THE INGONYAMA TRUST WAS formed in 1994, just a day before the first democratic elections in South Africa. In terms of the founding legislation, all the land which had previously vested in the former ‘homeland’ of KwaZulu vested in a trust, the Ingonyama Trust, the sole trustee of which is the Ingonyama, the Zulu King. This arrangement was entirely unique and different from what took place in all the other former homelands, where the land reverted to the South African state.
A trust is created to allow a trustee or trustees to hold or manage assets for the benefit of beneficiaries. The beneficiaries of the Ingonyama Trust are the members of the tribes and communities and the residents of a district referred to in the Ingonyama Trust Act. This Act is very clear that the Trust must be administered for their benefit, material welfare and social well-being. The financial regulations applicable to the Trust provide that a maximum of 10% of the income of the Trust may be allocated for administrative purposes. That means that the remaining 90% should be preserved and earmarked for the beneficiaries.
Leases unlawful and invalid
Over the past decade at least, the Trust has accumulated significant revenue and reserves from commercial activities on Trust land as well as from a residential lease policy implemented around 2007. In 2021, however, the KZN High Court held that the Trust and its administrative board, the Ingonyama Trust Board, had acted unlawfully and in violation of the Constitution by concluding residential lease agreements with people living on the land held in trust by the Ingonyama. They were the true and beneficial owners of Trust-held land under Zulu customary law, by virtue of being members of the tribes and communities referred to in the Act.
These residential lease agreements were held to be unlawful and invalid, and the Trust was ordered to refund all monies paid to the Trust or the Board under such lease agreements. The Trust and the Board have appealed this judgment and as such, the Court order is suspended, pending the outcome of the appeal.
Accountability is needed
There is a disproportionately low ratio of distribution of resources to the Trust beneficiaries. Distributions (if any) are vaguely reported with little mention of how these are put to use. The beneficiaries of the Ingonyama Trust are its primary stakeholders and as such should be entitled to full and meaningful disclosure of Trust assets, income and revenue, and expenditure.
The Constitution envisaged legislation to regulate financial management of public entities in South Africa and to give effect to constitutional values. In 1999, the Public Finance Management Act (the PFMA) was enacted.
Its object is to secure transparency, accountability and sound management of public institutions, such as the Trust. For over twenty years the Trust complied with the provisions of the PFMA. However, in 2016, the then-chairperson of the Board argued that the Trust and the Board were separate legal entities. This argument developed into the notion that since there were two entities and since it was the Board and not the Trust listed in the schedule of public entities under the NPFMA, only the Board was required to comply with the PFMA in relation to its own income and expenditure. The provisions of the PFMA did not apply to the Trust.
However, the Board has no separate juristic personality or corporate capacity. It exists solely to serve the Trust, to administer Trust land and to report on the financial status of the Trust. Following the enactment of the PFMA, amendments were made to the Trust’s financial regulations to bring them in line with the new Act. The Board was named as the “accounting authority” of the Trust, acknowledging the accounting obligations of the Board on behalf of the Trust under the PFMA.
Nonetheless, and notwithstanding the Minister of Agriculture, Rural Development and Land Reform’s strong opposition to this argument in 2017, this narrative took hold. The Board now no longer complies with the provisions of the PFMA in its preparation of the Trust’s annual financial statements.
The Ingonyama Trust is an organ of state which has been entrusted with 2.8 million hectares of land, worth in the region of R24 billion in the 2019/2020 financial year, and on which millions of South Africans reside. This practice means that it is not subject to meaningful public finance oversight. Non-compliance with the PFMA has meant that the Trust’s performance against predetermined objectives is no longer reported. This is concerning because the Trust has over the years consistently fallen short of its performance targets. Of greatest concern, however, is that the changes in the Trust’s financial reporting mean that there is now no reference to funds available for beneficiaries in the financial statements.
These issues require urgent attention to ensure transparency and accountability on the part of the Trust, and Parliament should ensure that it complies with the provisions of the PFMA. If the Auditor General continues to concede that the Trust and its Board are separate legal entities and that therefore the provisions of the PFMA do not apply to the Trust, then the Minister of Finance should take urgent steps. He should list the Trust in the schedule to the PFMA so that the Trust’s financial affairs are subject to proper oversight in the interests of the Trust beneficiaries.
Different “categories” of land
There is another recent change in reporting practice affecting beneficiaries. This relates to the status of Trust land. Over the years, the value of all the land has been reflected in the financial statements (at around R24 billion in the 2019/2020 financial year). However, in the 2021/2022 annual report, Trust land is for the first time split into two separate categories. The first category is described as land which is in the direct control of the Trust and not within the jurisdiction of any traditional or community authority. The second category is described as land which is not wholly within the control of the Trust. This appears to refer to land which falls within the proclaimed jurisdiction of traditional and community authorities listed in the report.
This is a significant departure from the way in which Trust land has previously been dealt with and valued. The Act specifically provides that all the Trust land is held by the trustee for and on behalf of the Trust beneficiaries, whether or not the land falls within the jurisdiction of a traditional or community authority. Indeed, there are no sub-categories of land in the Act.
This change may have far-reaching consequences for land tenure and land rights on Trust land. Categorisation implies that a certain amount of Trust land is separately owned or different from the rest of Trust land. This land has a carrying value of R2.9 billion and consists of approximately 250,755 hectares. This category appears to ignore that there are communities and residents, referred to in the Act, living on this land.
There are also historical situations (for example, the Hlubi) where traditional communities and authorities were deprived of their land during colonialism and apartheid.
The differentiation between these two “categories” of land reinforces the narrative that communal land is owned directly by traditional councils where they exist, and by the state where they do not. This flies in the face of the beneficiaries’ rights set out in the Act and the strength of customary ownership rights confirmed by the Constitutional Court. It is also contrary to the residential leases judgement referred to above.
This change in reporting therefore requires urgent interrogation by the parliamentary portfolio committee. In the meantime, the Auditor General should ensure that the components of both “categories” of land are properly identified, publicly disclosed and individually valued. This is especially important given that, in terms of the Act, the Trust is exempt from oversight embodied in trust legislation.
A new dawn or more of the same?
Recently, the Minister appointed new Board members and the Ingonyama has appointed a new chairperson of the Board. Members of the parliamentary portfolio committee welcomed these changes and appointments, hoping for a “new dawn” for the Ingonyama Trust. To this end, it is hoped that the members of the Board act boldly.
They should ensure that the Trust complies with the PFMA, or is listed under the PFMA, so that the objects of the Trust Act are adhered to. The “categorisation” of Trust land should also be urgently addressed. This is crucial for the beneficiaries of the Ingonyama Trust, so that its founding premise is fulfilled – that the Trust land be administered for their benefit, material welfare and social wellbeing.