ATC091104: Report 2008/09 Annual Report of the Ingonyama Trust Board

Rural Development and Land Reform

Report of the Portfolio Committee on Rural Development and Land Reform on the 2008/09 Annual Report of the Ingonyama Trust Board, dated 04 November 2009

 

The Portfolio Committee on Rural Development and Land Reform, having considered the  2008/09 Annual Report of the Ingonyama Trust Board, reports as follows:

 

1.              Introduction

 

The briefing on the 2008/09 Annual Report of the Ingonyama Trust Board (ITB) took place on 28 October 2009.

 

The following people appeared before the committee for the briefing on the annual report:  Hon. Mr. Justice S.J. Ngwenya (Acting Chairperson of the Board), Adv. W.E.R. Raubenheimer and Ms. Ntombifikile Zitha (Board members), Mr. Chris Aitken and Amin Mia (members of the Secretariat), and Mr. Mdu’ Shabane (Deputy Director General - Land Tenure Reform).

 

The Ingonyama Trust is established in terms of the Kwazulu-Natal Ingonyama Trust Act (Act 3 of 1994). The amendment of the Kwazulu-Natal Ingonyama Trust Act provides for the establishment of the Ingonyama Trust Board which functions as a landowner-in-law of the Ingonyama Trust Land. By 31 March 2008, the land in question comprised 2,705,229 hectares under some 1600 individual titles in all of the 11 Districts of Kwazulu-Natal and eThekwini Metro. The total number of people living on Trust land as at 2001 census was estimated at 4, 5 million.  

 

The vision of the ITB is to improve the quality of the life of the people living on the Ingonyama Trust land by ensuring that land usage is to their benefit and in accordance with the laws of the land. The work of the ITB work is based on the following objectives: 

 

           To formulate and implement policy;

           To provide an effective land administration systems;

           To create a climate which encourages development; and

           To extend security of tenure in accordance with both customary and statutory law always subject to the Constitution Act, 1996.

 

The performance of the ITB should be understood in the context of the legislative framework governing its establishment and the 2008/09 Strategic Plan of the ITB. The Strategic Plan identified the following key priorities for the reporting year:

 

           Update and maintain the land tenure information systems

           Transfer KwaZulu Towns to local authorities/municipalities

           Transfer state domestic properties

           Allocate land for housing, and infrastructure purposes

           Identify land in township areas

           Ongoing cooperation with DLA in preparation for CLaRA

           Monitor legislation impacting on ITB land

           Granting of leases and other tenure rights

           Disbursements to beneficiary communities

This report provides a summary of the 2008/09 Annual Report of the ITB with a focus on its structure and governance issues and assessment of its performance against the key strategic priorities of the Board.  It further offers highlights the findings of the committee and concludes with the recommendations of the portfolio committee.

 

 

2.              Presentation of the 2008/09 Annual Report of the ITB by Hon Mr. Justice S.J Ngwenya

 

2.1.       Overview of the corporate governance and structure of the Board

 

The ITB’s governance comprises the Board and Board Committees; namely audit committees constituted in terms of the Public Funds Management Act, (PFMA), 1999 (Act No1 of 1999), the executive committee and bid adjudication committee. The sole Trustee of the Ingonyama Trust is His Majesty King Zwelithini Goodwill ka-Bhekuzulu. However, in terms of the Section 49 of the PFMA, the Board is the Accounting Authority.

 

The Board is supported by the Secretariat to conduct its day to day business. The Secretariat is responsible for real estate management, general and financial administration, management of the ITB’s agents and service providers, engagement with numerous organs of state and the private (commercial) sector, and interaction with various traditional leaders and government departments

 

2.2.        Land use and development of Trust Land

 

The Board encourages sustainable use and development of the Trust land. In terms of its policies, the board can not permit the sale or alienation of land except under exceptional circumstances.  The policy promotes making land available on leasehold basis so that the communal nature of the land is retained whilst providing secure tenure to the right holder. Income generated from the leasing of land is passed on to the community.

