Maize Surplus & Livestock Recording & Improvement Scheme with Minister of Agriculture, Forestry & Fisheries

Meeting report

Introduction
Mr S Abram (ANC) proposed that Ms N Twala (ANC) act as Chairperson. The proposal was seconded by Ms N Phaliso (ANC). The Chairperson was not present at the meeting because he was in China leading a group together with the Environmental Affairs Committee on Climate Change. Apologies were received from Mr L Bosman (DA), Ms I Ditshetelo (UCDP) and Mr L Gaehler (UDM).

An Overview of the Maize Surplus Situation
Ms Sue Middleton, Acting Deputy Director-General: Department of Agriculture, Forestry and Fisheries (DAFF) briefed the Portfolio Committee on Agriculture, Forestry and Fisheries (the Committee) on how the maize surplus arose as well as strategies DAFF had embarked on to address the surplus. The origins of the surplus were: continuous good production over the past three years; favourable weather conditions and higher yields per hectare due to the varieties planted; high global carry-over yields per year leading to depressed prices globally and locally; improved production in other Southern African countries had displaced exports from South Africa; and the reluctance of the African market to buy South Africa’s genetically modified maize.

Negotiations with alternate markets in China, Egypt and Tunisia were not successful and the viability of establishing an export pool for surplus maize was scrutinized by a Task Team of DAFF and the National Agricultural Marketing Council (NAMC) as a measure to stabilize prices. The view of the team was that the export pool would not benefit producers in the long term, but rather would increase prices and production, stimulating a cyclical trend. A long term strategy to deal with the challenges included local market initiatives such as strategies to support black farmers in the sector; exploration of bio-fuels; maize for animal feed to expand maize-based downstream industry; increase production of yellow maize, wheat, Soya bean and sunflower and decreased production of white maize. Export market development such as deep sea exports of yellow maize and consideration of an export agency were also suggested by the Task Team.

Discussion
Ms M Mabuza (ANC) asked why there was a surplus of maize at a time when South African people were going to sleep hungry and how the sector could assist with feeding hungry citizens.

Mr Langa Zita, Director General: Department of Agriculture, Forestry and Fisheries, replied that the obvious route appeared to be that Government should buy the surplus maize to feed the poor, but farmers could not be forced to make maize available for feeding the hungry when farming was underpinned by market considerations for profit rather than for social development. The challenge was to match the market for food production with solving the problem of hunger. DAFF was working to find markets for commercial agriculture products and quite separately to define a guaranteed State market for black small-holder farmers through offering Government assistance together with a social development plan. The latter strategy would be for food production directly for the purpose of solving the hunger problem.

Ms Mabuza asked if maize for bio-fuels would increase the price of maize for food consumption.

Ms Phaliso asked if a feasibility study had explored bio-fuel agriculture.

Mr Zita replied that bio-fuels had been discussed with the Committee previously. Should bio-fuels be introduced, food insecurity would be protected and bio-fuel production would be regulated with stringent restriction and policy. With the immediate issue of maize surplus, bio-fuels from maize had become an option.

The Hon. Dr Pieter Mulder, Deputy Minister of Agriculture, Forestry and Fisheries, added that the bio-fuel debate warranted further investigation. If food prices were to increase due to the introduction of bio-fuels and if there was a turn and the surplus did not continue, the principle of ‘bio-fuels from the surplus’ would be a mistake; bio-fuels may be a regional Southern African initiative and not only a South African initiative; other commodities for bio-fuel, such as sugar cane, should be included in the debate.

Mr S Abram (ANC) believed that begging foreign markets to buy at a price which was too high would not be successful; that dependence on other countries should be limited; South Africa should expand on the maize value chain; and that with the assistance of co-ops and Government support with electricity, instead of importing food, especially chicken, South Africa should rather be producing locally and creating permanent jobs. Black emerging farmers required cheap interest rate loan they could pay back, not handouts, to assist with input costs. He also said that with 80 % of South Africa’s land surface not suitable for cultivation purposes, there should be focus on using maize to feed livestock and develop viable commercial herds of livestock for beef and dairy farming in the rural areas and thereby also reduce importation of expensive beef and mutton. Local sheep farmers, who were struggling due to theft of stock and predators, should also receive assistance from Government.

Mr Zita said that initiatives were already underway with agri-processing. The Competition Commission believed that should the market force prices to become lower, the chicken industry and all stakeholders in the food chain of the chicken industry would be forced to play a role in a new viable industry through new initiatives. Currently, 40% of chicken was imported from Brazil. DAFF planned to assist the 157 small-holder farmers affected by the surplus by offering loans for repayment and would continue to explore secure markets for these farmers. The issue of electricity was a challenge and involved commitment from Eskom.

