Onderstepoort Biological Products and Ncera Farms Annual Reports 2008/9

Agriculture, Land Reform and Rural Development

12 November 2009
Chairperson: Mr S Abram (ANC)
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Meeting Summary

Onderstepoort Biological Products (OBP) presented its annual report, describing the board's activities, audit committee, and financial matters. The company performance and the historical background of OBP were presented. The presentation outlined the  estimated livestock figures in South Africa, which were dominated by sheep, then cattle, goats and horses respectively. The animal health market was divided among bacterial and viral vaccines, blood vaccines and diagnostic reagents. OBP manufactured key vaccines, and mostly dominated by the local sales with some exports. Rural development included collaboration with emerging farmers associations. OBP also attended to provincial public/private partnerships and making small vaccine dose packs. It also played a role in food security and supply of vaccines to neighbouring countries. Challenges included the crumbling production plant, capacity development, investment in research and development and product development. The solutions were to set up a vaccine bank and the upgrade of the plant. However, the financial position of OBP was described as strong. Members asked for clarity regarding the upgrading of the building, how the assessments of numbers of livestock were made, how OBP decided which areas to target for vaccines, and how it was assisting to increase the pool of researchers. Members asked what corrective measures were being taken in respect of the Auditor-General's concerns on the financial statements, what was done to increase milk production, and urged OBP to be proactive in treating livestock disease. Members also enquired what had been done for people who relied on communal grazing land, where disease might be easily transmitted due to close proximity, whether there was active encouragement to farmers to vaccinate.

Ncera Farms presented its Annual Report. The background to Ncera Farms was described. These farms were established in the 1980s and were a Schedule B enterprise, after land had been purchased by commercial farmers from government. Some of the land had been transferred, other land remained still to be transferred, and 300 hectares was operated by Ncera Development Corporation. The services included agricultural extension services, mechanisation services, business and training services, outreach services, postal sale of vegetables and livestock and the breeding of cattle. Ncera was faced with many challenges such as a lack of legal documentation for settled farmers, lack of clarity on funding and operational resources, lack of accreditation for the training centre and inadequate water. There was also an urgent need to appoint board members. Members of the Committee expressed their concern that Ncera had not been a going concern for some time, asked why Government continued to spend money on farms that were benefiting single individuals, why so much was being spent on salaries, the details of the government grant, the details of who was occupying farms, why only one farmer had thus far been successful, and whether similar nearby projects were of assistance. The Department of Agriculture was urged to come up with a plan to correct the situation.

Meeting report

Onderstepoort Biological Products (OBP) Annual Report presentation
Adv Dave Mitchell, Acting Board Chairperson, Onderstepoort Biological Products, went through the governance report. He touched on the remuneration committee activities such as the remuneration of employees, directors and executive and other human resource matters. He said that the audit committee had worked on the internal and external audit. On financial matters, he touched on management accounts, investments financial policies, financial statements and the Annual Report. The risk management committee looked at occupational health and safety and monitoring and evaluation. The Research and Development (R&D) committee included intellectual property management, audit, policy, monitoring and evaluation in its scope of activities.

Dr Mandisa Dyasi ,Managing Director, OBP, spoke on company performance and described briefly the historical background of OBP. He touched on the estimated livestock figures in
South Africa, which were dominated by sheep, then cattle, goats and horses respectively. He spoke on animal health market that was divided among bacterial and viral vaccines, blood vaccines and diagnostic reagents. He mentioned key vaccines that were uniquely manufactured by OBP, and mostly dominated by the local sales with some exports. Rural development included collaboration with emerging farmers associations. OBP also attended to provincial public/private partnerships and making small vaccine dose packs. With regard to the role of OBP in food security, he mentioned the visit to Zimbabwe to supply vaccines. On the human resources side, he spoke about skills development, staff profile per category, and employment equity.

Challenges included the crumbling production plant, capacity development, investment in research and development and product development. The solutions were to set up a vaccine bank and the upgrade of the plant.

