Annual Reports of Bala and Ncera Farms: briefings

Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
9 November 2004
ANNUAL REPORTS OF BALA AND NCERA FARMS: BRIEFINGS

Chairperson: Mr H Masithela (ANC)

Documents handed out:
Ncera Farms Annual and Financial Statement
Bala Farms Annual Report (email: [email protected])
Bala Farms Action Plan: Dissolution (email: [email protected])

SUMMARY
Ncera Farms and Bala Farms presented their Annual Reports to the Committee. Bala Farms outlined the dissolution plan for the farms, the completion date of dissolution, and the challenges in closing down the farms. Ncera Farms presented a proposal that their farms become a service centre, in order to allow the farm to generate revenue to sustain itself.

Members were concerned at the length of time it had taken to resolve the turnaround strategies for the two farms; the impact on farm workers and the local community, and about the role played by the Department in assisting the community.

MINUTES

Bala Farms briefing
Mr M Du Toit outlined the dissolution action plan for Bala Farms. The dissolution was in the final phase. He gave detailed information about the remaining of the four farms that were in the process of being disposed of. He outlined the difficulties that had been faced, such as the amount of R77 000 owed by SARS to the company.

Discussion
Mr D Dlali (ANC) commented about what would happen to the Bala Records. Since everything would be transferred to the Department, why was there a problem regarding the records. It would seem that they would be transferred to the Department?

Mr Du Toit explained that were different routes to follow during a dissolution process. The Department were the legal owners and it was an issue of the manner of disposal.

Mr M Ngema (IFP) asked for clarity about Mr Du Toit being the sole shareholder of Bala Farms.

Mr Du Toit explained the history of Bala Farms. Bala Farms had been created under what was formerly known as Bophuthatswana. The farms had been put in the name of a single member. In the winding up of the company the share was transferred to him. He was still the official shareholder but he had the trust deed explaining the relationship. The Minister was the owner of the property through the Department.

Ms S Tshwale (Department Land Affairs) said that the Department had picked up on the issue and they had wanted to normalise the situation but the company was already in the dissolution process.

The Chairperson agreed that when the government took over the responsibility of the farms, the farms were an ongoing responsibility of the Minister regardless of the change.

Mr B Radebe (ANC) appreciated that the company was winding down but he was concerned about the destruction of property. How would the Department ensure that the beneficiaries would get the infrastructure still intact?

The Chairperson commented that the people who were currently leasing the land were the beneficiaries. Logic would dictate that awaiting beneficiaries would look after the infrastructure.

Mr Du Toit said that of the remaining four units to be disposed of, one had gone to a community living in the area; the second had been offered to a lady who had been living on the land for eight years; the third was sold to a workforce of a commercial farmer that lived on the land; and the fourth was leased to a specific beneficiary. The second unit offered to the lady had encountered problems because the lady did not succeed in getting a loan. Thus it was being transferred to the Department for the time being. The commercial farm workers had leased the land to the commercial farmer for the time being.
The Chairperson pointed out that Mr Du Toit had not responded as to whether the infrastructure would be intact. Mr Du Toit said that it would be.

Mr T Ramphele (ANC) asked about farms in the Hartebeespoort area. He said that the Annual Report indicated problems with the tenants on the farms. The presentation showed prices of land in Hartebeespoort. He asked if this was the selling price of land in the area because of the problems? He asked if there were other beneficiaries besides previously disadvantaged people.

Mr Du Toit said that all the properties sold well below the market price. The Minister had approved all the very low prices. The Department of Water and Forestry Affairs planned to phase in payment of water over five years to deal with the problems. He pointed out that the after care of the properties was the responsibility of the Department of Agriculture and Land Affairs.

The Chairperson asked about the lady whose husband had passed on who was unable to secure a loan. He asked why she was not eligible for a Land Redistribution for Agriculture Development (LRAD) grant?

Mr Du Toit said that she had not qualified because her income was too high. The MEC of the area had asked for a postponement action on the property in order to provide assistance. Basically she did not qualify but the Department was pursuing the matter.

The Chairperson asked why the SARS forensic audit would delay the winding down of the company.

Mr Du Toit said that forensic audits generally tended to take a long period of time. He had been given questions to answer, which he had done. The company lawyers and the Auditor General felt that the issue could be resolved quickly. He said that he had mentioned it to the Committee because he was sensitising them to the matter.

The Chairperson said that the Committee would check with SARS. The matter of Bala Farms should have been resolved ages ago. It was a pivotal matter to look at. The Committee would check with the parliamentary legal advisors to assist in the matter without interfering with the work of SARS.

Mr Ngema asked if the lady in question could not be assisted by the Land Bank.

The Chairperson said that the matter was no longer in their hands. The Committee could only make recommendations at this stage. He asked if other people waiting for loans from the bank could not benefit from LRAD loans?