The Hon Ms Tina M Joemat-Pettersson, Minister of Agriculture, Forestry and Fisheries, urged the Committee to familiarize itself on the new policy of the Growth Path Strategy (GPS) and the Industrial Policy Action Plan (IPAP2). Government was re-engineering its resources and policies and DAFF had certain outcome and output commitments which were outlined in the Minister’s delivery and performance agreements with the President. The Inter-Sectoral Inter-Ministerial Committee which consisted of DAFF, Education, Health, Social Services, Economic Development, Public Works, Trade and Industry (DTI) and Rural Development. Rural Development addressed off-farm infrastructure and the need for electricity and a performance agreement had been signed with the President. DAFF addressed on-farm infrastructure, such as irrigation and windmills. Public Works was responsible for development of the infrastructure. The 12 outcomes of Government, which would be presented to the Committee, outlined the responsibilities of the different Departments in the rural areas and in relation to small-holder farmers in particular. After infrastructure, agri-processing was the second most important sector for job creation and the economy and was driven by DTI and DAFF. In the past DAFF was responsible for primary production of agriculture and agri-processing and products lower down in the value chain were dominated by DTI and Economic Development. The new Growth Path committed the Departments to work in synergy. Agri-processing was now a primary focus for DAFF.

The agreement with the Chinese Government was not about whether or not they would buy South Africa’s maize but pertained to funding downstream agri-processing activity to produce cattle and chicken feed from maize. DAFF did not control import/export of food, which was DTI and Economic Development’s responsibility. DAFF worked together with these Departments to solve critical areas on tariffs and to ensure that South Africa was not vulnerable to cheap production from other countries where governments subsidized their food production.

Indeed, DAFF was ensuring transformation in the sector by supporting small-holder farmers and protecting the country against food insecurity. In the Budget Speech, the Minister announced R3 billion recapitalization of the Land Bank over the next three years for financial provision at lower interest rates payable over a longer period of time for small-holder farmers. Another success story was that the Chinese Vice-Minister of Agriculture had engaged on a bi-lateral agreement with DAFF which offered financial assistance from the Chinese Development Bank. Copies of the Bi-lateral Agreement and other international agreements would be made available to the Committee. A further initiative was seasonal maize trade with Egypt, as well as route subsidization by Egypt for South Africa exports via the Indian Ocean to broaden the agriculture market to the Middle East.

The maize surplus did not impact on food security. Surplus was in addition to the 9.5 million tons of food security as required by South Africa. If the surplus was artificially purchased by Government, the market price of maize would be distorted. DAFF was working with the Competitions Commission to eliminate unfair monopolization of prices, such as Pioneer Food’s inflated price of bread and flour. Reduction of prices - initially flour followed by in-line reduction of the price of bread - would be done gradually so as not to put small bakeries out of business.

DAFF’s commitment to IPAP2 and the new GPS would ensure feed locks for cattle and poultry farming and low interest loans over a long period of time for small-holder farmers with assistance from the Chinese Development Bank and the UN-based International Fund for Agriculture Development (IFAD). DAFF was also developing a One-Stop Model for easier access of funding for farmers.

DAFF had not had sufficient interaction with the Provincial Department. Building capacity was the next focus of the Provincial Department, as the National Department could not engage on every small project in the province. DAFF was working closely with DPW on irrigation, storage and logistics of the entire value chain of agriculture.

The Minister urged the Committee to engage with the Department of Energy on Bio-fuels, as Green Energy – solar and wind- was currently its focus. It was important that Bio-fuel and Bio-fuel Mix was on the State legislative agenda. DAFF could lobby for farmers but could not affect legislation on Bio-fuel and Bio-diesel.

Dr Mulder added that many of the local problems of land and food security could be solved at the local level with assistance from Government and good-will initiatives he had witnessed at local level. The problem with electricity was that local Government was not being paid by Departments and therefore could not pay Eskom. Initiatives should address solving this administrative problem.

The maize surplus problem which had originated in previous years was further compounded by South African farmers farming in other African countries. Another problem was that because of the surplus, commercial and small-holder farmers were bankrupt and were moving out of rural areas and thus would not be in a position to contribute to rural development if the problems were not resolved immediately.

Ms Mabuza said that she understood that DAFF had established Food Banks to feed 84 400 people per day and asked for clarification on the use of Food Banks in times of emergency.