He noted that the financial statements included performance and condensed income statement. Performance information provided included operations, cash generations, and financial position. OBP had a strong ability to pay debts, strong balance sheet and the assts exceeded liabilities

Discussion
Mr P Pretorius (DA) asked for clarity regarding the upgrading, as he could not understand the fact that the building was already being upgraded while Dr Dyasi was asking for more funds for upgrading.

Adv Mitchell explained that OBP was looking at different options, such as the finance market and the Government, to finance the upgrading process. The actual upgrading had not yet started, but the feasibility studies for the new building had already started.

Mr R Cebekhulu (IFP) asked how the leadership of Onderstepoort Biological Products came up with the number of livestock in rural areas. He also asked how OBP would decide which areas should be targeted for vaccinated livestock. He asked whether there was a reserve pool of researchers

Dr Dyasi replied that the numbers of livestock were obtained from the Department of Agriculture as well as the areas that had to be vaccinated. The OBP focussed on staff development by offering bursaries and customised learning.
 
Mr Ayanda Ntsho, Chief Financial Officer, OBP, mentioned that he had spoken to students at the Nelson Mandela Metropolitan University about the importance of studying agriculture and how this would benefit the country for food security.

Mr Pretorius asked about corrective measures that were being taken to fix what the Auditor General had highlighted in respect of the financial statements.

Mr Ntsho explained that OBP monitored their performance through recording all the meetings.

Mr L Gaehler (UDM) asked about the areas that were covered in the definition of “rural areas”. He also asked whether small farmers were aware of the services offered by OBP. He said that South African farmers lost millions because pigs had to be culled to stop swine flu, while Cuba was able to prevent the disease. He urged the organisation to be proactive when dealing with treating livestock diseases.

Mr Cebekhulu asked what had been done to increase milk production.

Mr Dyasi replied did not have information regarding the milk production, but he added that he would seek further information on the matter.

Mr F Adams (ANC) urged Dr Dyasi to contact the Agricultural Research Council regarding the decline in meat production.  

Mr Pretorius asked what amount was required for upgrading the OBP building. He asked whether black distributors were used to sell vaccines.

Dr Dyasi explained that rural development was one of OBP's priorities and so it would make small packs available that were affordable to the small farmers, and availed vets to train farmers on the administration of the vaccines.

He said that the current building was built during 1963 and it was crumbling. The first plan was to build a new plant but research revealed it would be too expensive. A decision was made to extend the existing building, but the plant had to be quarantined before building could commence. The amount required was for the overall construction was around R4 billion. 

The Acting Chairperson asked what had been done for people who relied on communal grazing land, where disease might be easily transmitted due to close proximity. He asked whether farmers were informed about the money they would save by vaccinating. He suggested the use of Further Education and Training (FET) College students to vaccinate livestock.

Mr Dyasi explained that the OBP collaborated with the Department of Agriculture in combating disease through primary health care programmes. OBP was also addressing trans-boundary diseases and those in communal grazing lands. He said that skills shortage was a chronic challenge but the mandate of training fell to the Department of Education. Previously the country had two vet training faculties but only one now remained open. The existing university faculty did not produce enough professionals. During the meetings of farmers' associations, OBP made  presentations in rural areas. He said that he had been to Ngqeleni in the Eastern Cape to provide training to wool farmers. OBP representatives on the ground explained to farmers the importance of vaccination. Workshops would be held with farmers to explain the importance of vaccinating livestock. 

The Acting Chairperson thanked the delegation and suggested that they should speak to the Director General about the upgrading of facilities.

Ncera Farms Annual Report
Mr Andile Hawes, Deputy Director General: Production and Resources Management apologised on behalf of the Ncera Farms Interim board for their inability to be present.

The Chairperson said that Mr Hawes could not explain the problems of the Ncera Farms in the Eastern Cape, while he was based in Pretoria. He asked the Committee Secretary whether the Ncera management had been informed about the meeting on time. He then asked Members about the wisdom of continuing with the presentation, in view of the Board's absence.

Mr Pretorius suggested that the meeting continue at this time, but that the Committee should call the Ncera management in at a later date. He also suggested that the Committee could go on an oversight visit to the farms.     

