Minister's & Department of Rural Development & Land Reform's responses to issues around restitution, land claims, projects & recapitalisation

Meeting report

Department of Rural Development and Land Reform (DRDLR) follow up meeting on Annual Report 2008/09
Mr Thozi Gwanya, Director General; Department of Rural Development and Land Reform, said that the Department  would respond to the four questions posed to it. These included meeting the target of redistribution of 30% of white-owned agricultural land by 2014, the issue of the preliminary plan on surveying of State owned land,  the briefing on Ingonyama Trust Board (ITB), and briefing on the Commission for Restitution of Land Rights (CRLR)  Annual Report, with emphasis on the Community Property Associations (CPAs).

Mr Gwanya  said that DRDLR had delivered 5 million hectares of the 30% white-owned land, which amounted to 24.9 million hectares, leaving 19 million hectares to be delivered by 2014. The Annual Report of DRDLR showed that the 1.5 million hectares target was adjusted to 647 000 hectares in line with what was provided to the DRDLR, which could only deliver 443 000 hectares in terms of the budget. 99.9% of the budget was spent on land acquisition. The projection by DRDLR was that R3.3 billion was required to deliver 914 570 hectares in 2009/2010, and R3.7 billion would deliver 954 168 hectares in 2010/2011. A total of R71.5 billion was required to deliver the redistribution target of 30% of white-owned land by 2014. The time for the target needed to be revised. The rationale for the extended time period required for achievement of the target (2025) was based on the current level of funding, land prices and inflation rate.

Land prices for grazing had increased from R3000 per hectare to R10 000 per hectare in some areas and sugar cane land was around R55 000 per hectare.

Discussion
Ms P De Lille (ID) asked if the projected target included future inflation rates and market related land prices.

Ms A Steyn (DA) asked if the estimated figures were checked against other institutions or organisations.

Mr M Swart (DA, Standing Committee on Appropriation) asked Mr Gwanya about valuations. If sworn valuers were qualified, yet the seller was not satisfied with the three valuations, he wondered what would happen and hoped that payment to more valuers for yet more valuations would not be made indefinitely.

Mr M Swathe (DA) asked what method was used to determine the target land price and to establish if this price was too high or low compared to the market price.

Mr Gwanya said that valuers were registered with the Valuers Council. A challenge was that the profession was an non-transformed profession, where old white males still dominated the profession. Professionally qualified valuers reported vastly different values for the same property. Their explanation was that the Department used different methods of valuation. The Land Claims Court and valuers argued that valuation of land was not an exact science, and results depended on what method was used. The Council of Valuers stated that a 10% difference between valuers was acceptable. The land owner was given the right to review the valuation given from DRDLR and then use his or her own valuers to give opinions based on comparative sales. Therefore the DRDLR valuers were used as a basis for arriving at a price. DRDLR was told that prices used were market related prices. Benchmarks and comparatives from other institutions such as banks were being considered.

DRDLR had appointed a valuer to investigate the discrepancies in price. Banks looked at productive value of the farms, and could not pay more than that. The farmers, however, did not accept those values. A debate and reflection was necessary to determine what was acceptable. Farmers selling between themselves did not demand from each other the prices that were demanded from Government. This problem had also occurred in Kenya and Brazil.

Ms De Lille asked if the value of the land included top structures on the land to reach the market related price.

Mr Gwanya said that the value of the farm property was included in the valuation, whether dams, irrigation or houses.

The Chairperson said that the approach when dealing with the captive market of restitution was different to that of redistribution. Under redistribution, the DRDLR was regarded as a bulk buyer, as opposed to restitution, when a particular farm was claimed with no alternative method of compensation. He asked if National Treasury had been exposed to that debate, and if the budget was different for restitution and redistribution.

Mr E Sogoni, (ANC, Chairperson of the  Standing Committee on Appropriations), asked if during the interim time the market prices had increased due to an increased demand, and if there was a role for Government intervention in such a situation.

