2. The Budgetary Review and Recommendations Report of the Portfolio Committee on Rural Development and Land Reform, dated 22 October 2014

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1 2. The Budgetary Review and Recommendations Report of the Portfolio Committee on Rural Development and Land Reform, dated 22 October 2014 The Portfolio Committee on Rural Development and Land Reform, having considered the performance and submission to National Treasury for the medium term period of the Department of Rural Development and Land Reform, reports as follows: 1. Introduction In terms of the Money Bills Amendment Procedures and Related Matters Act, 2009 (Act No.9 of 2009), the National Assembly is required to conduct annual assessment of the performance of each national department with a focus on the medium term estimates of expenditure. Section 5 of the Act sets out a procedure for assessing the performance of each national department to be followed by the National Assembly. This procedure provides for portfolio committees to prepare budgetary review and recommendation reports (BRRR), which must provide an assessment of the departments service delivery performance given available resources; must provide an assessment of the effectiveness and efficiency of the departments use and forward allocation of available resources; and may include recommendations on the forward use of resources. This report, therefore, accounts for work carried out by the Portfolio Committee on Rural Development and Land Reform (the Committee) when it assessed the performance of the Department of Rural Development and Land Reform (the Department) and related public entities. It further makes specific recommendations for budget review and improvement of service delivery. 1.1 The mandate of the Portfolio Committee on Rural Development and Land Reform The Committee, as an extension of the National Assembly, is governed by the rules of the National Assembly to oversee the portfolio of rural development and land reform. Explicably, it oversees the work of executive and the Department of Rural Development and Land Reform whose mandate is transversal; that is, to create and maintain an equitable and sustainable land dispensation and act as a catalyst in rural development to ensure sustainable rural livelihoods, decent work, and continued social and economic advancement of all South Africans. Furthermore, the Committee oversees the work of the public entities and commissions reporting under the Department; namely, the Commission on Restitution of Land Rights (the Commission) established in terms of the Restitution of Land Rights Act, 1994 (Act 22 of 1994) as amended, and the KwaZulu-Natal the Ingonyama Trust Board established in terms of the KwaZulu-Natal Ingonyama Trust Act, 1994 (Act 3 of 1994) amended by the National Act 9 of The Committee, thus, considers and processes legislation from the Department and its entities, exercises oversight on implementation of the various programmes of the Department and related entities, facilitates public participation, considers budget votes, enquires and makes recommendations about any aspect of the Department, including its structure, functioning and policy. The Committee exercises its powers within a legal framework of the Constitution, relevant statutes and the Rules of the National Assembly. 1.2 The Department of Rural Development and Land Reform The Department derives its mandate from priorities of government, as obtained from the National Development Plan and articulated through the Medium-Term Strategic Framework and 12 Outcomes of government. It coordinates implementation of Outcome 7: Comprehensive Rural Development and Food Security for All. Concomitant to the outcome, the outputs for this Department are sustainable agrarian reform with a thriving farming sector, improved access to affordable and diverse food, pg. 1

2 improving rural services to support livelihoods, improved employment and skills development and enabling institutional environment for sustainable and inclusive growth. Table 1: Strategic Outcome Oriented goals Programme Strategic Goal Strategic Objective Statement Administration Corporate governance and service excellence Reformed policy, Sound corporate governance and service excellence through compliance with legal framework achieved by 2014 legislative and institutional Reformed policy, legislative and environment institutional environment by 2014 Geo-spatial and cadastral services Rural Development Restitution Land Reform Spatial equity Job creation and skills development Effective land planning and administration that is biased toward rural areas Integrated institutional arrangements for effective cooperative governance and stakeholder participation by 2014 Sustainable agrarian reform Improved food production Rural livelihoods Job creation and skills Development Settle land restitution claims and provide settlement support Sustainable agrarian reform Job creation and skills development Integrated land planning, spatial information and administration system to promote an equitable, sustainable land use and allocation by 2014 Skills development and sustainable economic opportunities created by 2014 Integrated service delivery facilitated through the coordination of government and development by stakeholders by Recapitalisation and development support provided to land reform beneficiaries and rural communities by Profiled rural households enabled to improve their food security by Socio-economic infrastructure facilitated to improve access to services by Skills development and sustainable economic opportunities created by Land rights restored or alternative forms of equitable redress awarded to claimants by 2014 Integrated service delivery facilitated through the coordination of government and development by stakeholders by Strategically located land acquired and allocated by 2014 Recapitalisation and development support provided to land reform beneficiaries and rural communities by Skills development and sustainable economic opportunities created by pg. 2

