Transformation in the agricultural sector: input by Department of Agriculture, Forestry and Fisheries & AgriBEE Charter Council

Meeting report

Opening Statement
The Chairperson said that the Deputy Minister of Finance had phoned him to request that the Agri-BEE Fund be dealt with in the following meeting, on Tuesday, as the fund was still being discussed by the Land Bank, the Minister of Finance and National Treasury.
Briefing by the Department of Agriculture, Forestry and Fisheries
Ms Noncedo Vutula, Acting Deputy Director-General: Economic Development, Trade and Marketing in the Department of Agriculture, Forestry and Fisheries (DAFF), introduced the DAFF team and AgriBEE Charter Council (hereinafter referred to as the Council), who were also in attendance.

Ms Kwena Komape, Chief Director, DAFF, presented the status of transformation in the agricultural sector to the Committee.

The AgriBEE Sector Code (hereinafter referred to as the Code) in terms of Section 9 (1) of the Broad-Based Black Economic Empowerment (BBBEE) Act 53 of 2003, was gazetted and became effective from 28 December 2012. It had the same legal status as the Generic Codes of Good Practice and stakeholders had the right to choose whether to comply with the Code or not. They could not be prosecuted for not doing so. It was now fully implementable and enforceable using government measures: the Preferential Procurement Policy Framework Act, the Department of Water Affairs’ water-use allocations, the Agricultural trade permit for imports and exports of agricultural products, and Fresh Produce Market Agents’ certification.

The DAFF had developed the AgriBEE IT Portal, a web-based information system to be used by sector stakeholders for reporting their Black Economic Empowerment (BEE) status. Training for this portal was rolled out to all nine Provincial Departments of Agriculture officials to assist farmers and agribusinesses to upload their valid BEE certificates and scorecard information. The portal was tested in consultation with agricultural sector stakeholders and was now functional, URL: http://webapps.daff.gov.za/agribee/.

There was currently no actual information on the status of transformation due to the Department of Trade and Industry (DTI) BEE IT Portal no longer being functional. The DAFF had commissioned a study through the National Agricultural Marketing Council (NAMC) to provide estimated information on the status of transformation in the sector; perceptions and viewpoints from agricultural enterprises regarding BEE and transformation in the sector; and the obstacles and challenges to the implementation of AgriBEE. The study sample population can be found on slide 14 of the attached document. In the study, 47% of the respondents stated: “I am not considering a BEE strategy for my business”; 30% stated: “I first want to test waters and see where things are heading before committing myself to a BEE strategy”; 10% stated: “I am considering the implementation of a BEE strategy as soon as possible”; and 13% stated: “I have already developed a detailed BEE strategy and have to implement it in my core business”. The main obstacle to implementation of the Code was family business – ownership structure. Other obstacles were availability of suitable black farmers to partner in business, and cost of compliance. Only a small portion of respondents believed that all the obstacles could be overcome. The estimated status of transformation suggested that the agricultural sector was on level 4.

The DAFF’s contribution to transformation was: implementation of the Comprehensive Agricultural Support Programme (CASP) to improve enterprise development in the sector, implementation of the AgriBEE Fund to improve equity ownership on Black people in the entire agricultural value chain, and mentorship for 50 smallholder women tomato farmers in Limpopo, in collaboration with DAFF, Limpopo Department of Agriculture and Small Enterprise Development Agency (SEDA)’s Timbali Technology Incubator.

Discussion
Mr S Abram (ANC) commented that the respondents’ arguments were important. The agricultural sector was volatile, cost of compliance was an obstacle and 47% (775 respondents) were not considering a BEE strategy for their business. Unless like-minded people with the same level of commitment came together, figures in boardrooms would not be realised. People could not be forced into a project. Currently, there were parts of the country going through a drought. The study also showed that only 215 respondents believed that all obstacles could be overcome. He asked what the real obstacles and challenges were to implementation of AgriBEE for the Charter Council, what the DAFF would do to ensure obstacles would be overcome and if the DAFF’s plan was implementable.

