The Portfolio Committee on Agriculture and Land Affairs, having considered budget vote 25, reports as follows:

The Constitution of South Africa (Act No. 108 of 1996) recognises that Legislative Authority has an important role to play in the oversight function in overseeing the performance of departments and public entities.

In terms of Treasury Regulations published in Government Gazette in May 2002, strategic plans must be tabled in Parliament at least 7 days prior to the discussion of the budget Vote of the Department.

It is important for the Committee to ensure that strategic plans are tabled within the stipulated period because the plans provide information for the budget review process of the Portfolio Committee.

The budget and strategic plan form the basis of the annual report. The Public Service Commission in its report "Evaluation of the Department’s Annual Reports as an Accountability Mechanisms" clearly states that the emphasis on measurable objectives, which should be part of the strategic plan, is to create a clear contract between Parliament and the relevant Minister regarding specific deliverables for which the Minister can be held accountable.

This explains the importance of budget and strategic plan and their necessity for departments to table them on time to ensure that Parliament is provided with information required for its oversight work.

On the 8^th March 2006, the Department of Agriculture and entities namely, the Land bank, National Agricultural Marketing Council (NAMC), the Onderstepoort Biological Products (OBP), the Agricultural Research Council (ARC), the Perishable Products Export Control Board (PPECB) and Ncera farms tabled their budgets and strategic plans for 2006/07 as required by regulations.

Upon referral of these instruments by the National Assembly, the Committee scheduled extended briefing sessions with Department and the entities to present their budgets and strategic plans for the ensuing financial year.

On the 15^th March, the Committee completed the budget hearings process of the Department of Agriculture and all entities reporting to the committee.

The Director-General, Mr Masiphula Mbongwa and programme managers presented 2006/07 budget priorities as related to the strategic plan of the Department.

The following are department’s key priority programmes for the period 2006 to 2009 and targets for 2006/07:

Comprehensive Agricultural Support Programme (CASP): The aim of the programme is to provide post-settlement support to the targeted beneficiaries of land reform and other producers who acquired land through private means. The implementation of CASP depends on provincial departments, some of which do not have capacity resulting in significant under-spending and rollovers. During 2006/07 some management members from National Department of Agriculture will be deployed to provinces to assist in improving service delivery.

Micro-Agricultural Financial Institutions of South Africa (Mafisa): The scheme was launched in 2005 in Limpopo, Eastern Cape and kwaZulu-Natal provinces, and will be rolled-out to other six provinces in 2006. Within provinces, steering committees will be established to facilitate the implementation of Mafisa. Institutions such as Land Bank, Uvimba finance and Ithala Development Finance will be participating in the scheme as financial intermediaries, once their capacity for outreach has been established. The target is to have 2 000 farmers awarded loans through Mafisa.

Broad-Based Black Economic Empowerment for Agriculture (AgriBEE): The AgriBEE framework is the Department response to improving equitable access to and participation of historically disadvantaged people in the agriculture sector. The AgriBEE Charter will be finalised and implemented in 2006, after which several workshops will be conducted at national, provincial and local level to address issues relating to the implementation and monitoring of AgriBEE. Training workshops that are aimed at promoting awareness, understanding and clarification of the impact on and relevance of broad-based BEE for local municipalities will be undertaken by selected service providers.

African Agricultural Development Programme (AADP): The Programme has been developed as a NEPAD framework for agricultural development in Africa. In 2006 the Department will focus on strengthening its relationship with African countries. It will see through implementation of NEPAD/Comprehensive Agricultural Development Programme (CAADP).

Accelerated and Shared Growth Initiative (ASGISA): The Department will develop detailed plans for identified ASGI projects. The five key areas identified for maximising contribution to ASGI include livestock development, establishment of new and rehabilitation of existing irrigation schemes, biofuels, land rehabilitation, as well as development of agricultural development corridors.

The organisational structure of the Department has been restructured and its programmes have been reduced from nine to five. The purpose of the restructuring is to strengthen the Department’s capacity to provide oversight over implementation of national programmes and to focus on priorities.

