Financial Report: DRDLR’s Annual Report Ending 31 March 2015 Presentation to the Select Committee on Land and Mineral Resources 17 May 2016

Statement of Financial Performance Statement of Financial Position Contents Executive summary Statement of Financial Performance Statement of Financial Position Statement of Changes in Net-Assets Cash flow statement Disclosure Notes

Executive Summary The Department received an appropriation of R9.455 billion which represents a decrease of R48 million from prior year R9 560 billion. The Department’s expenditure for the financial year 2014/15 amounted to R9,396 billion or 99.4% of the budget allocation of R9,455 billion. This resulted in an under-spend of R59 million Goods & services decreased by R807 million or 53.8% from R2.1 billion to 1.3 billion in 2014/15. This due to Expenditure for NARYSEC participants that was reclassified from Goods & Services to Transfer Households as well as ccost containment measures that were implemented following cost containment circular issued by National Treasury. The decrease indicate that the Department spent most its budget towards achieving it’s mandate supported by the fact that 61% of the total spent was on Transfers and subsidies.

Statement of Financial Performance 2014/15 2013/14 Note R'000 REVENUE Annual appropriation 1 9 455 305 9 459 740 Departmental revenue 3 87 439 104 622 Aid assistance 4 30 316 7 909 TOTAL REVENUE 9 573 060 9 572 271 EXPENDITURE Current expenditure Compensation of employees 5 1 791 559 1 541 261 Goods and services 6 1 342 466 2 175 153 Interest and rent on land 7 5 674 5 759 11 605 3 346 Total current expenditure 3 151 302 3 725 519 Transfers and subsidies 9 5 851 749 5 470 892 Total transfers and subsidies

Statement of Financial Performance cont.. 2014/15 2013/14 Note R'000 Expenditure for capital assets Tangible assets 10 400 247 254 463 Total expenditure for capital assets Payments for financial assets 8 4 361 6 528 TOTAL EXPENDITURE 9 407 659 9 457 402 SURPLUS/(DEFICIT) FOR THE YEAR 165 401 114 869 Reconciliation of Net Surplus/(Deficit) for the year Voted Funds 59 550 5 684 Annual appropriation   Departmental revenue and NRF Receipts 19 87 439 104 622 Aid assistance 4 18 412 4 563

Analysis of movement R’000

Revenue Analysis (Decrease) Revenue decreased by 16%, prior year revenue included reversals of unclaimed Restitution vouchers of R39 million, compared to R4 million in current year. These are vouchers which were issued to claimants as settlement of their claim, however as at year end the claimants have not taken their settlement money . Once these vouchers are unclaimed for a period of 3 or more years, the money is declared as Departmental Revenue and paid over to the National Revenue Fund.

Expenditure Analysis (Decrease) Description 2014/15 2013/14 Variance % Ref   R '000 Travel expenditure 277 842 790 962 513 120 -64.9% 1 Administrative fees (travel related) 27 070 61 446 34 376 -55.9% Training & development 9 482 109 003 99 521 -91.3% 2 Agency outsourced services 33 838 93 655 59 817 -63.9% Consultants Business Advisory Services 166 397 236 188 69 791 -29.5% Contractors 22 093 53 617 31 524 -58.8% Venues and facilities 70 164 98 783 28 619 -29.0% 3 Advertising 28 344 47 896 19 552 -40.8% 4 Audit cost: External 14 728 15 675 947 -6.0% 5 Catering 5 423 15 097 9 674 -64.1% 6 Infrastructure and planning services 4 071 12 628 8 557 -67.8% 7 Fleet Services 11 170 16 998 5 828 -34.3% Inventory 2 830 11 490 8 660 -75.4% 8 Minor Assets 8 954 12 671 3 717 -29.3% 9 Rental & hiring 6 791 10 267 3 476 -33.9% 10 Consumable 28 073 31 839 3 766 -11.8% 11

