Authority has an important role to play in the oversight function in overseeing the

performance of Departments and Public Entities.

Section 65 of the Public Finance Management Act requires that Ministers table the

annual reports for the Department and Public Entities for which they are responsible by

30th September each year.

On the 30th September 2005, the Department of Agriculture and its Entities namely,

Land Bank, National Agricultural Marketing Council (NAMC), Onderstepoort

Biological Products (OBP), Perishable Products Export Control Board (PPECB), and

Agricultural Research Council (ARC) tabled their 2004/5 Annual Reports and Financial

Statements to Parliament in terms of Section 65(1)(a) of the Public Finance

Management Act, 1999 (Act No. 1 of 1999).

Upon the referral by the National Assembly, the Portfolio Committee on Agriculture

scheduled extended briefing sessions with the Department, and its entities to present

their Annual Reports and Financial Statements including the report of the Auditor-

General on the Financial Statements for 2004/5.

After welcoming and accorded a platform to officials from the Department and public

entities the Chairperson, Ms Nhlengethwa , in her introductory remarks indicated that

the main purpose of the sessions were to provide platform to the officials to brief

Members on the contents of 2004/5 annual reports submitted to Parliament in terms of

Public Finance Management Act. The presentations generally focused on 2004/5

targets, achievements and challenges, and audited Financial Statements ending at 31st

March 2005.

The first report annual report presented was of the Department of Agriculture. The

Chief Operations Officer and Programme Mangers presented the report. The main focus

of the presentation was on 2004/5 targets and achievements related to programmes such

as Administration, Farmer Support, Agricultural Trade, Economic Research,

Agricultural Production, Sustainable Resources, Regulatory Services, Communications

and Programme planning.

The audit committee report, baseline over the Medium Term Expenditure Framework

(MTEF) period, budget allocation per programme and economic classification, actual

expenditure in previous and current financial year, transfer payments, and Human

Resource matters were also highlighted. Major departmental activities were structured

to correspond with the priority areas set in the Strategic Plan

The second annual report presented was of the Land Bank. The Chief Executive Officer,

Mr Alan Mukoki presented the annual report and audited financial statements of the

Bank. The main focus of the presentation was on the vision, mission, evolution of the

Bank since 1998, approach, external environment, operational review, loans to

emerging farmers, AgriBEE support, financial review and turnaround strategy.

NOTE: PAETA does not usually report to the Committee but reports to the Portfolio

Committee on Labour. However, the committee took a decision that the Entity should

also present to Agriculture and Land Affairs Committee as it is dealing with training in

the Agricultural Sector. The Chief Executive Officer, Mr Michiel van Niekerk presented

the report. The main focus was on targets and key achievements, such as Learnerships,

Skills programmes, ABET, HIV / Aids, Quality Assurance, National Skills Fund and

audited financial statements.

NAMC annual report was the fourth to be presented. The Council Vice-Chairperson, Ms

Dora Ndaba presented the report. The report focused on the legislative mandate of the

council, the relevance of the NAMC in the deregulated marketing environment, the

activities for 2005/6 in support of the objectives of the Department of Agriculture,

increase support to agricultural activities in the emerging sector, budget utilization of

2004/5, the actual expenditure, audited statement and audit opinion.

OBP was the fifth entity to report. The Managing Director, Dr Makuleni presented. The

presentation outline focused on introduction, governance report, the company

performance for 2004/5, human resource report, the financial performance for 2004/5,

and audit opinion.

The PPECB also appeared before the committee. The Chief Executive Officer, Mr

Neels Hubinger presented the report which focused on the legislative mandate,

governance and structures, the purpose, business model and strategic emphasis;

elaboration on the annual report; the financial statements for 2004/5, and audited

financial statements.

The ARC was the last institution to appear before the committee. The Chief Executive

Office, Dr Tau-Mzamane assisted by the Senior Management presented the report

which centred on the ARC structure, the Council, Research and Development,

Sustainable community development, Corporate support services, Human resource

overview, Information & communications Technology overview, and financial

overview.

