NOTES
ON SLIDES
SLIDE 1
PREESENTATION ON ANNUAL REPORT FOR YEAR.
ENDING 31 MARCH 2006 TO PORTFOLIO COMMITTEE ON TUESDAY 17 OCTOBER 2006 BY
THE INGONYAMA TRUST BOARD REPRESENTED BY:
JEROME NGWENYA (Acting Chairperson)
Ms J ABU BHENGU (Board Member) ROBIN RAUBENHEIMER (Board Member) CHRIS AITKEN
(Secretariat: responsible for Real Estate) AMIN MIA (Secretariat: responsible
for financial matters)
SLIDE 2
MAP
Showing by green colour the land owned by the Ingonyama Trust in the Province.
Land is owned in all District Municipality areas.
SLIDE 3
With the indulgance of the Committee we would like to start our presentation
with a few background facts and figures as detailed in Part 3 of the Report at
page 37.
Legislation:
The Trust was established in terms of the KwaZulu-Natal Ingonyama Trust Act (Act
3 of 1994)
This was amended by National Act 9 of 1997. Administrative and Financial
Regulations have been promulgated and these were amended in September 2005. We
will deal with these amendments later in the presentation.
Land Ownership:
The Trust is the largest landowner in the Province with a total extent of 2,
703, 508 hectares. Land is owned in all of the 11 Municipal areas.
Population:
Based on information supplied by the Bureau of Statistics the number of persons
residing on Trust land as at the year 2001 census is estimated at 4.558.698.
This represents just over 50'Yo of the total population of the Province.
Traditional Authorities:
A total of 224 Traditional and Community Authorities have jurisdiction on Trust
land.
These are now represented at District Municipality level and there is now a
house of Traditional Councils for each of the District and Metro
Municipalities.
This presents an additional challenge to the Board and to the Trust, as the
largest landowner in the Province, to ensure that its policies are in tune with
those of the various Municipalities, specifically their Integrated Development
Plans.
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SLIDE 4
BACKGROUND
The expenditure of the Ingonyama Trust is paid from the Grant-In-Aid received
from the Department of Land Affairs and from income generated by the trading
activities of the Trust.
The own fund income which makes up 88.3 "0 of the total income for the
year is generated from Leases, Permissions to Occupy, Royalties and
Investments.
In addition to the above, R 1 837 000 was received from the Department of Land
Affairs as a transfer payment which is 11.7 "0 (inclusive of the interest
thereon) of the total income received for the year.
INGONY AMA TRUST BOARD - OWN FUND - (INCOME FROM INVESTMENTS AND TRADING
ACTIVITIES)
1. RENTAL INCOME - R 1 444 058 - INCREASE
OF 60.18 "0
The increase is due to the annual basic escalations and concluding a lease with
Total South Africa (P1Y) Ltd which included the recovery of outstanding rentals
and also entering into new leases with Vodacom South Africa (P1Y) Ltd.
2. ROYALTY INCOME - R 7009 681 - INCREASE OF 0.50"0
The increase is due to annual escalations for minimum royalties and also
dependent upon the actual extractions which increased during the year.
3. INVESTMENT INCOME - R 5 523324 -
INCREASE OF 23.02"0
The increase is due to further capital being invested during the year and also
the increase in investment rates towards the latter part of the financial year.
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SUDE 4 CONTINUED
INGONY AMA TRUST BOARD - OWN FUND EXPENSES
1. DISBURSEMENT TO TRADITIONAL
AUTHORITIES - INCREASE OF
75.80 '0
In terms of the Board's Disbursement policy, 90'}'o of the income generated
from Traditional Authority areas is to be provided for as Disbursements to
Traditional Authorities. The increase in the own fund income effectively has
increased the amount provided for as Disbursement to Traditional Authorities.
2. ADMINISTRATION EXPENSES - DECREASE
OF 83.35 '0
A greater portion of the administration expenses was paid from the Board's own
funds for the prior years. The amendment to the Regulations enabled the Board
to make greater use of the
Departments grant-in-aid, therefore a decrease in administration expenses paid
from the Board's own funds, hence an increase in the grant-in-aid income and
expenditure.