Mr Andrew Donaldson, Deputy Director General: Public Finance, National Treasury, said that National Treasury very much recognised the priority of land redistribution and rural development. The budgets for land restitution and reform were separate. He referred back to the position in 2001/02, when progress for the restitution programme began. The budget allocation had increased in 2003/04, with the aim that it would e completed in 2008/09. It had turned out to be more expensive than envisioned and the approach to settlement of the 3 000 to 4 000 rural claims implied higher costs than had been planned. The considerable rise in costs of restitution, and the manner in which this had been implemented, caused a need for review in the approach for redistribution, restitution and reform. There had been mention of that that in the Medium Term Budget Policy Statement.

He noted that, particularly in the communities, National Treasury recognised the need to identify beneficiaries of the land restitution programme and outstanding claims. There was a need to recognise the substantial role of municipal services in those communities, to invest in the kind of activities which opened up economic opportunities, and to establish links with agricultural support and extension services that made land projects viable. National Treasury welcomed opportunities to review the linkages in their new approach, where currently backlogs and budget constraints were challenges to restitution and land reform programmes.

The Chairperson said that the Committee would be interested in engaging with National Treasury on the review process. In the restructuring component of land being bought, the Committee believed that stripping a developed farm of its assets, so that the beneficiary would have to start from scratch, created unintended additional costs.

Hon Gugile Nkwinti, Minister of Rural Development and Land Reform, said that Government policy at the moment remained the same, and 2014 was still the target. However, given the challenging circumstances, that target date was under review. Further detail on the review was premature.

The Chairperson thanked the Minister for his comment and added that it would be helpful to see the product of the review before National Treasury allocated funding for that.

Dr J Rabie (DA, Standing Committee on Appropriations) asked if it was possible, in the Western Cape, that municipal common ground could to be invested for small scale agricultural development. He also enquired if there was any attempt to improve communication between organised agriculture and DRDLR.

Mr M Dandala (Cope) asked if there were historical reasons why Government had not negotiated a fixed formula to ensure reasonable agreements on sales of land, and another formula to ensure that farms were not stripped naked, to allow resolution of these issues.

Ms Steyn said that up until now it appeared that the bulk of the R28 million spent on restitution was paid out for financial compensation. She asked at what stage the DRDLR had picked up the problem of shortage of finances to settle the last  few thousand claims, and how many claims were still not settled. She also asked for clarification on the difference between a settled and finalised claim.

The Chairperson said that some of the questions posed were the subject of the review.

Mr Gwanya said that the DRDLR would appreciate any input from the Committee. The Department had interacted with farmers recently at the SA Congress where the Department asked the farmers to help with resolution regarding land prices and land reform. There had been distortions regarding State owned land. Three million hectares of State owned land were available for land redistribution, and according to the land reform programme, 50% was still to be redistributed. The rest of the State land was communal land where there was congestion due to population growth. The review of redistribution and restitution of land would include the Comprehensive Rural Development Programme (CRDP) principles, and the role of the municipalities, provincial and national Government, as well as the private sector, in sustainable use of the land. A fixed formula would be welcomed as a contribution to the review. Previous debate and discussion of this type of formula had led to Section 25 of the Constitution and was clearly a subject of the review.

Mr Gwanya indicated that 80% of claims for restitution were urban settlement claims for financial compensation. In the 2003 to 2005 period, the DRDLR had identified that the rural claims were more complex than urban claims, as different types of agricultural land (such as sugar cane or forestry) were affected by restitution. The review process would look at how best to deal with these more costly rural claims. When an agreement was signed with the claimant as to how the claim was to be settled, it was regarded as a “settled claim”, and when a settlement agreement was implemented it was considered a “finalised claim”.

The Chairperson said that one of the purposes of the meeting was to engage with National Treasury on the reason why the mandate had to be shifted because of lack of funding to the DRDLR.

