Report of the Portfolio Committee on Agriculture and Land Affairs on Budget Vote 25, dated 7 June 2005:
The Portfolio Committee on Agriculture and Land Affairs, having considered Budget Vote 25, wish to report as follows:
A. Introduction
The most important challenge for the agricultural sector is to provide enough, affordable food. Agriculture is not only important in the international and regional context but also at the household level. Agriculture is also important because of its contribution to Gross Domestic Product (GDP), its forward and backward linkages in the economy, its share of the labour force, and its contribution as an earner of foreign exchange.
The Committee examined the estimates for 2006/7/8 included in Estimates of National Expenditure.
1. Department of Agriculture
The main features of the 2005/6 budgets are:
1.1 Strategic overview and key policy developments for 2005/6 & 2007/8
The most important challenge for agriculture sector is to provide sufficient food to the nation. This is only important in a macro and regional context, but especially at household level. Importance of agriculture also highlighted by the relative contribution to the Gross Domestic Product (GDP), forward and backward linkages in the economy, its share of the labour force and its contribution as an earner of foreign exchange.
Over the past ten years, agriculture in South Africa has provided greater opportunities for participants in the sector in the form of greater access to foreign markets, smallholder participation among role players in agriculture. The deregulation of local and international markets and the establishment of preferential trade agreements with a number of countries and trading blocks have created significant trade opportunities for South African agriculture and farmers. Ensuring adequate protection for animal and plant health as well as public health remains a priority for the Department as this has a direct bearing on the ability to take advantage of trade opportunities.
The Department has seen rapid growth in its commitments to and participation in international programmes of cooperation. The driving force and basis for the strategy in Africa is the NEPAD Comprehensive African Agricultural Development Programme (CAADP). The Department continues to interact with key continental and international partners and stakeholders to generate greater access to financial, technical and institutional support for the implementation of NEPAD. In this regard, the Department on behalf of the government of South Africa hosted the 23rd FAO Africa Regional Conference, which agreed on a set of actions within the context of the NEPAD agriculture plan and reviewed the implementation of the CAADP.
The presentation was structured in terms of programmes. The following programmes reported: administration; farmer support and development; agricultural trade and business development; economic research and analysis; agricultural production; sustainable resources management and use; national regulatory services; and communication, planning, monitoring and evaluation.
Overview – Administration
The Administration Programme conducts the overall management of the department and provides strategic leadership and corporate services through the activities of the Minister, the Deputy Minister and senior management. It also provides for financial, procurement, legal and IT services, an internal audit function, human resources management and secretariat services. Within the programme, there is also a directorate that deals with the collection of agricultural debt. The allocation for 2005/6 is approximately R 170 480 million as compared to R 171 528 million for 2004/5. There is a decrease of 0.6%.
Overview – Farmer Support and Development
Farmer Support and Development focuses on developing norms and standards for settlement of emerging farmers; food security and rural development; agricultural finance and cooperative development and agricultural risks and disaster management. The received an amount of R 476 791 for 2005/6 compared to R 361 272 for 2004/5. There was an increase of 32.0%.
Overview - Agricultural Trade and Business Development
The programme aims to enhance agribusiness development, competitive markets and the international trade environment through improved opportunities and more equitable access in order to maximize growth, employment and equity in the agricultural sector. It financially assists the National Agricultural Marketing Council. The programme is allocated R 95 783 million for 2005/6 as compared to R 38 919 million for 2004/5.
Overview – Economic Research and Analysis
The programme supports the establishment and management of national agriculture databases and provides for the collection and analysis of agricultural statistics. It also monitors and evaluates the economic state and performance of the sector and produces quarterly reports on sector trends. The programme received R 25 590 million for 2005/6 as compared to R 23 647 million for 2004/5. There is an increase of 8.2%.
Overview – Agricultural Production
The programme develops policies to facilitate increased and sustainable agricultural production. In addition, the programme also ensures support for agricultural research, technology development and transfer. An amount of R 407 648 million has been allocated for 2005/6 compared to R 382 202 million for 2004/5. There is an increase of 6.7%.
Overview – Sustainable Resources Management and Use
The programme develops policies, norms and standards on the management and use of land and water resources in agriculture. The programme has been allocated R 177 252 million for 2005/6 compared to R 160 597 million for 2004/5. An increase of 10.4% has been realized.
Overview – National Regulatory Services
The programme is responsible for managing the risks associated with animal and plant diseases and pests, ensuring food safety and bio-safety. This is done through developing policy and legislation and implementing compliance and operational support systems. The programme received an amount of R 230 513 million for 2005/6 compared to R 216 602 million for 2004/5 with an increase of 6.4%.
Overview – Communication and Information Management
The programme provides agricultural news and information, facilitates and manages international relations as well as facilitates skills development and the training of new and existing farmers. The programme received R 92 716 million for 2005/6 compared to R 88 305 million for 2004/5 with 5.0% increase in allocation.
Overview – Planning, Monitoring and Evaluation
The programme consolidates and supports strategic and operational planning in the Department as well as facilitating knowledge management through tracking and monitoring the implementation of the strategic plan. The programme received R 7 965 million for 2005/6 compared to R 6 319 million for 2004/5 with an increase of 26.1%.
