Trends in Intergovernmental Finances: 2000/01 – 2006/07

Agriculture & Land

Aditi Maheshwari

National Treasury

06 October 2004

Overview

Introduction to the agricultural sector Institutional framework Expenditure and budget trends Agricultural programmes and expenditure Land programmes: expenditure and service

delivery Key challenges and initiatives

Agricultural Sector

Contributions through GDP, employment, rural development & food security 3,5% to GDP in 2002 Forward and backward linkages

2 segments: commercial farming & subsistence and emerging farmers 10,3% of employment

Accounts for 81% of land use (17% for cash crops) ~10% of total exports (R28 billion p.a.) – 55% are processed

agricultural products Citrus fruit, wine, sugar, deciduous fruit and grapes

Institutional Framework

Agriculture – concurrent function shared National Department of Agriculture – formulates

government policy Provincial departments of agriculture –

implement national policies State Agencies provide services to provincial

departments and farmers Land – national function only

Agriculture Expenditure Trends

Combined national and provincial budgets rise from R3,0 bn to R4,4 bn between 2000/01 to 2003/04 Rising to R5,5 bn in 2006/07 Annual average increase 10,6% over 7 years

Provinces receive 78% of combined budget (2004/05) – increase from 73% in 2003/04

Provincial Budgets (1)

Increase of 11,7% p.a. from 2000/01 – 2003/04 to R3,2 bn

16,9% increase to R3,7 bn in 2004/05, rising to R4,2 bn in 2006/07

Budgets include transfers from NDA in the form of conditional grants Comprehensive Agricultural Support Programme

R200m in 2004/05, R300m in 2006/07 Land care

R18,1m in 2000/01 – R44,5m in 2006/07, 16,3% increase p.a.

Provincial Budgets (2)

Expenditure growth rates over MTEF vary amongst provinces Average growth rate 9,5%

Agriculture budgets account for ~ 1,9% of total provincial budgets in 2003/04

75,4% of total provincial spending on agriculture in 2003/04 was in 4 provinces: Eastern Cape (23,5%), Limpopo (24,6%), KwaZulu-

Natal (17,2%), North West (10,2%)

Compensation of Employees

Continues to increase from R1,9bn to R2,4bn over MTEF BUT declines as proportion of total agricultural spending, from

60,4% to 56,7% Provinces with largest agriculture budgets spend the most

on personnel (2003/04): Eastern Cape – 59,3% Limpopo – 75,6% North West – 59,6%

Challenge to reduce personnel expenditure whilst expanding skills base in order to fund and support agricultural activities

Non-Compensation of Employees

Rises from R1,3bn in 2003/04 to R1,8bn in 2006/07 Increases from 28,1% (2000/01) to 43,3% (2006/07) as

proportion of total agriculture expenditure Increased allocation for farmer support programmes Spending on agriculture infrastructure increases from

R230m (2003/04) to R510m (2004/05) 2/3 for construction projects, remainder for maintenance

and rehabilitation Funding directed towards key support services and

start-up capital for resource poor farmers

Agricultural Programmes

Largest budget: Farmer Support & Development (46,5% in 2003/04) Main spenders: EC, KZN & LMP Followed by:

administration (23,0%) - EC technology research and development services (9,6%) veterinary services (9,5%) – EC, KZN, MPG, NW

Reporting system not standardised, therefore unable to compare productivity across provinces

National Agricultural Programmes

Farmer support & development accounts for 23,3% of budget in 2003/04 Followed by regulatory services (16,0%) and

administration (12,3%) Sustainable resources management and use deals with

land care projects Other programmes include agricultural trade & business

development; economic research & analysis; agricultural production & programme planning, and monitoring & evaluation

Land Affairs Budget

Includes funding for redistribution & restitution programmes

Land redistribution grants increase from R156,6m in 2000/01 to R614,4m in 2006/07

Funding for restitution increases from R265,1m in 2000/01 to R1,4bn in 2006/07 Annual average increase of 31,5 percent Target to finalize restitution claims by December 2005

Land Reform

Target to redistribute 30% of agricultural land (24,7m ha) & finalise restitution in 2005

3,3m ha transferred over last 10 years Redistribution – 1,5m ha (47,0%) Restitution – 810 292 ha (24,8%) State land – 773 000 ha (23,7%), driven by NDA

Restitution

48 463 (60,8%) claims settled by February 2004 at a total cost of R2,7bn 64% of outstanding claims are in urban areas

Cape Town and eThekwini metros

Sharp increase in expenditure from R839,1m (2003/04) to R1,4bn (2006/07) – 17,8% p.a.

Funded until 2006/07 allowing for cash outflow beyond December 2005

Amendment to Restitution of Land Rights Act in 2004 enhancing expropriation powers

Redistribution

LRAD is primary mechanism for redistribution 1,7m ha transferred through redistribution & tenure

reform programmes 487 180 ha transferred through LRAD since 2001

Amount of land being transferred & number of benefiting households varies across provinces Determined by size and potential of land for farming Most land is redistributed in predominantly rural

provinces

Future Challenges

Tackling bottlenecks in speed of delivery and development impact of LRAD such as functioning of land market Need clear guidelines for subdivision of land

Improved co-ordination is needed between ARC and provincial extension services to ensure better dissemination of technology

Expanding access to retail and wholesale financial services for farmers through commercial retail banks

Conclusion

Balance between supporting HDIs and sustaining commercial sector essential for transformation and maintaining secure food supply

CASP signifies need for increased co-operation between different departments & spheres of government

Provincial expenditure needs to be redirected away from compensation of low-skilled staff to enhancing their skills base & increasing delivery

Need effective monitoring & evaluation, and standardised reporting systems

Thank You!