1. Trends in Intergovernmental Finances: 2000/01 – 2006/07 Agriculture & Land Aditi Maheshwari National Treasury 06 October 2004

2. 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

3. 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

4. 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

5. 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

6. 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.

7. 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%)

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. Thank You!