Perishable Products Export Control Board & National Agricultural Marketing Council on their Annual Reports for 2012/13

Agriculture, Forestry and Fisheries

10 October 2013
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Perishable Products Export Control Board (PPECB) and the National Agricultural Marketing Council (NAMC) presented the highlights of their annual reports for 2012/2013 to the Committee.
The main issue arising from the PPECB presentation was the effect of Citrus Black Spot (CBS) on fruit exports.   The European Union was expected to respond very unfavourably towards this problem, but political pressure had been placed on them to reconsider their position.  Between the United States of America and South Africa, scientific investigations were being made into the prevention of CBS.   CBS was currently not highlighted as a big problem by all consumers, as some markets in East Asia still accepted fruit affected by CBS.   However, even in the East, there were markets like Vietnam and Indonesia that were increasing their control measures and were asking for more information on the problem before allowing South African citrus to enter their ports.

The PPECB believed the scientific analysis in Europe was unfair and ‘out of step’ with the rest of the world, as European claimants -- contrary to South African, American and Australian science -- were saying that CBS would propagate in their orchards through exposure to South African imported citrus fruits. The reluctance to accept South African citrus was political, due largely to the fact that Spain was the world’s largest producer of citrus and was therefore protecting its market, seeing South Africa as a threat. In addition, CBS was progressive, manifesting itself only after some time in the export chain.  Even though multiple inspections were being done before exports were sent off, CBS still appeared on the fruit at its destination, most likely due to a lack of temperature control and handling.  
The Department of Agriculture, Food and Fisheries said that a multi-pronged approach -- using farmers, science and politics -- would be needed in order to manage this situation.   However, the best way to deal with the problem of CBS might be to depend less on the European market, which had always seemed lucrative but was becoming increasingly hostile, and instead open the doors to other markets.  The PPECB advised the Committee that at the request of the EU, voluntary exports of oranges to Europe had been stopped from 19 September, and as of the 3 October the EU had closed the market to South African citrus fruits.

Many of the issues raised by the NAMC centred on the need to increase exports, and these had largely been covered by the PPECB.  NAMC said that the South African Reserve Bank Governor had also placed some pressure on it to increase exports.  The Marketing of Agricultural Products (MAP) Act had been reviewed towards the end of the previous year. It had been published for consultation, but had been withdrawn as it was being engaged with by the Council. The NAMC had continued to work with the Department of Trade and Industry (DTI) and was focusing on its relationships with BRICS and the African markets.  Although the NAMC had received an unqualified audit report, there were issues involving procurement and a bank overdraft that had been pointed out by the Auditor General.
 

Meeting report

Chairperson’s Opening Remarks
The Chairperson opened the meeting, saying the pre-election period might be the cause of a drop in the attendance of Members at the meeting. Apologies were submitted for the absence of Ms Phaliso and Ms Pilusa-Mosoane (sick), Mr Gaehler, Mr Cebekhulu, and Mr Cele.  Mr Van Dalen indicated that he would arrive late.
Certain members of the National Agricultural Marketing Council (NAMC) would be arriving late, therefore the Perishable Products Export Control Board (PPECB) was asked to present its report first.

Briefing by Perishable Products Export and Control Board (PPECB) on its 2012/13 Annual Report
Mr Mono Mashaba opened the presentation on behalf of the PPECB, indicating that a new board had been appointed by Minister Tina Joemat-Pettersen, effective 1 September 2013.   This board had not been able to meet to appoint a Chairperson and Vice-Chairperson. For this reason, Mr Mashaba had been asked to be the spokesperson for the annual report.  The new board had retained a 30% membership continuity through Mr Tim Reddell and Ms Tini Engelbrecht.

Mr Mashaba introduced some of the new members of the board, as well as the Chief Executive Officer, Mr Stuart Symington, who he had indicated was would do the presentation, together with his management team. He also thanked the previous Board and the Chief Financial Officer for doing a sterling job and managing to achieve an unqualified report from the Auditor General.

