Ingonyama Trust Board on 2015/16 Annual Report

Meeting report

Apologies were received from Minister Gugile Nkwinti, and Deputy Minister Candith Mashego-Dlamini.

Briefing by Ingonyama Trust Board

Dr Fikisiwe Madlopha, CEO, Ingonyama Trust Board (ITB), briefed the Portfolio Committee on the ITB’s non-financial performance.
The 5-year performance analysis were 2011-12(118%); 2012-13 (91%); 2013-14(98%); 2014-15(91%); 2015-16(98%). Performances per programme were: Administration 81%, Land Management (149%), Rural Development (91%), Traditional Council Support (70%). The breakdown of the overall performance of 98% was: Administration 21%; Rural Development 23%; Land Management 38%; Traditional Council Support 18%. 2 Policies were achieved out of a target of 5 due to delay in sourcing service providers.94% of vacant positions were filled as a result of scarce skills on property management. 610 land tenure rights were approved out of a target of 1300 due to policy review. No MOU was approved as it involved third parties. 28 Traditional Councils were trained out of a target of 45 as focus had shifted to workshopping amakhosi. 78 educational awards were granted out of a target of 100 because it was based on requests from the Traditional Councils (TCs). There were 58 staff members, made up of 27 permanent posts and 31 contract posts. 25 of the permanent posts were filled while 2 were vacant. The Ingonyama Trust preceded the Board; the entity had started land valuation as well as sought guidance from the Department and National Treasury on the issues raised by the AGSA but was having challenges in filling the post of Manager-Real estate. It would improve on internal controls and supply chain systems to avoid irregular and wasteful expenditure.

Mr Amin Mia, CFO, ITB, briefed the Portfolio Committee on its financial performance. The transfer payment of R18 131 224 was utilised. Net assets was R 301 256 156, revenue was R128 162 126, expenditure was R72 894 979 while non-cash surplus for the year was R55 267 147. Money in the bank was R191 443 911. Total expenditure for the year was R78 392 860. Budget was R87 691 696, while actual was R50 791 679 with a variance of R36 900 017. Expenditure increased by 9.49% due to increase in agricultural expenses, depreciations as well as salaries. Compensation of employees increased by 5.47%. Employee cost to the company was R18 051 701, goods and services was R54 625 478. There were no incomplete capital projects for office accommodation purposes.

Discussion
The Chairperson said there were a lot of delays such as appointing the service providers and there was no assurance to what extent that would be addressed.

 Mr T Mhlongo (DA) asked if the recommendation of the AG for 2014/15 had been implemented

 Dr Madlopha replied that the ITB had come out with an action plan which had also been presented to the audit Committee. The irregular expenditure emanated from an extension that was granted to Renis Travels for all bookings. It was being addressed as it was not that it did not go through the normal process of the Board.

Judge Jerome Ngwenya, Chairperson, ITB, added that it was always unfortunate when the AG presented about the ITB when the latter was not present as in fairness, there was an entitlement to a hearing and a response. At a stage the Portfolio Committee offered to mediate when there were tensions between the AG and the ITB. On the advice of the Committee, the Board had engaged the AG who was very receptive. AG as human beings were not error free. It was not about the Office of the AG as it had a particular and a huge responsibility to fulfil. This was appreciated. Royalties that accrued to ITB belonged to the people and should not have gone to National Treasury. The ITB met with the AG and the National Treasury last week with a view to seeking guidance on how to recover substantial royalties that were sitting with the National Treasury for over 5 years.

Mr Mhlongo said there was a concern about lack of policies not only from the AG but also the Portfolio Committee. There were no bursary or payment policies as well as payment forms. The controls were not in place.

Ms Jabulile Bhengu, Deputy Chairperson, ITB, replied that the Bursary and disbursement Policies had earlier been sent to the Portfolio Committee officials and could be sent again.

Mr Mhlongo said were there no pictures that there must be separation of the Trust and the Board in the last financial year as the CEO had said the Board was only told in July 2016, which was why the report was late.

Judge Ngwenya replied that it was because of engagement with the AG. The approach of the ITB with the AG was to reach an understanding that there was an oversight or error on both sides for not emphasising the existence of two entities. The Public Finance Management Act (PFMA) which was the legislation to which the ITB was responding, was enacted after the Trust was in place. The qualification as far as land valuation was concerned was because the Board did not recognise the value of the land at the time of acquisition. The ITB had said it was not possible to value land in terms of the PFMA which was not in place at that time. When the AG was finally in agreement with the Board that there were two entities, it was four days before the close of the audit. The ITB engaged the AG for extension of time. That was why it was only attended to in this current period. The Board sincerely apologised for the delay. It had wanted to comply with the time as soon as possible. It was beyond its control. It was important that the Committee and all stakeholders understood the importance of the two entities. The ITB held the view that there were two entities. Until the AG was convinced, the ITB could not have prepared its financials. On 26 July there was an email from the AG that their legal opinion and technical advice concurred with the opinion that there were 2 entities. That was why the financials were prepared late as it was only 4 days before July 31.

