Agricultural Research Council & South African Wine Industry Trust Annual Report 2009/2010

Agriculture, Land Reform and Rural Development

14 October 2010
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Committee was briefed about SAWIT’s transformational agenda. The industry was growing, but less than 1% of the land was owned by black farmers, where the aim was 35%. Both water shortages and large capital layouts were noted as issues. SAWIT had played a big role in facilitating communication between stakeholders in the industry, as well as provided economic support to BEE farmers. They had also driven various social development initiatives in order to improve the lives of farm workers. The voluntary nature of compliance to the Wine Transformation Charter was noted as an issue in driving forward transformation. It was also underscored that the unions within the industry were struggling, due to the low wages associated with members, and a lack of communication. The high cost of running sustainable wine farms in the Western Cape was highlighted, and it was suggested that the Orange River would be a more feasible location in future.

Meeting report

The Chairperson commented that it might be necessary to set up an extra meeting to talk about the broader strategy on how best to work towards an efficient Department of Agriculture. The Committee was taking the matter of food security very seriously, noting that food prices were likely to go up next year, and South Africans could not continue to grow what they do not eat as it was not sustainable. The 2015 target for the Millennium Goals was in serious jeopardy. They needed to work with the United Nations on food security through the mobilisation of linkages. He congratulated the new ARC Chairperson.

Dr Shadrack Moephuli (CEO and President) briefed the Committee, supported by Agricultural Research Council (ARC) team management: Ms Anati Canca, Executive Director (ED), Technological Transfer; Dr Mohammad Jeenah, ED Research and Development; Mr Michael Netsianda, ED Human Resources (HR) and Support Services (SS); Mr Gabriel Maluleke, Chief Financial Officer (CFO), and the ARC team council: Mr Jonathan Godden, Chairperson; Prof Vil Nkomo, Deputy Chair; Ms Dudu Msomi, Chair: Finance; Mr Hamish McBain, Council and Audit; Mr Andre Young, Council and HR, and Mr Craig Matthews, Secretary.

Mr Jonathan Godden (ARC Chairperson) began by noting that the previous Council’s term had ended in November 2009, and the current one was only appointed in June 2010. The period on which they would be reporting was under the management of the previous Council. They had assumed responsibility for the work undertaken. The ARC had received a clean audit report. The organisation had stabilised after a difficult period, and financial statements were in place. The new Council was happy to support the ARC executive management and provide strategic report.

The CEO thanked the Committee for providing guidelines for focus - as a result the presentation was large, and would not all be gone into in detail. Dr Moephuli then began discussing the progress the ARC had made with the business plan over the past financial year, which was carried out under the mandate provided for within the Agricultural Research Act – which was primarily to conduct research, development and technological transfer. This was the third year of their strategic plan, 2007-2012; hence the Medium Term Strategic Framework (MTSF) priority outcomes were key. He matched ARC’s achievements with these outcomes as he went through his overview.

He said they had succeeded to deliver on their business plan, especially in terms of client expectations, and in view of the recession. He noted several achievements. Among them was their contribution to agricultural growth, providing support to Government on disease management, good employee relations (4.9% staff turnover), successful wage negotiations within budget (no strikes in the previous four years), addressing all the previous years’ matters of emphasis from the Auditor-General, contributing to the competitiveness and sustainability of the sector, and exceeded the target on financial performance. National Research Foundation (NRF) grants had been secured for 19 doctoral students, AgriSETA funding had provided for staff improvements, the Professional Development Program had capacitated 90 people, and informal training through short courses was provided to 795 employees.

On Research and Development, he noted that they had exceeded their target of scientific publications by 124% (184 vs 229), and also improved the quality of the publications, and they were spread out over all four strategic objectives. The heartwater vaccine was ready for field trials – and funding for this had been secured from the SA Woolgrowers Association. This could result in increased sheep and goat production in SA. Three and a half tons of improved sorghum variety seed was produced for distribution to black farmers for production and commercialisation. Collaborations were going well with other institutions – nationally and abroad.

