PREESENTATION ON ANNUAL REPORT FOR YEAR.
ENDING 31 MARCH 2006 TO PORTFOLIO COMMITTEE ON TUESDAY 17 OCTOBER 2006 BY THE INGONYAMA TRUST BOARD REPRESENTED BY:
JEROME NGWENYA (Acting Chairperson)
Ms J ABU BHENGU (Board Member) ROBIN RAUBENHEIMER (Board Member) CHRIS AITKEN (Secretariat: responsible for Real Estate) AMIN MIA (Secretariat: responsible for financial matters)
Showing by green colour the land owned by the Ingonyama Trust in the Province.
Land is owned in all District Municipality areas.
With the indulgance of the Committee we would like to start our presentation with a few background facts and figures as detailed in Part 3 of the Report at page 37.
The Trust was established in terms of the KwaZulu-Natal Ingonyama Trust Act (Act 3 of 1994)
This was amended by National Act 9 of 1997. Administrative and Financial Regulations have been promulgated and these were amended in September 2005. We will deal with these amendments later in the presentation.
The Trust is the largest landowner in the Province with a total extent of 2, 703, 508 hectares. Land is owned in all of the 11 Municipal areas.
Based on information supplied by the Bureau of Statistics the number of persons residing on Trust land as at the year 2001 census is estimated at 4.558.698. This represents just over 50'Yo of the total population of the Province.
A total of 224 Traditional and Community Authorities have jurisdiction on Trust land.
These are now represented at District Municipality level and there is now a house of Traditional Councils for each of the District and Metro Municipalities.
This presents an additional challenge to the Board and to the Trust, as the largest landowner in the Province, to ensure that its policies are in tune with those of the various Municipalities, specifically their Integrated Development Plans.
The expenditure of the Ingonyama Trust is paid from the Grant-In-Aid received from the Department of Land Affairs and from income generated by the trading activities of the Trust.
The own fund income which makes up 88.3 "0 of the total income for the year is generated from Leases, Permissions to Occupy, Royalties and Investments.
In addition to the above, R 1 837 000 was received from the Department of Land Affairs as a transfer payment which is 11.7 "0 (inclusive of the interest thereon) of the total income received for the year.
INGONY AMA TRUST BOARD - OWN FUND - (INCOME FROM INVESTMENTS AND TRADING ACTIVITIES)
1. RENTAL INCOME - R 1 444 058 - INCREASE OF 60.18 "0
The increase is due to the annual basic escalations and concluding a lease with Total South Africa (P1Y) Ltd which included the recovery of outstanding rentals and also entering into new leases with Vodacom South Africa (P1Y) Ltd.
2. ROYALTY INCOME - R 7009 681 - INCREASE OF 0.50"0
The increase is due to annual escalations for minimum royalties and also dependent upon the actual extractions which increased during the year.
3. INVESTMENT INCOME - R 5 523324 - INCREASE OF 23.02"0
The increase is due to further capital being invested during the year and also the increase in investment rates towards the latter part of the financial year.
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INGONY AMA TRUST BOARD - OWN FUND EXPENSES
1. DISBURSEMENT TO TRADITIONAL AUTHORITIES - INCREASE OF
In terms of the Board's Disbursement policy, 90'}'o of the income generated from Traditional Authority areas is to be provided for as Disbursements to Traditional Authorities. The increase in the own fund income effectively has increased the amount provided for as Disbursement to Traditional Authorities.
2. ADMINISTRATION EXPENSES - DECREASE OF 83.35 '0
A greater portion of the administration expenses was paid from the Board's own funds for the prior years. The amendment to the Regulations enabled the Board to make greater use of the
Departments grant-in-aid, therefore a decrease in administration expenses paid from the Board's own funds, hence an increase in the grant-in-aid income and expenditure.