Mr Symington introduced the members of the management team. All were present, except for Mr Lucien Jansen, who was away on leave and was represented by Mr Shaun Coetzee.

PPECB’s highlights included the exiting of its commercial business and the renewed focus on its statutory mandate. For this reason, the PPECB Act of 1983 and the Agricultural Product Standards Act of 1990 had been revised and completed, but Mr Symington expressed the regret of the PPECB that the Act would not be tabled in Parliament this year.

Other highlights included human resources personnel being deployed in the field to focus on problems employees were having on the ground. In addition, financial losses had been reduced to R1m for this financial year, compared to the previous year, when a loss of R16m had been recorded.  The PPECB had also focused on projected technological changes within the organisation, because most employees’ ages ranged within the mid-twenties.  Innovations had included supplying employees with i-pads and using social media.

The main setbacks included the appearance of Citrus Black Spots, which were causing a decline in the value of exports, especially those going to Europe.

The PPECB had started partnering with private farmers in the Eastern Cape and the Winterveld in order to promote the development of farming practices.

A shortfall of R1.2m, against a budgeted shortfall of R4m, had been experienced. This was mainly due to reduced expenditure, such as lower administrative expenses and the closure of the commercial side of the business. This improvement in the net result was achieved through significant savings in expenditure and a marginal improvement in income from statutory services. A decrease in ground nut exports had caused the business to be R3m below budget.  Income from statutory service had increased. Interest received had been below budget due to reduced cash reserves at the end of previous year. Main income had come from statutory levies (89%). The main expense was for employment costs (69%). Debtor collection days had been 38 days, against a target of 55 days.  Bad debt had represented 0.05% of total income.  An unqualified Audit report had been received.

Discussion
The Chairperson asked the PPECB what its understanding of transformation was.

Mr Symington said that it was to change the nature of the organisation to play to its strengths and what the country had to offer, especially in terms of diversity with regards to demographics, gender and expertise.  The PPECB believed that a culture of passion in terms of entrepreneurship and servant leadership was also very important in transforming the organisation to play towards its strengths. In addition, the new information technology programme was part of transforming the way employees thought and saw themselves and the outside world.

Mr Zakhe Makhaye, General Manager: Human Resources, PPECB, responded by speaking about the development of farmers and working towards values.   PPECB believed transformation went beyond mere employment equity. Part of transformation was procurement, another part was development of farmers through the development programmes, and another part was working toward the values that the organisation stood for.

The Chairperson said that the question had been asked because agriculture was one of the sectors of South Africa that was lacking transformation in racial terms.

Ms R Nyalungu’s (ANC) first question was directed to Mr Cyril Julius, General Operations Manager, Coastal. She asked why certain containers had been rejected and what PPECB had been looking for when inspecting those containers. Her second question was on risks and challenges.  She said PPECB had spoken about insufficient infrastructure in terms of information technology systems, and whether it might need consultants to run these systems, and she was concerned that the service providers would not thoroughly transfer their skills to the employees. She asked what criteria were being used to select the 20 farmers in the Eastern Cape and the 60 farmers in the Winterveld for the development programme, as she was concerned about the other provinces. What progress was being made with the problem of Citrus Black Spot?

Ms N. Twala (ANC) asked what organisational challenges had been faced by the PPECB that had caused it not to achieve 8% of its performance indicators.  What the meaning of ‘0’ under SETA accredited training products -- was the entity not working with SETA?   What transgressions were involved in the 14 Disciplinary hearings in 2012?

The Chairperson asked how much income was being lost due to third party certification not being done anymore.  The integrity of export certification had been raised during the presentation – he wanted some more elaboration on that issue. The PPECB had recorded a 71% achievement of its performance indicators, what was the norm for an organisation such as this elsewhere? He also wanted to know what was causing Citrus Black Spot.

