Report of the Ad Hoc Committee on Agriculture and Land Affairs on Budget Vote 26—Agriculture, dated 23 June 2004:

The Ad Hoc Committee on Agriculture and Land Affairs, having considered Budget Vote 26, reports as follows:

Introduction
The Committee examined the budget of the Department of Agriculture (Vote 26) for the 2004/5 financial year as well as the forward estimates for 2005/6/7 included in Estimates of National Expenditure.

Main features
The main features of the 2004/5 budget are:
a) The Department is allocated R1,3 billion for the financial year 2004/5, while the forward estimates anticipate it receiving the total allocation of R1,4 billion, R1,5 billion over the Medium Term Expenditure Framework (MTEF) period respectively. Baseline adjustments totaling R1,1 billion include the Comprehensive Agricultural Support Programme (CASP) — a provincial grant for post-settlement support to farmers. These initiatives are aimed at providing support to beneficiaries of the Land Redistribution for Agricultural Development (LRAD) programme. This compares to the R1,2 million voted in 2003/4. This budget can be described as a growing budget with a difference of 4,5%.

The allocation for LandCare projects, under the Sustainable Resources Management and Use programme, has been increased from R18,0 million in 2000/1 to R38 million in 2003/4 and subsequently to R44,5 million in 2006/7.

A significant increase is anticipated in compensation of employees from 2004/5 onwards, mainly due to the filling of vacant posts following the finalization of the Public Sector Coordinated Bargaining Council Resolution 7 of 2002 and the approval of the new structure. Transfers dominate the expenditure with an amount of R594,6 million for 2004/5, of which approximately 57% or R338,4 million will be a transfer payment to the Agricultural Research Council, under the Agricultural

Production programme.
b) The 2004/5 budget is divided into nine programmes, same to the previous year. These are: Programme 1—Administration (0,2% of the total); Programme 2—Farmer Support and Development
(10,8%); Programme 3 — Agricultural Trade and Business Development (15,4%); Programme 4 — Economic Research and Analysis (12,1%); Programme 5 —Agricultural Production (16,4%); Programme 6 — Sustainable Resources Management and Use (18,6%); Programme 7—National Regulatory Services (1,7%); Programme 8 — Communication and Information Management (2,5%); and Programme 9—Progamme Planning, Monitoring and Evaluation (38,4%). All these programmes do correspond to the operational needs of the Department. c) The budget for 2004/5 can also be divided into the following functional categories:

— Compensation of employees R360 299 million (18,7%)
— Goods and Services R318 108 million (11,3%)
— Transfers and subsidies R594 600 million (4,1%)
— Payments for capital assets R33 221 million (18,9%)

d) The primary objective of Programme 1 is to provide strategic leadership and direction on matters of policy, financial and organizational performance. The programme is composed of the Office of the Director-General which includes transformation imperatives, overall security and internal audit. The Administration and Governance which includes Human Resources Management, Legal and Executive Secretariat Services, and Information & Communication Technology. The Financial Management includes Financial Services, Debt Management & Disbursements and Procurement and Asset Management. Planned expenditure is R157,8 million for 2004/5, R166,8 million for 2005/6, and R176,7 million for 2006/7.

e) The budget for activities falling under Programme 2 has decrease from R292 396 million budgeted for 2003/4 compared to the R260 936 million for 2004/5. The activities budgeted for under Programme 2 are Management, the Farmer settlement, the Agricultural Finance and Co-operative Development, the Food
Security and Rural Development; the Agricultural risk management; and the Registrar of co-operatives.

f) The budget for Programme 3 has increased from R37 380 million in 2003/4 to R43 137 million for 2004/5 and in terms of percentage the programme has increased by (15,4%). The Programme is composed of the following components: the Management; the Business & entrepreneurial Development; the Marketing; the International Trade; and the National Agricultural Marketing Council.

g) Programme 4 budget is increased by 12,1% from R20 054 million in 2003/4 to R22 486 million for 2004/5. The increase is accounted for the Management of the programme by 4,8%; the Production & resource economics by 12.3%; and Statistics by 12,7%.

h) Programme 5 budget increases from R319 342 million in 2003/4 to R371 653 million for 2004/5 by 16,4%. The increase is accounted for the Management of the programme by 1,8%; the animal and aqua production increases from R3 846 million to R10 026 million; the Agricultural Research Council by 9,5%;
the Plant production; and the Scientific research and development. The Department indicates that in line with 2003 output targets, a draft policy on agriculture and sustainable development is awaiting approval. The policy focuses on production practices while incorporating the outcomes of NEPAD and SADC
initiatives. A framework for the livestock development strategy was also finalized.

