REPORT OF THE PORTFOLIO COMMITTEE ON AGRICULTURE AND LAND AFFAIRS ON THE ANNUAL REPORTS AND FINANCE STATEMENTS FOR 2004/05 OF THE DEPARTMENT OF LAND AFFAIR AND ITS PUBLIC ENTITIES

EXECUTIVE SUMMARY

1. BACKGROUND
The Constitution of South Africa (Act No. 108 of 1996) recognises that the Legislative Authority has an important role in the processes of oversight function in overseeing the performance of Departments and public entities Annual reporting is a mechanism by which department and associated entities account to Parliament on their activities.

Section 65 of the Public Finance Management Act requires that Ministers table the annual reports for the Departments and public entities for which they are responsible by 30'h September each year.

On the 30'h September, the Department of Land Affairs and associated entities namely, Commission on Restitution of Land Rights, Bala Farms (Ply) Limited, and KwaZulu-Natal Ingonyama Trust Board tabled their reports in terms of Section 65(1 )(a) of the Public Finance Management Act (Act No.l of 1999).

Upon the referral by the National Assembly, the Portfolio Committee on Agriculture and Land Affairs scheduled extended briefing sessions with the Department of Land Affairs and associated public entities to present their reports and financial statements including the report of the Auditor-General on Financial Statements for 2004/05.


2.
OVERVIEW OF ANNUAL REPORTS OF THE DEPARTMENT AND PUBLIC ENTITIES FOR 2004/05 The main purpose of the extended briefing sessions were to provide a platform to departmental officials to brief Members on the contents of 2004/05 annual reports submitted to Parliament in terms of Public Finance Management Act. The presentations focused on 2004/5 targets, achievements and challenges, and audited Financial Statements ending at 31 March 2005.

2.1 Department of Land Affairs
The Director-General, Mr Glen Thomas presented the annual report. The main focus of the presentation was on strategic objectives, performance review highlights in relation to Land Restitution, Land Redistribution, and Land Tenure, Land Planning and Information, improved governance of the Department, and financial review for 2004/05.

2.2 Commission on Restitution of Land Rights
The Chief Land Claims Commissioner, Mr Tozi Gwanya presented the commission report on the 7th June. The main focus was on the strategic objectives of the Commission which include: providing equitable redress to victims of racial land dispossession in terms of the restitution Act No. 22 of 1994 as amended: provide access to rights in land, including land ownership and sustainable development; to foster national reconciliation and stability: and improve household welfare, underpinning economic growth, and contributing to poverty alleviation.

2.3 Bala Farms (Pty) Limited
The Chief Finanacial Officer, Ms Sarah Choane presented the progress report on deregistration on the 5'h April. Bala Farms 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 policy. A new deadline of 31 March 2005 was set. Properties which have not been disposed-off by that date will be transferred to the Department of Land Affairs for disposal. The department does not provide any financial assistance to the company. The company generates its own revenue from interest earned on investments and on the leasing of properties, and from the sale of land. Total income in 2003/04 was R1.3 million, with a net profit of R0.5 million.

2.4 KwaZulu-Natal Ingonyama Trust Board
The Board member, Adv Robin Raubenheimer presented the report. 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 Agriculture and Land Affairs, came into operations in October 1998 to administer the affairs of Ingonyama Trust.

3. COMMITTEE OBSERVATIONS Based on 2004/05 annual reports and audited financial statements presented, the Committee has generally observed that:
The 2004/05 annual reports of the Department of Land Affairs and associated entities have provided information on service delivery and reported on financial statements, management and audit reports against the performance targets and budgets as outlined in the strategic plans / business plans and Estimates of National Expenditure

In terms of Audit opinions, the financial statements fairly present, in all material respects, the financial position 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 practices and in a manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999).

Tabling of 2004/05 annual reports and financial statements of the Department of Land Affairs and public entities to Parliament by the Minister of Agriculture and Land Affairs has complied with the requirements of the Public Finance Management Act.


1. REPORT
The Portfolio Committee on Agriculture and Land Affairs, having considered the Annual Reports and Financial Statements for 2004/05 of the Department of Land Affairs and the public entities reporting to the Minister during the extended briefing sessions, reports as follows:

2. ANNUAL REPORTS AND FINANCIAL STATEMENTS FOR 2004/05 OF DEPARTMENT OF LAND AFFAIRS AND PUBLIC ENTITIES
On the 1~ of November 2005, the Committee completed its oversight work on the reports of the Department of Land Affairs and the associated entities, namely, the Commission on Restitution of Land Rights, Bala Farms (Pty) Limited, and the KwaZulu-Natal Ingonyama Trust Board.