Based on 2004/5 annual reports and audited financial statements presented, the

Committee has generally observed that:

The 2004/5 annual reports of the Department of Agriculture and Public

Entities have provided information on service delivery and have reported on

the financial statements, management and audit reports against the

performance targets and budgets as outlined in the strategic / business plans

and Estimates of National Expenditure.

Audit opinion, the financial statements fairly present, in all material respects,

the financial positions of the Department and its Entities at 31 March 2005

and the result of their operations and cash flows for the year then ended, in

accordance with prescribed accounting practice and in a manner required by

the Public Finance Management Act, 1999 (Act No.1 of 1999).

The tabling of 2004/5 annual reports and financial statements of the

Department and Entities to Parliament by the Minister of Agriculture and

Land Affairs has complied with the requirements of the Public Finance

Management Act.

The Portfolio Committee on Agriculture and Land Affairs having considered the

Annual Reports and Financial Statements for 2004/5 of the Department of Agriculture

and the Public Entities to reporting to the Minister during the extended briefing

sessions, reports as follows:

On the 1st November 2005, the Committee completed its oversight work on the reports

of the Department and the public entities namely, the Land Bank, Khula Land Credit

Facility, Ncera Farms (Pty) Limited, National Agricultural Marketing Council,

Onderstepoort Biological Products, Perishable Products Export Control Board and

Agricultural Research Council.

The Chief Operating Officer, Mr Mabombo and programme managers presented the

2004/5 annual report and audited financial statements of the department. The main

focus of the presentation was on 2004/5 targets and achievements related to

programmes such as Administration, Farmer Support, Agricultural Trade, Economic

Research, Agricultural Production, Sustainable Resources, Regulatory Services,

Communications, and Programme planning.

The audit committee report, baseline over the MTEF period, budget allocation per

programme and economic classification, actual expenditure in previous and current

financial year, transfer payments, and HR matters were also highlighted. Major

departmental activities were structured to correspond with the priority areas set in the

Strategic Plan.

The period under review included: adjustment of operational plans because of 2004

general elections; the approval of the new departmental structure; the Departure of the

Director-General, Ms Bongiwe Njobe on 28 February 2004; the outbreak of animal

diseases; working relations between the Department of Agriculture and Department of

Land Affairs; the alignment of the agricultural public entities and the Department of

Agriculture; mandate given by the State of the Nation Address, such as, the Agricultural

Credit Scheme, the AgriBEE and the Comprehensive Agricultural Support Programme

(CASP).

The programme provides the department with political and strategic leadership as well

as management and administration services. Actual spending for the period under

review is R169 838 million that 12.2% of the total budget.

The programme promotes stability, competitiveness, growth and transformation in the

agricultural sector by developing policies governing farmer settlement, food security,

rural development, the registration of co-operatives and agricultural risk and disaster

management. Actual spending for the period under review is R330 044 million that is

23.8% of the total budget.

The programme develops policies governing access to national and international

markets and promotes black economic empowerment (BEE) in the sector. Actual

spending for the period under review is R26 759 million that is 1.9% of the total budget.

The programme provides the necessary information for developing and monitoring the

agricultural sector. Provides timely, accurate agricultural economic and statistical

information to relevant stakeholders and other interested parties to improve decision-

making. Actual spending for the period under review is R16 108 million that is 1.2% of

the total budget.

The programme promotes agricultural research, productivity and sustainability.

Objective is to provide national leadership for increased sustainable agricultural

productivity, genetic resources management, research, technology development and

transfer. Actual spending for the period under review is R368 496 million that is 26.6%

of the total budget.

The programme develops, implements and monitors policies for the management and

use of land and water resources in agriculture. Actual spending is R143 219 million for

the period under review, this is 10.3% of the total budget.

The programme develops and monitors risk management strategies, policies and

legislation for food safety and for the control of animal and plant diseases. For the

period under review, actual spending is R246 666 million that is 17.8% of the total

budget.