i) The budget for Programme 6 increased by 18,6%. In 2003/4 the programme was allocated R139 533 million whereas for 2004/5 is allocated an amount of R165 469 million. This increament is accounted for the Management of the programme by 13,2%; the Water Use and Irrigation Development by 14,1%; and the Land use and soil management by 21,9%. The Department indicates that this is due to key challenges such as response to drought, pests as and when they occur.

j) In terms of the Budget Review, the National Regulatory Services programme would receive and additional allocation to reduce the risk of animal and plant diseases through regulation and effective
control of the movement of people and animals across national borders. The Budget for this programme shows a decrease from R197 932 million allocation for 2003/4 to R194 965 million for 2004/5, a decrease of 1,7%. The increase is accounted for the Management of the programme by 5,2%; the Food Safety and
Quality Assurance by 3,5%; the Genetic resources by 16,9%; the Plant health by 14,4%; the Animal health by 13,8%; and the South African agricultural food, quarantine and inspection services by 24,7%.

k) Programme 8 budget also increases from R80 777 in 2003/4 to R82 797 million in 2004/5. The increase is 2,5%. The programme is accounted for the following components: the Management of the programme icreased by 3,4%; the Agricultural Information Services by 8,7%; the International Relations
declined by 18,3% from R36 257 in 2003/4 to R29 617 million in 2004/5; the education and training by 60,9%; the Grootfontein agricultural development institute by 10,9%. The major challenge of the programme is to train and skill Black emerging farmers.

l) Programme Planning, Monitoring and Evaluation consolidate and supports strategic and operational planning in the Department. Programme Management supports the strategic and operational planning, while Monitoring and Evaluation monitors and evaluates the impact of the policies of the Department. The
budget for the programme increases from R5 272 in 2003/4 to R7 296 million for 2004/5. Expenditure is forecast to grow from R7 to R8,7 million in 2006/7. Due to the nature of the programme, the bulk of its expenditure is on compensation of employees and goods and services. Chapter 7 of the intergovernmental Fiscal Review served as a source in terms of identifying the spending pressures in the sector and ensuring alignment of available resources. Subprogramme: project planning would be fully implemented by 2005 and monitoring and evaluation by March 2005 as targets.

Comments:
m) The Committee was satisfied with the spending patterns and it was also clear that there was good synergy in the way the Department was dealing with the issues; and it was found that by and large the Department attained most of the output targets identified in 2003/4. The report also indicates that there were improvements in organizational efficiency, corporate governance and work environment.

THE COMMITTEE AGREED THAT:
The Department of Agriculture should in the second-term report on developments with regard to the Agricultural Credit Scheme.

n) There was an understanding with the Department that following critical issues require special sessions with the Committee in the near future:

— International Strategy
— AgriBEE;
— Integrated Food Security and Nutrition Program (IFSNP) progress report (Social Cluster);
— Comprehensive Agricultural Support Program (CASP) rollout in relation to: CLARA and SLAG per province;
— Research & Development (National, Regional, International);
— Human Resources Development Strategy (update figures) especially in farmer training and extension reform;
— Sustainable Agriculture; and
— Agricultural Finance

The Committee also had an opportunity to engaged on budgetary issues with the entities associated to the Department — the National Agricultural Marketing Council (NAMC), the Agricultural Research Council (ARC), the Onerstepoort Biological Products (OBP); the Land Bank and Ncera Farms (Pty) Ltd. The highlights of the hearing discussions included:

o) National Agricultural Marketing Council (NAMC)
The Marketing of Agricultural products Act (47 of 1996), established the National Agricultural marketing Council to advise the Minister for Agriculture and Land Affairs on the marketing of agricultural products. The activities of the NAMC are informed by the Act and the Agricultural Sector Strategic Plan. Ministerial approval of the Council’s budget and Business Plan is required on an annual basis before the beginning of each financial year. Transfers to the NAMC form part of the Agricultural Trade and Business Development programme (programme 3) and amounted to R10,4 million in 2003/4. The approved budget for 2004/5 is approximately R11,9 million and is made up of the Transfers from the Department of Agriculture; the Interest; the surplus and other income. The budget would be accounted for personnel expenditure R6,5 million; the Administration R2,9 million; the Professional services R2,4 million and Stores R180 000.

Comments:
The Committee ACCEPTED the budget report and RAISED THE FOLLOWING CONCERNS:
_ The NAMC report does not relate to the State of the Nation Address in any way; and
_ Secondly there were a number of gaps in the report in terms of projecting core business of the institution and challenges it faced.