Total allocation for 2005/6 was approximately R 1.6 billion compared to R 1.4 billion for 2004/5 financial year. The Budget could also be classified into the following functional categories:
Compensation of employees - R 420 098 million (18.3%)
Goods and Services - R 370 591 million (27.6%)
Transfers and subsidies - R 864 993 million (14.3%)
Payments for capital assets - R 29 056 million (38.3%)
2. Strategic Plan for 2005
Strategic Performance areas for Government and social partners are:
2.1 The conclusion and implementation of the Grain industry strategy with attention to, among others, maize price management;
2.2 The implementation of the Comprehensive Agricultural Support Programme Recharge;
2.3 The implementation of AgriBEE once it has promulgated as the broad based black economic empowerment in agriculture;
2.4 The launch of the pilot of the Agricultural Credit Scheme: Micro-Agricultural Financial Institutions of South Africa (MAFISA) in a selected rural development nodes and its gradual scaling up to other rural development nodes and eventually to the entire country;
The implementation of the Agricultural Advisory Services Programme (Extension);
The establishment of Food Insecurity and Vulnerability Information System Management as part of the strengthening of the Integrated Food Security and Nutrition Programme;
Integrating all engagements of South Africa in the field of agriculture into the Africa Agricultural Development Programme of the International Agricultural Strategy of the Department of Agriculture;
The implementation of the Livestock Development Programme; and
The enhancement of the state of continuous surveillance system to promptly and decisively deal with natural disasters and bio-safety and security threats.
3. Budget 2005: Implications for Agriculture and Land Affairs by University of Stellenbosch
The budget must address the barriers to small business development and job creation that arise from cumbersome municipal planning and approval procedures, or from overly burdensome administration of the tax laws, environmental regulations or labour market controls.
Tax relief of R 1.4 billion targeted at small business. This includes raising the turnover limit for eligibility from R 5 million to R 6 million. In addition, the graduated rate structure will be adapted as follows: qualifying small companies will pay no tax on the first R 35 000 of taxable income, 10% on R 35 000 to R 250 000, and 29% thereafter. Small business will also be eligible for a simplified 50:30:20 depreciation write-off rate for non-manufacturing assets, while manufacturing assets will continue to qualify for 100% write-off.
Then there are rural development challenges to address. The proposed allocations to Department of Land Affairs will enable the land restitution programme to complete its work over the next three years. Comprehensive Agricultural Support Programme is in place to support for emerging and resource poor producers. The Minister of Agriculture and Land will introduce this year a new credit scheme for small-scale farmers.
Infrastructure spending by municipalities and public enterprises will impact on the sector. The Berg River Water Scheme and further development of the Olifants River and Groot Letaba River dam systems. Transnet’s R 4.9 billion locomotive and wagon fleet renewal and modernization programme is important. Land restitution allocated R 6 billion. A new Micro agricultural Finance Scheme to complement the CASP and provide further assistance to emerging farmers and land reform beneficiaries. An amount of R 1 billion is available, of which R 600 million is expected to be allocated over the next three years.
Small business: Additional relief of R 367 million will form part of streamlining ongoing filing obligations. This will involve halving the number of VAT payments small business make in a year and exempting them from the skills development levy. The diesel refund concession for primary producers will be raised, with the rebate increased by 3.14 c/litre. The R 250 million earmarked for AgriBEE. Consolidated budget growth Agriculture for the period 2001/2 to 2004/5 was relatively high. For the years 2004/5 to 2007/8 it is the highest of all functional spending areas of the state, at 18.7% per year.
Comments
The Committee considered the reports and agreed that:
It would be fair for the Committee to know the consulting companies contracted by the Department. Department is to provide the list;
The Language policy is that South Africa has 11 official languages. The serious challenge to the Department is to ensure that it uses languages accessible and understandable to farmers;
The Committee could not find the reason behind separating programmes 1 and 9. The Department should consider whether the two programmes are not duplicating each other;
A concerted message must be communicated to communities about the importance of agriculture and the end result would be gaining human capital to the sector;
The Extension Services need a serious revamp or if that is not possible, the Department must consider closing them completely;
The Committee felt that a curriculum must be developed to link agriculture and education; and
The Agricultural Research Council must remain within Agriculture and Government must allocate sufficient resources for this important institution in order to carry out its public mandate.
4. The Committee also had an opportunity to engaged on budgetary issues with the Entities associated to the Department: that are the National Agricultural marketing Council; the Agricultural Research Council; the Onderstepoort Biological Products; the Land Bank; and the Perishable Exports Control Board
4.1 National Agricultural Marketing Council The National Agricultural Marketing Council is a schedule 3 public entity established in accordance with Marketing of Agricultural Products Act (Act 47 of 1996). Transfers to the NAMC form part of the Agricultural Trade and Business Development Programme. The core mandate of the NAMC is to do investigations and advise the Minister of Agriculture and Land Affairs on agricultural marketing policies and their application, and co-ordinate agricultural marketing policy in relation to national economic, social and development policies and international trends and developments.
Funding to the Council amounts to R 11.9 million for 2004/5 and R 16.4 million is proposed for 2005/6. The income is from the following sources: transfer from Department of Agriculture; the interest earned; the trusts and other bodies; and additional request from Department.
