National Agricultural Marketing Council Strategic Plan and budget 2010-2013

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the representatives of the National Agricultural Marketing Council (NAMC). They were Ms Ntombi Msimang, Chairperson; NAMC, Mr Ronald Ramabulana, Chief Executive Officer; NAMC, Ms Sarah Muvhulawa, Chief Financial Officer; NAMC and Mr Billy Moroko, Director of Marketing, DAFF.

The Chairperson asked the Committee and delegates to adopt an approach that differed from that taken in the past, whereby, at the end of the financial year 2010/2011, the thrust of the NAMC’s four or five strategic areas could be measured by whether they had been successfully implemented. Although the extensive information received was important, Parliament acted as a strategy platform and therefore should not be bogged down by details of figures and staff politics. Instead, Parliament would move forward more effectively by NAMC getting to the thrust of what was expected.

National Agricultural Marketing Council Three-Year Strategic Plan (2010-2013), Business Plan (2010/2011), HR Plan (2010/2011) and Budget (2010/11)
Ms Ntombi Msimang, Chairperson, NAMC said that a meeting the following day would highlight and align the NAMC strategic documents with the specific priority areas of Department of Agriculture, Forestry and Fisheries (DAFF). Therefore the four strategy areas were still ‘in progress’.

The Chairperson asked if it was possible for NAMC to divulge what areas would be prioritised so that the Committee could know what the targets for the end of the financial year would be.

Ms Msimang said that since NAMC acted in an advisory capacity for the Minister within the budget allocated, and access to markets for agricultural products was the overall specific intent of NAMC, she believed that it was possible to share the priorities with the Committee. She said that NAMC would prioritise access to markets for emerging farmers, and that this would be done in a collaborated way. Trusts that had been supported over the years also needed close attention.

Mr Ramabulana added that understanding the impact of inflation was also a priority. NAMC had advised how Government could address inflation. The presentation would explain how NAMC planned to use the R1.4 billion within the Agricultural Trust and how the R257 million raised each year through statutory measures would grow the Agricultural Sector. There was a target for raising funds, and detail on how it was to be spent. Skills development was also a priority. At the end of the year, that impact of NAMC intervention could be measured.

Discussion
Ms M Mabuza (ANC) said that NAMC had presented a 5 year project to the Committee in the past year. She asked if the programme implemented by the Committee had been attended to, as planned. Points that were raised in the presentation last year included the NAMC strategy, the role of agriculture, NAMC and food price monitoring, global drivers of food price inflation, reasons for the food crisis, issues and development in South Africa, future outlook and policy options, rural food price monitoring, strategy levies, general retail issues, South African Trade and Agricultural guidelines, transformation guidelines, export promotion, financial figures of industry, trusts and the challenges associated with trusts.

Ms Msimang assured the Committee that NAMC’s strategic objectives had not changed. The objectives for the coming period were listed. These included increasing market access for all market participants, promoting efficiency in the marketing of agricultural products, optimising export earnings from agricultural products, and enhancing the viability of the agricultural sector. She added that the NAMC was limited by its Act, by availability of funding and by the fact that NAMC acted primarily as an advisory capacity. Together with industry role players, NAMC covered the trusts. The NAMC Annual Report 2009/2010 would include key performance indicators, strategic objectives and the budget allocation per strategic objective.

Mr Ramabulana expanded on the points about the agricultural trusts. He said that the Marketing Act did not allow for the South African government to provide adequate services required by agriculture in South Africa, especially with regard to the agricultural trusts. Some of the trusts had changed their operations to address issues that were important for South Africans. Legal opinion had led to the opinion that the Marketing Act should be rewritten.

The Black Economic Empowerment (BEE) industry was facing challenges, and a team, including NAMC, would ensure that recommendations by the Committee were implemented by DAFF and by industry. Food price inflation and rural food prices and monitoring had challenges, in terms of quality of data received by the rural communities. However, data collection had been improved and food price inflation could now be compared between communities. NAMC felt that Government did not understand the inflation problem. Control of inflation could not happen if the structure of the agricultural sector in South Africa was not addressed, and if there was not an increase in production. In the past, farmers had been the focus when addressing food price inflation, but other players had a far greater impact on prices. The Marketing Act would help in addressing some of the issues of price inflation.

Ms Mabuza said that according to the South African Food Code Review of 2008, inflation increased primarily due to transport costs, frequency of trips and distance from suppliers. She added that there were many spaza shops in the rural areas that charged inflated prices. She asked if NAMC researched these shops, as she believed that they were serving the rural people negatively.