3 Source: Adapted from the amended Strategic Plan and 2013/14 APP of the DRDLR The Strategic Plan ( ) of the Department, read together with its 2013/14 Annual Performance Plan (the APP) demonstrated the extent to which the Department was aligned to Outcome 7 and the National Development Plan. Outcome 7 was adopted as the vision of the Department; that is vibrant, equitable, and sustainable rural communities and the mission is to initiate, facilitate, coordinate, catalyse and implement an integrated rural development programme. The vision and mission of the Department is underpinned by the strategy of agrarian transformation, interpreted to denote a rapid and fundamental change in the relations (systems and patterns of ownership and control) of land, livestock, cropping and community. This strategy aimed toward contributing in social cohesion and development. In the 2013/14 APP, the Department interpreted social cohesion and development to mean shared growth and development, full employment, equity and cultural progress. 1.3 Approach and methods In line with the mandate of the Committee discussed in section 1.1 and section 5 of Act 9 of 2009, the committee carried out its oversight activities and processes whose end result is this Budget Review Recommendations Report. Those processes included the following: Consideration of the annual reports was informed by various overarching policy documents such as the National Development Plan, the Medium-Term Strategic Framework which outlines the government-wide priorities, major policy pronouncements arising from the various cabinet makgotla, the State of the National Address, the Budget Speech, and the Minister of Rural Development and Land Reform Budget Policy Statements, the strategic plans of the Department, the Commission and the Ingonyama Trust Board. Review of responses to the previous BRRR; consideration of various reports of the 4 th Parliament s Portfolio Committee. For example, the legacy report, oversight visits reports, reports of public hearings and meetings with stakeholders, a report of the ad hoc Committee established to exercise coordinated oversight on redressing the legacy of the Natives Land Act (1913). On 10 September 2014, the Committee considered the 4 th quarter reports (2013/14) and first quarter reports (2014/15); and further took into consideration the Management Performance Assessment Report and commitments to the Outcomes delivery agreements from the Department of Performance Monitoring and Evaluation; On 15 October 2014, the Committee received briefing on annual reports by the Commission, the Ingonyama Trust Board and the Department. In addition, it conducted an in-depth analysis the financial statements and programme performance of the Department, the Commission, and the Ingonyama Trust Board; and On 03 September 2014 and 15 October 2014 the Committee was received briefing by the Auditor- General of South Africa on its audit findings for the Department and the Ingonyama Trust Board. The Committee further assessed the Department s implementation of remedial actions. 1.4 The structure of the report pg. 3

4 Following this introductory chapter, this report proceeds as follows: Section 2: Section 3: Provides an overview of strategic and key policy focus areas. This section sets the scene for analysis of the performance of the DRDLR, the Commission and the Ingonyama Trust Board. It examines the extent to which the plans and programmes are aligned to the current government policy priorities as discussed in 1.2 and 1.3. Discusses an overview analysis of financial and non-financial performance recommendations of the previous Committee for the 2012/13 reporting period. It is thus based on the BRRR of Section 4: Provides an overview and assessment of financial performance for the 2013/14 financial year. It draws on the financial statements of the Department and its entity as well as other reports of the Auditor-General of South Africa. Section 5: Section 6: Section 7: Assesses the service delivery in terms of the planned interventions according to the predetermined objectives, and priorities of the Department. It draws on the reports of the department and the Committee s findings from the oversight visits. Presents observations of the Committee and conclusions thereof. This is the overall assessment and it identifies key areas for recommendations, both financial and nonfinancial issues. Presents recommendations to the National Assembly. 2. Key relevant policy focus areas During the 2013 State of the Nation Address (SONA), President JG Zuma, identified inequality, poverty and unemployment as the foremost challenges confronting South Africa. Directly related to the mandate of this Committee, he announced that government would reopen lodgement of land claims to accommodate those who missed to lodge land claims by the closing date of 31 st December 1998, to provide for exceptions to the 1913 cut-off date to accommodate claims to the historical landmarks, heritage sites and descendants of the Khoi and San who lost their land rights prior to The President further announced that government has put in place mechanisms to fast track land redistribution. Such mechanisms include curbing the weaknesses of the willing-buyer willing-seller through an application of the just and equitable principle for compensation as set out in the Constitution of the Republic of South Africa. The SONA further articulated particular interventions aimed at youth development, especially the National Rural Youth Service Corps (NARYSEC) and Rural Youth Hubs. The Strategic Plan of the Department ( ), amended in February 2013, and the 2013/14 Annual Performance Plan that breaks down the high level priorities, addressed the priorities of government discussed above. The Committee found that the amendments to the Strategic Plan were guided by the National Development Plan, the New Growth Path (NGP) and the Outcomes Approach of government, in particular Outcome 7, and the various makgotla (2012 and 2013). pg. 4