The expenditure would be accounted for salaries; the administration; the operational expenditure; the professional services; and stores. Professional services included, the consultants; the courier services; information and knowledge management; the communication committee; and the section 7 committees and / or Working groups.
Comments
The Committee considered the report and raised the following concerns:
a) The Council needs to clarify its relevance in the present circumstances and its role in relation to small
emerging black farmers; and
b) Non-availability of the Business plan that relates to the budget.
The Committee agreed that:
The Council must provide the Committee with the list of consultants currently being utilized and must project clearly its core business in relation to the provinces. The Council must as a matter of urgency, table the Food Prices Monitoring Report.
4.2 Agricultural Research Council (ARC)
The ARC is a statutory body established in terms of the Agricultural Research Act, Act 68 of 1990 and is the principal agricultural research institution in South Africa. It provides agricultural research and development, technology and support to the agricultural community. It serves as a custodian of national collections of insects, fungi as well as the South African gene banks. It delivers various services in the national interest, such as diagnostic services, migratory pest control and animal performance testing.
Research activities have been aligned to address major government priorities such as, to modernize and grow the 2nd economy; to grow the competitiveness of the 1st economy and to create social security safety nets. Furthermore, to focus on integrated rural development, natural resource management, food security and trade development support.
It has embarked on new initiatives, which include introducing a performance management culture, improving project management systems and becoming more customer-oriented. Balanced scorecard targets have been set and are designed to focus and improve the level of outputs and improve the investment in resource poor farmers, while on the other hand ensuring the delivery on public mandates with the Department of Agriculture. The priority will be to contribute to the national agenda for stimulating the 2nd economy and sustainable rural livelihoods, and to contribute to transforming the agricultural sector.
It derives approximately 60% of its revenue from transfers from the Department of Agriculture. This amounts to R 312.9 million, R 333.3 million and R 361.9 million over the MTEF period. The external revenue ranges from R 215.1 million, R 234.5 million and R257.9 million over the same period. It also competes for supplementary research funding (transfers) from Department of Science and Technology Innovation Fund. Commercial revenue as % of total income is 37% for 2003/4, 37% for 2005/6 and 38% for 2006/7 respectively. In terms of economic classification for 2005/6, compensation of employees is R 344.4 million; Goods and service is approximately R 203.2 million; Use of infrastructure allocated R 29.1 million; and Payment for Capital assets is R 52.8 million. Total resource allocation for 2005/6 is R 629.6 million.
It is still facing challenges in relation to competition for skilled capacity; investments made in public interest research; and investments in new infrastructure.
Comments
The Committee considered the report and noted:
The unavailability of the documentation from Departments and State entities on time is unacceptable; and
The non-availability of documents places difficulty to members to interact with people appearing before the Committee.
The Committee agreed that:
The ARC must within seven working days forward the Strategic/Business Plan to the committee; also must forward its projections on what is required in order to function effectively in serving the country. The external funding should in no way influence the ARC to surrender its public mandate as stipulated in the Act of Parliament. The Council must continue responding to challenges posed both the 1st and 2nd economies; and also to intensify research on the indigenous knowledge.
4.3 Onderstepoort Biological Products Limited
The OBP Ltd is a biotechnical company manufacturing vaccines and related products for the global animal healthcare industry. The company was established in accordance with the Onderstepoort Biological Products Incorporation Act of 1999. In modern agriculture it is impossible to farm profitably with livestock without implementing an animal health programme which will incorporates vaccination. OBP provides a wide range of vaccines against most endemic and economically important diseases that occurs in livestock. It has responsibility to ensure production capacity, which enables quick response to disease outbreak in South Africa, SADC region and the continent.
Strategic initiatives will focus on improvement and development of its internal and external customers, products and processes to ensure a sustainable and profitable organization. The following pillars needed to ensure sustainable and positive growth: efficient and effective distribution channels; the emerging sector in the domestic market; the development of international markets within the continent and abroad; production facility that meets GMP standards; the expanding of OBP product range; the development of research and development capacity and capability; and the strategic alliances.
Currently, the company is developing and manufacturing 50 vaccines and 10 antigens for animal health care industry. Out of 50 vaccines, 8 vaccines are for prevention of endemic disease in Africa and are uniquely produced. The present productive output is of the order of 100 million doses of vaccines per annum. In addition, the company manufactures 40 000 litres of diluents to accompany the vaccines. Direct and indirect exports are more than 50% of total sales.
The product line will mainly target the cattle, sheep, goat, horse segment to ensure good health and growth in the agricultural industry. Geographic focus will be South Africa, SADC, East Africa, North Africa, West Africa, European Union, Middle East, South America and India.
The company is entirely self-financing. It derives its revenue from the sale of vaccines and related biological products. Since inception in 2000, OBP has consistently shown a positive growth in sales. The contribution of exports since then has risen from 25% to 50% of total sales, while growth in profits has increased.