Mr Mhlongo asked what strategy was the ITB coming up with to fill the outstanding 6% on vacant posts?

Dr Madlopha replied that because of the challenge with the position of Real Estate Manager, the Board had separated the functions to have town planning as well as a person dealing with tenure. This had yielded a positive result. The land planning had started but there had been no suitable candidate for the Land tenure position but the process had been advertised.

Mr Mhlongo said there were no people with disability in the ITB as entities of government must have at least 2%.

Dr Madlopha replied that the ITB did not have employment equity in terms of People with disability. It was being looked into and hopefully it would be addressed in this current financial year.

Mr Mhlongo asked if the surplus of R55m implied that the ITB could stand on its own.

Judge Ngwenya replied that the impression that ITB had surplus money which could be used for many things was at face value and was not correct because the money belonged to the beneficiaries which were the Community as well as the Members of the Community, hence there could be no surplus. This was not money that came from the fiscus. When the CEO was presenting, she had indicated that the money from the fiscus was R18m out of a budget of over R100m. If ITB had relied on the money alone, there would be a deficit. The ITB supplemented the shortfall of what should have come from National Treasury. It was for that reason that the transfer payment would be completely utilised and go beyond that. Money that remained as net income would not be sent back to the National Treasury as a result of failure to use it as it had its owners as well as users. There would only be a surplus if there were money not utilised but transferred from the Department and voted. The money voted by Parliament was R18m. This was what was appropriated to the Ingonyama Trust Board and not the Trust. The Minister appointed subject to consultation the Board Members and in terms of the legislation could appoint from the Public Service as well as non-public service. On whether the ITB could go without transfer payment because of the surplus of R55m, Judge Ngwenya replied No. In fact, the ITB needed more from Government. The Board was a government instrument to manage communal Land and to help capacitate the people. The land was not State land. It was far less than the Board could achieve because of the resources available. Once the issue of adequate management was addressed the Board would be able to fast track the issues.

The Chairperson added that the ITB should also indicate why there were surpluses in the revenue every year but in the transfers all cash was used and there was no surplus, not even a cent.

Mr Mhlongo said he was concerned with the movement of money as R6.17m was given to Traditional Leaders. What was the reason why the traditional Rulers received the money as it was not stated? What strategy was in place to address the issue of curbing debt?

Dr Madlopha replied that the ITB had started to engage the TC especially those that had balances so that it could start projects. Rural development personnel were moving from one Traditional Council to another to ensure that the funds were used. There was also an engagement with the TC to ensure a certain percentage of the funds were dedicated for bursaries so that the minimal allocation for bursary could be addressed. There would be a different picture in the 2016/17 financial year.

Ms N Magadla (ANC) asked if Advocate Vincent Mngwengwe was allowed to be a Board Member as well as an official of the Department. The presentation said MOUs could not be finalised as they involved third parties. How could that be a reason for variance? There was no clarity about Municipalities as there were always negative variances. It was said that the Board was seeking guidance from National Treasury, the AG and the Department in terms of recommendations of the AG. She did not think the Committee had these recommendations.

Dr Madlopha replied that the Board was not disputing the issue of audit. National Treasury set standards and therefore needed to be at par with the ITB and the AG on how it should be treated in the future. National Treasury had said treatment of the set of financials would not be applicable to only 2015/16 but also wanted to look at the prior years. National Treasury as well as the AG had to be engaged and this must first be in writing.  Would there be two entities or two sets of financials within the same entity. How far back did the ITB have to go in terms of the treatment of these financials? These were some of the issues that the Board was dealing with both at technical as well as policy level.

Mr P Mnguni (ANC) said the report was the minimum of what was expected. It was simple, user friendly and understandable. It exposed the Principals of the Board and the Chairperson of the Board must be commended for opening himself up for scrutiny and hiding nothing. He did not want the Committee to steal the show about the separation between the Board and the Trust. The Committee wanted more clarity on that.  98% of performance was good but the worry was that it came out of one programme Land management which had 149%. This had condoned the rest of the underperformance. 100%- 102% is fine but 149% was wrong and had a wrong cushioning effect. 610 Land Tenure rights were approved by the Board out of a target of 1300. This 149% showed that the ITB did half of what it should have done.  Once the ITB was open, it gave the opportunity to the Committee to engage constructively. The budget performance was 55% and not 65%. This was informed by page 38 of the presentation. There was a variance of R36m out of a total of R87m.This budget performance was not acceptable in Parliament. The ITB should never bring 55% of performance as people blamed the ANC and not the ITB for non-performance.