Mr Du Toit said that they could. Most properties were funded by the Land Bank combined with LRAD loans. The Land Bank had said that the woman did not qualify. The allocation of loans was time consuming and difficult because they had to see what people had. LRAD grants worked directly with the poor thus both entities tried to be flexible.

The Chairperson asked if Unit 9 could qualify for an LRAD loan or not?

Mr Du Toit said that this unit belonged to the farm workers who had leased their land to the commercial farmer they worked for. There was a program in place to get a loan from the Land Bank. They had received a LRAD grant but there was a problem with the Land Bank as they had lost their identity documents.

The Chairperson said that they needed to be clear about where the problem was so that they would be able to follow it up. It was expected that the Bank would follow things up. Some people applied for loans and it took up to eight years. Was the problem with the Bank or the Department? The Committee had to make resolutions on an informed basis. He asked if Unit 12 was benefiting from LRAD loans.

Mr Du Toit said that she was. It was the North West farmer of the year.

Mr Du Toit said that the process regarding that unit was nearly complete. The transfers had been sent to SARS but they had been rejected both times because of VAT problems.

The Chairperson asked if the beneficiaries were supposed to get this.
Mr Du Toit said that they had to. They were waiting for approval because the VAT had been paid. They also had to prove that they did not have local authority municipal tax in arrears.

The Chairperson asked how far was the process?

Mr Du Toit said that SARS had returned the application last Saturday. The conveyancers had taken it up.

The Chairperson clarified that they had received the bank guarantees with the problem only lying with SARS.

Mr J Bici (UDP) commented about how much one was allowed under the LRAD grants. The maximum was about R20 000 with farms costing roughly R200 000. He then went on to say that the Committee would have problems working with the Department of Land Affairs because the Department had problems in acting swiftly and acting to help poor people get land.

The Chairperson ruled that the first comment was not relevant because it was not specifically for this project. However the 2^nd question was necessary for the making of recommendations. He cautioned the Committee that they should not be too hasty. He said that they had to make good judgements on how best to engage with the Department.

Mr Ramphele raised the issue of sustainability of the farms. He wanted to know what chances they had of sustainability.

The Chairperson ruled that Mr Du Toit on behalf of Bala Farms would have to submit in writing the sustainability of the farms, all the beneficiaries of the farms and what problems the people were facing. He said that the report would be debated alongside the Annual Report. The issues would be taken to the legal advisors in order to get an approach that would not interfere with the audit. The difficulties of the Land Bank and the Department would have to be presented. The issue had to be closed by the end of the next financial year.

Ncera Farms briefing
Mr A Stylianou (Chairperson) presented the make up of the company, their relationship to the government, the activities during the year, the training they offered, their financial statements, and the suggested way forward.

Discussion
The Chairperson said that according to the PFMA, audited statements and Annual Reports had to be submitted to the auditors. The correct authorities had to receive these reports. He asked Mr Marais if this had not been done.

Mr T Marais (Assistant Director General: Financial Affairs) said that on a normal report from a national Department there were all the relevant program performances. In terms of private member practice this was how it had always been done. He suggested that there was a misunderstanding from the private sector. He said that the company would undertake to present the report but include the activities and a legal report covering what had happened during the year.

The Chairperson said Mr Marais had a good defence. He said that last year he had seen a different report. The company presented a report to state what had happened annually and the financial statements. It was about 2 to 3 pages and it was part of the report. He said that it was important for entities to follow the law to the letter. The Act dictated how it should be handled. .

Dr E Schoeman (ANC) was concerned about the lack of guarantees from the Department, which the company needed to stay afloat. The management fees were listed at R960 000. Who were the beneficiaries of this figure? It was reported that labour costs had risen by 53% - what was the explanation for the increase?

Mr Marais said that the piece of land belonged to the Department of Public Works. They had hired someone to manage the project, which was the managing agent. They were being paid to manage the project. Mr Marais said that the labour costs now included 47 labourers, which was the reason for the increase of 53% from the last financial year.

Mr Ramphele said that he was also concerned that they were getting continuous assistance from the Department with no clear indication on the direction that the Department was going in. He said that the service was clearly required and there should be no exit plan.

Mr Marais said Department assistance was the way forward. The solution suggested was to settle framers onto the land and provide post settlement support. They would create a service centre which would be handed over to the newly-settled community.

Mr Ramphele asked how in 2003 they listed no entertainment expenses, but in 2004 entertainment and catering expenses were catered for.

Mr G Van den Heever (Managing Director) pointed out that the entry had been R503 in 2003 and R803 in 2004. The member had looked at the statement incorrectly.

The Chairperson asked Mr Marais if the Board had taken a decision on the way forward. Would it be a training site for communities and was the Department planning to go ahead with this? Was there a plan on how it should be run?