Increase Analysis Description 2014/15 2013/14 Variance % Ref R '000   R '000 Legal costs 130 213 104 706 25 507 24.4% 1 Communication 67 100 54 260 12 840 23.7% 2 Property payments 105 610 93 660 11 950 12.8% 3 Transport provided Dept Activities 7 428 3 223 4 205 130.5% 4 Operating payments 189 142 180 456 8 686 4.8% 5 Bursaries (Employees) 4 419 3 604 815 22.6% 6

Reasons for increase The Department’s overall expenditure on goods and services decreased, however the following individual expenditure items increased by 5% or more: Legal Costs Total increase of R25, 5 million or 24.4% year on year. An increase of R12 million was spent on Legal representation for claimants in court, to resolve Restitution claim disputes and to represent the department in cases relating to payment disputes raised by landowners. Land Reform legal cost incurred increased by R9, 4 million. 2. Communication An increase of R12.8 million due to an incorrect billing by Telkom in 2013/14 financial year amounting to an additional cost of R6, 8 million on the April 2014 billing. Landline telephone cost for branch Land Reform increased year on year with R1, 2 million - Switchboards at PSSC offices in provinces is linked to land reform from previous PLRO structure. The extension of PSSC establishment directly increase cost for Land Reform due to the linkage.

Reasons for increase…cont 5. Operating lease payments The increase of R8,6 million (4,8%) is attributed to inflationary escalations 6. Bursaries Employees bursaries saw an increase of R814 999 or 22.6% due to increase in number of internal bursary holders and the cost of studies.

Statement of Financial Position 2014/15 2013/14 Note R'000 ASSETS Current Assets 420 056 230 601 Cash an cash equivalents 12 363 368 194 443 Prepayments and advances 14 49 224 23 447 Receivables 15 7 464 12 711 Non-Current Assets 33 923 26 422 Investments 16 16 112 17 811 10 310 TOTAL ASSETS 453 979 257 023 LIABILITIES Current Liabilities 429 285 234 729 Voted funds to be surrendered to the Revenue Fund 18 59 550 5 684 Departmental revenue and NRF Receipts to be surrendered to the Revenue Fund 19 25 949 40 940 Payables 21 325 374 183 542 Aid assistance repayable 4 18 412 4 563 TOTAL LIABILITIES NET ASSETS 24 694 22 294 Represented by: Capitalisation reserve Recoverable revenue 8 582 6 182 Revaluation reserves - TOTAL

Analysis of movement R’000

Analysis of movement (increase) Description 2014/15 2013/14 Variance % Ref   R '000 Cash and cash equivalents 363 368 194 443 168 925 86.9% 1 Prepayment and advances 49 224 23 447 25 777 109.9% 2 Receivables 25 275 23 021 2 254 9.8% 3 Payables 325 374 183 542 141 832 77.3% 4 Aid Assistance 18 412 4 563 13 849 303.5% 5

Statement of Changes in Net Assets 2014/15 2013/14 Note R'000 Capitalisation Reserves Opening balance 16 112   Closing balance Recoverable revenue 6 182 4 262 Transfers 2 400 1 920 Debts recovered (included in departmental receipts) -3 450 -2 371 Debts raised 5 850 4 291 8 582 TOTAL 24 694 22 294

Cash Flow Statement 2014/15 2013/14 Note R'000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts 9 572 537 9 572 124 Annual appropriated funds received 1.1 9 455 305 9 459 740 Departmental revenue received 3 74 873 85 613 Interest received 3.3 12 043 18 862 Aid assistance received 4 30 316 7 909   Net (increase)/ decrease in working capital 113 801 (134 207) Surrendered to Revenue Fund (108 114) (120 353) Surrendered to RDP Fund/Donor (4 563) (2 841) Current payments (3 156 887) (3 720 102) Interest paid 7 (5 490) (5 417) Payments for financial assets (4 361) (6 528) Transfers and subsidies paid (5 840 674) (5 470 892) Net cash flow available from operating activities 23 566 249 111 784

