Department of Rural Development and Land Reform & Ingonyama Trust Board on 4th Quarter 2013 and 1st Quarter 2014 Performances

Meeting report

Welcome and Opening Remarks
The Chairperson welcomed all Members of the Committee. The purpose of the meeting was to be briefed by the Department of Rural Development and Land Reform (DRDLR) on the fourth quarter (2013/14) and first quarter (2014/15) financial reports of the Department and the Ingonyama Trust Board (ITB). The Committee would also consider and adopt the minutes of 3 September 2014.

Financial Performance: 2013-2014 Quarter 4 and 2014-2015 Quarter 1:
Mr Thapelo Motsoeneng, Acting Chief Financial Officer, DRDLR, said total spending to the end of the third quarter of the 2013/14 financial year amounted to R7.5 billion, representing 79.8% of the final 2013-2014 appropriation of R9.4 billion. Spending for the fourth quarter amounted to R1.9 billion, representing 20.1% of the appropriation, which resulted in a 99.9% overall spending for the year and leaving a balance available at the end of the financial year of R5.7 million. It was important to note that the fourth quarter spending did not spike to abnormal levels, as the percentage spent of 20.1% was within the linear target of 25% per quarter.

The expenditure for the first quarter of the 2014/15 financial year amounted to R2.1 billion, representing 22.4% of the 2014/15 appropriation of R9.4 billion, and reflected a 2.6%, or R248.1 million, under-spending of the linear target of 25%.

With regard to the Agricultural Land Holding Account (ALHA), the entity’s expenditure to the end of the third quarter of the 2013/14 fiscal year amounted to R1.3 billion, representing 79.3% of their R1.6 billion allocation. During the fourth quarter, the entity reflected expenditure of R348.3 million, or 20.6%, which was within the linear target of 25% per quarter. Total spending for the 2013/14 fiscal year amounted to R1.6 billion, or 100%, leaving a balance of R198 000. ALHA’s expenditure for the first quarter of 2014-2015 amounted to R160.2 million, representing 37.3% of the first quarter transfer of R428.9 million from the Department to the entity. The total allocation for transfer to the entity for 2014/15 amounted to R1.9 billion, and was transferred to the entity quarterly at its request.

The Deeds Trading Account generated its own revenue. During the financial year 2013/14, it had received transfers from the Department amounting to R214, 8 million to augment the budget for the E – Cadastre Project.

As far as the KwaZulu-Natal Ingonyama Trust Board was concerned, spending to the end of the third quarter of the 2013/14 fiscal year amounted to R83.1 million, representing 107.5% of their 2013/14 budget of R77.3 million. Expenditure during the 4^th quarter amounted to R29.0 million, resulting in total spending of R112.1 million for the 2013/14 financial year, meaning a R34.8 million over-spending of their budget.  The Board furthermore indicated that the full transfer from the Department, which amounted to R14.5 million, had been utilised. The Board’s financial performance for the first quarter of the 2014/15 fiscal year amounted to R8.7 million, representing 13.8% of their R62.7 million budget for the year. The Board had been allocated a total transfer of R17.3 million from the department for the 2014/15 financial year, which was to be transferred quarterly on request. No transfer of funds had been made by the end of the first quarter, but an amount of R 6.7 million (39.0%) has since been transferred in the second quarter, leaving a balance available for transfer of R10.6 million for the rest of the financial year.

Mr Motsoeneng gave details of the Department’s performance per programme during the first quarter. On administration the total budget allocated was R1.2 billion, of which 22.5% was spent. On geo-spatial and cadastral services the allocation was R774 million, and 16.9% was spent. On rural development, 17.4% of the allocated R2 billion budget was spent. On restitution the allocation was R2.7 billion, with 27.9% spent, and on land reform, 22.1% of the R2.8 billion was spent. The total budget allocated to all programmes was R9.5 billion, of which 22.4% had been spent.

In terms of economic classification, 22.2% of the R2.2 billion budget for compensation of employees was spent. On goods and services, the budget was R1.3 billion, and 30.2% was spent. On departmental agencies and accounts, 21.1% of the 2.068 billion budget was spent. On households the budget was R3.8 billion, of which 18.4% was spent.

Discussion
Mr M Filtane (UDM) asked whether another report would be submitted to the Committee, which would focus on the socio-economic impact of all the expenditure. The issue was not Rands and cents, but the return on the investment. If there was no other report focussing this aspect, he would rather reserve his questions, because he wanted to know the impact of the expenditure.

Mr T Mhlongo (DA) said that when analysing the financial statement, there was a culture in the Department of not spending in the first quarter, and although he was aware that programmes or projects differed, there was this culture of spending in the third and fourth quarters. In 2013/14, the Department had done well, but R5.7m had not been used and this was a concern. The Department had reached 99.9% but the 0.1% was important, because the records showed it amounted to R5.7 million. He asked why the money was not used.

He asked what provinces and municipalities were doing, and how much budget they had spent in the first quarter of the 2013/14 financial year, because in the first quarter of 2014/15 they had used only 1.5% for programme 1, Administration. He asked why the department in the Free State had spent 4.9% less than the other provinces on projects.