The programme provides the department with political and strategic leadership and management, and also manages capital investments. The allocation for 2006/07 amounts to R247 195 million as compared to R224 559 million for 2005/06. The allocation reflects an increase of 10.1%.

The programme promotes equitable access to the agricultural sector, the growth and commercial viability of emerging farmers, food security and rural development. Facilitate market access for South African agricultural products nationally and internationally by developing and implementing appropriate policies and targeted programmes. Promote BBBEE in the sector. Provide information for developing and monitoring the sector. Programme allocation for 2006/07 is R746 783 million compared to R695 074 million for 2005/06. The allocation reflects an increase of 7.4%.

The programme is responsible for managing risks associated with animal and plant diseases and ensuring food safety. The programme also develops the agricultural risk and disaster management policy framework for providing early warnings and post-disaster support to farmers. Under this programme there are three sub-programmes. For 2006/07, allocation for the programme amounts to R245 939 million, a decrease by 35.8% compared to R383 250 million for 2005/06.

The programme focuses on creating an enabling environment for increased and sustainable agricultural production; and promoting sound management and use of land and water resources through appropriate policies, legislation, norms and standards, technical guidelines and other services. Programme allocation for 2006/07 is R240 514 million compared to R212 361 million for 2005/06. The allocation indicates an increase of 13.3%.

The programme manages and co-ordinates stakeholder and international relations, education and training, and the Grootfontein Agricultural Development Institute. It supports agricultural research and extension and advisory services. The budget allocation to this programme amounts to R477 217 million for 2006/07 compared to R481 308 million during 2005/06 financial year. This allocation also reflects a decrease of 0.8%.

Therefore, the total allocation to Department for 2006/07 amounts to R1 957 648 billion compared to R1 996 592 billion for 2005/06. The budget reflects a decrease by 1.9%.

The Committee welcomed both the proposed budget allocations and the strategic plan presented. The Committee further encouraged the department to put more resources, human and financial on the following:

1. Stepping up the intervention strategy to help in building capacity of the emerging farmers. Provincial departments of Agriculture should play a pivotal role in these areas.
2. Work in consultation with the Department of Health to monitor developments around the Genetically Modified Organisms debate.
3. Work on fostering synergies with the Department of Land Affairs, Department of Water Affairs and Forestry, Provincial and Local Government with respect to strategy alignment and coherence.
4. Ensuring that training and capacity building initiatives meet increasing demands for research capacity and advisory support services t o emerging farmers.
5. Consolidation of intergovernmental relations initiatives to ensure that the departments play its role of oversight and support to provincial and local spheres of government.
6. Roll out the implementation of norms and standards of extension services and ensure that it plays a significant role in the monitoring and evaluation of performance of extension services.
7. Ensuring that there is a strategy alignment between national and provincial departments of Agriculture.

THE COMMITTEE FURTHER AGREED THAT from the 1^st April 2006 onwards department must report quarterly to Parliament in terms of progress in implementation and challenges thereof. The committee felt that such trend would be of assistance to both the committee and department for any early intervention that may be required.

The Bank was established in terms of section 1 of the Land Bank Act, 1912 (Act No. 18 of 1912), which was repealed by section 53 of the Land Bank Act, 1944 (Act No. 13 of 1944), which was again repealed by the Land and Agricultural Development Bank Act, 2002 (Act No. 15 of 2002). The Bank operates as a development finance institution within the agricultural and agribusiness sectors. Provides a range of finance options to a broad spectrum of clients in the sector, including entrepreneurs, women and youth, through its network of 27 braches and 37 satellite offices.

The Bank recorded a poor performance in the past financial year. This resulted from a number of factors which affected operations of farmers, such as depressed commodity prices, the strengthening of the rand, which impacted negatively on exporters and the unstable conditions which affected farming produce. The poor performance manifested in a net loss of R541 million in 2006/06 compared to a R246.6 million profit reported in 2003/04.