5 In the last two years, some of the major policy and organisational developments for the period under review included the following: The National Development Plan recommended alternative approaches to land reform where District Land Committees should be established and play a critical role in determining the land needs in particular districts, identification of land available and collaboration of stakeholders to address those needs. Support of smallholder farmers, especially in the former homelands, was another major policy shift in the National Development Plan. In addition, there has been an intensified policy urge to support rural cooperatives with marketing and markets and to promote food security. Faster land reform and hastening settlement of land claims lodged before 1998 have been singled out as part of the top priorities. In addition, the codification of the exceptions to the 1913 cut-off date for land claims has been elevated as a priority. A split of land reform programme into two distinct branches, namely land redistribution and development as well as the Land Tenure Reform. This restructuring has significantly improved the focus on development support through the recapitalisation and development programme and Animal and Veld Management Programme, as well as policy development in relation to the land tenure policy, both the communal land tenure and tenure reform for people living on commercial farms. Other policy priority highlights were: Continuing with the National Rural Youth Service Corps (NARYSEC) and planning of nine Rural Youth Hubs taking cognisance of the 23 poorest districts in South Africa; Shortening of the time to finalise claims. Instead of the willing-buyer willing-seller approach, the Department would pursue the just and equitable principle for compensation as set out in the Constitution. It anticipated to curb the challenge of escalating land prices and purchasing of land at a cost exceeding the actual market value; Amending the Restitution of Land Rights Act, 1994 in order to provide for the reopening of the lodgements of restitution claims by those who missed the deadline of 31 December 1998; Extending the June 1913 cut-off date to accommodate claims by the descendants of the Khoi and San as well as heritage sites and historical landmarks; Providing adequate post-settlement support to new landowners in order to ensure they sustain productivity of farms acquired by the state for redistribution. Providing better incentives to commercial farmers that are willing and capable of mentoring smallholder farmers. 3. Previous key financial and performance recommendations This section presents an overview of the Committee s recommendations regarding financial and service delivery for the 2012/13 reporting period as tabled in the BRRR of October It further presents the responses of the Minister of Finance as per provisions of Section 7(4) of the Money Bills Amendment Procedure and Related Matters Act (2009). This Act provides that the Minister of Finance must submit a report to Parliament at the time of the budget explaining how the Division of Revenue Bill and the national budget give effect to, or the reasons for not taking into account, the BRRR recommendations. The section also highlights the responses of the Minister of Rural Development and Land Reform. 3.1 The recommendations of the 2013 Budget Review Recommendations Report pg. 5

6 3.1.1 Funding recommendations In 2013, the Committee had noted that the Restitution of Land Rights Amendment Bill, 2013 (B ), which was before the National Assembly at the time of the BRRR processes, would result in the reopening of the lodgement of land claims once assented to by the President. In addition, it noted that the outstanding and backlog land claims as well as the commitments of R6 billion under restitution presented enormous financial burden on budget allocation for each financial year. The commitments implied that the budget allocated for restitution had to cover increased interests due to court orders that compel the Commission to process particular payments. As a result, the time taken to finalise the settled land claims was prolonged. The Committee, therefore, recommended that the Minister of Rural Development and Land Reform and the Department approach the National Treasury for additional allocation to cater for commitments. The Committee further recommended increase in allocation of budget for finalisation of outstanding and backlog claims by 2014 to give effect to the President s call for hastening the settlement of land claims. In view of the National Development Plan s provisions for improved land administration and spatial plan, and further considering that the Spatial Planning and Land Use Management was signed into law by President in August 2013, and that there was a budget shortfall of R258.3 million for the implementation of Spatial Planning and Land Use Management Act in 2014/15, the Committee recommended that more funding should be allocated for implementation of this Act. The Committee recommended that the allocation for the Recapitalisation and Development Programme be increased. It took into cognisance a need to ensure that land reform farms were 100 per cent productive as well as strategic goals to rekindle a class black commercial farmers. The Committee sought to ensure that the National Development Plan s proposals for the development and support of smallholder farmers received a priority and that there was increased public investment in this policy area Service delivery recommendations The Committee expressed concerns regarding the capacity of the Department to implement some of its programmes and achieve the targets. It particularly recommended that the Human Resources Development Strategy be implemented to ensure capacity development within the Department. It further recommended that implementation of the strategy should be regularly monitored. Concerning the challenge of high staff turnover, the Committee recommended that the Department should consider exploring a staff retention policy for skilled professionals, especially in fields of internal audit, policy development, geomatics profession and rural development. Having regard to the fact that rural development is a transversal function, and further considering the budget cuts for the 2014/15, the Committee recommended that the Department should develop mechanisms to enhance its capacity to coordinate government interventions in all spheres of government in a manner that foster the intergovernmental approach to rural development. It further recommended that the Department should focus on its key mandate but coordinate relevant sector departments to deliver other services. With regard to rural development, the Committee recommended that mechanisms for rigorous monitoring of the National Rural Youth Service Corps programme be put in place to ensure that rural youth could obtain the needed skills which could be utilised in their communities. With regard to the Ingonyama Trust Board, the Committee recommended that the Board should table a report about plans to address the non-compliance with Public Finance Management Act and the pg. 6