Ms Komape replied that the Code was voluntary - enforced to empower business.

Dr John Purchase, Chief Executive Officer, Agricultural Business Chamber (AGBIZ) and convenor of the group specialising in the sector codes, said that the Council’s mandate was not to be an implementing agency but to align the transformation charter with legislation. Agriculture was the fourth sector in the country to publish sector codes for transformation. Measured against sector codes, the Council had been proactive - also proactive in creating a platform through the IT portal.

Mr Abram said that the DAFF made budgets available to provinces, which were to be spent in a judicious way. He questioned whether this was done. On implementing the CASP fund to support enterprise development for black people, some farmers with an achievable plan did not receive support. Here was an example of where millions of taxpayers’ money, and the hopes and aspirations of farmers had been shattered. Another example was where tractors bought by the Free State province had been parked in a disused showground. In March 2013, he had asked the DAFF what had happened to the equipment, but still awaited a response. The tractors had subsequently been parked somewhere else due to pressure from the media. Furthermore, on oversight visits, extension officers had never been visible; and Ncera farmers were given “permission to occupy” land but were never been given any assistance by the DAFF. Unless government worked in sync, the AgriBEE strategy could not win. The issues had been taken up at parliamentary level but the Committee had received no response. When farmers were not satisfied, there would be serious consequences to the nation.

Mr P van Dalen (DA) said in transformation of the fishing industry, management was now 60% black. The DAFF counted Coloured and Indian people as Black people. He asked what the Council's definition of Black was.

Mr Ndivhuho Phungo, AgriBEE Charter Council Member: AgriBEE Charter Council, added that Coloured and Indian people were referred to as Black on the Codes.

Mr van Dalen commented that the Committee should be given the report on the National Agricultural Marketing Council (NAMC) study of the agri-sector, which cost R4 million.
 
Ms A Steyn (DA) asked if the Council’s term expired every five years and if the gazetted agriculture BEE transformation charter of the 20 March 2008 included the five year Council term. If it expired in March 2013, the council’s validity and mandate to deal with a charter was in question. This had to be fixed as a matter of urgency.

Mr Madime Mokoena, Director: BBBEE Charter Compliance for DAFF, replied that the term of Council had expired and a new Council would be appointed by the Minister. It could consist of stakeholders, members of Agri Sector Education and Training Authorities, African Farmers Association of South Africa (AFASA) and market agents.

Mr van Dalen suggested that the Committee should recommend that the Council tenure time be extended until the Councils' work was complete.

Ms Steyn said that all the elements of empowerment through government undertakings could only happen if “a to z” happened under the DAFF. She asked what happened if the DAFF abdicated its responsibility. Agriculture needed an enabling environment from the DAFF. She asked to what extent, or to what percentage - could it be 10% from the DAFF and 90% from the sector? - The DAFF and the sector contributed to transformation and how Parliament could ensure that the DAFF enabled transformation in the agriculture sector.

The Chairperson said that after almost 20 years, Parliament heard of planning and more planning. He wished to insist that the Committee heard more on implementation. It was a contradiction that the plan was fully implementable and legal, yet volatile.

Dr Purchase said that there were many success stories on implementation, but a full day conference was required. An example was export of table grapes by Black farmers. The agribusiness sector was big business, and even those that did not fall within the Codes were monitored every 2 years for compliance with legislation. The scope of transformation was limited for the Exempt Micro Enterprise (EME) single owner family business. The challenge was to understand the challenges, then grow and improve the sector. Publication of the Codes was a major step forward and the agri-sector would rewrite codes to align with new legislation and DTI codes.

The Chairperson asked if the sector was self-regulated.

Dr Purchase replied that to a degree, it was self-regulated. When applying for water licences, farmers had to submit Qualifying Small Enterprise (QSE) certification. They were subject to licences and permits and in some cases they were not asked for a scorecard. Enforcement of BEE legislation was for procurement. Businesses that did not participate in BEE were marginalised in terms of business opportunities. The new Act would change things. Going forward, businesses that did not comply alienated themselves further from the sector, as no one would do business with them.