The programme manages and co-ordinates communication, education and international

relations. Provide effective internal and external communication and information

management through the implementation of a proper strategy and a structured plan.

Actual spending by the programme for the period under review is R83 405 million and

6.0% of the total budget.

The programme consolidates and supports strategic and operational management in the

department. Actual spending for 2004/5 is R2.306 million, which approximately 0.2%

of the total budget.

The total allocation to Department for 2004/5 is R1 449 391 billion. The total actual

spending for the same period is R1 386 841 billion that is 95.7% of the total budget. The

report reflects under-spending of R63 million that is 4.3% of the total budget.

Audit opinion the financial statements fairly present, in all material respects, the

financial position of the Department of Agriculture at 31 March 2005 and the results of

its operations and cash flows for the year then ended, in accordance with prescribed

accounting practice and in the manner required by the Public Finance Management Act,

1999 (Act No1 of 1999), as amended.

MATTER OF EMPHASIS:

Attention is drawn to the control over fixed assets, the audit reveals various cases where

assets could not be physically verified or traced to the asset register at the national

office and other regional offices.

The committee CONSIDERED THE ANNUAL REPORT and expressed the following

concerns:

a) The outbreak of animal diseases in Eastern Cape, Western Cape Limpopo

and KwaZulu-Natal.

b) The intergovernmental relations challenges.

c) Information flow and management between three spheres government.

d) Training and lack of support for emerging farmers.

e) The role of played by Extension Officers in some areas is not visible.

f) Agricultural co-operatives and the registration process.

g) Implementation plans of Provincial departments and Districts

RECOMMENDED THAT the follow up meeting with the Department of Agriculture is

necessary to discuss the Comprehensive Agricultural Support Programme (CASP)

funding.

AND AGREED to accept the report.

The Chief Executive Officer, Mr Alan Mukoki presented the annual and audited

financial statements of the Land Bank. The main focus of the presentation was on

vision, mission, evolution of the Bank since 1998, approach, external environment,

operational review, loans to emerging farmers, AgriBEE support, financial review and

turnaround points.

During 2004/5 the Bank has recorded successes in relation to:

a) Raising levels of investment in the natural environment through agriculture

and by adding value to the contributions of the rural, provincial and local

government agricultural stakeholders.

b) Raising rural awareness levels and empowering communities to create new

social business networks to facilitate productive partnerships amongst smallscale

farmers through the Step –Up product by creating credit histories for

the unbankable.

c) Effectively delivering on its undertakings, often in partnership with other

commercial and development finance institutions.

d) Fostering and strengthening a regional approach to delivery.

e) Achieving on the ground outcomes and promote sustainable agriculture.

Apart from successes, Land Bank faces specific challenges relating to:

a) Improving access for various categories of agricultural entrepreneur and

meeting a variety of needs with the innovative thinking required to meet the

challenges of limited access to land ownership and collateral.

b) Matching service capacity with outreach- the Bank must ensure that it offers

excellent and cost-effective service to all clients.

c) Maintaining sound financial performance and credit rating – balancing

outreach and quality service with imperatives of sustainability.

d) The Bank has to continue to grow into the space created by the Land and

Agricultural Development Act (Act No. 15 of 2002) and make creative use

of the opportunities created by the Act.

Turnaround Strategy: since 1998, the Bank was accorded a development mandate, the

focus of its activities have altered to embrace both the commercial farming enterprises

and the emergent farming enterprises across agricultural value chain. For the Bank to

deliver on the mandate it was obliged update and strengthen its financial controls. As a

consequence, the Land Bank has developed a Turnaround Strategy embracing its core

activities, including, but not limited to short –term, medium-term, and long-term outputs

and outcomes.

The Audit opinion reflects that the financial statement fairly present, in all material

respects, the financial position of the Land Bank and the Group at 31 March 2005 and

the results of its operations and cash flows for the year ended in accordance with South

African Statements of Generally Accepted Accounting Practice, and in the manner

required by the Public Finance Management Act (Act No.1 of 1999).