INGONYAMA TRUST BOARD - GRANT-IN-AID RECEIVED FROM THE DEPARTMENT OF LAND AFFAIRS/APROPRIATED FUNDS
1. TRANSFER PAYMENT RECEIVED - R 1 837 000 - INCREASE OF
The increase in the grant-in-aid received is due to the greater use of Departmental funds after the amendment to the Regulations and also to pay for non-recurrent expenditure such as the development of the Land Tenure Information System, CLRA Mapping Exercise and the introduction of the internal audit system.
2. TOTAL EXPENDITURE - R 1 487712 - INCREASE OF 326.64 ')'0
As mentioned above, the Board made use of a greater portion of the Grantin-aid available and also incurred additional expenditure explained in note 1 above.
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The Bodrd is naturally concerned that the Auditor':General saw fit to qualify the Accounts once again and also emphasised several matters.
We would like to deal with these and explain what steps are being taken by the Board to address them:
It should be noted that whilst the Auditor-General has again qualified the Financial Statements, none of the qualifications relate to financial mis-management.
Whilst the qualifications are important to help and improve the management of the Boards affairs, it is arguable whether the matters raised are justified as qualifications.
This is evident from the comments made in previous years. In particular, reference is made to the issue of rates allegedly owed by the Board to several Municipalities.
At one stage, the Financial Statements were qualified on this issue but although not yet resolved, this issue is no longer a matter of qualification but rather a matter of emphasis only.
Firstly the Qualifications:
1. J..and holdinas (paae 19 of the Report)
The Auditor-General took a sample of 1,688143 hectares for testing and found: a) For 353 200 hectares there were no hectares of land listed on the title deeds. b) For 626.0005 hectares differences were noted between the hectares recorded
in the asset register compared to the hectares reflected in the title deeds.
c) Supporting documentation to substantiate the total decrease of 372 hectares
from the previous year could not be submitted for audit purposes.
The Board considers the qualifications to be harsh and unnecessary for the following reasons:
. The Board has an asset register which was compiled and maintained by a
registered land surveyor. He obtained his data from the records of the Surveyor-General and the Registrar of Deeds.
. The Board is aware that the Deeds Registry have not always amended their records of many properties following approval of substitution diagrams by the Surveyor-General. This is particularly true of "Remainders" and in cases where a property has been sub-divided they have not endorsed the title deed with the revised area. It is the responsibility of the Deeds Registry to ensure that their records are correct and reliable.
SUDE 5 (CONTINUED)
The Committee should note that many of the Boards title deeds date back to the 1860s when imperial measurements and only rudimentary surveying techniques were used.
By way of illustration an extract of such a deed has been circulated to you. From this you will see that the description of the subject land is somewhat vague. This extract is taken from the title deed of Upper Umkomaas and is dated 1875. The hand written description reads: "comprising one thousand six hundred acres English measurement or thereabouts, the same more or less, bounded south by the river Gwangwane, to the east by the Umzimkhulu river and northwest by Crown land".
Modern survey equipment, conversion of area to metric and changes in physical features such as river courses have resulted in the amended areas reflected in the Boards asset register but in many cases these have yet to be reflected by the Deeds Registry on the title deeds.
This explains why, as noted by the Auditor-General, there were no hectares listed on some title deeds differences reflected on others and a decrease shown compared with the previous year.
The difference of 327 hectares represents a mere 0.01375 'Yo of the total land holdings of 2,700,000 hectares. As mentioned, the Board is happy that the extents shown by the Land Surveyor in the assets register are accurate and truly reflect the land holdings of the Board as at 31 March 2006.
Notwithstanding this the Board is currently re-examining all of its 1491 titles and is interacting with both the Surveyor-General and the Register of Deeds in order to ensure that the Registrar of Deeds amends his records accordingly.
2. The second Qualification concerns "completeness of income" (page 20 of the
This according to the Auditor-General concerned royalty income and Permissions to Occupy.
In connection with royalty income we have several major mining operators on our land such as Zululand Anthracite and Richards Bay Minerals. Steps have been taken to ensure that in future these major operators will provide audit certificates and we are assured that this will satisfy the auditors regarding completeness of income.