Within the Technological Transfer department, progress had been made on the management of intellectual assets, in order to contribute to the competitiveness of the sector. An internal audit of the intellectual property portfolio had been conducted, and a policy approved. 300 black farmers had been trained through the Kaonafatso a Dikgomo program (with the effect of a 20% raise in saleability of animals), and training at schools in the North West on nutrition awareness had happened, as did the distribution of 500 cuttings of potatoes for planting – thus also contributing towards food security. More than 200 farmers had been trained on small scale organic cotton production. 90 000 fruit trees had been distributed across 52 villages and 2500 households across the OR Tambo District – contributing towards food security and providing a form of income generation. They were in discussions with the Eastern Cape Department of Agriculture to take over this project.

Collaboration on disease management with the Department of Agriculture, Forestry and Fisheries (DAFF) and the National Department on Communicable Diseases had been a key concern, focusing on Rift Valley Fever and Foot and Mouth Disease. A business plan had been put together for the funding resuscitation of work on a disease vaccination for the latter. He noted the ARC’s desire to present this to the Committee in the future (the National Treasury had provided R149m). Progress had also been made to address the bee disease, in collaboration with the Department of Agriculture. They had received some interns funded by DAFF, and were also working with DAFF on market access issues involving the testing of export products (National Revenue Monitoring Program), which was going well. The ARC had also nurtured numerous other collaborations such as with the Department of Water Affairs and Environment, the NRF, the Department of Science and Technology (DST), and various provincial departments of agriculture. Funding had been received from and collaborations engaged with the Water Research Council, the Independent Development Trust (IDT), the National Development Council and the South African National Biodiversity Institute (SANBI). Commercial agriculture had also funded some research projects.

Dr Mohammad Jeenah, ED Research and Development, went over ARC’s progress with regard to its four strategic objectives and outcomes (see presentation), highlighting how the crux of the R&D department’s work was the reduction of risk, increased production and quality, and thus improved food security for all. He noted which targets had been met, and mentioned some shortfalls (such as with new and improved products). He made examples of the ARC's cultivation of a new export product (New Blush Pear released by the ARC, with the potential to earn R354m/yr – over 200 000 trees had been released last year), and the improved yield of the sweet potato, which carried the potential for improved nutrition. In addition, a novel applicator designed to combat the Clearwing Moth – a pest affecting Rooibos – had achieved 80% control. A more effective system for the delivery of the Rift Valley Fever vaccine was in phase II of trials (supported by the Bill and Melinda Gates Foundation). The utilisation of dried legumes had enabled the rehabilitation of degraded farming land in portions of the Eastern Cape, which allowed more livestock – thus contributing towards poverty alleviation. There had been 325 occasions upon which they were able to release the ARC’s scientific results to the wider community / stakeholders. Wth regard to training, they had been able to reach 2000 beneficiaries, where the target had been 700.

Ms Anati Canca, Executive Director: Technological Transfer, reported on the progress within her department (which aimed to maximize the value of R&D outputs, transfer ability and manage knowledge). Collaboration had occurred with the Departments of Rural Development and Land Reform, Science and Technology, as well as with provincial departments of Agriculture (often in terms of training of extension work). Licensing agreements and economic infrastructure were core focuses through, for examples, SMME portfolios and agro information hubs, which also addressed food security issues. An office of Technology Transfer had been established, and training and economic services programs established. Agri-SETA guidelines had been followed, and detail communicated to the appropriate market (ABET to level 6 conducted). Community engagement was re-focused upon and initiated – in the past many local projects had failed over time, and the Technological Transfer department sought to redress this issue. 149 training events had occurred, 342 farmers days had been held, and 11 000 pamphlets distributed on vegetable production. An international symposium on collective innovation had been hosted to support capacity building (110 people), which was part of a Netherlands funded project. In terms of the business plan, income for business generation from the private and international sector had been exceeded, but not in terms of the public sector. Royalties collected came in just under target (R9.9m vs. targeted R10.5). MOU’s had been signed with local and international groups, and a contract had been signed with DST with regard to sustainable livelihoods in communities. Four Intellectual Property (IP) workshops were conducted internally; 29 new plant user rights were registered (target = 50); and a patent for a new vaccine was filed. Here again, under-funding played a role. One impact assessment was done (target=one). Because of budget constraints, they had not yet started working upon the knowledge management strategy. With regard to challenges and their possible solutions, Human Resource capacity (linked to budget constraints) continued to be an issue (47% vacancy for TT positions as of March 2010), as was compliance to the new
Intellectual Property Rights from Publicly Financed Research and Development Act, 2008. A possible solution would be to build capacity from within the organisation. The lack of alignment to the new legislative environment for the management of Intellectual Property within the agricultural industry interactions, had led to a delay in concluding key licence agreements, and intense engagement was required as a result. There was also a need to overhaul relationships with agricultural colleges.

