ATC200715: Report of the Portfolio Committee on Agriculture, Land Reform and Rural Development on the Special Adjustment Budgetand the 2020/21 Revised Annual Performance Plan of the Department of Agriculture, Land Reform and Rural Development: Vote 29, dated 15 July 2020

Agriculture, Land Reform and Rural Development

 

REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE, LAND REFORM AND RURAL DEVELOPMENT ON THE SPECIAL ADJUSTMENT BUDGETAND THE 2020/21 REVISED ANNUAL PERFORMANCE PLAN OF THE DEPARTMENT OF AGRICULTURE, LAND REFORM AND RURAL DEVELOPMENT: VOTE 29, DATED 15 JULY 2020

 

 

The Portfolio Committee on Agriculture, Land Reform and Rural Development (hereinafter referred to as the Portfolio Committee) having examined the 2020/21 Special Adjustment Budget for Vote 29: Agriculture, Land Reform and Rural Development and revisions on the 2020/21 Annual Performance Plan of the Department of Agriculture, Land Reform and Rural Development (hereinafter referred to as the Department) on 08 July 2020, reports as follows:

 

1.         Introduction

 

The Public Finance Management Act, 1999 (Act No. 1 of 1999) and the Money Bills Amendment Procedures and Related Matters Act, (Act No. 9 of 2009) empower the Minister of Finance to table in Parliament an adjustment budget when necessary. This has been done through the tabling in a joint sitting ofParliament, of the Adjustments Appropriation Bill (B10 of 2020) to effect adjustments to the appropriation of money from the National Revenue Fund for the requirements of the State in respect of the 2020/21 financial year; and to provide for matters incidental thereto;the Division of Revenue Amendment Bill (B9 of 2020) to amend the Division of Revenue Act, 2020, in accordance with the Money Bills and Related Matters Act, 2009; and to provide for matters connected therewith; as well as a Supplementary Budget Review 2020.The adjustments to the budget were necessitated by the Covid-19 pandemic and the economic downturn, which the country faces.

The purpose of this report, which is supplementary to the previous Portfolio Committee Budget Vote 29 Report that was adopted by the Committee on 29 May 2020 and published in the Announcements, Tablings and Committee Reports (ATC) on 05June 2020, is to highlight the budget adjustments to Vote 29: Agriculture, Land Reform and Rural Development and the impact of these adjustments on the 2020/21 Annual Performance Plan (APP) of the Department.

 

2.         The Implications of the Covid-19 Pandemic on the Mandate of the Department

 

The Department’s mandate is to provide equitable access to land, integrated rural development, sustainable agriculture and food security for all. The sector is generally empirical by nature and most of its key activities, in order to realise this mandate, are implemented in provinces and/or municipalities. Although Agriculture is an essential service, the restrictions on some economic activities and on movement that have been posed by the national lockdown in response to the Covid-19 pandemic have placed constraints in the manner in which the Department carries out its mandate. As a result, the Department has been unable to perform some of its functions and had to revise and/or suspend some of its 2020/21 annual targets. The greatest concern to the Committee is that most of the revised and/or suspended targets are core service delivery activities in respect of land acquisition and redistribution, agricultural production, food security, farmer support and capacity development, agricultural and rural infrastructure development, as well as rural enterprise development.  

 

3.         Analysis of the Revised Budget on Department Programmes and Previously Planned

            Targets

 

The Department’s original budget has been reduced from R16.8 billion to R14.4 billion as reflected in Table 1 below. The budgetary reduction of R2.4 billion is attributed to suspension of:

 

• R300 millionfor compensation of employees across all Programmes;
• R393.3 million in respect of public corporations and private enterprises (Land Bank);
• R437.9 million in respect of Provinces and municipalities (conditional grants);
• R624.6 million forhouseholds (food security and land reform grants);
• R338.1 million in respect of Department agencies and accounts; and
• R299.9 million for goods and services.

 

The reduction on compensation of employees, which has been implemented in all Programmes, will likely have an impact on the filling of vacancies particularly critical and senior management service positions, which in turn, will impact the fulfillment of certain planned performance targets for the 2020/21 financial year. However, for most of the targets that the Department could not implement and therefore, revised or removed from the original APP, it cited restrictions on activities as a result of the lockdown as a contributing factor rather than personnel-related capacity.