Mr Ramabulana said that the principles of the Marketing Act were being reviewed. In 1996 NAMC de-regulated agriculture so that the price of food would be determined by demand and supply. NAMC could not look at who was selling, but could look at the prices of food. However, NAMC could not close down a shop that charged inflated prices.

Mr S Abram (ANC) argued that it was the duty of NAMC to monitor what was happening on the ground. He said that if exorbitant prices were being charged to the rural poor, it was the duty of NAMC to identify the shortcomings of the Act, based on NAMC retail price monitoring, and remedy those shortcomings immediately. He added that many of the spaza shops were not registered with South African Revenue Services (SARS). In Bloemfontein there were approximately 1 000 spaza shops run by foreigners and the entity collected levies to the total of R1 million per week. He said he expected NAMC to inform Parliament of problems such as this and offer solutions. If need be, Parliament would need to expedite legislation in order to benefit the poor people.

Mr Morokolo said that amendments to the Marketing Act had been submitted to the Legal Division of DAFF. Certain issues were not within the ambit of the NAMC to regulate. There had been provision factored into the draft Bill for who regulated prices and who had the authority to give direction and guidance. DAFF also proposed that it should play a part in the determination of the Agricultural Tariff Policy, which was currently under the portfolio of the Department of Trade and Industry (dti). DAFF wished to follow up with the Committee on the findings of the marketing review exercise and present on the issues.

The Chairperson said that the Committee had a role in the nomination process of appointing people to Boards such as the Agricultural Research Council.

Mr L Bosman (DA) proposed that the Chairperson ensure that the same appointment process was followed with NAMC as with any other board which reported to Parliament, whereby the Committee would have responsibility of appointing NAMC members, so that there was better oversight.

Continuation of presentation
Mr Ramabulana said that the way in which DAFF had supported black farmers in the past had been incorrect. In order to settle black farmers, all necessary support had to be offered. NAMC had started a process of designing marketing and development schemes to engage partners who provided within the design. A Vineyard Development Scheme was being established to assist emerging agri-businesses to grow their operations to commercial level through training and better planning. In the Eastern Cape, a Red Meat Scheme aimed to increase income earned by communal/emerging farmers from raising cattle through more beneficial participation in formal red meat markets. The Lucerne Development Scheme was established as a result of the unstable financial position of the National Lucerne Trust, to encourage farmers to take advantage of opportunities, especially with regard to the new irrigation schemes and the need to buy lucerne for animals during periods of drought. The Grain Crops Development Scheme aimed to increase black farmer’s access to maize and oilseed markets by providing cost reduction incentives to co-operatives financing black farmers, and by buying grain from black farmers. Training courses offered in partnership with Stellenbosch and Cornell Universities included Agribiz Training of Women Entrepreneurs, export-oriented courses and a five-day Business Development Course.

Approximately 32% (R70.7 million) of the NAMC total levy expenditure was spent on research projects and 17% (R36.9 million) was allocated to information on research and other functional information required by the industries.

There had been improvement in communication between the Minister and the Trustees and the process of appointing Trustees, but as long as the trusts were not incorporated into the Act, the processes would possibly continue to have drawbacks. Likewise, until food price and marketing information were incorporated into the Act, NAMC would continue to encounter challenges on those issues.

NAMC had also submitted a human resources plan setting out how the NAMC aimed to get the skills necessary for achievement of the organization’s strategic objectives.

The total budget for NAMC started at R32 494 000 in the 2010/11 financial year and would be R39 908 000 in the 2012/12 financial year. NAMC was confident , after rewriting of the Marketing Act, the financial needs of the Agricultural Sector would be clearer.

Discussion
Mr Abram said that the NAMC documents were only submitted to the Committee that day and requested that in future they be sent a week in advance.

Mr Abram asked when DAFF would present to the Committee on pricing issues and on the change in legislation. The Minister of Rural Development and Land Reform stated that 90% of the land which had been restituted and reformed had not been utilised. This meant that 6 million hectares (ha) of land had been withdrawn from productivity. He asked what assistance role NAMC could play, based on the studies that had been done, and in light of its small budget, to ensure that the land could be productive, people could be empowered and food security could be guaranteed.

Mr Abram noted that in the past, the growing of cotton had been spread over 90 000 ha in a number of provinces. Today it had been reduced to 10% of that figure. He asked what role NAMC played in resuscitating the cotton industry and promoting the use of cotton which would generate on-farm employment as well as off-farm benefit for the value chain.