The income of R 36.0 million on local and R 35.5 million on export sales for 2004/5 was realized. Whereas for 2005/6 income on local and export sales anticipated to be R 40.8 million and R 52.4 million respectively. Total revenue for 2004/5 is R 71.5 million and approximately R 93.2 million for 2005/6. Growth of 13% in local sales is based on emerging market; tender business; increased in marketing efforts; sales personnel increase; and key account management. Export sales growth of 48% is as a result of increased marketing efforts.
Comments
The committee considered the report and noted that:
The OBP is currently performing extremely well and is encouraged by the speed required to combat diseases. The Committee agreed that OBP must improve its Internal Marketing Strategy in other agricultural activities and must pay special attention to equity legislation in relation to people with disabilities. It must continue revamping old equipment and relate experiences to the African continent in order to fulfill NEPAD objectives.
4.4 Land Bank The Land Bank operates as a development finance institution within the agricultural and agribusiness sectors, regulated by the Land and Agricultural Development Bank Act (Act No. 15 of 2002). It provides a range of finance options to a broad spectrum
of clients in the agricultural sector, including rural entrepreneurs, women and youth,through its network of 27 branches and 37 satellite offices, supplemented by
mobilebranches, which are primarily located in rural areas.
The State is the only shareholder, represented by Minister for Agriculture and Land Affairs. Bank activities are governed by the Act and financial management guidelines provided by the Public Finance Management Act (Act No. 29 of 1999). Programmes are aligned with government’s key strategic programmes in the agricultural sector namely: the Agricultural Sector Plan; the Integrated Sustainable Rural Development Programme; the Comprehensive Agricultural Support Programme (CASP); and the Shareholder compact.
The focus priorities are to implement more effective banking and financial business systems and implement processes and actions to ensure best practice and compliance with AC 133. Reposition the Bank to grow the commercial and development books and increased focus on financing BEE transactions, in terms of AgriBEE framework. Completing the business process review to ensure that there is improved productivity; streamlined operations and enhanced customer service. Consolidated the management team in order to continue to support Government’s priority programmes such as, land reform, agricultural credit scheme; and food security.
Economic developments such as drought and delayed rains in Western Cape has a major negative impact on the agricultural sector and strong currency causes great difficulty for agricultural exporters such as wine and citrus producers. Grain prices are extremely low, especially serious for maize producers. Carrying over stocks in wine and maize sectors will continue to put downward pressure on prices and the sugar industry is benefiting from strong international sugar price.
The role of the Bank in agricultural transformation relates to the BEE transactions and other empowerment projects being financed or currently being considered for financing by the Banks CFU business is approaching R 3.7 billion. Secondly, the current Retail book start up farmers amounts to R 663 million. Thirdly, the step up adds another R 74 million in loan volume. Since the Bank serves as one of the instruments of Government’s effort to encourage and support black economic empowerment in agriculture, it is important that the Bank’s capital adequacy position be sorted out as a matter of urgency. A higher capital adequacy ratio will improve the credit rating and dampen investor fears regarding the risk of lending funds to the Bank.
The Bank’s micro-finance product, Step up, was introduced in April 1998 and 123 564 clients have made use of it and R 169 million was disbursed in 2003/4, with participation increasing at an average rate of about 3 175 clients per month.
The Department of Agriculture does not contribute financially to the bank, but has a high level representation on the Bank’s board. The Bank recorded a profit of R 247 million, accompanied by a 14% increase in the number of loans granted in 2003/4. The Capital adequacy of an appropriation of R 2 billion will increase capital adequacy ration to nearly 20% and will be adequate to shore up bank’s financial strength and restore investor confidence. A capital injection will require Bank to implement a turnaround plan to ensure:
Profitability is maintained;
Sustainability is ensured; and
Capital adequacy is maintained.
Comments
The Committee considered the report and noted that:
It is unacceptable to the Committee for the Land Bank to continue having male dominated Senior
Management structure when the majority of South Africans are women;
It must be visible and available to the stakeholders; and
The presentation was good as compared to the previous years.
The Committee agreed that:
The Bank must address the issue of women representation in its Senior Management structures; table its turn-around strategy, process and transition once completed and that the turn-around strategy should relate to Government direction in terms of Presidential Address. It must provide the Committee with its Equity Plan and figures; its timeframes, time-lines, objectives and targets.
The Committee further recommended that a closed session meeting with the Bank is required where the issue of interest rates will be discussed in detail. The Committee’s perspective is that it seems as even if the economic conditions improve in the country, the Land Bank rates remain the same or simply increase.
4.5 Perishable Products Exports Control Board The Perishable Products Export Control Board was established in terms of the Products Export Control Board Act (1983). Its purpose is to ensure that perishable products intended for export from South Africa meets international quality standards. Activities include inspections and quality control, and providing technical, development, and market intelligence and information services.
The Board is funded by its own revenue and does not receive transfers from government. Other non-tax revenue includes income derives from inspection services. Total revenue grew at an annual average rate of 13.4% between 2001/2 and 2004/5, and is projected to grow by 7% over the MTEF period, reaching R112.7 million in 2007/8.
Total revenue for 2004/5 amounts to R 93 million, which is attributed to Statutory Services; customized services and agency services and anticipated to be R 104 million for 2005/6. The Board indicates challenges experienced with regards delivery of a quality service to fulfill the mandate relates to: the under resourced if measured against the current requirements of 2% inspection of product and 100% monitoring of containers; a 4% expected volume growth for 2006; the increasing demands from customers regarding the delivery of information needs; and the added value at service delivery. Through a process started and approved by the Board in June 2004, the plan and the budget addresses the problem of resource shortages through a number of strategic programmes.
