Ncera Farms Turnaround Strategy: Update by Minister & Department of Agriculture, Forestry & Fisheries

Agriculture, Forestry and Fisheries

21 May 2012
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Minister and Department of Agriculture, Forestry and Fisheries, and the newly-appointed Chief Executive Officer of Ncera Farms, updated the Committee on the implementation of the turnaround strategy for Ncera Farms. At one stage, Ncera Farms lacked a board of directors, proper staff, an audit Committee and was providing no accredited training. It also had no work plans in place, was using outdated machinery and had allowed inbreeding of animals and outdated machinery, which led to the dairy that constituted its main business becoming highly unprofitable, whilst the infrastructure was actually dangerous. Since the implementation of a turnaround, senior staff had been appointed, a framework was developed for a Stakeholder Council, and policies were drawn for human resources and finance and fraud prevention. Ncera Farms had applied to be an accredited training provider with recognised qualifications, and was taking active steps to improve the socio-economic life of the communities around the Farms. The previous poor farm management was assessed, and a decision was taken to sell dairy and beef cattle, for R1.2 million, to bring in new Nguni breeding stock, to close the dairy business and to move to Boer goat farming and beef processing, as well as hydroponic vegetable production. The new stock and methods were useful to surrounding communities, were more disease and pest-resistant, and training programmes were in place for tractor driving, maintenance, and plough setting and welding. Ten tractors were purchased, to serve nine villages with a population of about 18 000 people. A fully-fledged workshop with modern equipment had been built. Ncera Projects should create 400 jobs. The current allocation was R3 million but it was suggested that R75 million would be required to take Ncera to its desired end state.

The Minister of Agriculture, Forestry and Fisheries said that turnaround strategies for the whole agricultural sector would help to demonstrate that agricultural revolution was a reality, as evidenced by 8.8% job growth in the agriculture sector. The Department was attempting to work with traditional leaders and commercial farmers, with a focus on KwaZulu-Natal and Eastern Cape. She noted that tensions had arisen in the Committee due to conflicting information furnished to the Committee and DAFF. She explained that she had not always found it possible to attend Committee meetings.

Members had a lukewarm response to the Ncera Farms presentation, with some commenting that they found the plans idealistic, not realistic. They questioned the assertions that local farmers were finding it difficult to sell to locals, believed the communities needed a dairy and were not convinced that the dairy closure was linked to the closure of Parmalat. Members believed that other alternatives should have been presented and investigated. They suggested that alien plant clearance should be done by locals, to boost employment. Members felt that more focus was needed to convert the plans to reality, and commented that what had been presented lacked detail in respect of fuel and energy costs, and project income, did not indicate how experts would be used. They asked what had happened to those officials who had previously run Ncera Farms into the ground, wanted to know if the potential links with Fort Hare University and Fort Cox College, for training, had been explored, how this project was linked to other DAFF initiatives, and whether water was available to support the Farms. They questioned links with other projects in the area, suggested that the original plans when the Farms were opened should be examined and suggested that detailed business plans were needed. DAFF was urged to take action to help projects like Ncera Farms to run effectively, and expressed their concern that, once again, DAFF seemed to have presented “half-baked information” lacking specifics.

Meeting report

Ncera Farms Turnaround Strategy: Update by Department of Agriculture, Forestry & Fisheries
Mr Langa Zita, Director-General, Department of Agriculture, Forestry and Fisheries, briefly highlighted that when his Department (DAFF or the Department) had visited Ncera Farms it found no Board of Directors and work plans in place, use of outdated machinery and in-breeding of animals on the Farms. Everything was in a state of decline at that stage. He was now happy to report that, following a turnaround strategy, there were now a Chief Executive Officer and Chief Financial Officer in place,  a renewed relationship between Ncera and the community, and preparation of sustainable plans and policies. He hoped that Ncera Farms was well on the road to success.