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In addition to these major operators we have some 30 small time operators mainly extracting sand and gravel from the many rivers that criss-cross Ingonyama Trust SLIDE 5 (CONTINUED)
Land. These are low volume operations and it is not feasible to institute controls over each of these sites to monitor the actual volumes being removed.
The Board is however seeking alternative methods to monitor such mining extractions in the future. These small time operators collectively contribute some R747, 659.00 annually by way of royalty income to the Board.
The Auditor-General emphasised several matters and we would like to comment as follows
Assessment Rates (page 20 of the Report)
The Board continues to repudiate the extent of any liability because the Municipality cannot substantiate their claims. The Board continues to await this information in order to scrutinise and interrogate the legality and accuracy of the claims.
The Board is of the view that, it is exempt in any event by virtue of the provisions of the Rating of State Property Act 1984. An opinion was sought from both the Department of Land Affairs and the Department of Provincial and Local Government.
This opinion is inconclusive and the Board is therefore, at the suggestion of the Department of Land Affairs, seeking another opinion from Senior Counsel. Of great concern to the Board is the introduction of new rating legislation in the form of the Municipal Property Rates Act 2004. This Act will introduce property rates in respect of every square metre of land in the country whereas the previous legislation only covered mainly urban areas.
The first valuation rolls are due to be introduced in July 2007 and these will impose additional financial and administration burdens on already limited resources. The Board is however actively engaged with the Department of Local Government and Traditional Affairs and the various municipalities with a view to seeking rebates, exclusions and exemptions where applicable.
. Change in Accounting Policy (page 21 of the Report)
The Auditor-General noted that the Board had changed its accounting policy in that it had not shown land values in the accounts. This step was taken to bring the Board into line with the parent Department of Land Affairs, and, it must be said, after consultation with the Auditor-General and the Boards Audit Committee.
Notwithstanding this, the Auditor-General has commented that the Board has departed from "Statements of Generally Accepted Accounting Practice IAS 16 (AC123). The Board maintains that it is not economically cost effective to value 2.7 million hectares of land which varies substantially in quality and use including
unusable mountainous terrain and land with a restricted use value such as proclaimed nature conservation areas and state forests.
SUDE 6 (CONTINUED)
. Performance Information, Supply Chains Management, materiality and
Significance Framework (page 21 of the Report)
The Auditor-General noted that the Board has a strategic plan in place but does not monitor performance against predetermined objectives.
The Board is aware of its responsibilities in this respect in terms of the Public Finance Management Act and has taken steps to ensure that performance is measured appropriately.
The Board is also developing policies for monitoring performance, supply chain management and significance framework. These policies are being implemented for the current financial year.
. Financial Management (page 22 of the Report)
The Auditor-General identified control weaknesses in the financial management.
The Board now has an Audit Committee and Internal Auditors and has approved an additional post to assist with the accounting functions. Policies and procedures are being reviewed to ensure that the requirements of the Boards Financial Regulations and Treasury Regulations are aligned and implemented.
OPERATIONS AND ACTIVITIES OF THE BOARD DURING THE YEAR
We would now like to touch on the operations and activities of the Board during the year:
. Amendments to the Regulations (page 7 of the Report)
The Board has both Administrative and Financial Regulations. During the year both were amended by the Minister to bring them into line with the req'uirements of the Public Finance Management Act, Treasury Regulations and to enable the Board to become more autonomous.
It must be emphasised that this autonomy is subject always to the concurrence of the Director-General of the Department of Land Affairs in respect of all organisational, human resources and procurement activities.
. Strategic Plan (page 8 of the Report)
The Board has an approved Strategic Plan. This was prepared in accordance with the requirements of the PFMA in order to assist the Board to achieve its mission and vision.
It has regard to Government priorities such as poverty alleviation, provision of housing and infrastructure and black empowerment. The objectives of the Plan are to optimise land usage for the material benefit and social well being of the communities living on Ingonyama Trust Land and to assist in extending security of tenure in accordance with both customary and statutory law.