Computer system: there are still deficiencies in the banking loan module, as well as

certain inadequacies in either logical or manual mitigating controls, which remain

unresolved.

Fruitless and wasteful expenditure: the Land Bank was assessed by the South African

Revenue Services in 2004 financial year for PAYE of R10 million, penalties of R665

210 and interest of R2.9 million relating to employees tax that was incorrectly

calculated and not deducted from employees earnings. The total PAYE not recovered

from employees, penalties and interest amounting to R13 606 849 is regarded as

fruitless and wasteful expenditure.

Submission of the financial statements: Section 55 of the Public Finance Management

Act, 1999 (Act No. 1 of 1999) as amended by Act No. 29 of 1999) requires the financial

statements to be submitted to the Auditor-General within two months after the financial

year-end, by 31 March 2005. The financial statements were signed by the accounting

authority and submitted for audit purposes on 31 May 2005.

THE COMMITTEE DELIBERATED THE REPORT and expressed the following

concerns:

a) Creation of an environment for the empowerment of the historically

disadvantaged.

b) Participation by previously disadvantaged South Africans within all levels of

the value chain in the agricultural sector.

c) Credibility of the Bank amongst the emerging farmers needs special

attention.

d) Borrowing and the ability to repay.

e) Lack of training and development to land reform beneficiaries.

f) Access to information and products of the Bank to rural villages.

The Committee accepted the report.

The Chief Executive Officer, Mr Michiel van Niekerk presented the 2004/5 annual

report and audited financial statements. The primary objective of PAETA is t to create

and promote opportunities for social, economic and employment growth for farming

communities, in conjunction with other stakeholders in primary agriculture, through

relevant, quality and accessible education, training and development.

The main focus of the presentation was on targets and key achievements such as

Learnerships, Skills programmes, ABET, HIV / Aids, Quality Assurance, National

Skills Fund Projects.

Total revenue for 2004/5 amounted to R93 108 million. The amount is constituted by

the Skills Development income, the Skills Development levy interest, the National

Skills Fund income; donations for special projects; and investment income. Total

expenditure amounted to R90 697 million, as a result of Employer grant and project

expenses, Administration expenses, National Skills Fund expenses and Special project

expenses.

Auditor-General’s note in terms of qualifications, matters of emphasis and significant

matters was none.

Key challenges for AgriSETA for 2005/6 and beyond:

Extensive support to the Agricultural Land reform processes in an integrated

manner via a large- scale strategic NSF project.

With financial support roll-out ABET programmes to at least 10 000 per

annum.

To capacitate learning centres (especially Agricultural Colleges) into Centres

of Excellence.

High quality, relevant and in-depth agricultural and agricultural processing

research.

To create infra-structural linkages with the secondary component to make

down-stream activities more accessible to small farmer.

The impact on Extension and Mentoring services.

a) The location of Agricultural Colleges to the Department of Education needs

to be considered (by Agriculture and Education Departments);

b) Transformation of the higher echelons of the entity.

The Committee accepted the report.

2.6 National Agricultural Marketing Council (NAMC)

The National Agricultural Marketing Council (NAMC) is a schedule 3 public entity

established in terms of Marketing of Agricultural Products Act (Act No. 47 of 1996).

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 to co-ordinate agricultural marketing policy in relation to national economic, social

and development policies and international trends and developments.

Funding to the council during the year under review amounted to R11 162 000 million.

The budget was made up of transfer from the Department of Agriculture with

R10 601 000 million and interest and other amounted to R561 000.

The actual expenditure amounted to R11.1 million that was made up of personnel

expenditure, administration, professional services, provision for audit fees. There was a

surplus of R1.7 million which has been approved.

Audit opinion

The financial statements fairly present, in all material respects, the financial position of

the NAMC at 31 March 2005 and the results of its operations and cash flows for the

year then ended, in a manner required by the Public Finance Management Act.