Mr Morokolo said that the World Trade Organisation (WTO) had dropped the subsidies on cotton in developing countries. Being a global commodity, the price of cotton was increasing and local textile production was important. Dti had implemented measures to reduce the amount of cotton filtering into the South African economy, but more importantly a WTO subsidy would trigger positive outcomes for developing countries.

Mr Abram also noted that there were very few small tanneries in South Africa despite 40% of the total GDP of agriculture being generated by the live stock industry and despite the large number of motor industries requiring leather for manufacture. He asked what could be done to create an industry based on leather, where along the value chain there could be increased employment opportunities.

Mr Morokolo said that the leather industry’s main challenges related to the cost involved in the treatment of skins and hides. Prices were not competitive internationally and customs had banned exports of skins and hides, causing a surplus in the leather tanning industry. A further challenge was the inferior quality of the skins and hides due to branding and tick bites.

Mr Abram requested that NAMC changed its approach from focus on core business functions to a proactive approach to identify shortcomings, opportunities and intervention strategy.

Ms N Twala (ANC) asked if NAMC engaged with co-operatives in rural areas as she had noted, during oversight visits, that many of them had collapsed due to lack of skills. She also asked if NAMC played a role in getting the produce of the small-scale emerging farmers to the markets.

Ms Msimang said that although all members in the NAMC were farmers themselves, there was lack of integration of agriculture in South Africa as a whole. The co-operative movement, for example, was very young and lack of understanding and skills prevented action on the part of NAMC and law makers. There was presently no entity to help farmers create co-ops. In the past three years, NAMC had opened unions for small scale farmers and was focused on the challenges of the farmers and understood the challenges facing the Committee. NAMC worked closely with DAFF, but the need for integration was huge. NAMC dealt with serious market access issues, but many of the solutions to problems such as with Thailand, China, Bangladesh and Indonesia were the mandate of dti. She suggested that a transport co-operative would resolve many problems for farmers, but stressed that NAMC could merely elevate the recommendation to the Provincial Government.

Mr N Du Toit (DA) referred to the Vineyard Development Scheme and clarified an inaccuracy with the figures relating to tonnage of grapes per hectare. He also explained that it was cheaper to make and preserve wine than juice, and pointed out that only the best wine was used for distillation. He suggested that realisation of the investment to market and succeed in the industry could take 20 to 30 years and was extremely risky. Further reasons for the risk were that there was already a surplus of wine for brandy in the country, the Minister was taxing consumers, and break-even in the industry could take many years. Successful farms were being sold because there was little net capital gain in wine farming, and he wished to prevent the chance of destroying people’s hopes in this regard. He suggested that creation of jobs would be more successful in the cattle industry.

Mr Ramabulana invited Mr Du Toit, through the Chair, to join the bi-monthly NAMC meetings to assist with the Vineyard Scheme.

Ms Mabuza asked how NAMC planned to overcome the decline in agriculture production due to the increase in cheap imports. She also asked what the outcome of NAMC’s Joint Trust Venture was, where the Summer Grain Marketing Scheme (2008/2009) supported 5 000 previously disadvantaged farmers. She asked whether NAMC planned to increase the number of disadvantaged farmers it was supporting. In light of the increase in agricultural and food production costs, and the near 100% increase in electricity costs over the next three years, she asked if NAMC had performed any studies or projections for these negative effects on agriculture, especially for small scale farmers.
Mr Ramabulana said that NAMC had identified struggling farms which had been funded by the Land Bank and had incorporated restitution plans within the schemes in order to support those farms with resources required. Not all of the struggling farms however could be help at once, but NAMC had a system that was committed to addressing all the problems which had been identified. NAMC was happy to share with the Committee all the Section 7 Committee reviews and strategy plans which had been developed, as well as the status of each of those plans so that the Committee could be familiar with measures which had been identified, recommended and implemented to address problems in agriculture.

Mr Ramabulana said that information on the impact of electricity and other regulations on food prices was available and would be released in the next quarterly Food Price Trend Manual at the end of May.

The Chairperson said that he wished to have future discussion on the importation of cheap goods such as from China, which had severely impacted on the local industry.

Ms N Phaliso (ANC) asked if there were currently any challenges within the trusts and whether emerging farmers were given a communication platform and invited to agri-conferences so that they could be adequately informed on access to overseas markets.