Mr F Madella (ANC) complimented and congratulated the department for its good expenditure of 99.9% in 2013/14, and commented that it would at least leave room for an improvement to 100%.
He pointed out that in first quarters of 2014/14 and 2013/14, there had been no budgetary projections, subject to issues of interest and rent on land, which meant that it became an expenditure that had not been planned. He asked why this was the case -- what were the rental agreements that existed, so as to make meaningful monthly rental projections? He also noted that in the first quarter, the Department had not achieved 11 out its 27 performance targets, which was indeed an area of concern.

He said that the issue of land use for provinces was a concern, because the Department had spent less in the Free State (4.9%) and the Northern Cape (9%) in the first quarter, while over-spending in other provinces like North West (109%). One would assume that this trend would not continue into the second, third and fourth quarters, because this would lead to under-spending and over-spending. However, with 37% expenditure overall in the first quarter, as opposed to 25%, the Department had done much better in terms of targets.

He also emphasised Mr Filtane’s point with regard to what the impact of the budget was in terms of households, and said he would be interested in a full report on whether it was indeed money well spent with regard to the improvement of the lives of people on the ground.

The Chairperson emphasised that in the near future a second report of performance should be presented to the Committee so that they could align the financial performance with the other report that had been submitted to the Committee by the Department.

Mr Motsoeneng said that only the financial report had been requested by the Committee, and the first quarter reports had been circulated two weeks ago. They could present the first quarter performance report, ubject to the Committee’s approval.

With regard to the question on the impact of the expenditure, The Department could report on a quarterly basis whether it had met the targets versus expenditure. The impact was a function of a separate process. For instance, for the Comprehensive Rural Development Programme, the Department had an independent evaluation of the programme and its impact. The report would soon go to Cabinet. They would be happy to bring the report back once it had been tabled by Cabinet, but by the nature of the programme, they would not be able to show the immediate impact of funds that had been spent. They could show the hectares they had acquired but whether those hectares had translated into sustainable farm production became a separate function of a different evaluation.

There had been an independent evaluation, for instance, on the Recapitalisation Development Programme. Again, the report would go to Cabinet and the Department would be happy to make it available to the Committee once Cabinet had made a decision on it. In restitution, they had had an independent evaluation. In all the three reports they had dealt with the issue of impact, highlighting weaknesses in the programmes, and recommending areas of improvement and as a Department, they had had to develop an improvement plan for the areas they had identified. They will be happy to come and present to the Committee on the impact, as soon as Cabinet approved the reports.

The Chairperson said the Department needed to present both performance and financial reports to the Committee, and they should not be separated so that the financial statements could be measured with the performance targets.

Mr Motsoeneng said, in relation to the question on the culture of slow spending in the first quarter, that this varied, but he did not remember the first quarter 2013/14.

With regard to the R5.7 million that had not been used, when one managed a budget of R9.4 billion and did not spend R5.7 million, in the bigger scheme of things it could have been an amount where they had not paid an invoices on a last project because the invoice had arrived later, or they might not have spent on salaries for a position not filled. It could have been a number of reasons, but it had more to do with timing than with a lack of will to spend.

Mr Motsoeneg said that provincial and municipal expenditure on administration was where they paid for motor vehicle licences. But with land reform and restitution, it was not only motor vehicles licences, but also rates and taxes for municipalities. Therefore, the 1.5% expenditure referred to was as a result of timing.

Regarding households under land reform, and the question of why Free State expenditure was only at 4.9%, this depended on how the negotiations had gone with the people they were buying the land from. They could have clear intentions of buying a particular piece of land, but then they would find that negotiations had stopped because of a disagreement between the Department and the land owner. There were also other issues, such as the registration of land process, which slowed matters down.

Mr Motsoeneng said in terms of no budget for interest on rented land, that when they attached interest for not paying on time -- whether they had been charged by a service provider for not paying them on time, or they had delayed finalising the land acquisition process -- then the interest was posted against that item so that they would not have a budget vote, because it was undesirable.

The Chairperson said that what had come out clearly was that under-spending and over-spending was not allowed. Accruals also had an impact on the current budget because they could not remain with the balance of the funds while there were things they needed to pay for, and if they took those funds and carried them over to the next financial year, it would have an impact on the current budget. However, there was a report on performance which the Committee was waiting for, from the first quarter up to the last quarter, which the Department should come and present.

The Chairperson thanked the Department for its presentation. The Committee would await its next presentation on the performance report. The presentation of the Ingonyama Trust Board would be deferred to the next meeting because they had tabled only the financial report, without the performance report. The Department should assist and monitor the ITB and quarterly reports to be submitted to the Committee, and also the annual reports. They agreed that as a Committee they did not have enough time to deal with quarterly reports, but they had to be submitted to the Committee.

Out of the discussions they had held that day, there should be compliance with Treasury regulations and the Public Finance Management Act (PFMA). There should be no over-spending and under-spending, but spending what had been allocated to them. They were aware that they were waiting for the annual reports of both the department and ITB at the end of September which should be submitted on time because they were in a process of dealing with the Budget Review and Recommendations Report (BRRR), and therefore they should take those annual reports into consideration.

The Chairperson informed Members that at the next meeting they would be dealing with the Land Audit Report. The ITB would also be included in the agenda with regard to its financial performance and annual performance report.

Minutes of 3 September 2014
Mr T Walters (DA) moved the adoption of the minutes. Mr M Nchabeleng (ANC) seconded. The Committee adopted the minutes.

The meeting was adjourned.