 

Table 1. Special Adjustments to the 2020/21 Budget of the Department

Programme/Branch	Original Budget	Special Adjustment	Current Budget
	R'000	R'000	R'000
1. Administration	2,732,229	-86,572	2,645,657
2. Agricultural Production, Health, Food Safety, Natural Resources & Disaster Management	3,220,722	-189,071	3,031,651
3. Food Security, Land Redistribution& Restitution	8,117,180	-1,895,060	6,222,120
3.1 Food Security	2,651,377	-947,586	1,703,791
3.2 Land Redistribution & Tenure Reform	2,034,017	-544,203	1,489,814
3.3 Restitution	3,431,786	-403,271	3,028,515
4. Rural Development	1,097,774	-199,793	897,981
5. Economic Development, Trade & Marketing	885,580	-135,922	749,658
6. Land Administration	756,571	112,674	869,245
6.1 National Geomatics Management Services	547,182	-30,620	516,562
6.2 Spatial Planning & Land Use Management	209,388	-6,706	202,682
6.3 Registration of Deeds	0,001	150,000	150,001
Total	16,810,056	-2,393,744	14,416,312

Adapted from DALRRD (2020) – PowerPoint Presentations to the Portfolio Committee, dated 05 May & 08 July.

 

1. Programme 1: Administration

 

The reduction for Programme 1 is R86.6 million (Table 1) in respect of compensation of employees, which is the largest reduction on compensation of employees and constitutes approximately 29 per cent of the R300 million that was suspended for compensation of employees. Although the actual impact on targets has not been highlighted on the Administration Programme, in its Revised APP, the Department has removedthe performance indicatorfor compliance to performance management frameworks, whose annual target was 100% compliance to performance management frameworks. This is one of the most important target for this Programme in light of the Department’s non-compliance with performance and financial management legislation and frameworks that has seen it receiving repeat audit findings from the Auditor-General of South Africa (AGSA) in previous years. During engagements with the Committee on APPs in May 2020, the Department acknowledged challenges with compliance to legislation and regulations and concerns with repeat audit findings; and thus assured the Committee that the aforementioned target, which has since been removed, would address such challenges in conjunction with other measures that are in place.

 

1. Programme 2: Agricultural Production, Health, Food Safety, Natural Resources and Disaster Management

 

Programme 2 saw a reduction of R189 million (Table 1) that constitute R68.3 million for compensation of employees and R120.7 million from the Ilima-Letsemaconditional grant. For the conditional grant, each provincial allocation has been reduced by approximately R13.4 million. The reduction in the Ilima-Letsema grant will have a negative impact on agricultural production and household food security particularly for subsistence and smallholder farmers. The Committee was concerned that the reduction occurred at a time when most of the farmers needed additional production assistance particularly those that have also been affected by the drought. Additionally, the impact will be further aggravated by the lockdown conditions associated with the Covid-19 pandemic particularly for the majority of disadvantaged farmers who have not received assistance from the Department’s Covid-19 Agricultural Disaster Support Fund.

 

In light of the restricted activities due to lockdown and the budget adjustments, all targets that require field activities and group physical contact (e.g. through interviews,consultative meetings/workshops and training activities) have been suspended from the current APP; and the area of cultivated fields that will be changed from conventional agriculture to conservation agriculture has been reduced from 10 000 hectares (ha) to 5 000 ha.

 

3.3Programme 3: Food Security, Land Redistribution and Restitution

 

This Programmesaw the largest downward budgetary adjustment despite it being one of the core Programmes in fulfilling the Department’s mandate.The initial budgetary suspension for Programme 3 was R2.7 billion and a re-allocation of R763.6 million for households under the Restitution sub-programme for Covid-19 purposes reduced the figure to approximately R1.9 billion as reflected on Table 1. TheR1.9 billion reductions is in respect of:

 

• R317.2 million from CASP infrastructure;
• R353.8 million from Food Security that was supposed to be a transfer to the Land Bank for the Blended Finance Scheme;
• R258.1 million worth of transfers to households for Food Security;
• R336.4 million worth of transfers to households for Restitution grants;
• R30 million worth of transfers to households for land tenure payments;
• R443.6 million from the Agricultural Land Holding Account (ALHA) for land acquisition;
• R44.5 million from the Office of the Valuer-General (OVG) for operations;
• R75 million from compensation of employees; and
• R36.4 million from goods and services.