Mr Mashaba answered that Citrus Black Spot (CBS) was still a major problem, as detection was not supposed to go beyond five cases.   However, reports had shown that they went beyond 20. The European Union was expected to respond very unfavourably towards this, but political pressure had been placed on them to reconsider their position.  Between the United States of America and South Africa, scientific investigations were being made into preventing CBS.   CBS was currently not highlighted as a big problem by all consumers, as some markets in East Asia still accepted fruit affected by CBS.   However, even in the East, there were markets like Vietnam and Indonesia that were increasing their control measures and were asking for more information on the problem before allowing South African citrus to enter their ports.

Mr Symington said that he believed the scientific analysis in Europe was unfair and ‘out of step’ with the rest of the world, as European claimants -- contrary to South African, American and Australian science -- were saying that CBS would propagate in their orchards through exposure to South African imported citrus fruits. Therefore, the reluctance to accept South African citrus was political, due largely to the fact that Spain was the world’s largest producer of citrus and was therefore protecting its market, seeing South Africa as a threat. In addition, CBS was progressive, manifesting itself only after some time in the export chain.  Even though multiple inspections were being done before exports were sent off, CBS still appeared on the fruit at its destination, most likely as a result of a lack in temperature control and handling.   Mr Symington expressed the gratitude of PPECB towards the President, Mr Jacob Zuma, the Minister of Trade and Industry, Mr Rob Davies, as well as Minister Joemat-Pettersen, for lobbying in the European market on behalf of South Africa citrus exports.

Mr M Mannya, Deputy Director General: Agricultural Production, Health and Food Safety, said that a multi-pronged approach -- using farmers, science and politics -- would be needed in order to manage this situation. He felt, however, that the best way to deal with the problem of CBS might be to depend less on the European market, which had always seemed lucrative but was becoming increasingly hostile, and instead open the doors to other markets.

Mr Julius reiterated the point that CBS was more of a political problem, and that EU was being protective of Spain, because experience in South Africa had shown that the disease could not be spread simply by contact. At the request of the EU, voluntary exports of oranges to Europe had been stopped from 19 September, and as of the 3 October the EU had closed the market to South African citrus fruits.

Mr Symington said that one should not only blame politics, but should also look at what was happening back home, as he felt  that South Africa might be overlooking certain steps in the value chain process.

Mr Siseko Maqoma, a farmer from the Eastern Cape who had benefited from the PPECB development programme, answered one of Ms Nyalungu’s questions, concerning how the 20 farms in the Eastern Cape had been selected.  He said it had been due to his collective of proactive farmers, who had approached the PPECB requesting training in order to improve their levels of competency to international levels. He said that it was possible to manage CBS by the implementing certain agriculture practices, such as pruning and orchard sanitation, which could be done on the farms.

The Chairperson commented that he was happy with the answers given and commended PPECB on their unqualified audit report.

A farmer from the Winterveld who had benefited from the PPECB development programme, raised a concern about transformation. He said that farmers in his area had been applying for water rights for the past five years, but these had not been granted to them and that they could not proceed with tackling the problem of CBS without them. He was very upset about this, and asked the Committee to raise this issue.

The Chairperson responded that issues relating to water rights issues needed to be referred to a committee that dealt with water issues, such as the Department of Environmental and Water Affairs.
Ms Tini Engelbrecht, PPECB board member, commented on the CBS issue, saying that currently 50% of South African citrus was being exported to the EU and if the European market was going to be closed to South Africa in the next financial year, these exports would have to be shifted to other markets. She believed that in the same way that political intervention had previously been carried out by President Zuma in Europe, it might also be necessary to open up markets in other countries, such as China.

Briefing by National Agricultural Marketing Council (NAMC) on its 2012/13 Annual Report
Ms Ntombi Msimang, Chairperson of the NAMC, presented the annual report and was assisted by Ms Sarah Muvhulawa, the Chief Financial Officer, and Simphiwe Ngqangweni, the Senior Manager.