Mr Mzi Titimani, Chief Executive Officer, Ncera Farms, tabulated two factors that led to the development of the turnaround strategy. Firstly, he highlighted the problems in governance, conceding that at one stage Ncera Farms had no Board of Directors, no audit committee, no accredited training being provided, no policies, procedures and systems in the finance unit, no appointment of accounting managers, and no forensic investigations were being conducted. These problems were tackled through a number of interventions. The Chief Executive Officer and Chief Financial Officer were appointed  in 2011. There had been development of a framework for the establishment of a Stakeholder Council, which was agreed upon by all relevant stakeholders. Six policies were developed, covering areas such as human resources, fraud prevention, and finances. Ncera had submitted an application for accreditation to the  relevant Sector Education and Training Authority, Agri-SETA, so that there would be recognised qualifications and better job opportunities for the trainees. It had taken definitive steps to improve the socio-economic life of the communities around the Farms,  and interviews were conducted for prospective candidates.

The second factor that required the evolution of a turnaround strategy was concerned with the farm’s business management. He confirmed that the problems identified included invasion of the forests and bushes by alien plants. There was inbreeding and generally poor management of animals, as some dairy cows were found to be suffering from mastitis, low milk production, loss of conformation, loss of weight and fertility, and were geno-typically weak. There were also inadequate water storage facilities for irrigation and drinking, poor fencing and handling facilities, and poor veld management. The dairy section was running at a loss of R200 000 per year, and its facilities were outdated to a point that the whole dairy structure was dangerous even to the animals.

The steps taken so far to improve the situation included the selling of 305 animals,  of which 197 were dairy cows and 108 were beef animals. Ten Nguni cows were selected for breeding. The dairy section was closed, due to the fact that too much inbreeding of the animals led to a decline in milk production, to the point where the dairy section was not producing the required volumes of milk per day. Income made from the sales of the animals amounted to R1.2 million.

A SWOT analysis was conducted, and this indicated that Ncera Farms had potential for beef and goat production and could produce vegetables throughout the year, by making use of hydroponics. The prevailing soil and climatic conditions were found to be conducive for beef, cash crops and grain production. It was felt that beef processing would be more profitable than selling live animals, and this would also help farmers in the area, who could approach Ncera for slaughtering.

Boer goat farming was another project that was viewed as less capital intensive, and which could support beef farming. The main purpose of this programme was production of meat, not milk. AmaXhosa were targeted for this project because the majority of them in the area were using goats for rituals and customs. Boer goats bred faster because of their high fertility rate, and they were disease resistant.

Ncera Farms was now experiencing good profits from tomato and green pepper production. As a result, eight more tunnels or hydroponics schemes would be built, to encourage year-round production and assist with better pest and disease control. This method of production was also less labour intensive.

Ncera Farms had also embarked on a mechanisation programme, and ten tractors and equipment were purchased. There was now a training programme in place for tractor driving, maintenance, and plough setting and welding. The tractors would serve nine villages with a population of about 18 000 people. A fully-fledged workshop with modern equipment had been built.

In the main, it was agreed that the Ncera projects would create 400 jobs, of which 66 would be permanent. This would reduce poverty, hunger and unemployment in the area. Ncera Farms would, in the longer term, be accredited and produce professional and technically trained cadets, and the upgraded farm would produce the required good breeding stock.

Mr Titimani noted that Ncera Farms received an allocation of R3 million. However, its administrators were of the opinion that amount was not sufficient. It was projected that, for the period 2012-2016 ,a sum of R75 million would be required to take Ncera to its desired end state. Mr Titimani noted that further graphs and tables for budget allocations, expenditure and projections were included in the presentation (see attached document).

Ms Tina Joemat-Petterson, Minister of Agriculture, Forestry and Fisheries, told the Committee that her Department would like, over the next few months, to present a turnaround strategy on the overall agricultural sector. This would show that agricultural revolution was a reality. This was evidenced by the 8.8% job growth experienced in agriculture, the highest it had been in the sector since 1970. There would be a particular focus on KwaZulu-Natal and Eastern Cape. In fact, work had already started in Nkandla in KwaZulu-Natal. DAFF was trying to work with traditional leaders and commercial farmers on issues of agricultural land.

Ms Joemat-Petterson noted that there had been a miscommunication between DAFF and the Committee, due to a mismatch of information received by the two institutions. She urged the Committee to study the quarterly reports of Statistics South Africa (SSA) regarding agricultural matters.