Cash Flow Statement CASH FLOWS FROM INVESTING ACTIVITIES Payments for capital assets 10 (400 247) (254 463) Proceeds from sale of capital assets 3.4 523 147 Net cash flows from investing activities (399 724) (254 316) CASH FLOWS FROM FINANCING ACTIVITIES Increase/ (decrease) in net assets 2 400 1 920 Net cash flows from financing activities Net increase/ (decrease) in cash and cash equivalents 168 925 (140 612) Cash and cash equivalents at beginning of period 194 443 335 055 Cash and cash equivalents at end of period 24 363 368

Disclosure Notes

Summary of disclosure notes Description 2014/15 2013/14 Variance % Ref   R '000 Contingent liabilities 2 057 101 3 316 356 -1 259 255 -37.8% 1 Contingent assets 100 414 173 943 73 529 42.3% 2 Commitments 6 181 436 6 251 525 -70 089 -1.1% 3 Accruals 116 828 223 898 -107 070 -47.8% 4 Employee Benefits 172 975 161 040 11 935 7.4% Operating Lease Commitments 460 716 314 426 146 290 46.5% 5 Finance Lease Commitments 4 815 5 814 -999 -17.2% Accrued departmental revenue 153 473 186 730 -33 257 -17.8% Irregular expenditure 14 778 26 065 11 287 43.0% 6 Fruitless and wasteful expenditure 15 677 41 095 -25 418 -61.9% 7 Related party transactions 2 959 3 878 -828 -21.3% Key management personnel 93 811 81 287 12 524 15.3% Impairment 99 191 112 433 -13 242 -11.1% Provisions 22 373 12 891 9 482 73.6% 8 Movable Tangible Capital Assets 524 584 372 067 152 517 41.0% 9 Immovable Tangible Capital Assets 1 753 038 1 975 797 222 759 11.5%

Public Entities and Trading Accounts Name of Public Entity Services rendered by the public entity Amount transferred to the public entity Achievements of the public Ingonyama Trust Board The trust manages land for the material benefit and social wellbeing of the individual members of the tribes. 17,294 The funds transferred to the entity were utilised to augment the entity’s operational expenditure Registration of Deeds Trading Account Registration of title deeds in order to ensure the security of tenure 113,194 The funds transferred to the entity were utilised to augment the entity’s operational expenditure. It further funded work towards the development of the E-Cadastre

Public Entities (Cont.) Name of Public Entity Services rendered by the public entity Amount transferred to the public entity Achievements of the public Agricultural Land Holding Account The Agricultural Land Holding Account was established in terms of the Provision of Land and Assistance Act, Act No. 126 of 1993. Section 10(1) (a) gives legal effect to the proactive acquisition of land, where the Minister may, from money appropriated by Parliament for this purpose, acquire land for the purposes of this Act. Therefore the State will proactively target land and match this with the demand or need for land. 1,613,529 The funds transferred to the entity funded the pro-active acquisition of the strategically located agricultural land

Programme Expenditure   2014/15 Final Appropriation 2014/15 Actual expenditure 2014/15(Over)/Under Expenditure 2013/14 Final Appropriation 2013/14 Actual expenditure 2013/14 (Over)/Under Expenditure Programmes R’000 Administration 1 384 430 1 382 197 2 233 1 268 553 1 267 482 1 071 National Geomatics Management Services 734 815 732 537 2 278 787 113 785 869 1 244 Rural Development 1 850 932 1 800 988 49 944 1 704 840 1 701 643 3 197 Restitution 2 998 742 2 997 937 805 2 836 851 2 836 703 148 Land Reform 2 486 386 2 482 096 4 290 2 862 383 2 862 359 24 Total 9 455 305 9 395 755 59 550 9 459 740 9 454 056 5 684

Irregular, Fruitless and Wasteful expenditure Fruitless and wasteful expenditure increased by 12% ( R 5,417 million to R 6,073 million) from previous year. This is due to the extension on the NARYSEC training program from 2 to 4 years due to the unavailability of accredited work place sites, unavailability of space at accredited colleges for further education and training and interest paid as compelled by the courts on Restitution matters. The Department has also seen an increase in Irregular expenditure (R 12,647 million to R25,286 million:2014/15). This is due to non-compliance with Supply Chain prescripts These case are still in the process of being investigated by the Financial Compliance Committee