7 Treasury Regulations, particularly to matters related to what is referred to as surplus funds. Further, the Committee recommended that the Board should table a report to parliament about mechanisms and plans to address matters raised by the Auditor General, especially reasons given for the qualified audit opinion Responses by the Minister of Finance The National Treasury shared the sentiments of the Committee and agreed that once the Restitution of Land Rights Amendment Bill was enacted, the budget strategy would need to be reviewed. The Minister of Finance undertook to work with the Department of Rural Development and Land Reform to address any shortfall arising from the enactment of the Restitution of Land Rights Amendment Bill. Concerning an increase in the allocation for restitution to ensure that land claims lodged before the end of 1998 were settled by the end of 2014, the Minister of Finance suggested that National Treasury and the Department should work together to reprioritise funds from underspending programmes to finance outstanding restitution claims. Therefore, no additional funding was given for restitution Responses by the Minister of Rural Development and Land Reform This section provides the Minister s responses to the previous BRRR (2012/13). It is organised into eight thematic areas as reflected in the previous BRRR, mainly focussing on service delivery recommendations. (a) (b) (c) (d) (e) (f) (g) Coordination: The Minister reported that the coordinating function of the Department is provided for in the CRDP Framework. He further pointed out that the Outcomes Based Approach of government, through the Delivery Agreements which are in line with the protocols defined in the Intergovernmental Relations Frameworks Act is a basis for coordination by the DRDLR. Government has set up coordinating structures known as Implementation Forum at both technical and executive level. The Department leads and coordinate Outcome 7. In addition, the CRDP Management System assists in this coordination. Capacity of the Department: The Minister reported that he welcomed the recommendation and that its implementation would be done as part of implementation of the Strategic Plan (2014/ /18). Monitoring and Evaluation: The Minister reported that the Planning, Monitoring and Evaluation Policy, Framework and Strategy aims to institutionalise planning, monitoring and evaluation. A project registration dashboard reporting has been introduced to track project implementation progress and status. Enhancing internal control systems and implementation of risk management strategy: The Minister welcomed the recommendation and reported that this recommendation would be implemented as part of the risk strategy. The Risk Management Unit has been elevated to a Chief Directorate: Risk and Compliance Management, and a Chief Director has been appointed. Project database: In 2012/13, the Department has started with development of an electronic database for land reform projects and beneficiaries. Finalising land claims by 2014: The Minister reported that the Commission would not be able to finalise claims by 2014 due to the number of claims and the nature of claims to be processed. The Department was still quantifying the value of the resources required. Faster pace of land redistribution: The Minister reported that there are institutional mechanisms being put in place to address this recommendation. The Department would establish the District Land Committees as proposed in the National Development Plan, Internal institution innovation pg. 7

8 include establishment of the Land Commission, Office of the Valuer-General, and a wideranging policy mechanisms to assist to speed up land redistribution. (h) Development of smallholder farming; The Minister assured the Committee that the MTSF ( ) developed in collaboration with Department of Agriculture, Forestry and Fisheries provides for 50 per cent for productive land acquired should be allocated to smallholders /15 Budget Vote Report of the Committee During consideration of the Budget Vote for the Department, the Committee recommended that the Minister should - Administration Finalise the extensive consultation processes on the Green Paper on Land Reform by documenting an overarching policy that interweaves various policies into a single coherent land policy within six months of the adoption of this report by the National Assembly Ensure that the APP s targets are realistic and measureable to assist Parliament in conducting its oversight responsibility Reduce the vacancy rate within the Department with a priority accorded to filling vacant strategic positions in order to address the challenge of lack of capacity perform on some of the critical programmes and excessive use of consultants. The Minister should further report to the National Assembly, within three months of adoption of this report, about the plans with time-frames to fill the funded vacant posts and strategies put in place to address high staff turnover in the Department. National Geospatial Management Services Submit a report about the targeted municipalities that the Department has planned to assist to develop the Land Use Schemes within three months of adoption of this report. This would enable the National Assembly to conduct oversight and track the progress in relation to the targets set for this programme Submit a status report in relation to the Internal Audit Committee recommendation for a forensic investigation on the e-cadastre project to the National Assembly within three months after the adoption of this report. Restitution (Commission on Restitution of Land Rights) Ensure that the Department does not continue to shift allocation for restitution to other programmes so that the Commission could accelerate finalisation of backlog claims and settled but not finalised claims. Where shifting and reprioritisation of funds is unavoidable necessary care should be taken to ensure compliance with the Public Finance Management Act (Act No 1 of 1999) Engage the National Treasury about increase in allocation of funding to finalise land claims lodged with the Commission by the cut-off date of 31 December Within six months of the adoption of this report, the Minister should submit a report to the National Assembly about the outcome of the engagements, especially requisition for additional funding allocation to finalise prioritised claims (old claims) and settlement of new land claims lodged since the reopening of the lodgement process Develop the National Land Claims register as a matter of urgency to assist the Commission to prioritise existing land claims lodged by the end of The Minister should report to the National Assembly about the plans and time frames for the development of the land claims register within three months of the adoption of the report by the National Assembly. pg. 8