The Committee considered the report and expressed the following concerns that:

a) The Council does not have a strategy to deal with enhancement of the first

economy and responding effectively to the challenges of the second economy.

b) Lack of proactive role by the council to ensure that South Africa is not a victim

used as a dumping zone.

c) The council should consider employing marketing officers, to deal with

domestic and international marketing.

d) It was not clear as to why it took so long for the council to disband the Wool

Board.

e) There is no strategy in place to for the council to be accessed by emerging

farmers.

a) The council to provide a report in relation to the time taken to disband the

Wool Board.

b) The council provide a report on the breakdown of personnel expenditure.

Onderstepoort Biological Products Limited is a bio-technical company manufacturing

vaccines and related products for global animal health care industry. The company was

established in terms of the Ondertepoort Biological Products Incorporation Act (1999).

The company is entirely self-financing and derives its revenue from the sale of vaccines

and related biological products. Since inception in 2000, the company has consistently

shown a positive growth in sales. The contribution of export sales since then has risen,

while the growth in profits has also increased.

The company reported a non-tax revenue of R69.7 million for 2003/4, and that was

projected to grow over the MTEF period, which was largely attributable to the projected

increase in sales of vaccines in the export market.

For the period under review the company reported net revenue of R77.4 million and

increase of R7.7 million compared to previous year. The increase was due to operational

cash flow, cash invested in three major banks, cash was retained for upgrade of

facilities.

The financial statements fairly present, in all material respects, the financial position of

the Company at 31 March 2005 and the results of its operations and cash flows for the

year then ended in accordance with the requirements of by the South African

Companies Act of 1973, and other reporting requirements set out in the Public Finance

Management Act of 1999.

The committee considered the report and expressed appreciation of the good work done

and encouraged the company to:

a) Strengthen personal contacts with the emerging farmers;

b) Continue visiting provinces on regular basis to end the diseases;

c) Extend more services to the SADC region and the continent.

FURTHER RECOMMENDED:

That the Committee shall undertake an oversight visit in the new-year to the Head office

of the company to oversee the renovated facility

2.8 Perishable Products Export Control Board (PPECB)

The Perishable Products Export Control Board was established in terms of the

Perishable Products Export Control Board Act (Act No.9 of 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, market intelligence and information services. The

Board is funded by its own revenue and does not receive transfers from government.

For the period under review, the total amounted to R91 248 418 million which was

derived from among others the volume, levy, customised, SA PIP and other related

matters. The total expenditure amounted to R95 410 166 million which comprised of

people, operations, technology, building and other matters. The statement reflects a

shortfall of R4.1 million while in 2004 a surplus of R2.4 million was recorded.

The financial statements fairly present, in all material respects, the financial position of

the Board at 31 March 2005 and the result of its operations and cash flows for the year

then ended in a manner required by the Public Finance Management Act of 1999,

except a note in the director’s report which listed areas of non-compliance with the

Public Finance Management Act (Act No. 1 of 1999).

The Committee considered the report and expressed the following concerns:

a) The Employment Equity Plan of the Board must be fast-tracked;

b) The bulk (about 70%) of the budget is utilised for personnel expenditure;

c) The Board needs to consider the possibility of labelling the products in terms

of branding in the second economy

AGREED to accept the report and the financial statements as presented;

AND RECOMMENDED THAT, the Board should provide the committee input on how

institutions such as NAFU and AgriSA can be included as part of transformation

process.

2.9 Agricultural Research Council (ARC)

The Agricultural Research Council (ARC) is a public entity listed in the Public Finance

Management Act (Act No. 1 of 1999). The ARC renders multidisciplinary services

addressing national agricultural priorities. It provides a scientific base and technology

transfer capacity to national agricultural industry in South Africa. The ARC was

established in terms of the Agricultural Research Act (Act No. 86 of 1990). It is one of

the ten publicly funded science and technology institutions that constitute the National

System of Innovation (NSI).