Ms Steyn said there were so many uncertainties, such as enforcement of the Code and the link to DTI new codes, what the Minister "must” or “may do", thresholds, cost of compliance, and water rights. She asked if DTI engaged seriously with the sector and if sector input was taken seriously. There were also processes within the legal framework, re-opening of land claims, BEE and other, which caused uncertainty. Week in and week out, the Committee discussed issues which had a major impact on the environment within which agricultural transformation had to function. The sector needed an enabling environment from the DAFF. Extension officers were also always an issue. They were supposed to ensure young black farmers could get background training and assistance through government. The Committee needed to engage the DAFF on this as responses on questions on these programmes had not been received.

Mr Edwin Mohlahlo, Acting Chairperson: AgriBEE Charter Council, said that each and every element of empowerment had objectives and targets for transformation, but the issue of thresholds was on Exempted Micro Enterprise (EME) and QSE, not elements of empowerment.

Dr Purchase said that currently, a QSE was an entity with a turnover of R5 million to R35 million per annum and an EME was an entity with a turnover of less than R5 million. This was written in the sector codes of good practice in line with the whole economy. In the meantime, the DTI had moved to change the turnover thresholds, to take effect from October 2014, for EME thresholds to increase from R5 million to R10 million to allow more small businesses to benefit from BEE exemption. QSEs would be adjusted from the current turnover of between R5 million and R35 million to turnover of between R10 million and R50 million. Where they were not in line with the rest of the economy, there had to be serious reasons why in terms of legislation, they were different to rest of economy.

Mr Mokoena added that the Minister might adjust the threshold if there was scientific evidence to suggest that the threshold must be adjusted.

Mr Mohlahlo commented that with the seven elements of BBBEE empowerment, as contained in the AgriBEE scorecard, the implementers had no excuse not to implement.

Ms Noncedo Vutula, Acting Deputy Director-General: Economic Development, Trade and Marketing in DAFF, added that the plan would be implemented in 3 - 6 months.

The Chairperson asked who the implementers were.

Mr Mohlahlo replied that the government and stakeholders were the implementers. The Council developed the codes and reviewed the thresholds and aligned them with the codes and monitored compliance with the codes.

The Chairperson asked the DAFF if it was implementing the plan.

Ms Komape replied that the DAFF was using the CASP and Micro Agricultural Financial Institute of South Africa (MAFISA) funds to assist previously disadvantaged farmers to link to value chain.

The Chairperson commented that the DAFF was getting nowhere. MAFISA funding was only R100 000.

Ms Komape said that it was making the maximum impact with the little funds available and also piggybacking on infrastructure development. It was not folding its arms.

Mr Johan Pienaar, Deputy Executive Director: Agri-SA added that Agri-SA was disillusioned with the slow progress on the code of good practice and BEE. Part of the reason was the Ministers’ insistence on having more farmers included, which meant benchmarks had to be adjusted. The PWC report showed that the process took four to five years to complete, yet benchmarks for the Agri-sector were still not sure. This made it difficult for Agri-SA to advise its constituencies on BEE compliance. Elements of uncertainty were around DTI’s ability to change the threshold turnover, which had drastic impacts, and goal posts shifted significantly. Land restitution also added an element of uncertainty, as it did not make sense to partner someone in business when there was uncertainty around property ownership or security of tenure.

Ms Steyn asked if it could be placed on the agenda that DAFF should present on the implementation of the Code outside of the Charter, what their role was in ensuring transformation, what processes were in place to create an enabling environment for transformation, CASP, MAFISA, insufficient funds, and how DAFF was linked to other departments to ensure adequate funds.

The Chairperson concluded that the Committee required guidance from the DTI or the AgriBEE Charter Council or from the DAFF on how to move faster on the implementation plan - short term, medium and long term. The threshold issue was moving in the right direction but needed to move faster. The discussion on regulation of the environment would continue the following week, as would the issue on those who applied and did not qualify for the AgriBEE Fund. Also, more clarity was required on the role DAFF played in transformation.

The meeting was adjourned.