 

The reduction of R1.9 billion in the Programme’s budget is quite significant (79% of the total reduction to the Budget Vote) and was highlighted as the biggest concern by the Committee given the Programme’s mandate on land acquisition and redistribution and food security promotion;and notwithstanding the important role Programme 3 is expected to play in contributing to Economic Transformation and Job Creation (Priority 2 of the Medium Term Strategic Framework). Approximately a third (33%) of the reduction to the Programme will be in respect of transfers to households (R624.6 million), which the Department attributed to restriction on economic activities due to the lockdown. With indications that Covid-19 may be part of our lives for another year or two, the concern is lack of a plan to address the challenges going forward particularly as Agriculture is an essential service.

 

While mindful of the restrictions posed by the lockdown, the Committee was particularly concerned with the budgetary suspension for food security and farmer support (approximately R612 million) including suspension and revision of related targets given the hunger situation in the country, which has been previously highlighted as a concern by Statistics South Africa. The food insecurity and hunger situation has since been compounded by the lockdown as a result of the Covid-19 pandemic as more people are losing sources of income and other means to eke out a living. The Committee was of the opinion that without the necessary support from the Department for production and other activities, particularly for subsistence and smallholder farmers, food insecurity is likely to increase.

 

In light of the suspension of the transfer to the Land Bank for the Blended Finance Scheme (R353.8 million), the support for commercialisation of 150 producers has been removed from the Revised APP. The annual target to support 9 000 red meat producers, which was previously questioned by the Committee, has also been removed while support for 200 Proactive Land Acquisition Strategy (PLAS) farms through the Land Development Support Programme has been reduced to 146 farms.

 

With regard to land redistribution, the Committee noted that a total of R443.6 million suspended from the Land Acquisition and Redistribution sub-programme, for the Agricultural Land Holding Account (ALHA), will result in lesser number of hectares allocated to farmers. Given the public demand for land, the Committee was concerned about the long-term effect on meeting the National Development Plan (NDP) targets for land redistribution as reported in the Budget Vote report. However, it commended the Department for the initiative to transfer state land to farmers. 

 

Whilst in the Budget Vote report the Committee commendeda renewed focus on the implementation of the Transformation of Certain Rural Areas Act, Act 94 of 1998 (TRANCRAA), a R30 million reduction from the Land Tenure sub-programme will result in a decrease in the number of TRANCRAA areas to be transferred, that is, from 21 to 10 areas to be precise.

 

The sub-programme of Restitution saw a R1.1 billion suspended from the baseline allocation. However, a re-allocation of R763.6 million to Restitution resulted in a total net reduction of R336.4 million. The Committee noted that the reduction was linked to a postponement of settlement of claims due to the restrictions on economic activities caused by the lockdown.

 

1. Rural Development

 

Of thetotalR1.1 billion allocated previously, R199.8 million was suspended, resulting in the revised allocation of R808 million for 2020/21. The reduction constitutes R11 million from compensation of employees and R188.8 million from goods and services. The Programme would, as a result, not fill vacancies and will suspend some of the infrastructure projects due to restrictions on economic activities. The Committee welcomed the commitment to still pursue youth training through the National Rural Youth Service Corps (NARYSEC). However, it was concerned about the lesser number ofFarmer Production Support Units (FPSUs) to be supported.

 

1. Economic Development, Trade and Marketing

 

The budgetary reduction of approximately R135.9 million in this Programme is in respect of:

• R21.7 million for compensation of employees;
• R74.7 million under Agroprocessing, Marketing and Rural Industrial Development for goods and services in respect of Farmer Production Support Units (FPSUs); and
• R39.5 million under Cooperatives Development that was supposed to be a transfer to the Land Bank for AgriBEE.

 

The Department has identified FPSUs as a crucial infrastructure element in support of the implementation of the Agriculture and Agroprocessing Master Plan (AAMP) that is being developed; and planned to support FPSUswith basic infrastructure, mechanisation support, input support, ownership support, human resources support and producer support.However, with the adjustment to the budget and the restrictions imposed by the lockdown as already alluded to, the target to ensure that 24 FPSUs are functional, has been suspended from the Revised APP along with all other targets on producer capacity development and support including cooperatives training.