INGONYAMA TRUST BOARD - GRANT-IN-AID RECEIVED FROM THE DEPARTMENT OF LAND
AFFAIRS/APROPRIATED FUNDS
1. TRANSFER PAYMENT RECEIVED - R 1 837
000 - INCREASE OF
716.44'0
The increase in the grant-in-aid received is due to the greater use of
Departmental funds after the amendment to the Regulations and also to pay for
non-recurrent expenditure such as the development of the Land Tenure
Information System, CLRA Mapping Exercise and the introduction of the internal
audit system.
2. TOTAL EXPENDITURE - R 1 487712 -
INCREASE OF 326.64 ')'0
As mentioned above, the Board made use of a greater portion of the Grantin-aid
available and also incurred additional expenditure explained in note 1 above.
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SLIDE 5
The Bodrd is naturally concerned that the Auditor':General saw fit to
qualify the Accounts once again and also emphasised several matters.
We would like to deal with these and explain what steps are being taken by the
Board to address them:
It should be noted that whilst the Auditor-General has again qualified the
Financial Statements, none of the qualifications relate to financial
mis-management.
Whilst the qualifications are important to help and improve the management of
the Boards affairs, it is arguable whether the matters raised are justified as
qualifications.
This is evident from the comments made in previous years. In particular,
reference is made to the issue of rates allegedly owed by the Board to several
Municipalities.
At one stage, the Financial Statements were qualified on this issue but
although not yet resolved, this issue is no longer a matter of qualification
but rather a matter of emphasis only.
Firstly the Qualifications:
1. J..and holdinas (paae 19 of the Report)
The Auditor-General took a sample of 1,688143 hectares for testing and
found: a) For 353 200 hectares there were no hectares of land listed on the
title deeds. b) For 626.0005 hectares differences were noted between the
hectares recorded
in the asset register compared to
the hectares reflected in the title deeds.
c) Supporting documentation to substantiate the total decrease of 372 hectares
from the previous year could not be
submitted for audit purposes.
The Board considers the qualifications to be harsh and unnecessary for the
following reasons:
. The Board has an asset register which was compiled and maintained by a
registered land surveyor. He obtained his data from the records of the
Surveyor-General and the Registrar of Deeds.
. The Board is aware that the Deeds Registry have not always amended their
records of many properties following approval of substitution diagrams by the
Surveyor-General. This is particularly true of "Remainders" and in
cases where a property has been sub-divided they have not endorsed the title
deed with the revised area. It is the responsibility of the Deeds Registry to
ensure that their records are correct and reliable.
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SUDE 5 (CONTINUED)
The Committee should note that many of the Boards title deeds date back to
the 1860s when imperial measurements and only rudimentary surveying techniques
were used.
By way of illustration an extract of such a deed has been circulated to you.
From this you will see that the description of the subject land is somewhat
vague. This extract is taken from the title deed of Upper Umkomaas and is dated
1875. The hand written description reads: "comprising one thousand six
hundred acres English measurement or thereabouts, the same more or less,
bounded south by the river Gwangwane, to the east by the Umzimkhulu river and
northwest by Crown land".
Modern survey equipment, conversion of area to metric and changes in physical
features such as river courses have resulted in the amended areas reflected in
the Boards asset register but in many cases these have yet to be reflected by
the Deeds Registry on the title deeds.
This explains why, as noted by the Auditor-General, there were no hectares
listed on some title deeds differences reflected on others and a decrease shown
compared with the previous year.
The difference of 327 hectares represents a mere 0.01375 'Yo of the total land
holdings of 2,700,000 hectares. As mentioned, the Board is happy that the
extents shown by the Land Surveyor in the assets register are accurate and
truly reflect the land holdings of the Board as at 31 March 2006.
Notwithstanding this the Board is currently re-examining all of its 1491 titles
and is interacting with both the Surveyor-General and the Register of Deeds in
order to ensure that the Registrar of Deeds amends his records accordingly.
2. The second Qualification concerns "completeness of income" (page
20 of the
Report ).
This according to the Auditor-General concerned royalty income and Permissions
to Occupy.
In connection with royalty income we have several major mining operators on our
land such as Zululand Anthracite and Richards Bay Minerals. Steps have been
taken to ensure that in future these major operators will provide audit certificates
and we are assured that this will satisfy the auditors regarding completeness
of income.