Mr Michael Netsianda, ED Human Resources and Support Services, reported on the progress of his department, beginning with the review of HR gaps within the organisation and efforts to come up with meaningful interventions – such as appointments with academia to highlight scarce resources. The professional development program was also noted (which brings in undergrad students to further their studies and do on the job training). There were currently 90 students in the program and R8.5 m had been allocated towards it. NRF and DST had provided a further R2 m to cater for doctoral students. Movement within the organisation was being actively encouraged. A performance management system had also been implemented. The alliance of limited resources with the strategy, and the engaging of partners to provide support was another initiated strategy. He underscored that they had never had any work stoppage as an area of success, but said that they needed a disaster recovery plan (reprioritised for the current year) and investment in ICT infrastructure. However, they had rolled out a new network to enhance communication between ARC employees across the country. An evaluation of security systems had been conducted. The legal department had completed an audit, and had a database of all contracts. A communication strategy was now in place to address the organisation’s image. Two big issues to address in the near future would be to develop a succession policy and deal with the infrastructural issues. Staff retention and attraction also needed to be addressed, as did the aging status of experienced staff.

Mr Maluleke, CFO, gave a synopsis of the financial department. The total income for the financial year had been R831,05 m, 9% higher than the previous year. However, they were in a tough financial position, but it had improved from previous years. They received an unqualified audit report, with irregular expenditure of R3.2m (down from approximately R9m the previous year). He noted that there had been accounting changes to the statements that had required adjusting to the results yielded. The biggest issue pertaining to this result was performance information systems. There had been a slight decrease in operating costs, which had been through the conscious effort and measures introduced by the organisation, and capital expenditure had also gone down slightly. They had increased the number of BEE suppliers by 10%. This would continue to be focused on in years to come. There was a shortage of 528 in terms of capacity, and 397 of these positions were currently unbudgeted. The problem of under-funding had resulted in the inability to fulfil its full mandate, the inability to grow and maintain critical skills, and allocate resources towards income generating research. In addition, the under expenditure on maintenance on fixed assets and equipment resulted in major backlogs in upkeep, sometimes resulting in the need for replacement of infrastructure, the inability to invest in new equipment, and the erosion of research capacity.

Dr Moephuli noted with sadness the death of a security guard in the ARC’s employ, while his counterpart was still in hospital. He said that approximately R30m was spent a year on security, with most facilities located in remote areas.

He said that they tried to do as much as possible with the resources available. They were currently compiling a report detailing the financial needs of the ARC, which was almost complete and ready for presentation to the Council and the Minister. Energy, water and food security were highlighted as the most important issues for the ARC to address. Internally, the ability to have the fitting amount of expertise was the most critical issue for the organisation. Thus, strategic investment was necessary.

Mr Johnson noted the Committee’s keen interest in the work of the ARC, and opened the discussion up for questions.

Ms M Mabuza (ANC) indicated her interest in the ARC, and asked about collapsing infrastructure, noting her worry about this issue and their lack of resources. In addition, she asked about ongoing criminal charges being laid by the ARC, enquiring as to the status of this case. She asked for clarity about the statement on production potential being exceeded by demand and supply. She noted shortages of potatoes and sweet potatoes in SA - highlighted by Pick n Pay in a previous meeting, and asked about the resistant strain that was being worked on. How far was this process? Lastly, she asked about the progress of a vaccine being developed to support the movement of animals from virulent areas without the risk of loss. When would the vaccine be developed and put through trials?