Statutory services show a deficit of R 1 million mainly as a result of: the phased approach in adjusting levies to recover full cost per industry; and the implementation of five strategic programmes. The Expenditure of R 95 million increases by R 9.7 million (11%), which is made up as: the increase in statutory services excluding strategic programmes by R 4.0 million or 4.8%; and the increase in cost of strategic programmes by R 5.7 million or 321%.
Comments
Although the Committee has accepted the report, it had a concern about the implementation of the Equity Plan within the company.
The Committee agreed that:
Both the external and internal bursary programmes should be intensified towards historically disadvantaged individuals and should embark on recruitment drive that would ensure a better balance in staff compliment. It must continue to maintain quality standards with regards to our exports.
5. Conclusion
While the Committee agrees that during the past year the Department has made remarkable progress on various issues, such as transformation of the sector at all levels, ensuring that agriculture is becoming inclusive, competitive and alleviate poverty. Much, however, remains to be done to create an enabling environment to achieve the country’s strategic goals.
The Committee would like to extend special appreciation the Department and the associated entities for attending the budget hearings and hoping matters of
concern would be attended.
4. Report of the Portfolio Committee on Agriculture and Land Affairs on Budget Vote 29, dated 7 June 2005
The Portfolio Committee on Agriculture and Land Affairs, having considered Budget Vote 29, wishes to report as follows:
A. Introduction
The Department of Land Affairs is mandated to provide an equitable and sustainable land dispensation that promotes social and economic development. The Committee examined the budget of the Department (Vote 29) for the financial year 2005/6 as well as the estimates for 2006/7/8 included in Estimates of National Expenditure (ENE).
1. Department of Land Affairs
The main features of the 2005/6 budgets are:
1.1 Strategic overview and key policy developments for 2005/6 & 2007/8
Strategic context for 2005/6: The framework for implementing land and agrarian reform is underpinned by the following:
At international level by the Millenium Development goals;
At regional level by the NEPAD;
At sub-regional level by the SADC Land Technical facility; and
At national level the framework takes into account the Vision 2014 poverty alleviation and job creation; the Ten year review; the 2005 Cabinet Lekgotla resolutions; the 2004 and 2005 State of the Nation addresses; and the 2005 directives from the executing authority; consolidating the African agenda; socio-economic development; rural development and urban renewal.
For 2005/6, the Department of Land Affairs will continue with Integrated land and agrarian reform implementation strategy; Micro-economic reform strategy (MERS); the comprehensive policy review process; the development planning within an African context; the contribution towards Urban Renewal Programme (URP) and Integrated Sustainable Rural Development Programme (ISRDP) land needs; the facilitating development planning for land reform projects; the devolution of functions to local government; the skilling of land reform beneficiaries; the State land disposal and management; the land for housing; the land for human settlement strategy; the Comprehensive Agriculture Support Programme (ACSP) and Land Redistribution for Agricultural Development (LRAD); and decentralization of Land Planning and Information function (Project Mutingati).
1.2 Governance
The Department will increase the capacity for the International Relations Unit; the training on diplomatic relations and protocol; the internship and leadership programme; the management development programme; the information security in terms of Minimum Information Security Standard (MISS); the skill audit; the citizen satisfaction survey; and service delivery improvement plan.
Amount of land to be delivered
The Department indicated that the total size of land in South Africa is approximately 122 million hectares. The total farmland is approximately 100 million hectares. The total White owned agricultural farmland is amounts to 82 million hectares. The Government has set itself the target of delivering 30% of commercial agricultural land by 2014. This means that about 22 million hectares of agricultural land must have been delivered by 2014. Therefore, 20.6 million hectares must still be delivered. On average 1.87 million hectares must be delivered per year to meet the target.
Land delivered since 1994 The total size of land delivered is about 3.5 million hectares (3 536 756.06 hectares). This includes land delivered through the restitution, redistribution and state land. The total number of households/individuals that have benefited from land reform is 1 028 887. The contribution per programme is as follows:
From 1999 to 31 December 2004, almost 57 257 claims have been settled, and benefited 164 103 households. About 812 315 hectares of land have been delivered. By 31 December 1998, validation project has ascertained that 79 696 claims had been lodged. The total of 28 087 claims are yet to be settled by 2008/9. About 18 238 claims are to be settled by 2005/6. The remainder of 9 808 claims are to be settled between 2006/7 and 2008/9. These claims have an impact on the economy of South Africa, that is, agriculture is the backbone of the economy in KwaZulu-Natal, Mpumalanga and Limpopo.
State Land Management and Administration
The Department stated that contrary to a widely held view, there is not much state land available for land reform purposes, especially for redistribution. State Land comprises about 24.5 million hectares or 20.3% of the total area of Republic of South Africa. Approximately 82.5% of state land is national while 17.5 is provincial. Department of Land Affairs controls 66.7% while Department of Public Works controls 33.3% of national state land. Only about 5% - 7% or 1.7 million hectares is available for allocation to land reform beneficiaries, the rest is used for state domestic purposes. Vesting of state land is necessary to confirm which "arm" of government owns it, before it can be used for land reform purposes. The Minister of Land Affairs does this by means of issuing a certificate.
