Report of
the Portfolio Committee on Agriculture and Land Affairs on Budget Vote No. 25,
dated 28 March 2006:
1. Introduction
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 they 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 8th
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
15th March, the Committee completed the budget hearings process of
the Department of Agriculture and all entities reporting to it.
2. Programmes of the Department of Agriculture
The
Director-General, Mr Masiphula Mbongwa assisted the programme managers who
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:
2.1 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.
2.2 Micro-Agricultural
Financial Institutions of
The
scheme was launched in 2005 in
2.3 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.
2.4 African Agricultural Development Programme
(AADP)
The Programme has been
developed as a NEPAD framework for agricultural development in
2.5 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.
2.6 The activities of the
Department are organised into five programmes
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.
2.6.1 Programme 1:
Administration
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%.
2.6.2 Programme 2:
Livelihoods, Economics and Business Development
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%.
2.6.3 Programme 3:
Bio-Security and Disaster Management
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.
2.6.4
Programme 4: Production and Resource Management
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%.
3. Land Bank
The Land 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 that affected operations of farmers, such as depressed
commodity prices, the strengthening of the rand, which impacted negatively on
exporters and the unstable conditions that affected farming produce. The poor
performance manifested in a net loss of R541 million in 2005/06 compared to a
R246.6 million profits reported in 2003/04.
For the
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.
4. Onderstepoort Biological Products (OBP)
The Managing Director, Dr Linda Makuleni and the Chief
Financial Officer, Mr P. van Jaarsveld presented the overview of the OBP,
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.
5. Agriculture Research Council (ARC)
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 primarily in 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.
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.
6.
National Agricultural Marketing
Council (NAMC)
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.
The
Council’s budget for 2006/07 financial year is R19.7 million allocated to the
Council to cater for 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.
7. Perishable Products Export Control
Board
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
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 in 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.
8. Ncera Farms (Pty) Ltd
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 assist small and emerging
farmers through various services to the surrounding rural communities in the
form of advice, extension services, training etc.
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).
9. Committee recommendations
The Committee made recommendations for each entity as
follows:
9.1
Department‘s Budget and Strategic
Plan for 2005/06
The Committee welcomed both proposed budget allocations and
the strategic plan presented. The Committee further encouraged the Department
to put more human and financial resources on the following areas:
a)
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.
b)
Work
in consultation with the Department of Health to monitor developments around
the Genetically Modified Organisms debate.
c)
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.
d)
Ensuring
that training and capacity building initiatives meet increasing demands for
research capacity and advisory support services t o emerging farmers.
e)
Consolidation
of intergovernmental relations initiatives to ensure that the departments play
its role of oversight and support to provincial and local spheres of
government.
f)
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.
g)
Ensuring
that there is a strategy alignment between national and provincial departments
of Agriculture.
The Committee further agreed that from the 1st
April 2006, the Department must report quarterly to Parliament on the progress
made in implementation and challenges thereof. The Committee felt that such
trend would be of assistance to the Committee and Department for any early
intervention that may be required.
9.2 Land Bank
The Committee welcomed the budget and the business plan for
2006/07 financial year and requested the Bank to consider the following issues:
a)
The
Land Bank needs to do more work on its strategy to compete with other
commercial banks in
b)
The
Committee was also concerned that there seems to be no aggressiveness in
promoting the brand promotion of the bank.
c)
The
Committee felt that the bank must deal with the credibility gap as a matter of
urgency.
d)
The
Management Bank must ensure that the turnaround strategy improves the
organisational health.
The Committee further agreed that bank must provide the
Committee with break down of bursary beneficiaries across the provinces.
9.3
Onderstepoort Biological Products (OBP)
The
Committee accepted both the budget and the business plan, and requested the OBP
to look into the following matters:
a)
It
is not clear to the committee how the vaccines are accessed by emerging black
farmers who owned livestock;
b)
The
skills development programme and the strategy to retain the skilled personnel
within the company;
c)
The
infrastructure development and maintenance of the existing facilities;
d)
Strengthening
relationship between the company and the Agricultural Research Council in
addressing the challenges facing the country; and
e)
The
OBP contingency plan to respond to the threatening bird flu facing the country.
The Committee noted the good work
currently done by the OBP and reiterated that the visit to its head offices
will be rescheduled for the 2nd term in the programme.
9.4 Agriculture Research Council (ARC)
The Committee considered the budget and the business plan
for 2006/07 financial year, and requested the ARC to consider the following
matters:
a)
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 the matter;
b)
The
comprehensive strategy of the Council to unlock the indigenous knowledge;
c)
The
Council to put the mechanisms in place for ordinary people to bring knowledge
to the Agricultural Research Council.
d)
To
also provide the Committee with provincial co-ordinators in all the provinces.
9.5 National Agricultural Marketing Council
The Committee considered the budget and the strategic plan
and highlighted the following issues:
a)
The
strategy of the National Agricultural Marketing Council to strengthen the
co-operatives on the ground so that people benefit needs to enhanced;
b)
In
terms of the strategic objectives of the council, the committee felt that
time-frames must be specific;
c)
Also,
in relation to training, the number of people targeted must be quantified;
d)
The
transformation of the mohair industry needs to be attended as a matter of
urgency;
e)
The
citrus industry is still dominated by the commercial farmers and this status
quo needs to change.
9.6 Perishable Products Export Control Board
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, 15th March 2006.PPECB complied with the
Committee directive.
9.7 Ncera Farms
(Pty) Ltd
The Committee accepted the budget and the
business plan of the Ncera Farms (Pty) Ltd for 2006/07, and expressed the
following concerns:
a)
The training budget is not reflected in the overall
allocation, and the relationship of the current training to National
Qualification Framework.
b)
The role of SETA and the Department of Education training
curriculum for the community.
c)
The management fees appear to be high in the expenditure
column, and the committee is concerned whether is there a value for this
expenditure.
d)
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.
e)
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.
10. Conclusion
The
Committee considered the budgets and strategic/business plans of the Department
and entities and concludes by reiterating its position that:
a) Agriculture has a potential to assist
in the fight for poverty alleviation. It
plays a critical role in producing food for the poor, especially in the rural
areas. The challenge facing the agricultural sector is that of providing
sufficient food for the nation. Beside food security, the other challenges
facing the Department of Agriculture are widespread drought, outbreaks of
animal and plant diseases, skewed participation in the sector and shortage of
skills.
b)
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.
c)
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 previously disadvantaged people within the
entire agriculture value chain.
d)
The committee extends special appreciation to
the Director-General of the Department, programme managers within the
department and to all heads of associated entities for attending the budget
hearings.