Dr Moephuli responded that the ARC had raised issues of infrastructure before, and they had been working with the resources available to them. When the last business plan had been presented last year, it had highlighted that they were under funded, which had a negative impact upon infrastructure. He said they were now working on a new plan on fundraising needs for recapitalisation. He apologised to the Committee for the typing errors/errata in the version given, citing a miscommunication between ARC, printer and the Auditor General. He clarified that demand would exceed supply of agricultural goods, and it was an economic question. The ARC was trying to produce cultivars that upped yields. Of potato shortages, he noted that the Plant Improvement Act, which the Government must regulate, had been neglected. This resulted in seed and table potatoes being grown in adjacent fields – which carried a risk for infection of seed potatoes and thus, shortages. Designated zones should exist. The ARC had been trying to make disease/pest resistant potatoes. On animal movement from virulent areas, he said that the heartwater vaccine had been developed with funding from the National Woolgrowers Association and the Red Meat Development Trust. Preliminary indications were good, and once all the results from field trials were in, advice would be given on how to move forward.

Mr N Du Toit (DA) noted the Auditor General’s audit report stated that the accounting authority did not ensure that the ARC had maintained an effective and efficient system, that their quarterly performance reports were not up to date, and some targets were not consistent with the business plan. It also cited problems with internal control, and a lack of performance information. He asked why these problems were necessary. He also highlighted his concerns about assets and liabilities, referring to the loss on a sale of property and equipment (R17m). Capital funding and depreciation were also noted as problem areas, as were issues with leave accrual. There were red flags all over, and that these problems must be explained and addressed. He asked why the alien plants division was not discussed, as it was known to be a problem, especially in terms of facilities. He was thankful for the good news, but emphasised that there was a need to look at the problems that were looming, noting that if all the answers were not given today, the Committee would have to ask the Minister.

Dr Moephuli responded that this had been there first year of thorough auditing of performance information (on a trial basis) to advise for next time, and was thus a guideline of weaknesses. Their system had not met certain requirements, but the report was in accordance with international accounting standards. ARC had provided a report on the invasive alien division previously, and felt there was no need for a briefing on it.

Mr Maluleke (CFO) added that R12 000 of interest had been paid, on surpluses – the ARC had been on an accrual basis, which resulted in figures not matching as it would on a cash basis. Systems had thus inflated it. The R10m balance accounted for government debtors, with which it becomes more difficult to get payment timeously. It had improved compared to prior years. Leave accrual was the result of the impact of staff shortages. This limited the ability of some employees to take full leave, thus resulting in the accrual. 

Mr S Abram (ANC) said that the Annual Report lacked details, and needed to improve. The asset register was not there, and that they were not adequately controlling their assets or citing them in enough detail. He highlighted the severe capacity constraints, and said they were losing experienced and valuable people. Examples were given. Regarding institutes, he cited the internationally renowned animal feeding site, which was now falling apart. He wanted to receive a report on this matter. The 300 trained farmers was positive, but asked if they were being adequately resourced, and were follow ups done. There was a need to move from small scale to the bigger picture to promote SA properly and make a big impact. If it was not the task of the ARC to fund and make animals available to people, they should say this so other Departments could make available funding. He noted the R3.7b budget for agriculture in 2009/10, with R1b 33m being spent on employment compensation. What were the results? He requested a written response to strategise. Referring to assets, he said that Nooidgedaght had suffered a loss of research capacity and part of it was being mined. He noted that they had been asking these questions for a long time, which was why they would now like a written response). The facility in Citrusdal was in tatters, and Sadara, the research institute in KZN, had gone to smithereens. On animal improvement, he mentioned the Integrated Recording and Information System - internationally acknowledged as one of the best, and asked about its status. There was a capacity problem with this project, resulting in mistakes being made. He was heated when he said that he was worried about unreliable information. He emphasised the need to have the correct people who were able to do the work properly, and the need to bring in new blood. Logistically, he brought up the lack of transport afforded the people employed to do milk recording. Over 80% of the country was rangeland – suitable for farming with animals, but where was the National Rangeland Monitoring and Improvement Program – supposed to be implemented in 2007 to address animal production issues? Feedback was again requested.

Dr Moephuli said that Nooidgedaght was not part of the ARC, and that Sadara was the property of the provincial department of KZN. Citrusdal had been closed, and ARC was looking to either dispose of it by giving it to resource poor farmers, or work towards its rehabilitation (which would require funds). A plan was being put together. However, the facility had closed down 12 years ago. When discussing the milk recorders, he said that the original contract for milk recorders was for R10m (from the Department), which has been reduced to R2.2m, which had greatly reduced the resources available to the program. He took the point made on delivering a good quality service and reliable information, and apologised for the error noted. The training had had results (such as improved asking price), but there were not enough resources to cover the whole country – which were currently in three of four provinces. ARC was not a funding institution, and thus could not fund farmers but that they would try to put together an advisory document. On the animal improvement database program, they found that the cost of running it was much more than the money being received (R21m shortfall). This issue has been raised with the Department, and he would like to give a detailed briefing on this issue. The National Rangeland Monitoring and Improvement Program was similarly under funded.