 

What remains of the Department’s annual targets under this Programmeis the target on processing AgriBEE Fund applications; as well as all targets based on reports on trade agreements and negotiations, and bilateral and multilateral engagements (International Relations and Trade sub-programme).  The maintaining of the targets on the latter reports implies that the Department is, or will be, able to hold engagements with other countries or international stakeholders outside the country. However, it suspended the development of the Draft Marketing of Agricultural Products Amendment Bill, which was the only legislation that the Department planned to develop on its original 2020/21 APP.  The planned process for the development of the Bill involveddrafting the Bill, internal consultation (possibly within the Department and/or other Government Departments and Agencies) and submission of the Draft Bill to the Office of the State Law Advisor.In this regard, if the Department can hold bilateral and multilateral engagements, then there is no justification for the suspension of theDraft Marketing of Agricultural Products Amendment Bill from the APP. The removal of the Draft Bill means that it might take another two years before it is introduced in Parliament despite its importance.

 

1. Land Administration

 

The Committee noted an upward adjustment under the Land Administration Programme. Although R37. 3 million was suspended under this Programme in respect of compensation of employees, a further R150 million was re-allocated for Covid-19 purposes, hence the upward adjustment of R112.7 million which is allocated for operational funding of the Registration of Deeds Trading Account whose revenue was affected due to restrictions on economic activities. In summary, the Programme allocation increased from R756 million in February to R869.3 million in June 2020.

 

 

 

 

4.         Committee Observations

 

1. The substantial reduction of R2.4 billion in the total budget of the Department, which the Committee previously noted was inadequate particularly for Programme 3: Food Security, Land Redistribution and Restitution, which also saw a significant reduction of R1.9 billion.
2. The suspension and/or revision of core service delivery targets when Agriculture is considered an essential service including the resultant impact on the sustainability of subsistence and smallholder farmers in particular as they remain the key beneficiaries of the Department’s support programmes.
3. The revision of the criteria for Covid-19 assistance waswelcome, however, there was uncertainty regarding the Department’s capacity to provide the required support to farmers in response to the Covid-19 pandemic. As an example, out of 55 000 applications that were received for the Department’s Covid-19 Agricultural Disaster Support Fund, approximately 15 000 applicants (28%) received approval for assistance.
4. Land acquisition (restitution and redistribution), support to Communal Property Associations (CPAs), TRANCRAA communities, and labour tenants remain an area of high priority for the Department. However, budget reductions could impact on the success of the programmes.
5. The suspension of the development of the Draft Marketing of Agricultural Products Amendment Bill from the APP, which puts further emphasis on the Committee’s uncertainty regarding the Department’s capacity to timeously develop essential legislation to address sectoral challenges.
6. Continued trade negotiations and engagements on bilateral and multilateral agreements in Programme 5 were appreciated and commended. However, the benefits of such agreements particularly in relation to access to export markets, are likely to benefit a few well established agribusinesses in light of the suspension of most service delivery targets to develop the smallholder sector. 

 

 

 

 

 

5.         Recommendations

 

The Portfolio Committee on Agriculture, Land Reform and Rural Development makes the following recommendations to the National Assembly (NA) regarding the Special Adjustment Budget for Vote 29: Agriculture, Land Reform and Rural Development:

 

1. Recommendations of the Portfolio Committee on the Budget Vote Report (Budget Vote 29) dated 29 May 2020, remain.

 

1. Additionally, the Minister of Agriculture, Land Reform and Rural Development must submit to Parliament –

 

1. The reviewed criteria for the Covid-19 Agricultural Disaster Support Fund including a comprehensive progress report on the Support Fund implementation and funding arrangements inclusive of the budget adjustment.
2. A Plan on how the Department is going to assist approximately 40 000 farmers whose applications for the Covid-19 Agricultural Disaster Support Fund were rejected. The Plan should also provide a provincial breakdown of those farmers, commodities and required assistance/support.
3. An Action Plan that outlines how the Department would catch up on delivery of core services in respect of land (both redistribution and restitution), food securityand farmer development and support over the MTSF period in order to meet the NDP targets.
4. A report that indicates specific land reform and conditional-grant fundedprojects that have been affected by the budget adjustment and revisions to the 2020/21 APP for each Programme, specifying the type of project, location and budget, as well as the impact on service delivery in each case.

 

The Committee further recommends thatwithin three months after the adoption of this report by the National Assembly, the Minister should submit to Parliament, responses to the above recommendations.

Report to be considered.