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In addition to these major operators we have some 30 small time operators
mainly extracting sand and gravel from the many rivers that criss-cross
Ingonyama Trust SLIDE 5 (CONTINUED)
Land. These are low volume operations and it is not feasible to institute
controls over each of these sites to monitor the actual volumes being removed.
The Board is however seeking alternative methods to monitor such mining
extractions in the future. These small time operators collectively contribute
some R747, 659.00 annually by way of royalty income to the Board.
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The Auditor-General emphasised several matters and we would like to comment as
follows
SLIDE 6
Assessment Rates (page 20 of the Report)
The Board continues to repudiate the extent of any liability because the
Municipality cannot substantiate their claims. The Board continues to await
this information in order to scrutinise and interrogate the legality and
accuracy of the claims.
The Board is of the view that, it is exempt in any event by virtue of the
provisions of the Rating of State Property Act 1984. An opinion was sought from
both the Department of Land Affairs and the Department of Provincial and Local
Government.
This opinion is inconclusive and the Board is therefore, at the suggestion of
the Department of Land Affairs, seeking another opinion from Senior Counsel. Of
great concern to the Board is the introduction of new rating legislation in the
form of the Municipal Property Rates Act 2004. This Act will introduce property
rates in respect of every square metre of land in the country whereas the
previous legislation only covered mainly urban areas.
The first valuation rolls are due to be introduced in July 2007 and these will
impose additional financial and administration burdens on already limited
resources. The Board is however actively engaged with the Department of Local Government
and Traditional Affairs and the various municipalities with a view to seeking
rebates, exclusions and exemptions where applicable.
. Change in Accounting Policy (page 21 of the Report)
The Auditor-General noted that the Board had changed its accounting policy in
that it had not shown land values in the accounts. This step was taken to bring
the Board into line with the parent Department of Land Affairs, and, it must be
said, after consultation with the Auditor-General and the Boards Audit Committee.
Notwithstanding this, the Auditor-General has commented that the Board has
departed from "Statements of Generally Accepted Accounting Practice IAS 16
(AC123). The Board maintains that it is not economically cost effective to
value 2.7 million hectares of land which varies substantially in quality and
use including
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unusable mountainous terrain and land with a restricted use value such as
proclaimed nature conservation areas and state forests.
SUDE 6 (CONTINUED)
. Performance Information, Supply Chains Management, materiality and
Significance Framework (page 21 of
the Report)
The Auditor-General noted that the Board has a strategic plan in place but does
not monitor performance against predetermined objectives.
The Board is aware of its responsibilities in this respect in terms of the
Public Finance Management Act and has taken steps to ensure that performance is
measured appropriately.
The Board is also developing policies for monitoring performance, supply chain
management and significance framework. These policies are being implemented for
the current financial year.
. Financial Management (page 22 of the Report)
The Auditor-General identified control weaknesses in the financial management.
The Board now has an Audit Committee and Internal Auditors and has approved an
additional post to assist with the accounting functions. Policies and
procedures are being reviewed to ensure that the requirements of the Boards
Financial Regulations and Treasury Regulations are aligned and implemented.
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SLIDE 7
OPERATIONS AND ACTIVITIES OF THE BOARD DURING THE YEAR
We would now like to touch on the operations and activities of the Board during
the year:
. Amendments to the Regulations (page 7 of the Report)
The Board has both Administrative and Financial Regulations. During the year
both were amended by the Minister to bring them into line with the
req'uirements of the Public Finance Management Act, Treasury Regulations and to
enable the Board to become more autonomous.
It must be emphasised that this autonomy is subject always to the concurrence
of the Director-General of the Department of Land Affairs in respect of all
organisational, human resources and procurement activities.
. Strategic Plan (page 8 of the Report)
The Board has an approved Strategic Plan. This was prepared in accordance with
the requirements of the PFMA in order to assist the Board to achieve its
mission and vision.
It has regard to Government priorities such as poverty alleviation, provision
of housing and infrastructure and black empowerment. The objectives of the Plan
are to optimise land usage for the material benefit and social well being of
the communities living on Ingonyama Trust Land and to assist in extending
security of tenure in accordance with both customary and statutory law.