Mr Zita replied that Food Banks were managed by a global non-governmental organisation (NGO) initiative which had offices in South Africa. Food Banks in South Africa were not confined to maize but to all food which was in surplus. Through negotiation with outlets, NGOs bought this market surplus cheaply or at no cost and then extended it to the poor. The modality of DAFF participation in the use of Food Banks to reduce hunger was being addressed. Silos existed in the North West and former Transkei but they were not optimally used. DAFF had proposed use of establishing a silo in the Eastern Cape for products from small-holder farmers as a means of providing Government market storage use for food security initiatives, such as for pensioners, hospitals and prisoners.

The Acting Chairperson asked what the difference was between silos and Food Banks.

The Minister added that in the past, silos catered for commercial white farmers but were now available for storage of maize for small-holder farmers. Food Banks, in conjunction with DAFF, NGOs and banks, were co-ordinated by Old Mutual. Social Services used the Brazilian model where outlets for cheap food were situated nearby the small-holder sector and were thus easily accessible to the poor. The Brazilian model would be presented to the Committee.

Ms Mabuza asked if research had been conducted on the immediate and longer term effects of organic food on the development of children.

Mr Zita replied that there had been increased global awareness of the possible affects of Genetically Modified Organisms (GMOs). Countries such as China and India were expected to have answers for its millions of middle class adults within the next ten years as to whether they should continue to pursue GMO production. DAFF could advise but could not determine whether farmers should produce GMOs or not.

Ms M Pilusa-Mosoane (ANC) asked for more information on the African Market’s reluctance to buy food of genetically modified nature from South Africa.

The Minister added that countries had the right to restrict import of genetically modified maize and it was essential for South Africa to expand on maize value within South Africa. The Inter-Ministerial Committee’s mandate on food nutrition and security included determining the impact of the diet on working class, middle class, rural and urban children. DAFF expected to have sufficient data compiled to brief the Committee on food security, safety and nutrition of South Africa by February 2011.

Ms Mabuza asked why Food Banks were not the responsibility of Government when the Annual Report clearly stated that DAFF had established four Food Banks; why there was no policy on Food Security; and why National Government and Provincial Departments were separated in their operations on Food Security.

Mr Abram asked for clarification on DAFF’s involvement with the Food Banks.

Dr Marinda Visser Chief Director: Agricultural Production, DAFF, said that the Department was part of an integrated Food Security Nutrition Task Team consisting of Basic Education, Health, DTI, Social Development, Economic Development, Rural Development and Land Reform, and Public Works. The Team had established Food Banks in Cape Town, Johannesburg, Durban and Port Elizabeth. Social Development, not DAFF, had signed a memorandum of understanding (MOU) with the Food Bank South Africa, which was driven by the private sector and NGOs. DAFF had capitalized on the existing distribution channels, logistics and infrastructure networks in order link small-holder farmers to the market, schools, hospitals and the most outlying areas of South Africa.

The Acting Chairperson asked for clarification on whether DAFF suggested that whilst commercial farmers farmed for profit, Government was concentrating on emerging farmers to take care of Food Security. Developing emerging farmers would be overcoming challenges of climate change over an extended period of time while there was a food surplus that was not addressing poverty.

Mr Zita said indeed it seemed perverse that there was hunger at the time of maize surplus but that DAFF was working together with the Task Team on a sustainable solution. The Brazil model and engagement with Brazil was an effort to duplicate the eradication of hunger which Brazil had succeeded in doing for eight years. DAFF expected to present a well thought-out plan on how to meet the needs of small-holder farmers as well as hunger by February 2011.

Mr Abram asked if the capitalization of the Land Bank was a dedicated loan for upliftment of small-holder farmers at subsidized loan rates.

Mr Zita said that DAFF would negotiate strongly that at least half of the money from Treasury would be ring-fenced for small-holder farmers only. Instructions had not yet been received from Treasury. The money negotiated from China and other countries was for small-holder farmers only. DAFF would provide R1 million of the R3 million for small-holder farmers only and already, 70% of provinces supported establishment of the One Stop Shop, which would benefit small-holder farmers. A challenge for DAFF was that it could not move ahead with this initiative until there was agreement from other Departments. Once DAFF received the funding and was given permission to implement allocation of the funds, Provincial Government would be able to plan with and mobilize farmers instead of being restricted to administrative work.

Mr Abram asked if there was a clear framework on how farmers could access Land Bank loans.

Mr Zita replied that requirements were that farmers approached DAFF with a clear plan on how the farm would operate and the market viability of their product.

Mr Abram said that logistics presented by DAFF suggested that the season would be over by the time negotiations were complete and the poor farmers would not be able to plant crops.