THEREFORE RESOLVED to mandate the NAMC to go back and make an introspection of itself whether was it still relevant within the current conditions; and
Secondly, within seven days, the NAMC should inform the Committee how does it see its relevance to the state of the nation address or what does the Council take from the Address.

p) Agricultural Research Council (ARC)
The Agricultural Research Council is established by the Agricultural Research Act (86 of 1990), to provide agricultural development, technology and support to the agricultural community. The ARC comprises a central office and 13 research institutes whose activities are grouped under five business divisions namely, Grains and Industrial Crops, Horticulture, Livestock, Public Support Services and Sustainable Rural Livelihoods. Transfer payments to the Council are included in the Agricultural Production (Programme 5). The ARC is expected to receive transfer payments amounting to R338,4 million in 2004/5, R355,7 million in 2005/6 and R386,8 million in 2006/7. The ARC also competes for supplementary research funding from the Innovation Fund on the Science and Technology Vote.

Comments:
The Committee CONSIDERED the Budget report and AGREED:
_ To accept theARC report, however for the Committee to be able to assist, theARC should forward projections on what is required to run the institution effectively pertaining to the problem of R&D and Finance;
_ That the ARC should expand its key performance areas and challenges to include challenges posed by the first and second economies;
_ That ARC should research on the indigenous knowledge; and
_ To under take visits to see the status quo of the institution and research apparatus

q) Onderstepoort Biological Products (OBP)
The OBP Ltd became a state owned public company on 6 September 2000. The company produces and markets a variety of animal vaccines and related biological products for local and international markets. The Department of Agriculture does not contribute financially to this entity as it is financially independent and derives its revenue from sales of vaccines and related biological products. Revenue from the sales of vaccines increased from R40 million in 2000/1 to a projected R99,8 million in 2006/7, an annual average
increase of 16%. Projections on sales local R40 million (R36 million 2003/4); export R35 million (R34 million 2003/4). The total budget for 2004/5 R75 million (R70 million for 2003/4), increases by 7% growth for 2003/4.

The Budget for 2003/4 is accounted for the increase in depreciation; the increase in repairs and maintenance; the new vaccines; the annual salary increases; the salary adjustments to market; the Research and Development; the travel to export market; and administration.

Comments:
The Committee NOTED THAT the OBP is doing extremely well; the committee has an overwhelming confidence to the institution; and thirdly was encouraged by the speed that was required to combat diseases.

THEREFORE AGREED:
_ That the Institution should set bench marks for itself;
_ That the OBP must improve on the marketing strategy; and
_ That the institution must continue revamping old equipment

r) Land Bank
The mandate of the Bank is to promote rural development by providing financial products and services, focusing on servicing all sectors of agricultural economy; meeting the needs of resource poor farmers and rural poor; contributing to rural development; and matching financial sector norms for cost efficiency, effectiveness and customer service.

The Bank has a client base of 45 000 commercial farmers, and had advanced R2 billion to 15 000 development farmers by March 2003. The micro-financing initiative of the Bank, Step up, has made up to
R300 million available to over 130 000 people who were previously regarded as unbankable. The Bank has also disbursed R129 million in government grants in support of the Land Redistribution for Agricultural Development (LRAD) programme. A further R0,8 million has been advanced to 155 beneficiaries in support of the land restitution programme.

The Department does not contribute financially to the Bank, but it has a high level representation on the Bank’s board of directors. According to financial statements for the financial year ended 31 March 2003, Land Bank is operating at a loss of R1,4 billion.

Comments:
The Committee CONSIDERED the budget report and NOTED THAT:
_ The contribution of the outgoing Chief Executive Officer, Mr Fandeso to Land Bank; and
_ Although appreciated the difficulty facing the Bank of women being lured by the private sector, however it was unacceptable to the Committee for the Bank to have a male dominated management structure, when the majority of South Africans are women.

THEREFORE AGREED THAT:
_ The Bank must address the issue of women representation in its management structures;
_ The Bank should also expose women in the parliamentary activities by ensuring that when it appears before the Committees, women are included in the delegation.

FURTHER REQUESTED THAT:
_ The Bank provide the committee with its equity figures;
_ The Bank provide the Committee with the statistics per Province of emerging farmers that were given money by the Bank, and those farmers collapsed; and
_ The Bank provides the Committee with statistics that relates to farms that would be going to auction per Province to make it easy for Members to advice constituency offices.

s) Ncera Farms (Pty) Ltd
Ncera Farms (Pty) Ltd is a public company in which the Department is the sole shareholder. The project is managed to establish small and emerging farmers. Transfers to the company form part of the Farmer
Support and Development Programme and are projected as R2,2 million in 2004/5.

The greater part of the revenue is earned from the sale of fresh produce and livestock and is anticipated to average around R1,2 billion per annum between 2004/5 and 2006/7. The budget expenditure is accounted for the plant material; the fertilizer; the pesticides; the labour cost; the mechanization; and
harvesting.

Comments:
The Committee ACCEPTED the budget report AND NOTED THAT:
_ The Committee is very serious about the training and development of Black people; and
_ Government institutions should consider seriously the issue of black procurement.

AND THEREFORE AGREED:
_ To undertake provincial visits in the second term in order to investigate all these projects.