Mr Ramabulana said that the reality of trusts was that they were governed by trustees and the only influence that the Minister had over the trusts was through the trustees. There were problems of trustees not attending meetings or attending but not engaging with the Minister. Appointment of adequately committed trustees had enhanced the relationship between the trusts and the Minister.

Mr Bosman said that the NAMC had to advise the Minister on certain issues but most of the development schemes were run by the trusts. He suggested that the Committee also receive reports from the trusts so that their fund disbursements could be analysed and the Committee could understand the links within the industry with regard to developing the farms. Most of the industry failure had nothing to do with NAMC but was due issues with managements not performing on their mandate.

Mr Bosman thought the Committee should focus on NAMC’s narrow objectives to decide if it was satisfied with NAMC marketing issues such as the Marketing Act and whether South African markets were globally positioned for success. While better understanding of the free market system which dictated most of the issues discussed that morning (like cotton and maize) would allow for solutions to many problems, focus on specific NAMC issues and the budget was the purpose of the meeting.

Ms M Pilusa-Mosoane asked if there was a time frame for the HR plan.
 
Mr Ramabulana said that in regard to targets and dates for implementation of plans, a thicker document, which was not circulated that day, detailed those issues.

Ms Pilusa-Mosoane asked how many black farmers were targeted for access to maize and oilseed markets in the Grain Crops Development Scheme and when the schemes and training courses were expected to be implemented.

Mr Ramabulana said that through the DAFF and Trusts, a number of black farmers had increased quantities of wheat production.

The Chairperson said that the budget needed to be engaged as it was Parliament’s responsibility to review reports and decide on the budget before 13 April 2010.

Ms D Carter (COPE) asked if Fisheries would fall under the NAMC now that it had been incorporated into Agriculture.

Ms Msimang said that according to the Act, Fisheries was an Agricultural product and the meeting with DAFF the following day would enlighten NAMC on whether Fisheries would fall under the NAMC.

Ms Carter stressed that if Fisheries was incorporated, a strategy plan would need to be incorporated and the budget would need to be adjusted. Oversight visits revealed that establishment of co-operatives, whereby the middle man would be omitted, would be beneficial to both the fishermen and the public. Lastly, she suggested that while taking on board Fisheries, other projects which had collapsed, but which still had solid infrastructure and potential, should be resuscitated and should include community involvement.

The Chairperson said that the adjustment to Fisheries was expected to be approved by the DAFF by October 2010.

Mr R Cebekhulu (IFP) suggested that the transport industry and mill owners were inconsiderate of the needs of the sugar cane farmers who often received very little profit for their work due to post harvest delays.

Mr Ramabulana said that development of transport co-operatives for sugar cane farmers would be explored.

Mr Abram congratulated the new Minister for admitting that 90% of the 6 million ha of restituted or reformed land was non-productive and that the projects had failed. He asked if NAMC had been approached by any of the commodity organizations, or DAFF to respond to the damage caused to the country financially, as well as to the farmers who had been set up to fail.

Mr Ramabulana said that NAMC had not been approached by an organisation on the issue of reform of the 6 million ha land. NAMC required collaboration between partners in order to have impact.

Mr Du Toit said that it was important to have small farm production models and management in place before expecting NAMC to perform. Unlike commercial farming, it was difficult to project success in small scale farming without taking all factors of production into account.

Ms Pilusa-Mosoane asked if all statutory applications by farmers would be received within the financial year.

Mr Ramabulana said that approximately 20 out of 30 farm applications would be approved. NAMC was confident that all those that were approved would receive support within the financial year.

Ms Muvhulawa outlined the status of NAMC’s finances. No money was owed to the organisation. According to the National Credit Act, however, NAMC was instructed to discontinue credit support to its staff.
 
Ms Carter felt strongly that there was not adequate time to address the challenges of NAMC. The Committee was also expected to act as a support to NAMC. She recommended that a future session be scheduled whereby the Committee could respond fully and confidently. She also requested that NAMC brief the Committee on the outcome of the meeting with DAFF the following day.

The Chairperson said that NAMC had done its duty in terms of its own regulations, laws, and restraints of time. However, since the Committee had not previously engaged on the NAMC issues, the Committee could not comment on how best to move forward.

The Chairperson said that he wished to have the approach of dealing with priorities and assessing performance in a succinct manner on a yearly basis.  The Committee further wished to unpack the regulations and laws governing the Trusts, the Marketing Act and Agri-BEE Charter.

The meeting was adjourned.