Mr Donaldson emphasised that National Treasury did not make allocations, and that the Cabinet was still to decide on 2010's national Department allocations. Although Cabinet had to consider substantial spending requirements, amidst the decline in economy and slow down in revenue, National Treasury, the Minister's Committee and Cabinet recognised the importance of rural development and pace of redistribution.

The Chairperson said that the Committee had noted that allocations by Cabinet to the DRDLR for rural development, when compared to allocations to other Departments, were not adequate. This forced the Committee to the conclusion that rural development was not a priority for Government. Rural development and land reform would impact on jobs and rural livelihood. However, the Committee could not expect the Minister to run anything other than pilot projects with the budget that was allocated to the DRDLR.

The Minister said that the Committee's concerns were valid. The DRDLR worked closely with other departments and municipalities and had an integrated approach with regard to synergising development of the restituted and redistributed land, with 25% of the budget going toward development of the land.

The Minister thanked the Committee for its support despite the enormous constraints.

Ms Steyn asked if the DRDLR had plans to address the problem of the several court orders against the DRDLR, and asked in particular if lawyers were meeting to resolve these issues.

The Chairperson said that the meeting was not a platform to address this, but that perhaps National Treasury should note the unforeseen and unavoidable costs incurred by such legal intervention.

Mr Gwanya said that DRDLR was responsible for the largest property portfolio of State owned land, in comparison to other Government Departments, but a large amount had not been surveyed and therefore could not be vested. A task team was working with the Department of Public Works (SPW) to table progress with regard to State land audited, programmes, surveying, and vesting of the land.

Mr Dandala asked for clarification on whether the areas of the former homelands surveyed included all the rural communities.

The Chairperson asked for clarification on the extent of tenders and if there were measures to verify conflict of interest in this regard.

Mr Gwanya said that external capacity was not necessary for surveying and vesting plans, but on the survey production side, work was detailed and would require support of the tender. This was guided by the DRDLR.

Mr Mduduzi Shabane, Deputy Director General, DRDLR, added that State owned land comprised other State assets such as schools, clinics, and police stations. In completing the survey of the outer boundaries, it was the duty of the Department to complete asset registers. There were formal and informal township plans, and the form of tenure for people living there included rental, deeds of grants, and other issues. The role of the DRDLR was to administer tenure legislation, to upgrade rural areas. In these areas there was interface between the DRDLR and municipalities, where the DRDLR incurred the cost. Where the DRDLR had the responsibility of completing the asset register, it would incur the cost. Each Department paid for its own assets. The office of the Chief Surveyor General had the mandate to approve the extent of land in South Africa.

Ms De Lille asked when the DRDLR would have an accurate audited report on what was owned by the State.

The Chairperson said that that particular question would be part of the strategy plan. The law required that the Director General must report to the Minister annually not only on the existence of the CPAs but on the lease, audit, and productivity of the land. In turn, the Minister reported to Parliament. The Committee had not received reports containing detail on these requirements, which was the reason why questions on CPAs had arisen.

The Minister said that he was encouraged by the input from the Committee and would produce the reports requested, not only because the Department was required to do so by law, but also because of the challenge relating to the CPAs. Traditional leaders held the view that CPAs were 'daylight robbery'. Conflicts were emerging in KwaZulu Natal, Eastern Cape, Limpopo and North West Province, where land had been restituted to ordinary citizens, whereas the traditional leaders believed that the land belonged to them.

Ms De Lille suggested that the legislation be simplified to assist the community in understanding the establishment of a CPA.

Ms Steyn agreed that there was huge confusion around CPAs and asked if there was a link between Communal Land Rights Act (CLARA) and CPAs.

The Chairperson said that CPA's involved court orders and politics and often did not operate in the interests of all involved. An area between Port Elizabeth and Uitenhage was of particular interest to the Committee. The Committee required information on the profile of the CPA members and reports on productivity to empower Parliament to debate the important issues surrounding CPAs.

Mr Gwanya thanked the Committee for the useful comments. He concluded that policy and legislation would be reviewed and included the important issues of governance, power play in CPAs, the part that CLARA played in the process, and benefits of land allocation.

