 

The DAFF reported that from the 2008/09 to the 2012/13 financial years the provinces had spent 97 per cent of the R1.237 billion Ilima/Letsema Project Grant funds. The DAFF reported that from the 2009/10 to the 2012/13 financial years, a number of highlights had been achieved. The DAFF explained that this Grant focuses on:

 

· The revitalisation of the three irrigation schemes (Taung, Vaalharts and Makhathini);

· Increasing food production by supporting households, subsistence as well as smallholder farmers; and

· Implementing value-adding projects like the Niewoudtville Rooibos Tea Processing Plant in the Northern Cape Province .

 

Between the 2009/10 and 2012/13 financial years, 129 496 households were supported with starter packs for household vegetable production, provision of feeds for poultry and planting of fruit trees; 1 202 community gardens were supported including 226 schools in Gauteng Province, through Ilima/Letsema. Provinces branded their household food production programmes and the department have what they call the Siyazondla programme in the Eastern Cape and Gauteng, Mohoma Mobung in Free State, Masibuyele Emasimini in Mpumalanga and Letsema la Mantshatlala in North West.

 

Through Ilima/Letsema 226 572.76 ha of land was put into production in the period between 2008 and 2013, covering the following commodities: maize, sugarcane, sunflower, grains, vegetables, fruit trees and table grapes. About 97 684 smallholder and subsistence farmers benefitted from the programme and 18 676 jobs were reported to have been created through Ilima/letsema initiatives in the period 2008/09-2012/13.

 

In North West province, about R58 million was invested in revitalizing and rehabilitating the Taung irrigation scheme. The work done had improved irrigation efficiency and resuscitated about 6 131 ha of land back to production. The farmers are reportedly beginning to better their yield and profit. About 18.5 km of road has also been graded to enable transportation of farmers’ produce to the market.

 

In the Northern Cape Province , about R27 million was invested in revitalizing and rehabilitating the Vaalhaarts irrigation scheme. The work done has improved irrigation efficiency and resuscitated about 2 002.7 ha of land back to production benefitting about 66 farmers in the area with improved yield and profit. The total Vaalhaarts irrigation scheme that requires revitalization and rehabilitation is about 32 000 ha. R30.8 million was invested to complete the Rooibos Processing Plant benefitting 90 Rooibos producers in the Suidbokveld and Niewoudtville areas of Namaqualand .

 

With respect to KwaZulu-Natal Province , the DAFF reported that about R80 million was invested in revitalising and rehabilitating the Makhathini irrigation scheme in the 2012/13 financial year. A total of 3 600 ha of land was resuscitated back into production benefitting 278 plots; 200km of infield road on the irrigation scheme was graded and a 119 km area fenced.

 

 

2.3 Presentation by Free State Department of Agriculture and Rural Development

 

The Free State Department of Agriculture and Rural Development (FSARD) reported that it had been allocated R54.6 million for the Ilima/Letsema Project Grant in the 2012/13 financial year. The FSARD further reported having spent R54.5 million, or 99,9 percent by 31 March 2013, although National Treasury reported their spending lower, at R49.2 million or 90,2 percent.

 

The FSARD reported that, out of a target of 714 beneficiaries, 652 beneficiaries have been supported through completed projects. These included women, youth and disabled persons. A total of 482 farmers (subsistence, smallholder, and black commercial) have been supported and a total of 1 641 hectares planted. The FSARD further reported that a total of 143 jobs have been created, of which four were permanent and 139 temporary or seasonal.

 

The FSARD reported that the following challenges have been experienced:

 

· Due to internal capacity constraints, the implementation of the Grant is outsourced to Implementing Agents (IAs).

· The late appointment of IAs has proven to be a problem.

· The FSARD lacks the capacity to monitor the IAs.

· Due to the lack of capacity, the collecting of information and the timely submission of reports are a challenge.

· The co-funding of projects through the Ilima/Letsema Grant and the Comprehensive Agriculture Support Progamme (CASP) complicate reporting.

· Late delivery of production inputs hampers performance.

 

The FSARD further reported that they were implementing the Mohoma Mobung food security programme. This programme was meant for poverty eradication. The objective of the programme was to encourage each household to cultivate a vegetable garden. The programme assisted households with seeds, fertilizer, and garden tools. Households were encouraged to use recycled water when watering their seeds. A total of 3 389 households and 51 schools have benefitted from this programme.