Turnaround Strategy, the Bank has established a committee that comprises officials from the bank, National Treasury and the department to oversee the turnaround of the financial position of the bank. The Bank has embarked on a process to review its banking and financial systems.

The committee welcomed the budget and the business plan for 2006/07 financial year and requested the Bank to consider the following issues:

1. The Land Bank needs to do more work on its strategy to compete with other commercial banks in South Africa.
2. The committee was also concerned that there seems to be no aggressiveness in promoting the brand promotion of the bank.
3. The committee felt that the bank must deal with the credibility gap as a matter of urgency.
4. The Management Bank must ensure that the turnaround strategy improves the organisational health.

FURTHER AGREED THAT the bank must provide the committee with break down of bursary beneficiaries across the provinces.

The Managing Director, Dr Linda Makuleni and the Chief Financial Officer, Mr P. van Jaarsveld presented the budget and the strategic plan for 2006/07.

The company is self-financing, including all operational and capital requirements. It derives its revenue from the sale of vaccines and related biological products. Over the years the company was able to achieve a positive and sustainable growth in revenue, profits and cash flow. The company reported an increase in sales, from 100 million doses of vaccines in 2003/04 to 105 million doses in 2004/05, while sales revenue increased from R69.9 million to R76.1 million for the same period. The sales are expected to further rise over the MTEF period. The rise will support profit growth from R4.9 million in 2005/06 to a projected R5.2 million by 2006/07.

The Committee accepted both the budget and the business plan, and requested the OBP to look into the following matters:

1. It is not clear to the committee how the vaccines are accessed by emerging black farmers who owned livestock;
2. The skills development programme and the strategy to retain the skilled personnel within the company;
3. The infrastructure development and maintenance of the existing facilities;
4. Strengthening relationship between the company and the Agricultural Research Council in addressing the challenges facing the country; and
5. The OBP contingency plan to respond to the threatening bird flu facing the country.

THE COMMITTEE FURTHER NOTED the good work currently done by the OBP and reiterated that the visit of the committee to head offices of the company will be rescheduled for the 2^nd term in the programme.

The Chief Executive Officer, Dr Tau-Mzamane presented the budget and the strategic plan of the council for 2006/07:

The focus of the council had some recent initiatives focus on primarily on improving the technology transfer capacity, the development of the ARC technology transfer academy, which is aimed at scaling up the capacity of the council development programmes. Some transformation initiatives that are aimed at addressing the needs of the resource poor communities include training of rural farmers in crop harvesting and pest management strategies to prevent serious losses.

Revenue comes mainly in the form of transfers from the department with another portion derived from services provided to external customers. Transfers to the council amount to R386.6 million, R405.8 million, and R425.3 million for the 2006 MTEF period.

In terms of the way forward, through realigning the research and development business divisions and a country network of research institutes, the council has positioned itself strategically to address agricultural imperatives of the country.

The committee considered the budget and the business plan for 2006/07 financial year, and requested the ARC to consider the following matters:

1. It appears to the committee that the number of researchers and scientists seems to be problematic, and urge the management of the council look into that as matter of urgency;
2. The comprehensive strategy of the council to unlock the indigenous knowledge; and
3. The mechanisms in place for ordinary people to bring knowledge to the Agricultural Research Council.

IT WAS ALSO AGREED THAT the council must provide the committee with provincial co-ordinators in all the provinces.

The Chief Executive Officer, Mr Ronald Ramabulana assisted by the Council members presented the budget and the strategic plan for 2006/07 financial year.

The National Agricultural Marketing Council was established by the Marketing Agricultural Products Act (1996), in terms of which the NAMC provides strategic advice to the Minister on agricultural marketing to ensure that improved market access by all participants, marketing efficiency, optimisation of export earnings and the viability of the agricultural sector.

To support this mandate, funding for the council amounts to R12.7 million, R13.3 million, and R14 million over the 2006 MTEF period.