 Dr Madlopha appreciated Mr Mnguni for the comments as the ITB hoped to improve in their reports. Mr Mnguni was correct in his analysis in terms of the land management. The Board was working hard to improve underperformance in the other areas within the programme. The analysis of the budget performance had been noted. The Board would work to improve on that as an entity. The ITB appreciated the candid comments from the Committee Members as well as the suggestions.

Mr E Nchabeleng (ANC) said there were tensions between the ITB and the Municipalities. This had affected the ability of the ITB to meet its objectives? What was the relationship of the ITB with Municipalities? What was the communication strategy and what was the capacity to manage relationships with diverse institutions?

Judge Ngwenya replied that generally in all enterprises, when there was an executing of competing Members, there were usually inherent tensions which were not always healthy. When there were references to Memorandum of Understanding (MOUs) of traditional Council with other stake holders, there was a gap in various legislations on how organs of state were operating. The ITB started in 2009 to develop MOUs with various stakeholders which were principally local governments. This was to enable the Board to function better. The tension arose out of misunderstanding or not knowing the ITB and its role. Some Municipalities in Provinces did not own land but had functions that related to land. Municipal offices were built by Municipalities without tenure on lands. The Department of Mineral Resources was granted exploration rights without consultations with the ITB. Some Municipalities took sites for quarry without permission from the ITB. There was also a high turnover of personnel in Municipalities as the moment an official began to have understanding; there was a promotion or transfer to another area. Relationships differed from one Municipality to another. There was a gap in terms of understanding.

Mr A Madella (ANC) said what land invasion prevention strategy had the Board applied. There was a Dr T Mbatha in the Board and another Dr M S Mbatha. Was one and the same person or a husband and wife

Dr Madlopha replied that the ITB was working hard at the Land Invasion Strategy. A draft would be tabled at the next Board meeting. Hopefully, it would be rolled out in all areas in order to prevent land invasion. It was Dr M S Mbatha. It was an error and apologies were tendered for that.

The Chairperson said the issue of vacancy had been on the report for a very long time. What could be done? What was the difficulty in filling the vacancy when the ITB had surpluses of millions? Once the first applicant declined, procedurally, the second applicant should fill the vacancy.

Ms Bhengu replied that in some cases there was only one applicant and once the applicant declined, the Board would have to advertise the post.

 The Chairperson said the ITB should invest more on education in land management by building skills and encouraging learners to pursue their careers. Looking at the surplus and the challenge of fees must fall; this was not the challenge of the Government alone. The Board should partner together with Government. The educational awards were not assisting learners as the ITB paid only R10 000 which was just a drop in the ocean as fees were very high. There should be an integration of Funda Zulu and the educational awards to sponsor students on full scale and not just half of the fees.

Ms Bhengu replied that this had been the case with awards given by the Traditional Councils. The limit of the amount to be given was recommended by the TC as the ITB had convinced the Council to give the full amount where possible but it depended on the funds available within a particular TC. The ITB gave the full amount in terms of the bursary recipient that was awarded by the Traditional Council. With Funda Zulu bursary, it was a different case. There were no figures in terms of what had been awarded because it had only started this year,

 Dr Madlopha added that the Board was working with the TC on increasing the amount of the awards. The Funda Zulu awards were paying higher than the Traditional Council awards.

The Chairperson said the CEO should unpack the increase of 5.4% in the compensation of employees when there was no increase in the staff establishment. When will the review of staff establishment be finalised.

Dr Madlopha replied that there was a standard annual increase. Over and above that there were posts that were vacant in 2014/15 which had now been filled, such as the post of the CEO and the Deputy Director of Administration. The issue of the review of staff establishment had been raised. There were some drafts and hopefully it would be finalised before the end of the current financial year.

 Mr Mhlongo said the CEO had said that the irregular expenditure was from the travel Agency. What was the policy on travelling and what action had been taken against the travel agency?

Dr Madlopha replied that it was the AG assessment that was irregular as there was a service level agreement (SLA) with the travel Agency that was drawn up by the Board. It was the analysis of the AG that was irregular hence there was no person charged with wrong doing. It would be addressed in terms of the AG’S recommendations. The ITB had a suggestion on travelling policy which was approved last year but not for the period under review. It was only used in the current financial year. With regard to using the funds for the beneficiaries, the TC concerned indicated how the funds would be utilised. The Board would sit with the TC and advise them to have projects at Community levels and this would be done vigorously because of the poverty levels. The comments and concerns were noted and would be taken to heart.