Mr L Tolo (COPE) suggested that another meeting be organised to discuss all of this in detail. He reaffirmed that experienced people must stay and help. Referring to pending food shortages, he asked why there was hardly any subsistence farming anymore, and everyone simply looked to buy.

Dr Moephuli said that the shortage of funding, equipment and land resulted in reduced levels of farming.

Ms M Pilusa-Mosoane (ANC) asked about the timelines and locations of the training events / programs. She asked about ARC researchers – how many had been removed and how many had left? She said some information on performance measures was not there, and some information had not been well defined – what was the reply? Lastly, she asked how far the ongoing fraud investigations were.

Dr Moephuli elaborated that food garden training, which aimed to address health and nutrition, had started in KZN and moved on to the North West, and worked together with partners on it. They were losing researchers, but the turnover was below average, and in fact they had registered a net increase in employee numbers. However, the difference lay in that the loss of one experienced researcher had a larger impact upon ARC in terms of experience. He said that he would respond in writing to some issues.

The Chairperson noted that ARC must ensure secure and safe food, and address the Millennium Development Goal (MDG) targets. CoP17 was to take place in SA, and he hoped it was on the ARC radar. He asked about the competitiveness of South African grown cottons.

Dr Moephuli responded that ARC’s work helped to increase income and thus addressed poverty alleviation – which contributed to the MDG. To do more, more resources were required. ARC ran projects addressing climate change through various ways, such as renewable energy and conservation farming. They were in the process of compiling a report highlighting these inputs that mitigate against climate change. They were using the same cultivates as India and China for cotton, but because the volumes were low, it was more challenging to have a major impact upon the market.

The Chairperson noted the desire to transform societies, and asked how it would be possible to integrate facilities into communities – to ensure they became more engaged.

Mr Du Toit requested a written report on the recapitalisation plan that was being worked upon, which he realized would require great expense He noted his disappointment that it was only being worked upon now – saying it was a year or two behind. Lastly, he noted that the focus of the ARC was very scientific, and it did not place enough emphasis on the economic component of the work that they did.

Mr Abram requested a written report on the malignant cattle fever research, ‘Bankrot bossie’ and the lost Nguni herd in the Loskop dam area that just disappeared.

The Chairperson noted the issue of the growing and retention of skills, and possibly including an amendment to legislation to speak to retaining skills as part of national service.

Mr Godden, in a general response, asked that the Committee take into account that it was a new council, and it had not been in place for long. They had started a program to move board meetings to visit various facilities (they had been to Stellenbosch) in order to assess capacity. Some members had been to Sadara, which was a well functioning facility. He recognised the problem of aging infrastructure and aging staff, and noted that they were understaffed in some critical areas – areas that related to the budget. As such, the question of recapitalisation was key (a draft was available). Referring to some of the critiques posed to ARC, he put forward that they often extended from the ARC mandate as stated in the Act, into the arena of agricultural extension (currently the mandate of provincial departments of Agriculture). There was a need to define more carefully where the ARC mandate ended, or a decision should be made to extend the mandate and change the Act.

The Chairperson said that the Committee would hold a session with the Department to look at agriculture holistically, and they would be calling on ARC in the future. He highlighted the problem of the loss of intellectual property with the resignation of scientists. Do we have a hold on the intellectual property?

South African Wine Industry Trust (SAWIT) Annual Report 2009/2010
In reply to the Chair asked SAWIT when the previous parliamentary briefing had occurred, Ms Sharron Marco-Thyse (SAWIT chairperson) said that it was the first time, and that the South African Wine Industry Trust was not a statutory agricultural trust (such as
Wines of South Africa (WOSA) and Winetech who were governed by an Act). Those organisations received funding from Parliament, while SAWIT did not. She said that they would like to continue giving briefings in the future.