Mr Hawes apologised on behalf of the Chief Executive Officer for his inability to attend, as he was undergoing chemotherapy.

Mr Hawes briefly went through the presentation, firstly touching on the background of the Ncera Farms. He mentioned that the farms were established in the 1980s and classified as a Schedule B enterprise in Public Finance Management Act (PFMA). The land was purchased from the commercial farmers by the Government. Out of the 14 000 hectares, 4000 hectares were inherited by Ncera and were transferred to Midushane Tribal Authority. In 2007, 3700 hectares were transferred to 10 emerging farmers, and 620 hectares not been transferred yet. Only 300 hectares were used as Ncera Offices, and that portion of land was operated by Ncera Development Corporation. In January 2009 all Government representatives on the Board resigned. Mr Hawes and Mr Moshe Swart were appointed caretakers of Ncera.

Mr Hawes touched on the management team and mentioned their portfolios. The services included agricultural extension services, mechanisation services, business and training services, outreach services (postal) sale of vegetables and livestock and the breeding of cattle. He briefly touched on the financials, success and the training done at the centre. Ncera was faced with many challenges such as a lack of legal documentation for settled farmers. Funding and operational resources were not clearly defined. The Training Centre was not accredited and there were inadequate water resources. There was an urgent need to appoint board members, which would go a long way in addressing most of these challenges.

Discussion
The Chairperson was concerned with the fact that the Government was spending money on farms that benefited individuals. He asked Mr Hawes to paint a more detailed picture of the farms because the report was sketchy.

Mr Gaehler said that some of the farms were subdivided between the communities while some were run by the Government employees. There were more employees than livestock and more money was spent on salaries. The Chairperson mentioned that the financial statements were not balanced because the profit was based on a government grant. He said that the farms were a bottomless pit that had been bleeding government funds for more than ten years.

Mr Pretorius asked whether the Government employees were also enjoying perks.

Mr Hawes explained that the farms were not profitable. When the former Ciskei homeland came into being, the farms were a pineapple co-operative. The pineapple farms fell outside the homeland system and were run by the apartheid government. These farms had not been profitable for the past twenty years and gradually fell into disuse.

The Chairperson enquired whether the government grant only went to one farm only.

Mr Jan Venter, Chief Financial Officer, Ncera Farms, replied that the Department of Agriculture gave a grant to Ncera Pty Ltd to support the adjacent communities with matters such as administration and training. The farms could not operate without the grant. A huge part of the grant went to the managing agent of the farms until February 2009, when the agent was incorporated. Ncera Farms were operated by the Department of Agriculture on behalf Department of Public Works. Aspirant farmers were interviewed, and, if approved, would occupy farms for a year,. After that, the settled farmer’s progress would be reviewed for a possible lease. The intension was to turn the State run farms into a centre of excellence for the benefit of the adjacent communities, where they could learn best practices. The State farms were not intended to make profit.

The Acting Chairperson asked for clarity on the 620 hectares of land not transferred. In addition to the ten already mentioned, he asked how many other farmers benefited. He asked the reason that only one farmer was successful.

Mr Hawes replied that the productive farmer demonstrated that a motivated person was prepared to tap into his own resources.

Mr Gaehler asked whether the nearby Fort Cox and Donnie that were doing the similar projects were helpful or not. He was concerned with the money was spent on boreholes and fencing, while only one farmer was productive. He suggested that the money could be used on other needy causes.

The Chairperson urged the Department to come up with a plan that could save the Ncera farms. It was a fact that when the Government bought a going concern, then the people who lived in it believed that they were entitled to loot that concern. He said that the settled Ncera farms were doing the same thing.

Mr Hawes mentioned that the Department of Agriculture,and the former Department of Land Affairs, had done some investigation into provincial priorities. The change in provincial administration had also delayed the progress on many issues. He said that he would investigate the way that Fort Cox and Donnie operated.

The Chairperson informed the Committee that hearings would be held on climate change on  17 and 18 November 2009. He wished everyone all the best for the end of the year.

The meeting was adjourned.

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