Mr Mhlongo said the ITB had also said the surpluses belonged to the beneficiaries. Why was it not used for them as this had been a consistent experience? The Committee wanted to see impact as the surpluses must be utilised

Judge Ngwenya replied that from experience Communities always had a need for capacity before it could manage money. That was why it may have seemed that money was released slower than necessary. The comments had been noted.

Mr Mhlongo said the Minister gave the Board one year and now the tenure had passed.

Judge Ngwenya replied that the tenure of the Board had come to an end. The Board was appointed full scale in terms of the Act for another 4 years. It was not an extended board but a full tenure Board.

 Mr Mnguni asked if the reappointment had been reported to the Parliament.

Judge Ngwenya replied that it had been reported to the Department of Rural Development and Land Reform (DRDLR) in the quarterly report.

The DG, DRDLR, Mr Mduduzi Shabane said the facts were as stated by Judge Ngwenya. The faces on the report were those of the members of the Board during the period under review. Advocate V Mngwengwe was no longer a member of the Board but he had been during the period under review.

Mr Mnguni said the Committee would request the Department to report on this formally as the Committee had an interest in the matter. He congratulated the Board on the reappointment

Judge Ngwenya replied that the Chairperson of the Board was appointed by the King or his nominee while the Deputy Chairperson was appointed by the Minister. It must have been an oversight from the Department. He added that his nomination was not tenure as he could be recalled at any time but his re-appointment was formal.

Mr Mnguni thanked Judge Ngwenya for updating the Committee and said the Department should do its part by reporting it formally.

Mr Mhlongo said the ITB had a surplus of R55m when in some communities tractors had been given away because of lack of functionality.

Judge Ngwenya replied that the tractors which the ITB had catered and accounted for were not donated to anyone else as they were still stored in the warehouses. They were released as per request to each community. They were seasonally used. The ITB wanted details of the Communities concerned. The Board was willing to undertake that investigation. All of the tractors were functioning.

The Chairperson said the ITB should unpack R2.1m for travelling and accommodation of Board Members as well as the motor vehicle expenses as the presentation had said no vehicle was purchased in the year under review. Clarify R656 748 for audit fees, the internal audit Committee members’ remuneration as well as human resource and communication expenses. Did the ITB have a communication strategy? How often did the Board communicate with the Community? Did it send newsletters on activities it was engaged on? Unpack R1.9m for Project launches and informative meetings because the Committee had to understand whether there was value for money. Give the Committee a breakdown of Agricultural equipment, the computer equipment under capital expenditure? What did the CFO mean by heritage assets and equipment as well as software and other intangible assets?
 
Mr Nchabeleng said were there contributions from the ITB when there were cultural events in rural KwaZulu-Natal? What happened when there was a requisition to fund a certain programme from the King? Could the ITB say no, it did not fall within its mandate?

Judge Ngwenya replied that the way the Board functioned for many years was that the institution of Traditional Council sat with Cooperative Governance and Traditional Affairs (COGTA), land management sat with DRDLR while cultural issues sat with the Department of Agriculture, Forestry and Fisheries (DAFF). If the King wanted a project, it depended on where it sat. There was no situation where there was a budget for a thing just because the King wanted it. The ITB did not only contribute just because the King had said so but because the amakhosi asked for a certain amount from its allocation towards a cultural activity.

The Chairperson said there was a question mark when the ITB spent R750 000 from April to December and R1m from January to March. It was regarded as fiscal dumping that lacked planning.75% of the budget should not be spent towards the end of the financial year. The Committee would go deeper to find out how the ITB funded cultural activities. The Committee appreciated the improvement on performance and writing of report as pointed out by Mr Mnguni. There should be improvement in the financial performance as regards charts and comparisons. There must comparisons of budgets and expenditures of one financial year to another. The AG was correct and there was a lack of compliance. The issue of delays impacted on performance. Changes on the APP should be presented to the Portfolio Committee. There should be an alignment of the APP and the Annual Report. The Appointment Equity Act must be complied with. It was a right of the people with disability to be employed and not a privilege. The ITB should stop noting and begin to act. Additional information on goods and services should be submitted to the Committee. Why would there be surpluses of R55m when Members of the Communities were suffering. The Board should see the need, engage the relevant Department as well as develop and implement the plan. Most of the people in the rural areas were unemployed, lacked food to eat and in most cases were not qualified for grants.

The Chairperson congratulated the DG and his team for being in the Committee briefing the whole of the previous day and also being available for the ITB briefing. She congratulated the new Board for being reappointed and encouraged it to tighten the screws where it was needed and leave behind a legacy by rewriting the story of ITB.

The meeting was adjourned.