On the Disposal of State Land Since 1998, Department of Land Affairs disposed of the following categories of State land for the various land reform programmes through facilitation:
Department of Land Affairs (former SADT land) is 601 276.00 hectares;
Financial Assistance Agricultural Land is 50 000.00 hectares;
Other Public Works Department Land is 91 350.00 hectares;
Land for Housing projects is 30 000.00 hectares; and
Total amounts to 772 626.00 hectares of land.
The Department of Land Affairs is mandated to provide an equitable and sustainable land dispensation that promotes social and economic development. The budget for 2005/6 amounts to total of R 3.8 billion while forward estimates anticipates for R 4.8 billion for 2006/7 and R 5.6 billion for 2007/8.
1.8 Budget in terms of Economic Classification for 2005/6
Challenges faced by the Department of Land Affairs
The Department is faced with enormous challenges related to ensuring implementation of land reform at a reasonable level; finalizing restitution process in 2007/8; managing risks inherent in the restitution "high drive"; not much state land exists for redistribution or restitution purposes (most of it is already settled); high land prices; some unco-operative land sellers; organized agriculture must demonstrate more concrete commitment to land reform; expropriation is constitutionally possible, but a "political hot potato," and increasing the culture of respect for land rights of vulnerable groups like labour tenants, occupiers and other farm dwellers.
Comments
The Committee commended the Department on the expenditure patterns as compared to the previous years and noted the bottle-necks in relation to the involvement of other sister Departments in the land reform processes both at national and provincial levels is a serious concern.
2. The Committee had an opportunity to engaged on budgetary issues with entities that are reporting to the Department such as, the KwaZulu-Natal Ingonyama Trust Board; the Commission on Restitution of Land Rights; the Khula Land Reform Credit Facility; and the Bala Farms (Pty) Ltd. 2.1 KwaZulu-Natal Ingonyama Trust Board
The KwaZulu-Natal Ingonyama Trust Board was established in terms of the KwaZulu-Natal Ingonyama Trust Act (1994) as amended. The Board, Chaired by His Majesty the King (or his nominee) and eight other members appointed by the Minister of Land Affairs, came into operation in October 1998 to administer the affairs of the Ingonyama Trust.
The core business of the trust is to manage its 2.7 million hectares of land, spread throughout KwaZulu-Natal, for the material benefit and social well being of individual tribe members. Activities undertaken by the board include: transferring townships to local authorities; granting permissions to occupy (PTOs); granting servitudes; issuing leases; identifying and transferring land for state domestic purposes; registering assets; minerals administration; restructuring state forests; compiling asset registers; and developing a land tenure information system.
The Board has granted 130 leases covering 10 000 hectares, which generates revenue of about R 600 000 a year. A further 12 leases are being processed, covering 1 684 hectares with an estimated revenue of R 145 000 per year. The leases cover land for diverse uses, such as shopping centers, game parks, residential developments, lodges, petrol filling stations, telecommunication base stations, sugar cane farming, grazing and aquaculture projects.
A total income of R 13.3 million is budgeted for 2005/6, of which R 11.9 million
will be redistributed to the communities. The Trust receives an allocation of
from the Department of Land Affairs to cover the operating expenses of its
Secretariat,which is expected to be R 2.1 million in 2005/6.
The following programmes will be implemented over the medium term:
Finalizing the transfer of KwaZulu-Natal townships to local authorities, establishing township registers and upgrading tenure rights;
Extending the security of tenure on trust land and providing rental income to communities living on trust land;
Concluding the registration of all vested assets in the name of the trust, which involves the consolidation and registration of titles for each traditional authority area (the trust currently holds 1 478 titles); and
Finalizing the transfer of land used for state purposes to relevant government Departments and municipalities.
Comments
The Committee considered the report and commended the Board on the progress made since the last engagement and agreed that:
The Department of Land Affairs must seriously consider some of the models employed by the Ingonyama Trust Board in KZN in particular when implementing elements of the Communal Land Rights Act.
2.2 Commission on Restitution of Land Rights
The President in the State of the Nation Address on 11 February 2005 gave a directive that additional resources would be allocated over the next three years to cover outstanding claims in the land restitution programme. In line with the Presidential directive the Commission is therefore committed to settle all outstanding urban claims in the 2005/6 financial year and all outstanding rural claims by 31 March 2008. The settlement of claims would be part of the process to reach the delivery of the 30% target of agricultural land by 2015 and thus ensuring not only the attainability of economical stability and poverty eradication but also the socio-political stability in rural areas. The Minister of Finance has in the Budget Speech of 23rd February announced that R 6 billion has been allocated to complete the land restitution process.