 

When the FSARD was asked to explain the matter of 75 tractors and farm equipment which were donated to the Free State Province by the DAFF for distribution to various beneficiaries, it reported that the tractors were stationed at Vrede Showground for safety and storage and that when they were delivered the province had not budgeted for operational costs. The FSARD reported that one tractor has been damaged and it would cost R7000 to fix. The tractor’s tyres and battery had been stolen. The FSARD also reported that they did not have funds to purchase diesel. However, the FSARD reported that it was ready to distribute these tractors in the 2013/14 financial year. The Department had since purchased 10 diesel tanks which would be used when delivering diesel.

 

 

2.4 Briefing by KwaZulu–Natal Department of Agriculture and Environmental Affairs

 

The KwaZulu-Natal Department of Agriculture and Environmental Affairs (KZNDAEA) reported that it received R63 000 million for the Ilima/Letsema Project Grant in the 2012/13 financial year. The KZNDAEA added that for the third and fourth quarter they were allocated R25 200 million and R12 600 million, respectively. The KZNDAEA further reported that they spent R13 560 million of the funds transferred in the third quarter and R49 440 million in the fourth quarter. The low expenditure in the third quarter and high expenditure later was reported to be due to incorrect allocation codes on the financial system which required correcting journals to be processed in the fourth quarter. The KZNDAEA added that the bulk of mechanisation and food security expenditure was incurred in the fourth quarter, which was in line with the seasonal agricultural activities. All allocated funds under the Grant were spent in the 2012/13 financial year.

 

Regarding capacity constraints, the KZNDAEA reported that the change in the allocation codes on the financial system affected the spending trends. However, this was rectified and all expenditure was correctly allocated. Another reported challenge was unseasonably high rainfall which caused some initial delays in the implementation of projects such as mechanisation and earth dams. The KZNDAEA also reported that a change in management of the food security programme, due to the contract of a Senior Manager ending, resulted in some delays in the programme. However, a newly appointed Senior Manager was able to recover the lost time.

 

With respect to monitoring capacity, the KZNDAEA reported that it had a Director within the Monitoring and Evaluation Unit responsible for monitoring performance of all activities including those of conditional grants. The departmental line managers report quarterly on performance against set targets. The KZNDAEA further reported that it submits monthly reports on financial performance to Provincial Treasury using the In-Year-Monitoring report of the National Treasury. The Department added that it reports on quarterly performance to the Department of Agriculture, Forestry and Fisheries. The KZNDAEA reported that no transfers are made to the local government sphere or public entities; the Department itself is responsible for the implementation of all projects.

 

The KZNDAEA argued that timely application and incorporation of appropriate amounts of lime, potassium and phosphate can more than double crop yields (including staple crops such as maize) provided that other factors such as rainfall, weed control, and seed and nitrogen inputs are conducive to crop growth and production.

 

The KZNDAEA reported that all tractors donated by national government were distributed amongst farmers and they had a database of all the beneficiaries.

 

 

2.5 Presentation by Eastern Cape Department of Rural Development and Agrarian Reform

 

The Eastern Cape Department of Rural Development and Agrarian Reform (ECDRDAR) reported that it had an available budget of R43.98 million for the Ilima/Letsema Project Grant for the 2012/13 financial year. Of this it had managed to spend R38 89 million, or 88.43 percent. The ECDRDAR further reported that a total of 4 582 farmers had been supported and 5 695 hectares had been planted. The estimated yield varied between areas, with an estimated 12 tons per hectare in the western district under irrigation, and seven tons per hectare in the eastern area of the province. In addition the ECDRDAR reported that it had employed 24 tractor drivers and 20 rangers and had paid them at the Expanded Public Works Programme rates.

 

The ECDRDAR reported that it had entered into Service Level Agreements (SLAs) with the Eastern Cape Rural Development Agency and Ntinga, who had been appointed as Implementing Agents (IAs) of the programme. Weekly meetings were held with them to report on progress and identify bottlenecks. However, the ECDRDAR reported that there was room for improvement in these SLAs and that roles and responsibilities needed to be better defined. This would be considered when planning for the following cropping season.

 

The ECDRDAR further reported that its continual under-spending on this Grant was due to the procurement and delivery of production inputs being delayed by unforeseen capacity constraints of some emerging suppliers; and the fact that the mechanisation contractors sometimes lacked implements. The ECDRDAR indicated that it was considering using term contracts to enhance effectiveness, efficiency and value for money in all its conditional grants.