Ms Joemat-Petterson then addressed the criticisms that had been voiced about her failure to attend Committee meetings. She explained that it was often difficult for her to attend Committee meetings because they clashed with Cabinet or other Committee meetings she had to attend. The Director General also had to attend G20 Agriculture Committee meetings and may not always be able to be present. Both the Minister and Director-General were also members of the Presidential Committee for renewing irrigation schemes in the Eastern Cape.

Mr Zita commented that Ncera Farms was exhibiting enthusiasm, and had moved from a dire situation to one that was much improved. Ncera Farms was a demonstration site, so that anyone who wanted to know about goat farming, for example, could visit and get advice. It was within easy walking distance from its surrounding villages.

Discussion
Mr R Cebekhulu (IFP) wanted to know why it was difficult for local farmers in the area of Ncera Farms to sell tomatoes to locals, instead of these being brought in from Limpopo.

Mr Titimani explained that the whole thing centred around supply and demand. The planting time was critical. Farmers were working around the problems, and were now aware that tomatoes, if planted in March, would be harvested in April.

Ms M Pilusa-Mosoane (ANC) commented the strategy was good, but that it had to be implemented step by step. She noted that budget might be a hindrance or slow down progress. She insisted that training needed to be provided to the villagers, who could then use and pass on that knowledge. She suggested that the uprooting of the alien plants could be done by the villagers, instead of hiring an outside person or company.

Mr S Abram (ANC) remarked that the strategy had weaknesses. No financial institution would be prepared to allocate money for this plan, as it was “a dream”. There were also too many people involved, and he thought that more focus was needed to convert the plans into reality. He commented that fuel and electricity costs were not included in the plan. Ideally, he would have liked to have seen a simpler approach that indicated what was being done and what experts were consulted. Unfortunately, that was not in the strategic plan. He warned the entity the government would not pump money into something that was not showing progress. The strategic plan was also flawed, because it did not provide details of projected income, but only showed projected expenditure. Overall, he commented that this was an ambitious plan not grounded on reality. It lacked research and back-up that would point to a specific niche, such as chicken farming.

Mr Titimani replied that the organisation was planning to bring experts to give specific advice, and he noted that experts on citrus farming had already been consulted. It was intended that secondment of personnel would take place, in order to give specialist advice, and determine ultimate roles to be played on the Farms.

Ms N Phaliso (ANC) asked what happened to the people who had effectively run Ncera Farms into the ground, and what action that would be taken against them.

Mr Zita explained that Ncera Farms had opened 60 disciplinary cases, and the Chief Financial Officer had been instructed to look into all the cases and make recommendations.

Ms Phaliso noted the comments around ageing infrastructure, but said that the plans did not give any indication of dairy revival. She remarked the areas around Ncera needed a dairy structure.

Ms Phaliso wanted to know how the strategy was aligned to other plans of DAFF, noting that it was already clear that the Agri-SETA and other agriculture colleges were not going to be used to their fullest potential.

Mr Zita responded that the Ncera project was linked with the Zero Hunger initiative that was already taking place in the area. Ncera Farms would serve as a planning unit as to how to proceed with the Zero Hunger project in the Amathole region.

Ms Phaliso asked if there would be a consistent supply of water to the farm, to support the hydroponics.

Mr Titimani responded that the area was not prone to erosion, and was mostly grassed. Hydroponics would not be a problem, as there was a small river near the farm from which water would be drawn for the Farms’ activities.

Ms A Steyn (DA) wanted to know if the Ncera Macadamia Project, and the vandalised training structure near Ncera Farms, were connected in any way to the Ncera Farms project.

Mr Titimani confirmed that neither the Ncera Macadamia Project, nor the dilapidated structures were in any way related to the Ncera Farms Project. The Macadamia Project, which dealt only with nuts, belonged to Village 1.

Mr S Msimang (ANC) remarked that the strategic plan was idealistic, not realistic, and he was worried that it would not be sustainable. He also asked why the dairy farming was discontinued, and whether the Boer goats were farmed for milk purposes.