Many of the issues raised by NAMC centred on the need to increase exports, and these had largely been covered by the PPECB.  NAMC said that the South African Reserve Bank Governor had also placed some pressure on it to increase exports.  The Marketing of Agricultural Products (MAP) Act had been reviewed towards the end of the previous year. It had been published for consultation, but had been withdrawn as it was being engaged with by Council. Attempts to improve productivity had been made by writing briefings to the Minister of DAFF, making submission to Business Unity South Africa (BUSA) and conducting studies on contract farming and doing a food price review. The NAMC had continued to work with the Department of Trade and Industry (DTI) and was focusing on its relationships with BRICS and the African markets.

Although the NAMC had received an unqualified audit report, there were issues that had been pointed out by the Auditor General. The first of these issues dealt with procurement.   After DAFF had been unable to find a suitable service provider, the NAMC had been asked to step in, who had then approached Deloitte and Price Waterhouse Coopers, and had asked these two firms to bid. This had been done without advertising this tender for public consideration.

The second issue concerned a bank overdraft.  Between the time that the budget of the previous year had been announced and the time that the first month’s salaries were to be paid, there would have been a gap. NAMC had applied to the National Treasury to allow an overdraft so that salaries could be paid, and in the absence of a response, had gone ahead with it anyway.

R36m had been received as a grant from DAFF and R724 000 had been generated as interest received through the investment of surplus funds.  R4.6m had been received as sponsorship funding from DAFF’s running of workshops, programmes and studies.  R38.5m had been spent. Creditors’ payments had been made within 26 days, against a target of 30 days. Debtors’ collections had been made within 16.8 days, against a target of 30 days.  R2.9m had been classified as irregular expenditure.

Discussion
Ms Nyalungu pointed out that an employee had received two bursaries -- for a B.Tech degree and an M.Tech degree -- in the same 2012/2013 financial year.  Why this was so, and was this individual related to the accounting officer?   The Auditor General’s report had indicated that a deviation had been approved by the accounting authority in contravention of the Treasury Regulation 16A6 (NAMC Annual Report, pg. 86). She wanted to know what had been done about this deviation.

Ms Muvhulawa said that the issue of two bursaries being awarded to one individual was due to the fact that the individual not been able to pay his/her tuition fees for the B.Tech degree in the previous year, before he/she became part of, and had been employed by, the NAMC and had also to undertake his/her M.Tech degree during the year under review. An arrangement had thus been made with the NAMC.

Ms Nyalungu asked whether this had occurred in one year.

Ms Muvhulawa reiterated that it had been in one financial year, but over two academic years.

Ms Msimang supported this statement by pointing out that a new policy had been put in place at the NAMC, requiring bursary beneficiaries to work for the organisation for at least three years, so that the Council benefited from that investment. She said the deviation was related to the money used for the procurement of Deloitte and Price Waterhouse Coopers without advertising it for public tender. Ms Msimang apologised for these deviations.

The Chairperson was not happy about these issues.   They could have been avoided.   Procedures had to be followed, as inconsistencies reflected badly on the Department, not on the public entity.

Ms Nyalungu again questioned the bank overdraft that had not been authorised by Minister of Finance. She asked if NAMC regularly did this.

The Chairperson asked about the relationship between the Agricultural Research Council (ARC) and the NAMC. He wanted to know whether the NAMC could comment on what it would be doing with the ARC in respect of cattle farming in the next financial year.

Ms Msimang says that they had incurred this overdraft because, even though they had applied to the National Treasury for condonation, they had not been given an answer – the Auditor General had called it ‘not approved by the Minister’. She repeated most of what she had already said on this topic.
The NAMC had collaborated in the past with the ARC on a red meat project, but this project had not been very successful.  Because the NAMC did collaborate with the ARC on other projects, such as sweet potatoes, she felt optimistic that the red meat project would be picked again up very soon.

Mr Mannya supported this statement, saying that the ARC was very proactive in the development of cattle farming from the beginning of the value chain, and that the NAMC’s role in this would mainly be at the end of the process. He did, however, emphasise the need for collaboration between the entities.

In the absence of further questions, the meeting was adjourned.

 

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