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

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

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

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

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