We would like to highlight some of the strategic objectives as follows:
. Land Tenure Information System (page 8 of the Report)
The Board is the successor- in- law to 1491 titles to land throughout the Province and has numerous subsidiary interests on its land. In order to optimise land usage it is important to identify and record all real estate assets including titles, leases, Permissions to Occupy and servitudes. During the year under review the Board commissioned a service provider to commence setting up a computerised Land Tenure Information System. This system will be operational shortly and will enable
ownership queries to be dealt with and rents to be updated and regularly invoiced. Approximately 15 510 records have thus far been identified.
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. Transfers of towns and State Domestic Properties
Firstly: Towns (page 9 of the Report)
In terms of the Ingonyama Trust Act, 1994 (as amended), the task of the Board was, and is, to transfer former R293 KwaZulu towns to the various Municipalities. As noted in previous reports, the definition as to what constitutes an R293 township in terms of outer boundaries has given rise to debate and there has been continued reluctance by some Municipalities to instruct the Registrar of Deeds to effect transfer. During the year, the Board continued to engage with the Municipalities to persuade them to take over the land which has vested in them. By the end of this financial year a total of 15 townships had been transferred.
Secondly: State Domestic properties (page 9 of the Report)
In terms of our legislation, property used for State Domestic purposes prior to April 1994 vest in various organs of State. Identification of such properties has continued to be a difficult exercise because in some cases there are no records of allocation prior to the coming into existence of the Trust and in other cases the question as to whether or not a particular property qualifies for transfer is not always straight forward - for example a community may claim that they bore the costs of erecting improvements, and that it would therefore be unfair to transfer ownership away from that community.
To date a total of 2700 State"Domestic properties have been surveyed. During the year the Board was aware of only 2 such properties, one a hospital, having been formerly transferred to the organ of state concerned.
During the coming year, the Board intends to take sterner measures to ensure that the relevant departments take action to register these properties in their name.
. Registration of Land vesting in the Trust and consolidation of titles (page 10
of the Report)
The Department of Land Affairs still has to complete the transfer of some 341 parcels of land to the Trust. Most of these parcels were to have been transferred to the Trusts predecessors -in - title following various proclamations and Commissions but for one reason or another have never been transferred.
The continued delays in transfer are impacting on other strategic objectives, notably the onward transfers of townships, state domestic properties and the issuing of leases.
SUDE 7 (CONTINUED)
During the year under review not one of the parcels of Land was transferred to the Trust. The Board therefore intends to pursue this matter to try and ensure that the transfers are effected during the coming financial year.
. Implementation of the Communal Land Rights Act, No 11 of 2004 (CLRA)
(page 10 of the Report)
This Act, once a commencement date has been announced, will reconstitute the
Board as the Ingonyama Land Rights Board for KwaZulu Natal. This Board will continue to own the land presently registered in its name and will have certain of the powers and responsibilities of .the Minister under CLRA in respect of the land. At the same time it will have to perform the functions of a normal Land Rights Board in respect of any other land subject to the Act within the Province. During the year the Board held meetings with the Department of Land Affairs in connection with implementation and now awaits publication of the draft Regulations. This will enable the "mapping" exercise previously commissioned by the Board to be completed to identify the future role and functions of the Board and the various processes and work flow, which will be necessary to successfully implement CLRA.
. Allocation and Provision of Land for Housing and Infrastructure Purposes
(page 11 of the Report)
The Board actively supports the allocation of land for rural housing projects and community facilities and also the provision of infrastructure including water, electricity and sewerage.
In order for communities to access rural housing grants from the KZN Department of Housing, the Board, in conjunction with that Department, have developed a Development Rights Agreement which in most cases are entered into with Municipalities once the Board is satisfied that the grant funding has been approved and that the Department of Local Government and Traditional Affairs have approved the projects from a development planning point of view.
During the year. the Board gave agreed in principle to 38 housing schemes and signed 14 Development Rights Agreements. The latter provided for 19,770 housing units to be upgraded in rural areas throughout the Province.