For 2006/07 financial year, the council budget amounts to R19.7 million which is classified into council and administration, marketing and trade, enterprise development statutory measures and economic research categories

For the period ahead, the council will be more involved in integrating government programmes such as CASP, LRAD, and MAFISA, monitoring the input of deregulation on the agricultural economy, and promoting development of marketing skills for black farmers.

The Committee considered the budget and the strategic plan and highlighted the following issues:

1. The strategy of the National Agricultural Marketing Council to strengthen the co-operatives on the ground so that people benefit needs to enhanced;
2. In terms of the strategic objectives of the council, the committee felt that time-frames must be specific;
3. Also, in relation to training, the number of people targeted must be quantified;
4. The transformation of the mohair industry needs to be attended as a matter of urgency;
5. The citrus industry is still dominated by the commercial farmers and this status quo needs to change.

The Chief Executive Officer, Mr Neels Hubinger presented the budget and the business of the board.

The board controls all perishable exports and provides quality certification on products destined for export, and provides cold chain management services for producers and exporters of perishable food products, thus assisting to prevent losses. Following the opening of market in China for citrus fruit, the ppecb introduced protocol on in-transit handling to facilitate exports to China and another protocol was developed for fruit exports to India.

The total revenue for 2004/05 amounted to R91.2 million, while expenditure totalled R95.4 million, resulting in a net shortfall of R4.2 million. This was mainly due to changes in the levy structures.

The 2006/07 budget, allows for a surplus of R337 K made up of statutory services shortfall, commercial services surplus and SA PIP surplus. The net contribution of R1 million from Ancillary services will be used to subsidise the shortfall from Statutory Services.

The income of R108.7 million represents an increase of R6 million on 2006 mainly as a result of a positive price (levy) variance of R5.6 million on inspection and sea services offset by a negative volume variance of R0.4 million on the same services. The expenditure of R108.4 million is R8.2 million up on 2006 with three expense captions contributing R7 million of the increase.

The committee welcomed the budget and the business plan for 2006/07, and due to time constraints recommended that that ppecb must respond to all questions raised in writing by Wednesday, 15^th March.

FOR NOTING, the ppecb complied with the committee directive.

Ncera Farms (Pty) is a public company listed under schedule 3B in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999) as amended. The Department of Land Affairs is the sole shareholder. It is situated in the Eastern Cape on the state-owned land of approximately 4 000 hectares, and is dedicated to assisting small and emerging farmers through various services to the surrounding rural communities in the form of advice, extension services, training and so on.

Of the total amount available in the 2005/06 financial year an estimated amount of R496 300 will not be spent. The under-spending can be attributed to certain planned capital projects not being finalised in time and will thus be rolled over to the 2006/07 financial year.

The expenditure budget for 2006/07 is made up of transfer from Department of Agriculture R2 177 million, plus own revenue amounting to R798 000. The main sources of revenue are the dairy (R646 000), beef herd (R20 000), vegetables (R117 000) and sundry revenue (R15 000).

The Committee accepted the budget and the business plan of the company for 2006/07, and expressed the following concerns:

1. The training budget is not reflected in the overall allocation, and the relationship of the current training to National Qualification Framework.
2. The role of SETA and the Department of Education training curriculum for the community.
3. The management fees appear to be high in the expenditure column, and the committee is concerned whether is there a value for this expenditure.
4. The creation of the Service Centre, and the impact of the centre to the surrounding communities, the committee was concerned of whether would they benefit.
5. The committee is also concerned about the future of the company, in the event the Department moves out, whether the company will be able to survive.

Having considered the budgets and strategic / business plans of the Department and entities, the committee concludes by reiterating its position that:

2. Since 1994 the focus of the Department of Agriculture had to broaden access to the agricultural sector by providing access to those who were previously disadvantaged.
3. Finalisation of the Broad-based Black Economic Empowerment for Agriculture (AgriBEE) framework and adoption of the AgriBEE Charter in 2006 will help to facilitate ownership and participation by