Ms Marco-Thyse briefed the Committee, supported by SAWIT CEO, Charles Erasmus; Mr Barry Stemmet, Trustee and Executive Committee Member; and Mr Sakkie van der Vyver, Chartered Accountant.

Ms Marco-Thyse said that their key objective was to drive transformation in the industry and promote ethical trading (also training and fund leveraging). She explained that SAWIT governance structures were comprised of seven trustees (more were in the process of being recruited), seven members of top management, and other staff. Most of their work operated through stakeholder collaborations, and was very facilitative, which greatly enhanced their capacity. She noted that it was a growing industry (exports increasing year on year), but there was a split whereby 20% of the industry produced 80% of the outputs (based on economies of scale). The huge capital layouts required put constraints on black entrants to the market. Both water shortages and worker equity (in terms of rights violations and the lack of due process being followed during evictions) were noted as major challenges. HR was highlighted as a key input cost.

Achievements were addressed through various categories. In terms of transformation, discussions had been coordinated to bring stakeholders together and determine the priority areas for the industry over the next three years, and establish specialist teams to coordinate implementation (after the collapse of the SA Wine Industry Council). Regarding economic development, SAWIT provided continuing economic support to BEE wineries, and played a strategic role in the Northern Cape and Free State through partnerships with government. On social development, SAWIT supported initiatives directed towards improved livelihoods for farm worker communities (such as grants supporting women’s health and HIV/AIDS, foetal alcohol syndrome education, labour and tenure rights education). Training had been supported through the granting of bursaries and the rollout of accredited educational programs to promote and enhance black management and leadership skills. In addition, national and international partnerships and networks had been developed. SAWIT had participated in the international conference of farm workers, and a USA / SA feasibility study to support the fast tracking of black leaders in the industry. They also had exchange programs with an academic institution in Burgundy, France.

Mr Charles Erasmus, SAWIT CEO, then took over and began by addressing transformation in the industry – which he stated was not transformed, and was not transforming - less than 1% of wine lands had black owners, where the aim was 35%. He said that the issue was not necessarily that the industry was unwilling, but that it did not know how. Although the Wine Transformation Charter (DTI, Department of Agriculture) provided some tools, 80% of the industry was exempted from compliance – effectively meaning that the Charter had no ‘teeth’. He hoped the Agri-BEE Charter would influence this He noted a major challenge as the lack of communication across the industry. Although the traders /sellers were well organised, the unions and civil society components were not, and a large proportion of workers were not unionised. He said that SAWIT’s only strength came from their government mandate. He then went over four projects that had, as a result, been established. They had established four projects - the first was Inform and Reform, designed to provide a status quo report which could be used as a monitoring tool by government on land reform and transformation. Second was CHANCE – in collaboration with Western Cape Universities, they had identified AIDS and primary health care for immediate intervention and support (funds from SAWIT, the Universities. and some farms in Grabouw and Molteno). The third was focused upon bridging the skills gap, and was a program concerned with training and development with regard to needed scarce skills (R15m over three years to fast track black managers). Lastly was LEAD – which focused on trade unions (there were seven) and their lack of capacity and forums to engage management and each other. Have found farmers would want workers to be unionised. SAWIT had never received government funding over the past 13 years, and had to work on generating its own (through producers and stakeholders).

Mr Barry Stemmet, Trustee and Executive Committee Member, began by noting that it was the CEO’s task not to upset producers/business. Access to farms was limited He noted the difficulty of having less than 10% organised workers in the industry. SAWIT had traditionally had a bias in terms of objectives, which meant that funding used to go mostly to industry (such as marketing). Now, with the new board of trustees, SAWIT had begun to contribute towards workers and communities. However, it had not totally changed. Although trade unions had invested both capital and human resources into transformation of industry bodies, after three years, industry had changed the constitution to ensure that labour and black people were not represented there. He admitted that SAWIT had been trying to facilitate conversations. He highlighted the fact that low wages lead to struggling trade unions in the industry. SAWIT had attempted to assist. There were many social problems associated with farm work, and therefore various Non Governmental Organisations (NGOs) had been brought in to assist trade unions in addressing these.

Mr Erasmus then thanked the ARC for their support over the past 13 years (SAWIT housed in an ARC office). Ms Marco-Thyse noted the challenge of recognising workers’ contribution and protecting their rights, and also the voluntary basis of participation in the Wine Transformation Charter.