 

Tenure rights on the Trust land include leases, indigenous titles, Permissions to Occupy (PTOs) and Servitudes. The Board’s preferred tenure right is leasehold because it is registerable and usually yields a market related rent. PTO’s were formerly issued by Department of Local Government and Traditional Affairs (DLGTA) under a delegation but have not been issued since April 2007 because they are also not registerable.

 

Another form of tenure on Trust land is servitudes.  Servitudes are registerable and range from Eskom power lines, Transnet railways, Petronet pipelines, roads, borrow pits and local authority bulk services. The ITB encourages community participation in development by way of joint ventures and also worth while job opportunities at both construction and operation stages of projects.

 

The policy of the ITB does not allow interference with the granting of indigenous titles. Indigenous titles encompass Inkosi/Induna’s allocation of residential and agricultural land in accordance with the provisions of indigenous laws and custom.  Those titles are not registered in any formal deeds registry.

 

2.3.       Performance of the ITB against its 2008/09 Strategic Plans

 

The Acting chairperson presented some highlights on the performance of the ITB against its goals and targets set under its strategic plan for the period 2008/09.

 

           Develop and asset register and land information systems

 

The Trust is the largest landowner in the Province with a total extent of 2, 709, 229 hectares held under some 1600 individual titles. It also has numerous subsidiary interests on its land.  The ITB failed to achieve on its plan to identify and record all real estate assets including titles, leases, PTOs and servitudes. The ITB argues that the exercise cannot be completed until some 300 land parcels have been transferred from the Department of Rural Development and Land Reform (DRDLR), townships transferred to Local Municipalities and State Domestic Properties transferred to the relevant organs of State.

 

To date, the Land Tenure Information System contains some 16,500 tenure right records which are continuously updated. However, there are discrepancies between the area extents recorded by the Deeds Register and data held by the ITB. The ITB in conjunction with the Surveyor General and the Registrar of Deeds is investigating those discrepancies.

 

           Transfer of Kwazulu Towns to local authorities

 

The Ingonyama Trust Act, 1994 (as amended) puts the board under obligation to transfer former R293 KwaZulu towns to the various Municipalities. During the reporting year, only 9 out of 26 townships remain to be transferred. The Board continuously engaged the local authorities on discussion and how they could take over those properties vested in them.

 

           Transfer of land used for state domestic purposes to relevant organs of state

 

The identification of properties used for state domestic purposes is a difficult exercise because of absence of records of allocation prior to the existence of the Trust. During the reporting year, no single state domestic property was transferred. The Board is continuously engaging various organs of state, including both the national and provincial Departments of Public Works, to ensure that this process is finalized.

 

The challenge in relation to the transfer of state domestic properties is the fact that most of those properties are located on communal land and it is expensive to subdivide land in terms of the subdivision of Agricultural Land Act, 1970 (Act No 70 of 1970).  However, the Board is seeking alternative mechanisms which could give effect to those transfers in a cost effective manner.

 

           Identification of land in outskirts of township areas

 

The Board started a process of identification of properties in its own township areas. Those areas include land zoned for residential and commercial purposes in Umlazi in Durban and Madadeni and Osizweni in Newcastle which are. When all properties are identified the Board would decide whether to sell or lease it in order to protect against illegal occupations and possible rating liability.

 

The ITB together with the relevant municipality and private developers has also identified KwaMakhutha Township as a model to integrate a former black township with former white suburbs. 

 

           Granting of leases and other tenure rights

 

Real estate management is the major core function of the Board. The Board encourages land development that will be of benefit to the various communities, in terms of rental income, employment and other opportunities such as shareholdings and seats on company Boards.

 

As at 31 March 2009 the Board had granted 376 leases generating R8, 492,090 per annum by way of income. The Board also noticed an increased demand for tenure rights on Trust’s land. The Board currently processes lease applications at the rate of 80 leases per month.  The Board estimates that by the end of the 2009/2010 financial year the income generated will rise to at least R9, 708,987 per annum.