In relation to claims to be settled, the total number of claims to be settled in 2005/6 is approximately 12 875. Of this number, 10 063 are urban while 2 812 are rural claims. The breakdown of figures per Province is as follows:
2.2.1 Eastern Cape (2 869 urban claims) while the number of (rural claims is 338);
2.2.2 Free State and Northern Cape has a combined number of (1 536 urban claims) and (269 rural claims);
2.2.3 Gauteng and North West has (71 urban claims) and (228 rural claims);
2.2.4 KwaZulu-Natal has (3 311 urban claims) and (746 are rural);
2.2.5 Limpopo there are (56 urban claims) and (448 rural claims);
2.2.6 Mpumalanga has (215 urban claims) and (415 rural claims); and
2.2.7 Western Cape has (2 005 urban claims) and (368 rural claims).
Over the past five years the experience curve shows that the past reasons for success are due to: the Section 42D Ministerial approval; the integration of the Commission with the Department of Land Affairs. This results to a more coherent flow of work. The grouping of individual urban claims; the use of Service Providers for specific tasks; the location of Regional Land Claims Commission offices closer to the people; the increase in resources allocation; and the fact that 80% of claims are urban thus it is faster to resolve.
Land prices in KwaZulu-Natal are R 25 000 per hectare and in Limpopo and Mpumalanga R 50 000 per hectare for sugar cane. Most of the privately owned land that was purchased was agricultural land; the lowest price paid was R 900 000 per hectare in Limpopo for a farm with macadamia nuts and mango’s (export). Land prices in the country are high.
The outstanding claims are all in various stages in the settlement process. Rural claims poses the following requirements: assist claimants to structure their various affidavits; the disputes resolution and mediation; the land price negotiations with current land owners; the protracted and costly processes, for example, expropriation; and the institutional capacity for community legal entities.
These requirements shall included the following: the financial resources; the human resource requirements; the office accommodation and equipment; the administrative support to fast track the process; and the strategic partnership with relevant stakeholders.
Restitution programme aims to restore land and provide suitable compensation to
victims of forced removals. The programme consists of three sub-programmes, that
is, the National Office, which provides administrative and professional support to
and Secretarial services to the Commission for processing and investigating restitution claims. The sub-programme also develops and coordinates restitution policy and oversees court cases. Regional Offices are responsible for negotiating restitution agreements and providing administrative support services to regional land claims commissioners.
Restitution Grants distributes grants that are used to restore land and makes provision for alternative land to victims. Provides for payment of compensation and alternative relief, settlement planning and facilitation assistance, and contributes to costs incidental to resettling communities.
In total the budget set out additional allocations of R 2.4 billion for 2005/6, R 3.1 billion for 2006/7 and R2.6 billion for 2007/8 over the MTEF period. By the end of 2003/4, approximately 48 825 claims had been settled: 60.2% of the 79 696 claims lodged. The cumulative number of settled claims for 2003/4 was 56 719, (71.2% of the total of 79 696 claims lodged). Urban claims accounted for 87% or 42 712 while rural claims accounted for 13% or 6 113. During 2004/5, up to the six months ending 30 September 2004, 8 143 claims were settled, or 46.8% of the targeted amount of 17 383.
The total allocated budget of R 727.4 million was fully utilized, with R 464 million or 64% settling urban claims and R 262 million or 36% going to acquiring land. These settlements benefited 33 097 households and 145 437 beneficiaries. The amount of land transferred was 148 643 hectares, with a total committed amount of R 928 million.
As a result of ongoing negotiations with Provincial Governments and the Department of Land Affairs, various commitments have been received from provincial governments and the Department to ensure that all outstanding rural claims are settled by 31 March 2008. The Belgian Government has also donated R 49 million to speed up the verification of remaining claims and a further 6 million Euros for post-settlement support for the 2006/7 financial years.
Although in relation to models for financing, there had been several proposals around models for financing land reform, that is scheduling of payment, scheduling the return of land, strategic partnerships, land tax, subdivision of large farms etc, these proposals are still under discussion with various stakeholders.
Comments
The Committee considered the report and noted:
The progress made by the Commission despite the difficulties and enormous problems;
The issue District and Local Municipalities in relation to sound financial management needs to be attended;
The role and contribution of Strategic partners in the restitution process needs to be considered to ensure that communities do not loose out in such relationships;
The non-utilization of the Expropriation by the Commission despite being constitutional in terms of section 25(2) of the Constitution of the Republic of South Africa;
The uncooperative role played by organized agriculture in the restitution process; and
The role played by unscrupulous valuers in relation to land prices in the country.
The Committee also agreed that:
In the provinces, there are still many practical challenges that need to be addressed; and those people who missed December 1998 deadline can in terms of section 6(2)b of the Act, make use of other Government programmes such as the Redistribution and Land tenure.
2.3 Khula Land Reform Credit Facility
The Department of Land Affairs established the Land Reform Empowerment Facility (LREF), located within Khula Enterprise as a revolving credit loan facility in 1998, for financing land acquisition and equity in commercial farming ventures. Khula Enterprise Finance Limited was contracted to administer the funds on behalf of the Department.
The partnership approach with the Private Sector has assisted in facilitating the establishment of viable land reform projects. The wholesale revolving funding facility is to provide highly concessionary (flexible repayment terms, lower transaction costs and reduced cost of capital) loans.