9 Land reform and development support Assess the Recapitalisation and Development Programme farms, especially those whose five year funding cycle would be ending at the end of this financial year, in order to determine if the programme has contributed to creation of sustainable emerging black commercial farmers. The Minister should submit a report to the National Assembly within three months after the adoption of this report by the National Assembly Submit performance plans on the Tenure Reform component of the land reform programme with clear and realistic targets and performance indicators within one month after the adoption of this report by the National Assembly. Rural Development Enhance the monitoring of the performance of the National Rural Youth Service Corps programme and develop policy mechanisms for placement of this programme s graduates Improve the coordination of planning and Comprehensive Rural Development Programme interventions to avoid duplication of services in implementing rural development interventions, by signing Memoranda of Agreement with various government and nongovernment entities, and ensuring alignment with the National Development Plan. The Ingonyama Trust Board Assist the ITB to address the disjuncture between its core businesses as provided for in law and its strategic plans to ensure that the Ingonyama Trust Board conduct its business in line with the purpose for which it was intended. The Minister should further ensure that the Ingonyama Trust Board submits clear plans and details about costed activities that it would carry out to support traditional communities during 2014/15 financial year Assist the Ingonyama Trust Board to conduct a comprehensive socio-economic impact assessment of its performance and demonstrate how the beneficiaries have materially and socio-economically benefited from its programmes Assist the Ingonyama Trust Board to develop policies to address gaps relating to its key programmes such as Human Resource Strategy, funding of cultural activities, educational awards and community development. The Minister should report to the National Assembly within six months after the adoption of this report. 4. Overview of financial performance 4.1 Vote allocation and expenditure trends (2010/ /16) The Committee s analysis of the budget allocation and financial performance of the Department over the last five years since 2009/10 financial year shows that there have been significant increases in the programmes Administration and National Geomatics Management Services (formerly known as the Geo-spatial and Cadastral Services) as illustrated in Table 2 (below). Such increases have been linked to the implementation of the Comprehensive Rural Development Programme, focus on the integrated spatial planning and land use management, especially after the enactment of the Spatial Planning and Land Use Management Act. The dramatic increase in rural development programme was also linked to the implementation of NARYSEC, especially between 2010 and Other major projects in the rural development programme were: construction of the Dalibhunga Mandela Legacy Bridge in the Eastern Cape, roll out national fencing scheme, establishment and registration of cooperatives and pg. 9

10 rural enterprises. Analysis of the overall budget shows that 79.1 per cent of the entire budget over the medium term went to rural development, restitution and land reform as national priorities. Table 2: Expenditure estimates for the DRDLR Revise d estimat es adjusted Programme Audited outcome appropri ation Medium-term expenditure estimates 2010/1 2011/1 2014/1 2015/1 R million / / / / / / /17 administration National Geomatics Aver age Gro wth rate (%) Expen diture/t otal averag e (%) Aver age Gro wth rate (%) Expen diture/t otal Averag e (%) Rural Dev Restitution Land Reform TOTAL Change to 2013 budget estimates - - (450) (700) (170) Source: National Treasury (2014) Estimates of National Expenditure, Budget Vote 2014 (Vote 33) /14 financial performance of the Department As indicated in Table 3 (below), the Department was allocated a budget of R9.459 billion and spent R9.454 billion or per cent. As a result, by the end of the financial year, the Department had an under expenditure of R5.684 million or 0.6 percent of the total budget. According to the Department, this under expenditure resulted from the accruals (commitments on goods and services, as well as machinery and equipment) that could not be translated to expenditure at end of the financial year. However, it should also be noted that the National Treasury reported that the under expenditure R5.7 million was a result of under-spending in the programme of National Geomatics Management Services mainly due to delay in the implementation of Spatial Land Use and Management Act. Table 3: Appropriation and expenditure for 2013/14 Programmes Final Appropriation R 000 Budget Expenditure R 0000 Over/under Expenditure R 000 Budget Expenditure per cent Administration Geospatial/Cadastral Rural Development Restitution Land Reform Total Source: Adapted from DRDLR (2014) Annual Report 2013/14 During the 2013/14 financial year, expenditure on goods and services increased to R2.175 billion, almost doubled when compared to that of R1.398 billion in 2012/13. Its original budget R1.375 billion which was increased by R782 million to R2.157 billion as a result of emerging priorities arising from the SONA and the Minister s Budget Vote Speech for 2013/14. Huge increases in expenditure for administrative fees, travel and subsidies, venues, facilities, as well as training and staff development played an important part in the increasing expenditures. Notable increase was on the expenditure for training and staff development, which increased from R million in 2012/13 to R million in 2013/14. Similarly, the cost for travel and subsistence doubled from R million in 2012/13 to R million in 2013/14. The total amount paid for consultants slightly increased from the R million in 2012/13 to R million in 2013/14; pg. 10