 

           Registration of land vesting in the Trust and consolidation of titles

 

Out of the 300 land parcels that the Department of Rural Development and Land Reform still has to transfer to the ITB, only one has been transferred to the Trust. Most of these parcels would have been transferred to the Trust’s predecessors-in-title following various proclamations and Commissions but some reason they have never been transferred. The delays in transfer are impacting negatively on the ITB’s commitment to registration of land vesting in the Trust and consolidation of titles.

 

           Implementation of Communal Land Rights Act (CLaRA), 2004

 

The ITB awaits the announcement of the commencement date of the CLaRA. The Board is currently investigating various projects to identify tenure rights which in terms of the CLaRA will be recognised as old order rights. Once a commencement date has been announced, the CLaRA 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 CLaRA in respect of the land. 

 

           Mineral Rights and Royalties

 

The Board continued to monitor the development of the mining potential on Trust land for the benefit of the communities.  The Board facilitates development of mining potential by way of granting mining rights leases (not mining permits) on Trust land. During the year under review, a total amount of R14, 378,571 was received as royalty income.

 

           Disbursement of funds to traditional beneficiaries

 

The ITB policy on income accruing from mining or commercial activity within a proclaimed traditional community area provides for such income to be earmarked for the benefit of that particular community.  During the year under review, 31 Traditional Councils qualified for funding and an amount of R1, 971, 101.00 was disbursed. However, the Board is concerned about the slow take up of funds by the Traditional Councils. The Board is further investigating alternative methods for the release of funds. 

 

The board encourages creation of Community Development Trusts to act as conduits for monies receivable from the Board in respect of mining royalties, leases and other income.  Such Trusts could also act as catalysts for development. 

 

2.4.       Constraints to the ITB’s mandate and core business

 

The ITB is constrained by the absence of accurate and adequate records of tenure for land that it owns but occupied by its beneficiaries. As a result, the ITB received rates accounts for the properties whereas the Board is of the view that those accounts should have been sent to the various occupiers. The Board’s indebtness in terms of the newly introduced Municipal Property Rates Act, 2004 (Act No 6 of 2004) could be inflated. The Board reported that it intends commissioning land audits in order alleviate this problem. In the meantime the Board is in dispute with eThekwini Municipality over the payment of rates and the matter is the subject of a dispute in terms of the Inter- Governmental Relations Framework Act, 2005 (Act No 13 of 2005).

 

The Board experienced an increase of illegal occupations on its land from private individuals and even organs of state.  Subject to availability of financial resources, field officers were appointed to identify such occupations following which the Board would take appropriate action. The Board identified land audits as a first step in identification of those occupations in key areas and dealing with the problem.

 

The ITB is aware of land restitution claims on the Trust land. It endeavours to co-operate with the Commission on Restitution of Land Rights to resolve those land claims in order for the Trust to perform its functions as land owner-in-law. However, the Board has been hampered and challenged by lack of access to full information about land restitution claims on its land.

 

2.5.       Financial Matters

 

The internal administrative costs of the Board are met from a transfer payment from the Department of Rural Development and Land Reform, (i.e. voted by Parliament).  The operational costs are met from 10% of funds accruing through the Trust. The Board generates revenue from its trading activities (such as leases and royalties).

 

During the year 2008/09, the departmental transfer payment was R2, 492,000 which is an increase of 5, 99% from 2007/08 financial year. The ITB incurred an expenditure of R2, 448,888 which is an increase of 8, 51% from 2007/08 financial year.

 

The ITB’s own income generation was the total revenue of R39, 090, 267 representing an increase of 35, 55% from 2007/2008 financial year. The Boards expenditure is R35, 271, 142 – an increase of 51, 98% from 2007/08 financial year.

 

2.5.1.    The Report of the Auditor General

 

The ITB has again received a qualified audit opinion by the Auditor-General of South Africa. The AG based qualified audit opinion the following factors, namely land holding and royalty revenue. 

 

           Land holding

 

The value of the ITB’s land/property is valued at nil rand. However, in terms of the international accounting standards (IAS) 16, property, plant and equipment; the cost of an item shall be recognized as an asset if and only if it is probable that future economic benefits associated with the time will flow to the enterprises and the cost the item can be measure reliably. The AG also found that there were discrepancies between the extent of land per property holding register and the title deeds register. 