 

When asked about the number of tractors, the ECDRDAR reported that they had 72 tractors and they were not permanently allocated to farmers. The tractors were being rotated amongst farmers depending on the demand.

 

When asked about under-spending on this grant, the ECDRDAR replied that late payment of invoices and poor weather contributed to the challenge of under-spending.

 

 

3. Findings

 

During interactions with the National Treasury, the Department of Agriculture, Forestry and Fisheries, the Eastern Cape Department of Rural Development and Agrarian Reform, the KwaZulu-Natal Department of Agriculture and Environmental Affairs, and the Free State Department of Agriculture and Rural Development, the Committee made the following findings:

 

3.1 The following provinces had huge expenditure spikes during the last quarter of the financial year: Eastern Cape (58.1 per cent), Free State (67.1 per cent), KwaZulu-Natal (78.5 per cent), and Northern Cape (41 per cent). The Committee noted with concern that these spending spikes have the potential for fiscal dumping.

 

3.2 The provinces that under-spent were Gauteng (39.2 per cent), Northern Cape (22.8 per cent), Eastern Cape (11.6 per cent) and Limpopo (7.2 per cent), the Committee noted with concern that the under-spending compromised service delivery.

 

3.3 Some of the under-spending are due to delays within supply chain processes, capacity constraints and service providers who fail to deliver.

 

3.4 Some of the provincial departments submit unsound plans that lack risk management, show unrealistic targets or do not show long term plans to ensure recipients become self-sustaining.

 

3.5 Distribution of tractors was not based on the plans from provinces, especially in the Free State where the tractors could not be utilised due to delays in registration and lack of budgeted funds for their operational costs.

 

3.6 The submission by Free State Department of Agriculture and Rural Development had some questionable figures like high cost per hectare and expenditure of 99.9 per cent while National Treasury figures showed 90.2 per cent expenditure during the fourth quarter.

 

3.7 The Free State Department of Agriculture and Rural Development was requested to reconcile its figures and re-submit by Friday, 24 May 2013. The Free State Department of Agriculture and Rural Development’s re-submission still reflected 99.9 per cent expenditure.

 

3.8 The Committee raised concerns with the viability and sustainability of the One Family One Garden campaign in view of the general inadequate supply of water to households.

 

3.9 The Eastern Cape Department of Rural Development and Agrarian Reform is struggling to recover tractors that were given to cooperatives.

 

 

 

 

4. Recommendations

 

After interacting with the National Treasury, the Department of Agriculture, Forestry and Fisheries, the Eastern Cape Department of Rural Development and Agrarian Reform, the KwaZulu-Natal Department of Agriculture and Environmental Affairs, and the Free State Department of Agriculture and Rural Development, the Committee made the following recommendations:

 

4.1 The Department of Agriculture, Forestry and Fisheries should ensure that approved provincial plans spread expenditure over the year to avoid March spending spikes that might lead to fiscal dumping.

 

4.2 The Department of Agriculture, Forestry and Fisheries and National Treasury should closely monitor the provinces ( Gauteng , Northern Cape , Eastern Cape and Limpopo ) that under-spend to avoid any further compromise to service delivery in those provinces.

 

4.3 The Department of Agriculture, Forestry and Fisheries and National Treasury should prioritise supply chain management and monitoring and evaluation when providing capacity building support to provinces.

 

4.4 The Department of Agriculture, Forestry and Fisheries should ensure that it approves credible plans that also include contingency plans for unforeseen circumstances.

 

4.5 The Department of Agriculture, Forestry and Fisheries should ensure that any material support like the supply of tractors to provinces is informed by provincial needs and plans to avoid delays in their utilisation.

 

4.6 The Department of Agriculture, Forestry and Fisheries and National Treasury should ensure that the expenditure figures for the Free State Department of Agriculture and Rural Development are reconciled without delay to avoid unnecessary roll-overs.

 

4.8 Provincial departments of agriculture should ensure that their One Family One Garden campaigns are sustainable.

 

4.9 The Department of Agriculture, Forestry and Fisheries should provide support to the Eastern Cape Department of Rural Development and Agrarian Reform to recover the tractors that have been allocated to the cooperatives.

 

Report to be considered.