Mr Marais explained that they were a Section 21 Company. A Section 21 Company had to have a board. He said that because the project was so small none of the directors received a salary. Everything was being done for free. The Board could not support the company. The Department decided to set up a service centre at Ncera. The Minister as the Executive Authority in terms of the PFMA had approved the turnaround plan. In this year's budget they had already included an amount of R700 000 which was a phasing in of R1.2 to R1.4 million to physically create a service centre. Decisions were made through the Managing Company to the Board who then put in a claim to the Department. The Department would release the funds to the Board who would then pass it on to the Managing Company. This meant that there were dual auditing processes.

The Chairperson said that he understood the point of sustaining the project through the company. He reminded the meeting that the one fundamental aim was to transfer land to previously disadvantaged people.

Mr Bici asked about page 3 of the Auditor-General's Report and the uncertainty of sustainability if the government did not support the project. Thus, regarding the way forward would there be any saving for the Department or government if the farms were disposed of? How long would this process take and would it have financial implications for the Department?

Mr P Ditshetelo (UCDP) said that the fact that the project was not sustainable on its own was an alarming remark. How could it be sustained and could this only be done in the foreseeable future? He said that if no timeframes were put in place they were leaving the project to chance. He agreed that the main aim was to transfer land.

Mr Ngema commented on the same point. He asked if there had been assurances from the Department to remove the qualifications of the auditors. He said that the focus must be on tightening the plan.

Mr Marais said that under current practice there was no way the project was sustainable. The only way to turn around the problem was to introduce a service centre. Under this approach they would also be able to get cash flow out of farming and the revenue from the centre would be enough to sustain the centre. He said that the centre had to be self-sufficient at all costs. All activities would be centralised and all the farms in the area would be serviced from a central point. Sustainability was in the centre.

Mr Bici said that he had heard nothing about timeframes.

The Chairperson asked if it was financially sustainable to dispose of the land or to run it under the current practice.

Mr Ngema clarified the debate by asking if all separate farms would have one farm service centre and if the farming activities would create revenue. The disposal of land was an urgent priority. Would there be an impact on cost and would there be high costs of maintenance if they went the route of settling farmers in the next year?

The Chairperson asked for a response about timeframes and what the best option was - disposal or a government-funded project?

Mr Marais said that only the security company would save. It would be better to dispose of the land and settle the land.

The Chairperson said that no one was arguing against post settlement support. He wanted to know why it had to be such a long process. Why did they not just work with the people who wanted the land from the onset? He pointed out that once the budget had been allocated it would be difficult to deal with these issues. The Committee needed a clear and succinct plan of the direction the Company wanted to go.

Mr Marais said the plan was to close down the company and do support through the Department. The other option was to do this through a service point.

The Chairperson ruled that Mr Marais would have to put down on paper the clear aims and objectives of the project for the Committee. The submission would have to include timeframes and the labour force. The Committee needed more information so that informed decisions could be made.

Mr Ramphele said that this report would have to include what the Department was thinking. Did they want to expand the project or not and the reasons?

Mr Marais pointed out that the farm was the only place to do such a project.

Mr Dlali commented that the report should include who were funding the students in the training program, who was funding the agency, how was the agency appointed and the relationship between the manager and the agency. He said that community public private partnerships tended not to work. The viability of initiatives was in question when too many people were involved. He said that the viability of the project had to be looked at in terms of running a business. He said that the report should also deal with the exit strategy and how far they had gone with it.

The Chairperson agreed that the exit strategy had to be included.

Mr Marais said that the training was being done by the Managing Agency. He said that they had agreed in principle to the notion of a partnership. He said that the public-private partnerships were just names for the Board to look into the partnership. The current stakeholders were the Company, the workers on the farm and the local group in the areas. They were working with all the players in the area.

The Chairperson said that in terms of integration the public had to be included. He said that as part of the suggestions and discussions last year the Committee had emphasised the involvement of black trainers. How far had they moved with this?

Mr Stylianou said that they had trained black trainers and they would be used in the new year. He said that they had lost two trainers to other projects and they were unable to get them back. Four others had been trained and they would be used in the new year.

The Chairperson said that it was advisable for a manager to appoint a company to train people. The company was being paid for by taxpayers thus this had to be done. They had to affirm black people to be integrated in the training. He said that the issue would be left there for now.

Mr Ramphele asked about the process of procurement. This was in reference to the Manager's wife working on the farm. He said that there was a need for the Committee to be satisfied that good laws of administration had been applied.

The Chairperson reminded the Committee that the wife was a volunteer and that was something that was encouraged. On the basis of that however it was important to integrate black people into the training of others. It was good work that the Stylianou's were doing.

The Chairperson reminded the Company that they had to submit a written report on the direction they wanted to follow for government to adequately fund it. Currently there was a debate about agricultural schools and the activities of the farm had to be synchronised with the national initiatives. The project had to be expanded. He said that it was important for the Committee to understand the activities of the Department and the Company.

The meeting was adjourned.