Mr Mono Mashaba, Head of Office: Office of the Director-General, DAFF, said that the Minister had embarked on Mechanization and Input Support Programmes managed by the Agricultural Land Commission (ALC). A process was currently ongoing to procure seeds and fertilizers from input suppliers for the 157 farmers. The challenge was that the ALC negotiations with banks and input services included DAFF guaranteeing in writing that it would subsidize 40% of the input cost. DAFF had initially resisted agreeing to this cost, but had subsequently decided to go ahead for the immediate season, but was now struggling to move forward with the ALC.

Bishop L Tolo (COPE) commented that, since 1994, the land that was previously ploughed in the rural areas was no longer being ploughed and ex-labourers could no longer afford to buy food. Also, DAFF did not appear to take interest in what was happening at the rural level. He urged DAFF to engage with the Department of Environmental Affairs to address the problem of pollution in the rivers which had resulted in the water being undrinkable and which was killing the fish.

Ms Phaliso said that the concerns by the Committee on Food Security originated from their constituencies and highlighted the obvious communication gap between DAFF and people on the ground.

The Acting Chairperson complained that files received from DAFF were delivered too late for the Committee to properly review them prior to the meeting.
The Minister said that the files had been delivered at the close of day on Thursday. She requested a system whereby the middle man was eliminated and the person receiving the files signed, and wrote the date and time that they were received.

Mr N duToit (DA) commented that although the maize surplus was outlined in the presentation, there were no implementation plans or deadlines given by the Task Team. It gave the impression that DAFF was treading water. He emphasized that Brazil’s turn-around in less than a decade was due to large scale commercial farming run by families. He believed the real problem of maize surplus was being overlooked. Production cost in South Africa was higher than other African countries which had higher rainfall, deeper soils and lower input costs. Since South Africa could not export, maize farmers were under serious threat of going out of business. What this meant was that Rainbow chicken farming would also go out of business, which was currently providing 60-70% of South Africa’s poultry supply. Also, should other countries not be able to export to South Africa in the future, South Africa would experience mass starvation. The question of how to keep farmers on their farms at lower costs was not being answered by DTI or DAFF.

Mr Du Toit said that although small-holder farming was a great idea, if it was not a cheaper means of production, it would create more problems.

Mr Du Toit asked if DAFF and Grain South Africa had come to agreement on a strategy to address issues together. He also questioned whether agreements with countries such as China and Egypt had been thoroughly thought out for the sake of protection of South Africa interest, as in the past South Africa had suffered at the hands of China over return of wool from China. He also asked if due diligence had been conducted on the ‘cheap rates’ South Africa would be charged by China - at what rate the Chinese Development Bank would supply credit; at what rate the Land Bank would loan money; and what collateral was required by China. These were serious questions which required answers.

Mr Du Toit also asked for thorough detail to be presented in the future meeting on all the functions involved with the Food Banks.

Mr Zita said that at a meeting on maize surplus which included critical players from the NAMC and Competitions Commission, Grain SA had expressed the view that DAFF need not be involved with the problem-solving process. Since the problem has persisted, DAFF now worked closely with these bodies to secure a market for the grain of South Africa. Despite the capitalist system, DAFF was assisting with the maize surplus due to national interest to safeguard the maize industry, but could not be responsible for what had occurred within the market system.

The Minister added that while Government was intervening on this issue of national interest, much of the detail was sensitive information. Once negotiations were complete, DAFF could openly discuss them. Negotiations with the Chinese Development Bank and IFAD were complete and the details thereof could be supplied to the Committee. Many areas had been revisited and as more detail became available on IPAP2 and the Growth Strategy, it would be made available to the Committee.

Mr Du Toit implored the Minister to address the Minister of Trade and Industry on tariffs as soon as possible. He also suggested a debate be scheduled for discussion on whether the market system or an alternate system should be introduced. Either farmers stayed on farms or left them. Ultimately the State had to take responsibility for food production.

The Minister noted the Members’ comments and said that DAFF was now working closely with DTI and Economic Development to speed up processes on the tariffs and import and export taxes. DTI now also had a greater understanding on stock feed and agri-processing.

Livestock Recording and Improvement Scheme – Proposal from SA Studbook
Dr Mohammed Jeenah, Executive Director: Research and Development, Agricultural Research Council, presented the process of the Livestock Recording and Improvement Scheme. Livestock contributed 53% to the gross domestic product (GDP) from agriculture in South Africa. There were 13.5 million cattle in total and about half of that was in the hands of black farmers. Most of the livestock was produced in semi-arid areas which required investment, innovation and strategy to improve adaptation and productivity.
Recording and genetic evaluation facilitated the identification of productive animals and helped to increase productivity.

