ANALYSIS OF THE NCERA FARMS INVESTIGATION REPORT AND RECOMMENDATIONS TO THE PORTFOLIO COMMITTEE 1.PURPOSE T O INFORM THE PORTFOLIO COMMITTEE ON THE STEPS TO BE TAKEN IN ADDRESSING THE RECOMMENDATIONS MADE BY KPMG ON THE INVESTIGATION OF THE N CERA FARMS.

BACKROUND The Department commissioned KPMG to conduct forensic investigations into; The procurement processes followed in the awarding of contracts relating to the infrastructure projects at the Ncera farms; Approval processes followed for payments made to contractors; Corporate Governance matters relating to the Board of Directors and the Audit Committee members; Possible conflict of interest involving Departmental officials; 2

BACKROUND ( CONTINUATION) The appointment of the Training Manager; The process followed regarding the selection of the farm occupants and the allocation of farms; The apportionment of land to the farmers (recipients); Background searches/ analysis of suppliers of the Land Settlement Directorate in order to identify possible instances of non-compliance with the procurement processes; Evaluation of the suitability of the entities supplying and installing water tanks and fencing and identifying and evaluate outsourcing situations 3

BACKROUND ( CONTINUATION) Investigate allegations that farms were initially allocated to particular farmers and were later reallocated to other qualifying farmers; Investigate that the farms boundaries were not properly established; The accountability of receipts and the application of funds of Ncera farms; The process of reconciling funds received and applied; and The record keeping of sold assets or livestock. 4

FINDINGS The investigation established that; The Audit Committee does not comply with PFMA and Treasury regulations because it comprises of a single member who is employed by the Department; There is no Board of Directors to conduct an oversight role of the operations and activities undertaken; Two beneficiaries were found to be in the employment by the State and thus contravened the criteria that no beneficiary should be an employee of the State; 5

FINDINGS (CONTINUATION) The successful beneficiaries were given permission to occupy the land contracts pending the finalisation of the Lease Agreements which were never concluded ; The Permission to occupy contract were from 30 May 2007 to May 2009 and they have since expired and the Lease Agreements were never concluded; Currently or as at the time of the investigation, the beneficiaries did not have a contractual right to occupy the farms; The hectare sizes differed 6

FINDINGS (CONTINUATION) The majority of farms were unoccupied and where farms were occupied, there were no farming activities undertaken since the expiry of the permission to occupy contract due to the non conclusion of the Lease agreements and that made farmers to be uncertain of the continued occupation; The valuation process was flawed regarding farm boundaries; The inability of the beneficiaries to start farming or to keep livestock as a result of illegal settlers occupying the land; Contracts were awarded to suppliers in Limpopo as many Senior Officials in the Directorate : Land Settlement are from Limpopo 7

FINDINGS (CONTINUATION) The purpose for which the beneficiaries showed interest in the Public Information Tender, ( being Agricultural development ) was not aligned with actual plans of the beneficiary for the farm; The viability of the farms for commercial farming were influenced by the lack of water, suitability of the ground ; and general lack of infrastructure; The Supply Chain Management processes were flawed; Proper specification were not issued and a requirement for the supplier to physically inspect the site prior to tender/quote was not addressed 8

FINDINGS (CONTINUATION) The payments made were authorised by junior officials; No reconciliations were made since there were no controls in place No site visits for the review, acceptance and sign off of finished projects in order for payment to be processed by Finance; Unclear tender specifications, specifically with regards to areas to be fenced which led to quotations being submitted that are not comparable (different lengths of fencing); Inadequate monitoring of work completed by officials of the Directorate: Land Settlement; 9

FINDINGS (CONTINUATION) Safekeeping of equipment after installation and no formal hand- over to the beneficiaries of the farms taking place resulting in the theft of borehole equipment and water tanks; Support services relating to infrastructure development that can be provided internally by the Directorate: Engineering Services (boreholes and fencing) of the Department were not used in order to prevent sub-standard work by contractors and wasteful expenditure; No formal and detailed review or reconciliation was performed on a monthly basis by the Directorate: Land Settlement as they are allocated an annual budget for the Ncera farms; 10

FINDINGS (CONTINUATION) The farmers were not informed of the sale of tractors; The sale of Tractors is therefore in excess of the initial valuation by the State Valuer; Land Settlement contracts were awarded to members and employees in the Directorate: Land Settlement; Contracts awarded to suppliers from the Limpopo Province, that appeared to be indicative of cronyism/nepotism; Majority of senior officials from the Directorate: Land Settlement are from Limpopo; 11

FINDINGS (CONTINUATION) The total value paid during 2009 exceeded R2 million Suppliers paid in full despite the fact that the work was incomplete; No lease or payments were received from the beneficiaries as a result of the fat that the Lease agreements for the farms were never finalised and concluded between the Department and the beneficiaries; 12

CONCLUSION To address the recommendations made by KPMG, the Department Is currently in a process of initiating disciplinary action against all employees who were implicated or who failed to perform their duties to ensure that there was value for money. MMAPITSO MASHELE DIRECTOR: EMPLOYEE RELATIONS 13