The Development Rights Agreements provide for any related infrastructure to be the subject of separate deeds of servitude with the Board. In addition the Board
continued, during the year, to negotiate with the Department of Transport regarding the upgrading and realignment of roads on Trust land and with Eskom on the construction of power lines. Leases were also concluded with the various
SLIDE 7 (CONTINUED)
cellular telephone operators in respect of cellular base stations to be constructed on Trust land.
. Granting of Leases (page 12 of the Report)
The Board sees real estate management as a major core function and during the year continued to encourage development on its land which will be of benefit to the various communities, not only from a rental income point of view but also through employment and other opportunities. This can include shareholdings and seats on company Boards.
The Board prefers to enter into leases for the use of Trust land. In so doing it endeavours to obtain the best deal for the relevant (affected) community. Ownership thus remains with the Trust for ultimate transfer to the beneficiaries to be identified in due course in terms of the provisions of the Communal Land Rights Act No 11 of 2004. .
In this connection it is standard policy to issue a short term lease for up to two
years to enable developers to obtain planning and environmental consents and to secure finance for the development. Thereafter a lease for a term of up to forty years with an option to renew for a further forty years is normally granted once the requirements of the short term lease have been met.
To date the Board has granted some 117 leases generating R1 102,569 per annum. The leases cover such diverse uses as shopping centres, game parks, residential developments, lodges, petrol filling stations, telecommunication base stations, sugar cane farming, grazing and aquaculture projects.
During the financial year under review a total of 29 new leases were entered into. The new leases generated additional income of R165, 929.02 per annum.
. Disbursement of Funds to Traditional 'Authorities (page 13 of the Report)
It is Trust policy for income accruing from mining or commercial activity within an identifiable traditional authority area, to be earmarked for the benefit of that particular community less the lO'Yo retained by the Board. During the year the number of Traditional Authorities qualifying for funding totalled 40.
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. Improvement of Debtor Control (page 14 of the Report)
During the year the Board took steps to improve the system of recording debtors and debt collection.
It is now possible to identify all debtors and take appropriate action against defaulters.
The Board has approved a credit control policy and action was taken against major debtors. Debt collectors were interviewed and appointed to assist with the debt collection process.
Constraints and Future Outlook
. Constraint (page 15 of the Report)
During the year the Board identified the following constraint:
The Board continues to be invoiced for rates by various municipalities. Whilst the Board refutes liability in most instances it continues to address this important issue with the Municipalities concerned. At the same time a request for exemption in terms of the Rating of State Property Act 1984 is being considered.
. Future Outlook (page 15 of the Report)
As already indicated the Board awaits the implementation of the Communal Land Rights Act, 2004. In the meantime, and indeed once that Act commences, it is very important that day to day real estate and land administration activities are continued on behalf of the communities for whom the land is held in trust.
During the coming year the Board will therefore continue with the implementation of its Strategic Plan and will concentrate particularly on the following:
. the transfer of townships
. the vesting of State Domestic properties
. the transfer of Land from the Department of Land Affairs
. agreement of property extents with the Registrar of Deeds.
. settlement of property rates issues with Municipalities.
. encouraging development and rental income through the issuing of leases.
In addition it is planned that a web site 'will be commissioned. This will provide full details of the Trust and Board and will include the legislation, Annual Report, and an application form in respect of requests for the grant of tenure rights.
The committee may also wish to be aware that the Board is negotiating for the acquisition of new premises. At the present time the Boards Secretariat are housed within the offices of the Department of Land Affairs Provincial Office.
These offices are inadequate and for that matter the Department require them for their own purposes. With this in mind the Board is proposing to acquire stand alone premises on the outskirts of Pietermaritzburg.
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These premises will be adequate for the immediate and medium term requirements of the Board and will enable the various posts identified in the Secretariat to be filled. The new premises will also provide for meeting rooms and boardroom facilities and there is ample space for additional office space to be constructed if this is required in the future by the Board or its eventual successor - the Ingonyama Land Rights Board.
Another major activity of the Board during this present year is to review its policies. Some of these require review because of Treasury Regulation requirements, some in the light of working experience and some in the light of comments raised by the Auditor-General in his report.