Chairperson Johnson thanked SAWIT for the annual report, which he had not expected to receive. He noted that the report was biased towards trade, industry and labour, with scant emphasis on agriculture. He also noted the voluntary Charter.

Ms Pilusa-Mosoane said that she did not think this was the relevant Committee (she thought Labour, DTI, or Rural Development and Land Reform might be). She did not see where the Committee came in, and thought that the issues raised pertained to other Departments.

The Chairperson enquired if SAWIT was governed by the Liquor Products or Liquor Act
Mr Erasmus responded that they were not governed by these Acts, and were a private, independent trust.

Mr Tolo highlighted the high levels of alcohol abuse in SA and how dangerous it was. He noted SAWIT’s BEE emphasis, and wondered as to the operational definition of who was included (Indian, coloured?) and if there were not white people suffering too.

The Chairperson noted that transformation was not just about replacing people, but was also about changing mindsets. It may have to do with individuals, but was primarily about forming a non racial society. He said that transformation did not necessarily always equate to ownership, and there were other arenas.

Mr Du Toit noted the 4000 wine farms in the Western Cape, and asked how they were developing moving towards 2014. Was the size of the farms increasing to make a profit? What were the minimum size, tonnage and price to keep a farm running? At what size / level of those farms was SAWIT interested in transformation? If a farm was bought out, at what cost would that be? What percentage of replacement managers / owners would be trained? From a bottle, what % did the farmer receive, and what % did the Government receive through tax? Compliance to the BEE Charter was not currently enforced because turnover was too small.

Mr van der Vyver responded that in the Western Cape (barrier being Du Toitskloof) the situation was disastrous. Only a few, mostly old labels, were making it, while many others were on their way out with property development set to take over. Possibilities for new ventures lay in the Orange River area, where there was water available, and room for growth and reformation. In these areas, production costs per hectare was R20 000, while in the Western Cape it was R35 000. A minimum of 30-35 hectares was required to make the land feasible. He was pessimistic about the future of the industry in the Western Cape with regard to upcoming farmers. Mr Erasmus noted that SAWIT was aware of the problem of transformation, and black farmers asking why the handover of land was not now viable in the Western Cape. SAWIT was still convinced there was a future for black farmers to make a profit, but capital was required.

Referring to Mr Tolo’s question, Mr Stemmet made a note of demographics and said that the term ‘black’ was defined according to the Constitution. In terms of Mr Du Toit’s comments, he noted the need to evaluate the relationship between transformation being implemented and the turnover needed for it to be allowable – questioning if it was set too high. He agreed that there was a need to talk more within the industry, and mentioned, in response to Ms Pilusa-Masoane, that SAWIT should definitely be at this Committee, as they were concerned with agriculture.

Ms Marco-Thyse said that ownership was only part of transformation, there was management for example. However, the ability to deliver on BEE transformation percentages would probably not be possible. She said that drinking responsibly was the issue.

Chair Johnson asked the CEO to touch upon the deal with KWV.

Mr Erasmus responded that in 1998 KWV requested permission from Government to change from a co-operative to a private entity. Government then instructed that KWV invest in corporate social responsibility to the amount of R200m after tax. SAWIT was created as the conduit through which it would be disseminated to industry bodies, which it remained from 1998 to 2004. In 2005 KWV approached the Trust to assist KWV in its own transformation. 25% of its shareholdings were made available to a black consortium, which SAWIT facilitated. R200m was made available for this effort (R74m from KWV, R126 from SAWIT). The black Consortium Trade union was created. At the time, of this investment, the Trust was promised that, R100m would be made available from the EU Liquor Trade Agreement, to go to SAWIT. Government appointed new trustees in 2005, with the primary purpose of recouping the loan, which was supposed to be over in 2 years. However, it had been a 20 year loan agreement with IDC and the Clack Consortium. Thus fast tracking payment was difficult. It was finally recouped in 2008.

Ms Pilusa-Masoane said she did not say that SAWIT should not be there, just that this Committee was not relevant.

Mr Tolo noted the need not to drink and drive, and was not sure if his question about affirmative action was understood.

Mr Johnson noted the lack of transformation. He said that this had been the start of a process which would continue, and thanked SAWIT for their time.

The meeting was adjourned.


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