Mr Titimani elaborated that the dairies had been closed since the machinery that was in the existing dairy structure was no longer usable. The new equipment was unable to fit in the infrastructure, which was originally created in the 1960s. The existing infrastructure was also sinking and it was dangerous to the animals. He reiterated that the dairy had not been making any profit and was contributing to the overall loss of the Farms, of about R200 000 a year. In order for the dairy to continue operating, the Farms would require pastures and lucerne, and a scale indicating the number of cows required. Those cows that were in the Farms originally were also not true dairy cows and were not producing the required volumes of milk per day. He said that the Farms in any event could not grow lucerne successfully, as it was affected by salt air, as the Farms were too close to the ocean, and this would render it unfit for animal consumption. The closure of Parmalat in the region had aggravated the situation. The local market was not prepared to buy Ncera's milk for R3.50 a litre. The only reason why the dairy had survived for long was that it had been subsidised by DAFF.

Mr Titimani also said that the Boer goat farming was for meat only, not milk.

Mr B Bhanga (COPE) suggested that the managers of Ncera Farm should broaden their approach in terms of training, and not look at SETAs only. Fort Hare University offered both theory and practical training, and it too had a farm. This institution could be used, as could Fort Cox College. He thought that there should be a focus on investing to recruit specialists to join Ncera Farms.

Mr Bhanga thought that the turnaround should make use of available resources to produce goods. The management of Ncera should consult the original plans developed when the Ncera Farms were started, investigate where matters went wrong and where there was success. The strategic plan, as it stood, did not reflect any feasibility study that was carried out. The strategic plan also did not show sufficient justification for the R75 million budget.

The Chairperson remarked that what Ncera Farms had presented was a plan that had to be tested, in order to move forward. It was a mid-term report, and Ncera Farms still had to be invited to present a detailed business plan.

The Chairperson commented that he would also support the community being used to deal with alien plant invasion, as that would create employment in the area.

Mr Titimani said he was in favour of the suggestion that Ncera Farms should present a detailed business plan. That plan was available, but was very lengthy and he would present it in the next meeting.

Mr L van Dalen (DA) commented that the property had to be viable and sustainable. A thorough scrutiny was needed on why Ncera Farms failed in the past. He commented that pastures around the area were not properly used, which was why there was encroachment. He refuted the suggestion of Ncera Farms that there was insufficient land for the project. He also challenged the assumption that milk could not be sold because Parmalat closed in the area, pointing out that other farmers were selling to Clover. He urged that more had to be done at the administrative level of the organisation.

Ms Steyn also agreed that she had found it difficult to accept that Ncera Farms was unable to sell milk to the local people. In Shiloh, near Keiskammahoek, people were producing milk and selling it to the locals at R10 a litre. She suggested that the entity should put more time into developing a proper plan, and ensuring that it would work. She warned that the government would not continue to pump R3 million yearly into projects that had nothing to show.

Ms Phaliso remarked that the Committee was not provided with the real reasons and alternative options around the closure of the dairy. The Committee may consider possibilities of keeping it alive. She also said that the SWOT analysis, as presented, did not give enough indicators to allow the Committee to engage with Ncera Farms in a productive manner. She noted that Ncera Farms had provided employment in the past, but now it was failing.

Mr Bhanga stated that DAFF should provide a helping hand for Ncera Farms, and help it to achieve. In the past, Ncera was fertile and an interrogation was needed on how to realise that potential again. He said that it was painful to note that the Department was not active in helping projects like Ncera Farms to start up and run, particularly in view of the high unemployment rate in the region. DAFF should make sure people were eating quality food, and that agriculture was taken seriously.

Ms Phaliso told the Minister and Director-General that the Committee was concerned that the Department always seemed to be presenting half-baked information. Figures were not backed up with documentation, particularly broken down by provinces, as to what projects were being carried out by DAFF. The Department had been given sufficient notice of this presentation but it delivered an insufficient report. She said that the Committee was determined that it must be taken seriously.

The Chairperson noted that remaining questions could not be entertained because of time constraints. He asked Ncera Farms to treat these seriously as real concerns of the Committee.

The meeting was adjourned.

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