Irregular, Fruitless and Wasteful expenditure On all the finalized cases of fruitless and irregular expenditure, warning letters were issued and disciplinary actions are underway for the officials who were found guilty. The Department remains committed to eradicating non-compliance with the laws and regulations applicable to it. The internal control environment is continuously being monitored for its effectiveness and weaknesses identified are addressed in order to improve financial management and the overall efficiency in the operations of the department In addition the Department has improved its standard operating procedures to identify fruitless and wasteful expenditure before it occurs

Report of Auditor General The audit report was issued by AGSA on 31 of July 2015 and the Department has obtained an unqualified audit opinion. The audit report contains emphasis of matter regarding significant uncertainties. These matters were not as a result of audit findings but as disclosed upfront by the Department in the notes to the AFS. The AG deemed it necessary to bring these matters to the attention of the users of the AFS. The emphasis was on: Claims instituted against the Department amounting to R2 123 million. These claims are subject to the outcome of legal proceeding. As a result, no provision for any liability that may result has been made in the Department’s financial statements. The Department has a possible liability towards the claimants in terms of the Restitution of Lands Rights Act, 1994 (Act No. 22 of 1994). The total amount of claims verified and on route for approval in terms of section 42D of this Act amounts to approximately R113 million, for which once approved by the Minister it will increase the commitment amount disclosed in Note 19 to the AFS.

Report of Auditor General-cont Provision has been made for the impairment amounting to R16 million. This relates to Inala Farms(Pty) Ltd which is in the process of being liquidated and the investment might not be recovered. Provision amounting to R 99 million has also been made, of which R43 million relates to non-recovery of lease debtors and R28 million relates to provision for doubtful debts. Other important matters were reported by the AG and the department has already developed Management Action Plans in order to address these matters. The action plans are monitored monthly by management and progress is reported to the Audit Committee & Senior Management Committee for oversight. The Department remains committed to maintaining the unqualified audit opinion that it received and will continue to implement measures to attain this ideal.

AGRICULTURAL LAND HOLDINGS ACCOUNT (ALHA)

Contents Executive summary Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement Other Financial Matters/Disclosures

Statement of Financial Position As at 31 March 2015 AFS Notes 2014/15 2013/14 Movement Expl Notes R’000 % Restated Assets Non-current assets Property, plant and equipment 3 10 324 915 9 174 172 1 150 743 11% 1 Intangible Assets 4 2 592 2 006 586 23% 2 Other Financial assets 5 250 178 236 689 13 489 5% 10 577 685 9 412 867 1 164 818 Current assets Trade and other receivables - exchange transaction 7 41 796 44 868 (3 072) (7%) Receivables and other receivables - Non exchange transaction 8 150 475 188 116 (37 641) (25%) Cash and cash equivalents 6 279 048 91 849 187 199 67% 471 319 324 833 146 486 31% TOTAL 11 049 004 9 737 700 1 311 304 12%

Statement of Financial Position As at 31 March 2015 - continued AFS Notes 2014/15 2013/14 Variance Expl R'000 % Note Restated EQUITY AND LIABILITIES Current Liabilities Trade and other payables – exchange transaction 9 30 533 14 192 16 341 54% 7 Trade and Other Payables – non exchange transaction 10 31 347 26 709 4 638 15% 8 Total current liabilities 61 880 40 901 20 979 34% Net assets Accumulated surplus 10 987 124 9 696 799 1 290 325 12% TOTAL EQUITY AND LIABILITIES 11 049 004 9 737 700 1 311 304

Statement of Financial Performance As at 31 March 2015 AFS Notes 2014/15 2013/14 Variance Expl R'000 % Note Restated REVENUE Exchange transactions 67 090 101 652 (34 562) (52%) Rental income 11 - 60 840 (60 840) 0% 9 Interest – lease receivable 19 229 15 752 3 477 18% 10 Other operating income 18 317 11 831 6 486 35% Interest received – bank 29 544 13 229 16 315 55% 12 Non – exchange transaction 1 615 074 1 718 932 (103 858) (6%) Grant income – Non exchange 1 613 529 1 697 119 (83 590) (5%) 13 Donation received 1 545 21 813 (20 268) (13%) 14 TOTAL REVENUE 1 682 164 1 820 584 (138 420) (8%)