According to the Animal Improvement Act 1998, Section 15.3, all registration and recording had to be registered on the Integrated Registration and Genetic Information System (INTERGIS). The Minister might establish schemes, with the rules of the scheme made in consultation with the body responsible for maintaining the INTERGIS.

DAFF had transferred the management of INTERGIS to the ARC in 2005. Prior to that INTERGIS was managed jointly by the ARC and South African Stud Book (SA Stud Book). Five schemes were announced by the Minister to improve production of beef, dairy, small stock, pigs and poultry and a scheme for resource-poor farmers.

SA Studbook, among other such organisations, were registered with DAFF and issued certificates of pedigree - parentage, birth and ownership. Four other registration authorities recorded the performance of the animals. All data was captured on an integrated data base.

The ARC did performance recording for all interested farmers and birth recording for non-stud farmers. Breed Plan was an organization based in Australia which also did registration and animal performance. Section 15.3A stipulated that data on South Africa studs captured by Breed Plan also had to be captured on INTERGIS.

The ARC planned to create an Advisory Committee made up of the different registration and breed societies, Rural Development and Land Reform, as well as the Black Farmers Association and others.

DAFF was the custodian of the policy and mandate, ARC was in charge of operations and the Advisory Committee advised on registration and recording. All data on the five schemes had to be captured on the INTERGIS System.

The ARC proposed to increase support given to the black farmers and to include commercial producers within the Scheme. Currently INTERGIS was being run by SA Studbook on behalf of the ARC. The issue at hand was that SA Studbook, which was one of the seven authorities, had a plan to consolidate registration and recording into a one-stop shop and take over the work of the ARC, giving DAFF the role of oversight only.

Of the five schemes, SA Studbook wanted to separate the four schemes from the black emerging farmers and also receive data from the other societies which were in essence, competitors of SA Studbook and would thus lose their independence. Brahman used a different recording association and this would affect the one-stop shop. SA Studbook also planned to improve efficiencies by reducing ARC staff from 107 to 42 staff. The 60 people SA Studbook would not require were expected to stay on at ARC.

The recording of animals was done in three phases A, B and C. According to the SA Studbook business plan, the major phase C, would be outsourced. Net funding required by Studbook SA from DAFF in 2009/10 to run the schemes was 15.6 million, excluding the INTERGIS contract.

The ARC had rejected the SA Studbook plan and had agreed to have a stakeholder workshop by the end of November or early January. All South Africa data would be captured on INTERGIS, which currently physically sat with SA Studbook. At this sensitive stage, the ARC was not insisting that SA Studbook competitors send their data to INTERGIS.

The process would be to move INTERGIS from SA Studbook in Bloemfontein to Irene and then ensure that the Act was followed and all data was captured on INTERGIS. Data could be sent to Breed Plan Australia, but that data had to be captured in South Africa as well.

Through this process by the ARC, schemes would be expanded to include more resource-poor emerging black farmers and commercial farmers; there would be a greater role for Provincial Departments; and opportunities for wealth creation and poverty alleviation.

Discussion
Mr Abram commented that the presentation made no reference to how previously disadvantaged people would be represented in the current breeding society or how they could acquire the knowledge of stud breeding. He knew of a number of previously disadvantaged stud breeders who started off with simple mixtures and graduated to become stud breeders and knew of no reason why anyone could not become a breeder. With assistance, commercial cattle farmers could benefit from better genetic material and yield higher quality animals, particularly for farmers in the communal areas. He suggested that the ARC should conduct a meeting for all role players in the breeding industry - not just the cattle industry – to achieve results. Simply furnishing farmers with a plan was not a viable way of improving the breeding industry.

Ms Phaliso asked if a workshop on Studbook could be held so that the Committee could understand and assist with policy decisions for the disadvantaged farmers.

Dr Jeenah clarified that great strides in recording had been done through Government funding of the ARC recording stations. The proposal was not about breeding but about recording and purely proposed that recording be moved from the ARC to SA Studbook, not to the breeders.

Dr Jeenah said that SA Studbook’s plan was that ARC would stop recording and the farmer would continue breeding as normal. SA Studbook would only deal with the business plan of the four recording schemes and a separate contract, a fifth scheme, for the emerging farmer. Of over 1000 emerging farmers, 40 had graduated to the official commercial beef recording schemes.

Dr Jeenah said that the ARC wanted to invite all role players to give the ARC and Government advice on how the scheme should work. The ARC wished to keep recorded data in a central place which was independent.

The meeting was adjourned.