2.1 DEPARTMENT OF LAND AFFAIRS The Director-General, Mr Glen Thomas presented the annual report. The main focus of the presentation was on performance review highlights for the period 1 April 2004 and 31 March 2005 targets and achievements related to programmes such as Land Restitution, Land Redistribution, Land Tenure, and financial review per programme expenditure (that is, Administration, Surveys and Mapping, Cadastral Surveys, Restitution, Land Reform, Spatial Planning and Information, and Auxiliary and Associated Services. First, the Department of Land Affairs derives its mandate from Section 25 of the Constitution of the Republic of South Africa Act, 1996 (Act 108 of 1996), which protects property rights while placing an obligation on the State to implement land reform. Therefore, the Department has the responsibility of providing access to land and extend rights in land, with particular emphasis on the previously disadvantaged communities.

Expenditure per programme for 2004/05

Programme 1: Administration The programme provides strategic and logistical support in the form of executive and corporate services. For the period under review the expenditure of the programme amounted to R192 018 million that is 97% of the R198 447 million budget.

Programme 2: Surveys and Mapping The objective of the programme is to enhance planning and monitoring of land reform, national infrastructure and sustainable development by providing accurate, up to date and accessible maps and other geo-spatial information. For the period under review the expenditure amounted to R65 597 million that is 95% of the R68 993 million budget.

Programme 3: Cadastral Surveys Key objective of the programme is to develop and maintain a high quality cadastral survey system in order to support and facilitate all land development including land reform. For the period under review the programme expenditure amounted to R79 044 million that is 98% of the R80 336 million budget.

Programme 4: Restitution Key objective of the programme is to have persons or communities dispossessed of property after 19 June 1913, as a result of past racial discriminatory laws and practices, restored to such property or receive just and equitable compensation. The overall target of 74% has been achieved, 59 345 claims settled by the end of financial year, 20 351 claims outstanding. 6 536 settled claims are rural, while 52 809 are urban. There was a 68% increase in the number of claims settled in 2004/5 in relation to 2003/4. A total of 10 520 land claims were settled in the financial year. A total of 207 527 hectares were awarded in 2004/5 financial year. For the period under review the programme expenditure amounted to R1 182 780 billion that is 99.8% of the total budget.

Programme 5: Land Reform Programme focus is to ensure that sustainable benefits of economic growth accrue to previously disadvantaged communities, groups and individuals through the provision of land rights to achieve increased income levels, productive land use and well-planned human settlements. For the period under the review, the programme expenditure amounted to R453 653 million that is 96% of the total budget of R472 753 million.

Programme 6: Spatial Planning and Information The programme aims to establish an effective and efficient system of spatial planning, land use management and spatial information to support development and land reform in South Africa. For the period under review, the programme expenditure amounted to R15 180 million that is 86% of the total budget of R17 722 million.

Programme 7: Auxiliary and Associated Services The programme provides auxiliary services and services associated with the departmental aims through its sub-programmes. For the period under review, the programme expenditure amounted to R2 624 million that is 32% of the total budget of R8 224 million.

The total allocation to the Department was R1 990 899 billion. The total actual spending for the same period was R2 031 882 billion that is 98% of the total budget. The report reflects under-spending by 2% of the budget.

Audit opinion The financial statements fairly present, in all material respects, the financial position of the Department of Land Affairs at 31 March 2005 and the results of its operations and cash flows for the year then ended, in accordance with the Public Finance Management Act (Act No. 1 of 1999) as amended.

Matters of emphasis: Forensic investigation into the Regional Land Claim Commissions (RLCCs); and • Internal control weaknesses

COMMITTEE OBSERVATIONS The Committee interrogated the report intensely and raised the following concerns: a) The lack of sufficient capacity within the Department. b) Relations between the spheres of government in relation to planning and implementation of government programmes and projects. c) The challenges imposed by implementation of Comprehensive Agricultural Support Programme (CASP). d) High land prices especially when the Government becomes a willing buyer. e) There is no mechanism in place to monitor farm evictions. f) The non-application of the expropriation as a means to acquire land. g) Municipalities selling land to foreigners. h) Amalgamation of Extension of Security of Tenure Act & Land Tenants Act have their own challenges WHILE THE COMMITTEE ACCEPTED the report, it also commended the Department on the expenditure patterns compared to the previous years. AND FURTHER RECOMMENDED THAT the department must table the implementation plan of the Land Summit recommendations. 2.2 COMMISSION ON RESTITUTION OF LAND RIGHTS The Chief Land Claims Commissioner and the Chief Financial Officer, presented the Annual Report:

a) Strategic Objective and Mandate of the Commission To provide equitable redress to victims of racial land dispossession in terms of the restitution Act No. 22 of 1994 as amended; To provide access to rights in land, including land ownership and sustainable development; Foster national reconciliation and stability; and Improve household welfare, underpinning economic growth, contributing to poverty alleviation

b) Financial Perspective: Details of Expenditure Transfer Payments * Land Acquisition R 489 554 million: * Financial Compensation R 505 286 million; and Development Grants R 23 774 million Compensation of Employees R79 617 million Goods and Services R80 590 million Capital Assets R3 405 million TOTAL R 1.1 billion

c) Total Financial Commitments for all claims settled to date Land Acquisition R1.7 billion Financial Compensation R 2.4 billion Restitution Grants R 0.316 billion Settlement Planning Grant R 0.142 billion

Total Transfer Payments R4.6 billion (Land Acquisition is linked to restitution grants for purposes ofsustainable development. This amounted to R2.1 billion for claims settled to date).

d) Funding of Restitution Programme The funding of restitution programme has demonstrated the political will to support land reform in general and restitution in particular. President, in the State of the Nation Address gave a three-year ex~n~nn '- " outstanding land claimc hA:,: -

"'L~1131Vll iurTinalization nf~" -.-....v,. iviiniSter of Finan~ i- ~ - reDruary, annnl n~-~ h -

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" Critical ss "'ULIO" udge

r'"ancial on7npn,_,. "Active

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Attractive to poor to address poverty related needs; Does not offer lasting solutions to poverty; Does not contribute to resolving the problem of skewed ownershic Leads to familv disoutes and fraud.

" L\1C(U3 *V lwuttl] uiuru*.vu uiivi iiuuu. Land Restoration • 887 093 hectares have been delivered by restitution to date; • More than 172 769 households have benefited; • Resettlement on restored land is problematic as the establishment of human settlement is a long process involving bulk infrastructuire (water, roads, electricity, housing etc); • Re-skilling of restitution beneficiaries is a long process, especiall) for highly commercial agriculture: • Rely on Provincial Department of Agriculture for capacity buildin( and training of claimants; • Meetings were held with AgriSA to discuss mentorship/developmen programs, but not much has come out of the general agreement; • More post-settlement support needed for claimants includin) technical assistance, financial services, project managemen' entrepreneurship, business training; • Some traditional Leaders wrongfully believe that land restored t the claimant community is their personal property. This matter st needs to be addressed with the Leadership of Traditional leaders; • The Commission is speaking to NGOs about their support t restitution beneficiaries so that they can make optimal use of th restored land; • There is an increasing number of people who would like tl" Restitution Act to be amended to allow for re-opening so that ne land claims can be lodged. Minister has ruled re-opening out main for the following reasons:

a) Most urban claimants want financial compensation, which defea the main aims of land redistribution;

b) Restitution was intended fo hp a c--~- -• - • Valuation of land rights lost (use of independent Professional Valuers), • Negotiations, (landowners, claimants and other stakeholders); • Options assessment (financial compensation, restoration, feasibility studies); • Referral (Minister or Land Claims Court) • Implementation of Restitution Award (land use plans, development plans etc).

All the Stages have different sub-processes. Rural claims take much longer to process than urban claims. Commission agreed to shorten the cycle by for rural claims from three years to one year. Procurement of goods and services still takes a long time and thus delaying for example the appointment of Service Providers for some of processes such as claimant verification or valuations. The introduction of Supply Chain Management by Department of Land Affairs will help to address procurement issues. The issue of determining just and equitable compensation, in line with Constitution, is still a challenge in some cases, given the collusion between Valuers and Landowners.

In Mpumalanga, the Commission has noticed the over-statement of lane values in some of the Badplaas farms. Legal steps have been taken to correc this. Landowners still continue demanding high prices for land. The boominc economy and Land reform may have contributed to the increase in deman( for land which may influence the increase in land prices. Govemmen intervention may be necessary for stabilizing land prices. This may include introducing: Ceiling on the size of land ownership: • Ceiling on land prices: • Land tax based on size of land owned; and • Pursuit of exorooriation

Pursuit of e n i • f .,<

• Budget and expenditure review; • Risk management (Risk register and Risk Management Committee): • Sing of the Commission.

g) Land Claims Court Cases Mashilane Community vs Minister (LCC No. 74/2003). Aventura BlydepOOrt & Swadini, Court held that the Minister must take the administrative decision to finalize the claim; • Mhlangu N VS Minister (SCA No. 572/2003). SCA decided that the LCC should adjudicate on the validity of the claim: • Mandia C Khumalo vs Minister (LCC No. 109/99). Court decided to give restitution award in favour of the claimant; • Richtersveld Community vs Alexkor and Government (LCC No. 151/98). Constitutional Court confirmed finding of SCA, awarding land plus mineral rights and precious stones to the community; • JMC Prinsloo and Botha Famity Trust vs Ndebele NdzundZc community decided to accept the validity of the claim and confirmee the decision of the Land Claims Commission.