11 Whilst the fruitless and wasteful expenditure declined from R million in 2012/13 to R5.417 million in 2013/14, irregular expenditure has increased from R5.688 million in 2012/13 to R million in 2013/14. This poses a crucial question to the sufficiency of internal controls within the Department. The following paragraphs summarise financial performance per programme of the Department, including the Commission on Restitution of Land Rights which is programme 4 (Restitution) of the Department. A summary of the financial performance of the Ingonyama Trust Board, as a schedule 3A Entity under the Minister of Rural Development and Land Reform is presented in sub-section Programme 1 (Administration): This programme received final allocation of R1.267 billion including a shifted amount of R million. The programme spent R1.267 billion of the final allocation, which represents per cent. When compared to spending patterns in 2012/13, where the total expenditure was per cent of the allocated funds, this is an improvement. However, such an expenditure should be read against the service delivery targets which are discussed in section 5 of the report Programme 2 (Geospatial and Cadastral Services): This programme received a final allocation of R million. Of this total allocation, R million was moved from Current Payment to Transfers and Subsidies (R million) and Payment for Capital Assets (R1.528 million). The programme spent R million, representing per cent of its budget. The Department, through this programme, oversees the Deeds Registration Trading Account which is responsible for the registration of title deeds. Its main source of funding is fees charged on the registration of deeds as well as sales of deeds information. During the year under review, the Deeds Registration Trading Account received a transfer of R241, 741 million. It was able to spend 100 per cent of the transfers. The funds were also used to augment the entity s operational expenditure as well as contributing to the development of the E-cadastre Programme 3 (Rural Development): This programme received a final allocation of about R1.7 billion, including shifted funds to the value of R million. It spent per cent of that allocation. The under-expenditure of 8.1 percent on transfers and subsidies to provinces accounts, to a larger extent, for the under expenditure in this programme Programme 4 (Restitution): The work of the Commission is reported under this programme. As illustrated in Table 3 (above), the Commission received a final allocation of R2.8 billion and spent R2.8 billion, which represents per cent of the total allocation. This final allocation resulted from the adjusted appropriation of R2.9 billion which was decreased due to a virement of R79.9 million. This R79.9 million was shifted from goods and services in Restitution Regional Offices sub-programme. When compared to the expenditure of 99.3 per cent in 2012/13, this suggest that the Commission has improved on its spending trends. As highlighted before, the financial performance should be assessed against the service delivery targets and performance thereof. Section 5 of this report discusses the service delivery performance. The total expenditure included expenditure of R2.2 billion on backlog claims that were approved, but could not be finalised, during the previous financial year. Of the total expenditure, R553.8 million (23.72 per cent) was used for backlogs and R1.7 billion (76.28 per pg. 11