We would like to highlight some of the strategic objectives as follows:
. Land Tenure Information System (page 8 of the Report)
The Board is the successor- in- law to 1491 titles to land throughout the
Province and has numerous subsidiary interests on its land. In order to
optimise land usage it is important to identify and record all real estate
assets including titles, leases, Permissions to Occupy and servitudes. During
the year under review the Board commissioned a service provider to commence
setting up a computerised Land Tenure Information System. This system will be
operational shortly and will enable
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ownership queries to be dealt with and rents to be updated and regularly
invoiced. Approximately 15 510 records have thus far been identified.
SLIDE 7 (CONTINUED) -
. Transfers of towns and State Domestic Properties
Firstly: Towns (page 9 of the
Report)
In terms of the Ingonyama Trust Act, 1994 (as amended), the task of the Board
was, and is, to transfer former R293 KwaZulu towns to the various
Municipalities. As noted in previous reports, the definition as to what
constitutes an R293 township in terms of outer boundaries has given rise to
debate and there has been continued reluctance by some Municipalities to
instruct the Registrar of Deeds to effect transfer. During the year, the Board
continued to engage with the Municipalities to persuade them to take over the
land which has vested in them. By the end of this financial year a total of 15
townships had been transferred.
Secondly: State Domestic properties (page 9 of the Report)
In terms of our legislation, property used for State Domestic purposes prior to
April 1994 vest in various organs of State. Identification of such properties
has continued to be a difficult exercise because in some cases there are no
records of allocation prior to the coming into existence of the Trust and in
other cases the question as to whether or not a particular property qualifies
for transfer is not always straight forward - for example a community may claim
that they bore the costs of erecting improvements, and that it would therefore
be unfair to transfer ownership away from that community.
To date a total of 2700 State"Domestic properties have been surveyed.
During the year the Board was aware of only 2 such properties, one a hospital,
having been formerly transferred to the organ of state concerned.
During the coming year, the Board intends to take sterner measures to ensure
that the relevant departments take action to register these properties in their
name.
. Registration of Land vesting in the Trust and consolidation of titles (page
10
of the Report)
The Department of Land Affairs still has to complete the transfer of some 341
parcels of land to the Trust. Most of these parcels were to have been
transferred to the Trusts predecessors -in - title following various
proclamations and Commissions but for one reason or another have never been
transferred.
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The continued delays in transfer are impacting on other strategic objectives,
notably the onward transfers of townships, state domestic properties and the
issuing of leases.
SUDE 7 (CONTINUED)
During the year under review not one of the parcels of Land was transferred
to the Trust. The Board therefore intends to pursue this matter to try and
ensure that the transfers are effected during the coming financial year.
. Implementation of the Communal Land Rights Act, No 11 of 2004 (CLRA)
(page 10 of the Report)
This Act, once a commencement date has been announced, will reconstitute the
Board as the Ingonyama Land Rights Board for KwaZulu Natal. This Board will
continue to own the land presently registered in its name and will have certain
of the powers and responsibilities of .the Minister under CLRA in respect of
the land. At the same time it will have to perform the functions of a normal
Land Rights Board in respect of any other land subject to the Act within the
Province. During the year the Board held meetings with the Department of Land
Affairs in connection with implementation and now awaits publication of the
draft Regulations. This will enable the "mapping" exercise previously
commissioned by the Board to be completed to identify the future role and
functions of the Board and the various processes and work flow, which will be
necessary to successfully implement CLRA.
. Allocation and Provision of Land for Housing and Infrastructure Purposes
(page 11 of the Report)
The Board actively supports the allocation of land for rural housing projects
and community facilities and also the provision of infrastructure including
water, electricity and sewerage.
In order for communities to access rural housing grants from the KZN Department
of Housing, the Board, in conjunction with that Department, have developed a
Development Rights Agreement which in most cases are entered into with
Municipalities once the Board is satisfied that the grant funding has been
approved and that the Department of Local Government and Traditional Affairs
have approved the projects from a development planning point of view.
During the year. the Board gave agreed in principle to 38 housing schemes and
signed 14 Development Rights Agreements. The latter provided for 19,770 housing
units to be upgraded in rural areas throughout the Province.