Performance since inception to march 2005 is approximately R 107 million. The sources of capital are: the Department of Land Affairs (R 117 million); the European Union (R 27 million); the Danish Development Agency (R 1.7 million); and the Department of Environmental Affairs and Tourism (R20 million). Khula Enterprise has implemented the following programmes: the Broad Based Black Economic Empowerment Act; the Financial Sector Charter; the AgriBEE Charter (still at development stage); and the Tourism Charter (also still at development stage).
The fund is progressing well and performed exceptionally well in that it exceeded all its targets. In terms of recapitalization, the Department of Environmental Affairs and Tourism has committed an additional R 20 million to the fund. Additional funding requests of R 200 million have been put to the Industrial Development Corporation (R 100 million) and the Department of Trade and Industry (R 100 million). More effort is being made in the current year to extend the scheme to under-serviced Provinces and diversify and shift the focus away from the Western Cape.
Currently, Khula is conducting skills gap survey on the projects. The partnership approach with Primary Agriculture Education and Training Authority (PAETA), the Comprehensive Agricultural Support Programme (CASP), and the Small Enterprise Development Agency (SEDA) has been entered into.
On the way forward the focus will be on the provincial budget allocations; organizational partnership approach; closer relationship with provincial Department of Land Affairs offices (LRAD); the Corporate partners for example, TSB, recapitalization, and the coordinated and structured capacity building approach.
Comments
The Committee considered the report and noted that:
There seems to be no relationship between Khula and the Land Bank;
The after-care support needs to be intensified against the backdrop that some of LRAD projects are failing in the provinces; and
The outreach programme to rural communities is not visible;
The Committee agreed that Khula must ensure the provincial equity in resource
allocations and improve on the target market. The report reflects in terms of beneficiaries 46% female and 54% male. There is no reflection in relation to people with disability.
2.4 Bala Farms (Pty) Limited
Bala Farms (Pty) is a state-owned company created by the former Bophuthatswana administration to buy and administer farms outside the homeland territory. The company is being deregistered in line with the Department’s land reform policy. A new deadline of 31 March 2005 was set. Properties that have not been disposed of by that date will be transferred to the Department of Land Affairs for disposal.
On progress on the properties remaining, the company reports that 4 farming units consisting of 7 farm portions had to be transferred to the identified beneficiaries. Portions 41, 64, 83 of farm Grootfontein 115 JO have been transferred to Department to complete the disposal process, as this was delaying the de-registration. Portions 22 of farm Blaauwbank 127 JO has also been transferred.
On the remaining properties, the company reports that Portion 2 of farm Logaga
124 KP has been disposed of. Portion 14 of farm De Putten 56 JO has been
transferred free of charge to beneficiary community.
De-registration process meant that first, all assets and liabilities had to be liquidated or ceded to the Department. All debts were settled including an amount of R 1.5 million owed to the North West (Loan was originally provided by Agricor). The last payments by the company were made on 9 March 2005 and a cession of all existing claims in favour of or against the company had to be issued as a contingent. All outstanding lease rentals were collected and pro rata payments for remaining periods of the leases were paid over to beneficiaries.
Secondly, a Certificate of compliance has to be issued by South African Revenue
(SARS). A dispute with SARS regarding the money owed to or by the company took longer to resolve than anticipated. Nevertheless, this was resolved in March
2005 after excellent co-operation with SARS staff and in depth analysis of all matters relating to VAT and Income Tax. The final results have been incorporated into the financial statements of the company for 2004/5 financial years. The final
certificate will be issued to the Registrar of Companies after the 2005 audit has
been completed. SARS was requested to cancel the company’s registration for
PAYE, SDL & VAT.
Thirdly, relevant resolutions had to be taken by the Board, that is, the deregistration of the Company; the transfer of shareholding from Chairperson of Company to the Department; the payment of the pre-deregistration dividend of R 15.3 million declared and paid to the Department on 23 March 2005; and the application of deregistration was sent to the Registrar on 30 March 2005.
Finally, accounting, auditing and legal matters had to be satisfied. All bank
accounts have been closed subsequent to the payment of the pre-deregistration dividend; the financial statements were compiled in March 2005; the Auditor-General has commenced with the final audit of financial statements. Once the audit is complete, the statements will be lodged with SARS. The Registrar of Companies will then in a position to deregister the company because the company will hold no further liabilities for Income Tax, VAT, PAYE or SDL.
The company has ceased its operations and the final deregistration is now in the hands of the Auditor-General, the South African Revenue Service and the Registrar of Companies.
Comments
The Committee considered and accepted the report and appreciated the work done by the company and the Department for completing deregistration process within stipulated time.
3. Conclusion
While the Committee accepted the reports presented, the Department of Land Affairs is making transfer payments to Provincial Governments, Local Authorities and community based legal entities on the basis of Agency Agreements. The purpose of such transfers is to facilitate the implementation of projects such as infrastructure, tenure, and agricultural support arising from the Restitution and Redistribution of land to beneficiaries.
The Department must remain accountable for the expenditure of such transfer of funds. Compliance in terms of the Division of Revenue Act needs to be examined to assess whether the nature of these transactions does not fall within the ambit of the law so that those institutions who do not comply, necessary mechanisms could be taken to rectify the situation.
The Committee would like to extend its appreciation to the Department and associated entities for attending and participating in the budget hearings.