12 cent) for the settlement of new claims. As a result, the Commission was able to decrease the total commitments from R6.3 billion to about R4billion Programme 5 (Land Reform): As illustrated in table 3, the final allocation for land reform was R2.862 billion which included a virement of R for the Land Reform Grants sub-programme. The entire budget allocation for this programme was spent. Within the land reform programme, the Agriculture Land Holding Account serves as an instrument for acquisition, holding and leasing land to beneficiaries in terms of the Proactive Land Acquisition Strategy. During the period under review, the ALHA received the final allocation of R1.697 billion and further spent 100 per cent of the allocation. 4.3 Schedule 3A Entity: the Ingonyama Trust Board In 2013/14, the total revenue of the Board was R104, 497, as illustrated in Table 4 below. It consisted of R7, 390,749, (71%) from rental revenue; R872, 171, 00 (1%) from royalty revenue; other revenue of R20, 475, (20%); and finance income of R9, 243, (9%). The approved transfers from the DRDLR was R7,5 million but a further R7 million funding additional to the baseline was transferred to the Board. Therefore the total transfer from the Department was R14, 5million which is about 14% of the total actual budget for the Board. Table 4: ITB Budget allocation and expenditure (2013/14 & 2012/13) 2013/ /2013 Actual budget and As % of the Actual budget and Expenditure (R) total revenue Expenditure (R) Rental Revenue 73,907, % 43,511, Royalty Revenue 872, % 710, Other Revenue 20,475, % 18,929, Finance Income 9,243, % 8,765, Total Revenue 104,497, % 71,918, Total Expenditure 108,333, % 58,797, Total Deficit (3,835,842.00) (4%) 13,120, Source: Ingonyama Trust Board Annual Report (2014) During the year under review, the Board over-spent is budget by approximately 4 per cent. This over expenditure/deficit in the total budget was attributed to depreciation/amortisation, provision of rates payable to municipalities for the Ingonyama Trust land, increase in the provision for doubtful debt, and loss in disposal of assets. The Committee observed that the overall budget drivers were provision of rates payable to municipalities, provision for disbursement of funds, secretariat administration, depreciation/amortisation, and Board Member s remuneration. Approved Budget (R) Shifts of funds (R) Funding additional to baseline 2013/2014 Final Budget (R) Actual Budget (R) Variance (R) Revenue pg. 12

13 ITB Fund Expenditure , DRDLR Transfers Revenue Expenditure Table 5: Budget allocation illustrating ITB revenue and transfers from the DRDLR Source: Ingonyama Trust Board Annual Report (2014) 4.4 Financial performance of the fourth Quarter 2013/14 and first quarter of 2014/ Department of Rural Development and Land Reform Table 6 (below) illustrates that by the end of the third quarter of the 2013/14 financial year, the total spending amounted to R7.5 billion, representing 79.8 per cent of the final 2013/14 appropriation of R9.4 billion. Spending for the fourth quarter amounted to R1.9 billion, representing 20.1 per cent of the appropriation, which resulted in a 99.9 per cent overall spending for the year and leaving a balance available at the end of the financial year of R5.7 million. The financial performance of 20.1 per cent has been within a close of the linear target of 25 per cent per quarter. During the first quarter of the 2014/15, the expenditure was amounted to R2.1 billion, representing 22.4% of the 2014/15 appropriation of R9.4 billion. This represented 2.6 per cent, or R248.1 million, under-spending when one considers the expenditure s linear target of 25 per cent. Table 6: Quarterly Financial Performance (4th quarter 2013/14 & 1st Quarter 2014/15) 2013/ /2015 R 000 Final budget Spending end Q3 % spent Spending for Q4 % spent Total spending % spent Current budget Spending end Q1 % spent Administration Geo-spat/ Cad Rural Dev Restitution Land Reform Total Source: DRDLR (2014) Presentation of Quarterly Reports to the Committee On administration, the total budget allocated was R1.69 billion, of which 22.5 per cent was spent. On Geo-spatial and Cadastral services, the Department spent 16.9 per cent of the allocation of 774 million. This is below the linear target of 25 per cent of the allocation. With regard to rural development, 17.4 per cent of the allocated R2 billion was spent. On restitution the allocation was R2.68 billion and 27.9 per cent was spent whereas land reform spent 22.1 per cent of the R2.8 billion allocation. An analysis of the overall financial performance of the Department shows that the 22.4 percent of the total appropriation of R9.45 billion was spent. The two programmes that have contributed to inability to achieve the expenditure linear target of 25 per cent of the total budget were Geo-spatial and cadastral services and Rural Development. With regard to the ALHA, its expenditure amounted to R1.3 billion which represented 79.3 per cent of its R1.6 billion allocation by the end of the third quarter of the 2013/14. During the fourth quarter, the Agricultural Land Holding Account spent R348.3 million, or 20.6 per cent of the entire allocation. Therefore, the total expenditure by the end of the financial year was R1.6 billion as discussed above, with a balance of R For the 2014/14 financial year, the total allocation for transfer to the ALHA amounts to R1.9 billion would be transferred quarterly. In the first quarter of 2014/15, ALHA spent R160.2 million or 37.3 per cent of the first quarter transfer of R428.9 million The Ingonyama Trust Board pg. 13