The Development Rights Agreements provide for any related infrastructure to be
the subject of separate deeds of servitude with the Board. In addition the
Board
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continued, during the year, to negotiate with the Department of Transport
regarding the upgrading and realignment of roads on Trust land and with Eskom
on the construction of power lines. Leases were also concluded with the various
SLIDE 7 (CONTINUED)
cellular telephone operators in respect of cellular base stations to be
constructed on Trust land.
. Granting of Leases (page 12 of the Report)
The Board sees real estate management as a major core function and during the
year continued to encourage development on its land which will be of benefit to
the various communities, not only from a rental income point of view but also
through employment and other opportunities. This can include shareholdings and
seats on company Boards.
The Board prefers to enter into leases for the use of Trust land. In so doing
it endeavours to obtain the best deal for the relevant (affected) community.
Ownership thus remains with the Trust for ultimate transfer to the
beneficiaries to be identified in due course in terms of the provisions of the
Communal Land Rights Act No 11 of 2004. .
In this connection it is standard policy to issue a short term lease for up to
two
years to enable developers to obtain planning and environmental consents and to
secure finance for the development. Thereafter a lease for a term of up to
forty years with an option to renew for a further forty years is normally
granted once the requirements of the short term lease have been met.
To date the Board has granted some 117 leases generating R1 102,569 per annum.
The leases cover such diverse uses as shopping centres, game parks, residential
developments, lodges, petrol filling stations, telecommunication base stations,
sugar cane farming, grazing and aquaculture projects.
During the financial year under review a total of 29 new leases were entered
into. The new leases generated additional income of R165, 929.02 per annum.
. Disbursement of Funds to Traditional 'Authorities (page 13 of the Report)
It is Trust policy for income accruing from mining or commercial activity
within an identifiable traditional authority area, to be earmarked for the
benefit of that particular community less the lO'Yo retained by the Board.
During the year the number of Traditional Authorities qualifying for funding
totalled 40.
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~E 7 (CONTINUED)
. Improvement of Debtor Control (page 14 of the Report)
During the year the Board took steps to improve the system of recording debtors
and debt collection.
It is now possible to identify all debtors and take appropriate action against
defaulters.
The Board has approved a credit control policy and action was taken against
major debtors. Debt collectors were interviewed and appointed to assist with
the debt collection process.
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SLIDE 8
Constraints and Future Outlook
. Constraint (page 15 of the Report)
During the year the Board identified the following constraint:
The Board continues to be invoiced for rates by various municipalities. Whilst
the Board refutes liability in most instances it continues to address this
important issue with the Municipalities concerned. At the same time a request
for exemption in terms of the Rating of State Property Act 1984 is being
considered.
. Future Outlook (page 15 of the Report)
As already indicated the Board awaits the implementation of the Communal Land
Rights Act, 2004. In the meantime, and indeed once that Act commences, it is
very important that day to day real estate and land administration activities
are continued on behalf of the communities for whom the land is held in trust.
During the coming year the Board will therefore continue with the
implementation of its Strategic Plan and will concentrate particularly on the
following:
. the transfer of townships
. the vesting of State Domestic properties
. the transfer of Land from the Department of Land Affairs
. agreement of property extents with the Registrar of Deeds.
. settlement of property rates issues with Municipalities.
. encouraging development and rental income through the issuing of leases.
In addition it is planned that a web site 'will be commissioned. This will
provide full details of the Trust and Board and will include the legislation,
Annual Report, and an application form in respect of requests for the grant of
tenure rights.
The committee may also wish to be aware that the Board is negotiating for the
acquisition of new premises. At the present time the Boards Secretariat are
housed within the offices of the Department of Land Affairs Provincial Office.
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These offices are inadequate and for that matter the Department require them
for their own purposes. With this in mind the Board is proposing to acquire
stand alone premises on the outskirts of Pietermaritzburg.
SLIDE 8 (CONTINUED)
These premises will be adequate for the immediate and medium term
requirements of the Board and will enable the various posts identified in the
Secretariat to be filled. The new premises will also provide for meeting rooms
and boardroom facilities and there is ample space for additional office space
to be constructed if this is required in the future by the Board or its
eventual successor - the Ingonyama Land Rights Board.
Another major activity of the Board during this present year is to review its
policies. Some of these require review because of Treasury Regulation
requirements, some in the light of working experience and some in the light of
comments raised by the Auditor-General in his report.
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