Statement of Financial Performance As at 31 March 2015-continued AFS Notes 2013/14 2014/15 Variance Expl R'000 % Note Restated EXPENDITURE Depreciation (40 498) (35 066) (5 432) 13% 15 Impairment 16 (65 044) (323 376) (258 332) (397%) Finance costs - (35) 0% Operating expenditure farmers/strategic partners 14 (257 874) (651 321) (393 446) (153%) 17 Other operating expenditure (25 124) (42 366) (17 242) (69%) 18 Loss on disposal of asset (128) (388 540) (1 052 290) (663 750) (171%)

Statement of Changes in Net Assets As at 31 March 2015 AFS Note Accumulated surplus Total Net Asset Expl note Balance at 01 April 2013 8 934 100 Correction of prior period error 26 (5 593) 19 Restated balance 01 April 2013 8 928 507 Surplus for the year 2014 768 292 768 262 Balance at 01 April 2014 9 696 800 Surplus for the year 1 290 324 Balance at 31 March 2015 10 987 124

Statement of Cash Flows As at 31 March 2015 AFS Notes 2014/15 2013/14 Variance R'000 % CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts 982 779 1 749 203 (766 424) (78%) Sale of goods and services 2 694 5 906 (3 212) (45%) Grants income 1 613 529 1 697 119 (83 590) (5%) Interest income 29 544 13 229 16 315 55% Other operating revenue 17 260 32 951 (15 691) (91%) Cash paid to suppliers and employees (258 061) (628 028) (369 967) 69% Suppliers and other payables (627 993) (369 932) Finance costs - (35) 0% Net cash flows from operating activities 17 1 404 966 1 121 177 283 789 (20%)

Statement of Cash Flows As at 31 March 2015 - continued AFS Notes Note 2014 Variance R'000 % 6 months 12 months Restated CASH FLOWS FROM INVESTING ACTIVITIES Purchases from Property, Plant and Equipment 3 (1 204 278) (1 336 743) (132 465) 11% CASH FLOWS FROM FINANCING ACTIVITIES Other financial assets (13 489) (11 387) (2 102) 16% Net (decrease)/ increase in cash and cash 187 199 (226 953) (39 754) (21%) Cash at beginning of the year 91 849 318 802 (247%) Total cash at end of the year 6 279 048 67%

DEEDS REGISTRATION

Statement of Financial Position for the year ended 31 March 2015 Restated 2015 2014 R'000 Assets Current Assets 355 072 381 558 Inventories 3 283 3 006 Prepayments 8 743 49 292 Receivables from exchange transactions 53 227 49 562 Cash and cash equivalents 289 819 279 698 Non-current Assets 292 376 189 039 Property, Plant and Equipment 152 326 48 989 Intangible Assets 140 050 TOTAL ASSETS 647 448 570 597

Statement of Financial Position As at 31 March 2015 (cont) Restated 2015 2014 R'000 Liabilities Current Liabilities 164 598 198 544 Finance Lease Obligations 1 007 697 Payables from exchange transactions 71 669 33 847 Unspent conditional grants and receipts 91 922 164 000 Provisions - Non-current Liabilities 15 638 15 274 903 749 14 735 14 525 Total Liabilities 180 236 213 818 Net Assets 467 212 356 779 Accumulated surplus 467 213 356 778

Statement of Financial Performance for the year ended 31 March 2015 Restated 2015 2014 R'000 Revenue Revenue from exchange transactions 536 728 522 800 Registration of Deeds and Sale of Information 521 549 515 045 Other Income 2 793 1 186 Interest received - investment 12 386 6 569 Transfer revenue Government grants 185 272 77 741 Public contributions and donations 2 824 Total revenue 722 000 603 365