Land Claims Commissioner presentation
Mr Andrew Mphela, Chief Land Claims Commissioner, Commission on Restitution of Land Rights, said that the Department was looking at the findings of the survey of the 200 struggling projects, and investigating strategies to recapitalise those projects, as well as the strategy challenges of partnerships and joint ventures and the Cabinet position on the Kruger National Park.

He highlighted that the problems arose because of the fact that a long term view of agricultural enterprises had not taken into account the costs for implementation of business plans down the line. The CPA members in the communities had not been trained sufficiently to manage these enterprises. Business plans from the provincial Departments of Agriculture and service providers were technical, and were not understood by the community. They did not relate to what was happening on the ground. There was a failure rate of 30% to 40% of all new businesses within their first or second year. However, after adequate support and recapitalisation, the CPAs could learn from the lessons and become successful. Not all land for restitution was commercially viable for economic purposes. Funding from companies, including para-statals, was attached to financial reward rather than social responsibility. Strategic partnerships and farm management were expected to assist in this regard. Assistance was necessary for marketing, after the original owner had transferred ownership to the new owner, and where confidence in the supplier had not been achieved. Some projects had to be liquidated, when the failure of communities was due to inadequate finance and accounting skills, such as sufficient understanding of equity, sales and profits, and knowledge about technical information. At times it was found that only a few members of the communities or CPA trusts benefited from development. In terms of the CPA Act, annual reports were supposed to divulge information on finances of projects, but this was currently not happening. It was found that CPA members were also directors of newly formed companies and this affected their accountability. The role of the CPA should be focused on governance and ensuring good administration and resolution of issues of policy. However, there were problems where there were conflicts of interest. Furthermore, there was no formula in place for maintenance of productive standards, nor for an exit strategy when there were problems visible with funding, or for quantifying equity of contributing parties. People were relying on development grants without business plans or without a proven track record in agricultural enterprise.

There was also conflict between CPAs and the community, CPAs and partners, and within the CPA itself. The Commission had proposed recommendations to a new branch in the DRDLR, which was in the process of developing capacity to address these challenges. The Department of Agriculture needed to complement agricultural production with provision of specific skills on certain farms, and closer monitoring of operations and implementation was necessary.

Discussion
The Chairperson asked the Commissioner if the responses in the report were a product of Departmental internal debate, or were responses submitted separately for the meeting that day.

Mr Mphela said that the report reflected the opinion of the Department.

The Chairperson then cited information on the Kruger National Park (KNP), which was not expressing the opinion of the Department.

The Commissioner agreed that the KNP report, although drafted by the Commission, was not owned by the Department but was the opinion of the community. He explained that the claimants had insisted that the Department be given title to the KNP land, or the Cabinet position should be tested in court. It appeared that the only sustainable option was to give the claimants titled land in the KNP, and ensure that a core management agreement between the Department of Environmental Affairs and the Department of Land Affairs (as they were then named) be implemented in the area.

Ms Thumi Seboka, Commissioner; Commission on Restitution of Land Rights, affirmed that the report on restitution was a Departmental Report.

The Chairperson said that the Director General could not vouch that this was a product of the DRDLR and the Committee therefore could not accept the report. If it received disclaimers it would be of no use at all. Therefore it was to be sent back to DRDLR, for the DRDLR to defend its content. Mr Gwanya said he was unaware of the section in the Commissioner's report as part of the response to questions that day.

The Minister said that he appreciated the approach of the Committee on the matter and took responsibility, as political head of the DRDLR, for the Commissioner's presentation that day. Had there been proper communication prior to the meeting this situation could have been avoided. The response of the Deputy President on the KNP report still stood.

The Chairperson said that the Committee would table its report to Parliament and reflect its own findings and make recommendations for Parliament to adopt. It would continue to interact with DRDLR on the outstanding matters on the strategic plan, so that there would be no disputes, disclaimers or ignorance with regard to anything that the Department would be tabling in Parliament.

The meeting was adjourned.