The mandate of the ARC includes conducting research, developing and transferring

technology. In so doing it promotes the agricultural sector industry, thereby contributing

to the quality of life of the people of South Africa. This mandate is funded through a

Parliamentary Grant and allocated as part of the Science vote. The secondary mandate

includes programmes or services required by the Department of Agriculture,

Department of Science and Technology (DST), the Provincial Departments of

Agriculture and other industry customers. The ARC, in its responsibility to conduct

research, develops technologies in response to agricultural priorities as identified

through national policy.

On Research and Development, the activities of the ARC have been aligned to address

major government priorities such as integrated rural development, natural resource

management, food security, and trade development and support.

On Sustainable Rural Livelihoods, in the past year the ARC has been involved in a wide

range of activities – from production projects and research programmes, to equipment

testing and trials. The extensive training it has conducted spanned from conservation

and cotton farming to pest management and beekeeping.

The services provided by Corporate support services are operation transaction based and

include finance, information technology, human resources, facilities management, legal,

management of corporate public relation events and travel. The highlights for the year

include the following: development of a service desk focusing on improving service

delivery, the upgrading of the Information Technology which had a major impact on

improving the communication infrastructure of the ARC.

On Human resource, the year was a period characterised by stable industrial relations

and a 4.7% growth in the total workforce. The ARC maintained its target of investing

3% of its labour cost in human resource development and also claimed the skills grants

due. Employment Equity, a subject of constant focus, still presents some challenges

even though the ARC has succeeded in appointing candidates from designated groups.

In this period, employees benefited from a range of professional development and

training programmes. To tackle the shortage of scientists in the research disciplines, the

HR division has come up with some innovative knowledge-transfer and mentoring

programmes. In the coming year, the focus is to be on succession planning, career-path

planning, performance evaluation frameworks and aligning of policies with latest labour

developments.

On Information and communication technology, the effective management of

information is crucial to organization that generates such a volume of knowledge. In the

year under review, the ARC developed a new ICT strategy and has established a

number of new systems.

During the year under review, the ARC has committed a total amount of R45 million

towards capital infrastructure and renewal, R25 million towards Information technology

upgrade and R27 million towards human capacity development.

Revenue from external funding at R219.3 million increased by 3.3%. Total

remuneration costs increased by 11.1% largely due to action taken to address the

remuneration levels of staff in ARC which has lacked behind. The corrective action will

improve the ability of the ARC to attract and retain core scientific. Capital expenditure

totalled R22.7 million. During 2004/5 the ARC has committed a total budget of R44

million to address the infrastructure needs.

Audit opinion: The financial statements fairly present, in all material respects, the

financial statements of the ARC at 31 March 2005 and the results of its operations and

cash flows for the year then ended, in the manner required by the Public Finance

Management Act, 1999 (Act No. 1 of 1999) as amended.

EMPHASIS OF MATTER:

The report reflects non-compliance with the PFMA, with regards to internal controls

and submission of financial statements.

While the committee accepted the annual report, it also expressed the following

concerns:

a) The ARC strategy in disseminating information especially to emerging

farmers (and in the rural areas).

b) The state of readiness by the institution to combat the developing bird flu

around the world, in the event it reaches the country.

c) The technology transfer of skills and development.

d) Participation by the institution in NEPAD activities.

e) The challenges posed by the Climate Change the readiness to respond.

f) The non-repairing of the facilities belonging to the ARC.

IT WAS AGREED THAT the ARC must provide written responses other questions.

Provide the committee with resource challenges that makes the institution

not being able to fulfil its mandate.

The Committee indicated to do all it can to assist the institution; and

Strengthen networking with all Universities in South Africa.

Having considered the 2004/05 Annual Reports and Financial Statements of the

Department of Agriculture and its Public Entities, the Portfolio Committee recommends

that:

A follow up meeting with the Department of Agriculture is required to

discuss the Comprehensive Agricultural Support Programme (CASP) and

MAFISA funding and the problems experienced at provincial levels;

While the Committee agrees that during the past year (2004/05) the

Department has made remarkable progress on various issues, such as

transformation of the sector at all levels, by 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; and

The Committee extends special appreciation to the Department of

Agriculture and all associated entities for attending the annual report

hearings and hoping matters of concern would be attended.