14 Table 7: Quarterly Financial Performance of the ITB (4th Quarter 2013/14 & 1st Quarter 2014/15) Economic classification Final budget Spending end Q3 % spent Spending for Q4 2013/14 % spent Total spending Under / (over) spending Comp of employees 5,000,345 0,407, % 4,198, % 14,606, , % Goods and services 7,110,850 67,138, % 23,392, % 90,531,059 ( 33,420,209) % Interest and rent on land 190, , % 46, % 181,500 8, % Building & other fixed structures 750,000 1,945, % 613, % 2,558,932 (1,808,932) % Machinery & Equipment 4,050,000 3,499, % 522, % 4,021,824 28, % Software & intangible assets 200, % 195, % 195,760 4, % Total 77,301,195 83,125,512 28,969, ,095,131 (34,793,936) Source: ITB (2014) Presentation on Quarterly Report s to the Committee on 17 September 2014 As illustrated in Table 7 (above): quarterly financial performance, by the end of the third quarter of the 2013/14 financial year, its expenditure amounted to R83.1 million, representing per cent of their 2013/14 budget of R77.3 million. During the 4th quarter, the expenditure was R29 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 s financial performance for the first quarter of the 2014/15 fiscal year amounted to R8.7 million, representing 13.8 per cent of their R62.7 million budget for the year. The Board received a total transfer of R17.3 million from the Department for the 2014/15 financial year, which was to be transferred quarterly. No transfer of funds had been transferred by the end of the first quarter. However, R 6.7 million or 39.0 per cent of the total allocation was transferred in the second quarter, thus leaving a balance of R10.6 million for the remainder of 2014/15 and was available for transfer. 5. Overview of Service Delivery Performance This section discusses an overall performance of the Department, the Commission and the Ingonyama Trust Board. They were assessed against the predetermined objectives set out in the 2013/14 APP and the relevant strategic plans. 5.1 The Department of Rural Development and Land Reform Table 8: Comparison of non-financial and financial performance of the DRDLR PROGRAMMES Targets 2013/14 Non-financial performance Targets Achieved Performance Rating (%) Final Appropriation Financial Performance Budget Expenditure % spent Budget Expenditure (%) Administration Geospatial & Cad Rural Development Restitution Land Reform Total Source: Adapted from DRDLR (2014) Annual Report of the DRDLR As indicated in Table 8 (above), the Department achieved 25 or 62.5 percent of the total 40 targets planned for 2013/14. About 15 targets or 37.5 per cent of targets were not achieved. In sub-sections that follow, this report provides details about the contributing factors to the variances. pg. 14

15 When compared to the previous reporting period, where it only achieved 8 targets or 30.8 per cent, this performance could be considered as a major improvement. However, there is still room for improvement, especially when one consider that the Department has spent per cent of its final allocation for the year under review. With the exception of the programmes of rural development and restitution, service delivery performance of the programmes of administration, geospatial and cadastral services, and land reform were too low if comparing the achievement of 37 per cent, 50 per cent and 55 per cent respectively. However, these programmes have spent over 99 per cent of their total budget allocations. Major policy achievements during the year under review include: Passing of the Restitution of Land Rights Amendment Bill (B35 of 2013), assented by the President on 30 June The Act provided for the re-opening of the lodgement period for land claims for those who missed the 1998 deadline. Passing of the Property Valuation Bill (B54 of 2013), assented by the President on 30 June The Act provides for appointment of the Valuer General who will put prices on the land to be bought by the State based on just and equitable principle of compensation. Therefore, Government will be under no obligation to pay for market value. Passing of the Spatial Planning and Land Use Management Act (Act No. 16 of 2013, SPLUMA). The Act provides, amongst others, for a uniform, effective and comprehensive system of spatial planning and land use management for South Africa. The process to codify the exceptions to the 1913 cut-off date for the descendants of Khoi and San, and identifying affected heritage sites and historical landmarks is ongoing. Work commenced for the construction of the first youth hub in Beaufort West during the year under review Programme 1 (Administration): This programme contributes to the two strategic goals of as outlined Table 1 of this report; namely, sound corporate governance and service delivery; and reformed policy legislative and institutional environment by The key deliverables during 2013/14 included beefing up internal capacity by reducing the vacancy rate, improving internal controls, finalising policies and legislation and ensuring provincial coordination with line departments for better service delivery. Table 8 above illustrates that the programme achieved 3 of its 8 targets but spent per cent of its budget allocation. Part of the challenges in this programme relates to inability to reduce the vacancy rate to the public sector accepted levels of 10 per cent. This challenge is demonstrated by an increases of vacancy rates from 11.4 per cent in 2011/12, to 16 per cent in 2012/13, and to 18 per cent in 2013/14. The reasons for this vacancy rate related to the expansion of the organisational structure which resulted in more vacant posts, the resignation of 710 employees. One of the vacancies was that of the Chief Financial Officer, a key strategic position that could assist in strengthening the internal controls and improved financial management. The inability to achieve the performance targets could also be linked to weak capacity of the Department which result from this 18 per cent vacancy rate. Part of the achievements under this programme was to ensure that the plans and programmes of the Department were aligned to the National Development plan. A review of the plans has shown that over 80 per cent of its Annual Performance Plan was aligned to the National Development Plan. pg. 15