 

           Royalty Revenue

 

The AG also found that there was no system of control over mineral extractions. As a result, no satisfactory audit procedure could be performed to obtain reasonable assurance that the royalty revenue had been properly recorded. The AG could not confirm if the R14, 38 million was complete. In 2008, it was R12.78 million.

 

3.              The findings of the Portfolio Committee on the 2008/09 Annual Report of the ITB

 

The committee appreciated the presentation by the ITB. The briefing was also seen as a commencement of a process of engagement between the Portfolio Committee and the Board to ensure that the committee is aware of the progress made by the ITB in carrying out its mandate, and further conducts effective oversight.

 

The Portfolio Committee raised the following concerns and issues with the ITB:

 

           Many of the rural people in the Kwazulu-Natal do not understand the role of the ITB. There is an expectation that the board should facilitate processes that would ensure development in the areas under its jurisdiction. According to the Board, some of the expectations by the public are in contravention to what the Board was set up for. The Committee also found that there was limited engagement with beneficiaries on various aspects of policy development which can help people understand the mandate of the ITB.

 

           For the two years in succession, the Board has not been able to fill vacant posts due to shortage of office accommodation. The committee is also concerned that  failure to fill vacancies as per the organogram has negative effects in terms of the ITB performing on its mandate and achieving the key strategic goals set under the strategic plan of the ITB.

 

           Some of the policy development initiatives have been ongoing for a long time. For example, the ITB reported about the process of recruiting the service provider to assist them develop the HIV/Aids policy in 2007/08 financial year. However, during the 2008/09 year the Board was still in the process of employing the service provider for the same purpose.

 

           A comparison on Annual reports for 2007/08 and 2008/09 reveals that three vacancies of Board members could not be filled by the end of the 2008/09 financial year. The committee wanted to know the reasons for failure to fill in the vacant positions in the board but at the same time concerned about the impact on the programmes of the Board and delivery of services to the beneficiaries. Even if the Board’s response was that all the vacancies were filled in the 2009/10 financial year, the committee felt that during the reporting year those vacancies had negative effects on the ITB’s performance. 

 

           The fact that there is slow take up of funds by traditional communities was considered a critical issue. The committee also raised concerns with regard to the role of the Board on information dissemination to communities. The slow take up of funds may be directly linked to the problem around lack of information.

 

           The question of payments of property rates in communal areas is matter that requires further discussion. The Annual Report indicated that rates accounts are being sent to the ITB as the owner of land however the ITB argues that occupiers should be paying those accounts.  

 

           The ITB received qualified audit opinion both in 2007/08 and 2008/09. The committee if further concerned that there appears to be no improvement on these matters by the ITB. It is important that the ITB comply with the International Accounting Standards (IAS) so that it does not receive qualified audit opinion in future.

 

4.              Recommendations

 

Having received a briefing from the Acting Chairperson of the Ingonyama Trust Board on the 2008/09 Annual Report of the Ingonyama Trust Board; and further having engaged with the ITB on the contents of its 2008/09 Annual Report, the Portfolio Committee on Rural Development and Land Reform makes the following recommendations:

 

(i)                   The Board to find cost effective mechanisms of valuation of all trust land and creating asset register and tenure information system in order to achieve effective management of communal land.

 

(ii)                 The Board to report to Parliament by the end of November 2009 on how it intends address the matters repeatedly raised by the Auditor General regarding the property holdings and royalty revenue. 

 

(iii)                The ITB to find effective mechanisms of communication with the beneficiaries and the public in general about its roles and mandates to assist in reducing those expectations that are contrary to what the ITB was established for.  It should also communicate regularly with traditional communities on what funds are available to be used for development and the procedure to be followed.

 

(iv)                The Board to submit to Parliament by the end of November 2009 further details on matters relating to mining companies operating on the Trust land. The information requested must indicate what companies, leases and on what extent of land.

 

 

Report to be considered