COMMITTEE OBSERVATIONS THE COMMITTEE CONSIDERED THE REPORT AND NOTED:

a) The progress made by the Commission despite the difficulties am enormous challenges and problems;

b) The Committee will continue supporting the Commission when eve it is possible;

c) On the other hand, the Commission must also avail information t the committee in relation bottle necks; rl\ Thn 't~ftin nf 1"~—>•-'•- I_

a) In the provinces, there are still many practical challenges that neec to be addressed:

b) The people who missed the 31 December 1998 deadline, can ir terms of the Section 6(2)(b) of the Act, make use of othe Government programmes such as the Redistribution and Lane Tpniim

lo HAIA rAniMie* /nTV\ i IMIITP

Bala Farms (Pty) is a state-owned company created by the forme Bophuthatswana administration to buy and administer farms outside th homeland territory. The company is being deregistered in line with th Department's land reform policy. A new deadline of 31 March 2005 was se Properties which have not been disposed-off by that date will be transferred t the Department of Land Affairs for disposal.

On progress on the properties remaining, the company reports that 4 farmir units consisting of 7 farm portions had to be transferred to the identifie beneficiaries. Portions 41, 64, 83 of farm Grootfontein 115 JO have bee transferred to Department to complete the disposal process, as this w delaying de-registration. Portions 22 of farm Blaauwbank 127 JO has al{ been transferred.

On the remaining properties, the company reports that Portion 2 of far Logaga 124 KP has been disposed of. Portion 14 of farm De Putten 56 J has been transferred free of charge to beneficiary community. Deregistration Process meant that first, all assets and liabilities had to I liquidated or ceded to the Department. All debts were settled including amount r)f R1 r; millinn ~rrhrl C^ ~ ~1IIIII "• - -

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.PAYEorSDL.

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. Audit opinion

The financial statements fairly present, in all material respects, the financial position of Bala Farms (Ply) Ltd 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 (Act No. 1 of 1999) as amended and the Companies Act, 1973 (Act No. 61 of 1973)

COMMITTEE OBSERVATIONS The Committee considered AND ACCEPTED THE REPORT AND FURTHER APPRECIATED the work done by the Company and the Department for completing deregistration process within stipulated time and for complying the instruction.

2.4 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, Chairec by His Majesty the King (or his nominee) and eight other members appointee by the Minister of Land Affairs, came into operation in October 1998 tc 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 fkF! )17~-i ~-~- -•

The Board has granted 130 leases covering 10 000 hectares, which generates revenue of about R600 000 a year. A further 12 leases are being processed, covering 1684 hectares with an estimated revenue of R145 000 per year. The leases cover land for diverse uses, such as shopping centers, aame oark.q TF~idpntiol ~~~"~ "

,.„...„ I vlu~llrlalii ucvciupr I:nrg, ioages, petrol filling Stations, telecommunication base stations, sugar cane farming, grazing and aouaculture roiect~

A total income of R12.5 million is earned for 2(15, through rental income, royalty income other incomes derived from investment, grant in aid receipts. Expenses amounted to R12.5 million as a result of administration and other expenses including provisions. The net income for the year amounted to R3J million

'I k implemented m the Mm tern:

Finalizing the transfer of KwaZulu-Natal townships to local ~i+k/M~:A* .-I-LI'-l' '

township registers and upgrading tenure

Extending the security of tenure on trust land anrl nm~inn

3. CONCLUSION AND RECOMMENDATIONS Having considered the 2004/05 annual reports and financial statements of the Department of Land Affairs and its public entities, the portfolio committee recommends that:

• While the committee accepted the reports presented, the Department of Land Affairs makes 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 of Land Affairs must remain accountable for the expenditure of such transfer funds. Compliance in terms of the Division Of Revenue Act needs to be examined to assess whether that 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 extends Special appreciation to Department of Land Affairs and all associated entities for attending the annual report hearing sessions and reauestinn all n?~~ nF ---- "•

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