Statement of Financial Performance for the year ended 31 March 2015 Restated 2015 2014 R'000 Expenditure (611 015) (497 291) Employee costs (411 717) (349 243) Depreciation and amortisation (20 490) (24 770) Impairment of prepayment (23 937) - Impairment loss (2 298) (1 558) Finance costs (177) (130) Impairment of receivables (586) (41) Repairs and maintenance (44 730) (13 600) General expenses (107 080) (107 949) Total revenue 722 000 603 365 Total expenditure Operating surplus 110 985 106 074 Loss on disposal of assets and liabilities (549) (754) Surplus for the year 110 436 105 320

Cash Flow Statement for the year ended 31 March 2015 Restated 2015 2014 R'000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts 662 875 755 262 Registration of Deeds and sale of information 537 295 506 952 Grants 113 194 241 741 Interest income 12 386 6 569 Payments (528 663) (513 927) Employee costs (411 717) (349 243) Suppliers (116 946) (164 684) Net cash flows from operating activities 134 212 241 335

Cash Flow Statement for the year ended 31 March 2015 (cont) Restated 2015 2014 R'000 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property, Plant and Equipment (124 449) (6 594) Proceeds from sale of property, plant and equipment 70 48 Intangible Assets - (50 177) NET CASH FLOWS FROM INVESTING ACTIVITIES (124 379) (56 723) CASH FLOWS FROM FINANCING ACTIVITIES Finance lease payments 288 (366) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 10 121 184 246 Cash and cash equivalents at the beginning of the year 279 698 95 452 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 289 819

Conditional grants received 2014/2015 The Deeds Registration Trading Account received the following grants in 2014/2015 from the Department Rural Development and Land Reform: E-cadastre project R98, 3m Annual salary increases R14, 9m

Irregular expenditure The Trading Account had an opening balance of R39, 8m Movement during the 2014/2015 financial year: Irregular expenditure recovered: R1 m Condoned relating to 2011/2012: R2m Condoned relating to 2012/2013: R4m Condoned relating to 2013/2014: R827 thousand During 2014/2015 irregular expenditure to the value of R6, 9m was condoned with the following steps taken: condoned, condoned with warning letters and disciplinary letters

Fruitless and Wasteful expenditure The Trading Account had an opening balance of R20 thousand Movement during the 2014/2015 financial year: Additional cases added: R7 thousand Condoned: R20 thousand The R20 thousand was condoned with the following steps taken: recovery from officials and warning letters

Services in kind Administrative services in kind: The Deeds Registration Trading Account falls under the administration of the Department of Rural Development and Land Reform. The executive of the department spend some of their time on the affairs of the Trading Account. Furthermore, the department provides the services of information technology, office accommodation and staff training. There is no cost charged by the department in this regard Other services in kind: The Department of Public Works provides office accommodation for some of the Deeds Registries

Report of Auditor General The audit report was issued by AGSA on 31 of July 2015 and the Deeds Registration Trading Account has obtained an unqualified audit opinion. The audit report contains emphasis of matter regarding significant uncertainties. The AG deemed it necessary to bring these matters to the attention of the users of the AFS. 3. The emphasis was on: 3.1 Restatement of corresponding (2013/2014) figures – Prior period errors Useful life of assets with R1 value were not re-assessed R6,99m Donated assets at R1 book value were not re-assessed R2, 8m Provision of R5m for Datacentrix to be removed as a provision and disclosed as a note under “contingent liabilities”

Report of Auditor General (cont) 3.2 Material losses/impairments Impairment provision for R23m relating to prepayment Provision for doubtful debts R3,5m 3.3 Significant uncertainties Contingent liabilities raised relating to a dispute of whether services were rendered R12.9m Other important matters were reported by the AG and the Deeds Registration Trading Account has already developed Management Action Plans in order to address these matters. The action plans are monitored monthly by management and progress is reported to the Audit Committee for oversight. The Deeds Registration Trading Account remains committed to maintaining the unqualified audit opinion that it received and will continue to implement measures to attain this ideal.

Thank You