The Portfolio Committee on Agriculture, Forestry and Fisheries held briefings by the National Agricultural Marketing Council (NAMC), the South African Poultry Association (SAPA) and the Association of Meat Importers and Exporters (AMIE) on the challenges facing the industry. It was disclosed that there were currently 26 Ministerial Trustees, and trusts managed over R2 billion worth of assets -- mainly financial assets. The NAMC was mandated to manage the communication and reporting processes between the Minister of the Department of Agriculture, Forestry and Fisheries (DAFF), the Ministerial Trustees and Industry Trusts. It was also responsible for reporting on an annual basis to the Minister on the operations and functioning of the trusts.
The challenges facing a number of trusts included the need for a more consultative nomination process, experience and industry exposure. The government’s intervention had been limited to Trusts Deeds. Other challenges were poor demographic representation and male domination, accountability was often limited to beneficiaries (private sector and members) and the trusts were often insufficient to cover administration in the areas of transformation, empowerment and land reform.
The Members wanted to know whether there was a strategy in place to address the challenges that had been identified in the trusts. Was there an effort to facilitate and fast-track a legislative process that would assist in the governing of the trusts? How could one ensure that the R2 billion worth of assets would be accounted for? What was the process that had been used to identify the beneficiaries for bursaries and internships? One Member was disappointed that the trustees had not been invited to participate in the meeting, as they could have spoken for themselves about the challenges that had been experienced in the trusts. Was there a particular formula on how the trusts were distributed? Was there enough capacity in place to ensure that the money from the trusts had been used efficiently and effectively? It was generally disappointing that some of the trusts, such as the Citrus Industry Trust, had not been complying with transformation.
The South African Poultry Association (SAPA) said that the broiler and egg industries were currently going through tough times, and the export potential for the two industries depended on fair trade conditions. SAPA was working closely with DAFF, the Department of Trade and Industry (dti) and the Department of Rural Development and Land Reform (DRDLR). South Africa was the ninth largest importer in the world, importing 20% of consumption -- mostly as surpluses and waste products -- and exporting 2% of production. South Africa represented less than 2% of global production, and was at risk from “dumping” and other low cost imports from the “big players” like the USA and Brazil. The broiler industry employed a total of 14 481 people and the egg industry added another 20 000 jobs, which were mainly permanent.
The effect of imports on job creation was massive, as every 10 000 tons of meat imports equated to the loss of approximately 1 000 local direct and indirect jobs. Other challenges included increasing maize and soya prices, and illegal imports. It was important for DAFF to ensure compliance at all ports of entry, especially in Durban. The issue of transformation of the industry was also important, and SAPA had established a Transformation Committee.
Most Members wanted further clarity on the issue of “anti-dumping” tariffs. How was the industry dealing with the issue of diseases and avian influenza in domesticated birds? One Member was opposed to the protectionism that had been practised by the industry, and suggested the opening up of the markets to allow exports and imports. Was there enough stock in the country for the industry to export? What could the Committee do to provide an enabling environment to drive further transformation? What was the issue of brining all about, as it had not been clearly explained in the presentation?
The AMIE conveyed views and recommendations to improve meat imports and exports, as the current industry was practising protectionism. Imports brought about affordable alternatives for consumers and supplemented local production by balancing supply and demand, and provided food security. The size of the South African market was about two billion kg per annum, and was worth about R35 billion. Imports accounted for less than 10% by volume and value, while there had been 144 million kg of bone imports in 2013, representing less than 7% of local consumption. The import sector was a catalyst for job creation, as it had created 5 000 local direct jobs and 10 000 indirect jobs.
The AMIE believed that the current tariff structure of the industry supported a flawed business model which needed to be changed in the pursuit of global competitiveness. However, the cost of feed had decreased by R7 billion per annum since 2012, and the rand depreciation had helped the industry to meet the challenge of import pricing.
Members expressed disappointment that the views of SAPA and AMIE were not aligned on the issue of exports and imports. They commented that the presentation made by AMIE had failed to touch on the issue of transformation. What was the impact of brining on the market, as AMIE seemed opposed to the process?
Chairperson’s opening remarks
The Chairperson welcomed everyone to the Committee meeting and indicated that the purpose of the meeting was to hear briefings by the by the National Agricultural Marketing Council (NAMC), South African Poultry Association (SAPA) and Association of Meat Importers and Exporters (AMIE) regarding the challenges that are facing the industry.
There had been apologies from Nkosi Z Mandela (ANC), Mr B Joseph (EFF), Ms T Tongwana (ANC), Mr T Ramokhoase (ANC) and Ms D Carter (COPE), Mr Senzeni Zokwana, Minister of Agriculture, Forestry and Fisheries and Prof Edith Vries, Director-General (DG) of the Department of Agriculture, Forestry and Fisheries (DAAF).
Briefing by National Agricultural Marketing Council (NAMC)
Mr Tshililo Ramabulana, Chief Executive Officer (CEO), NAMC, indicated that the Agricultural Industry Trusts had come into existence after the closure of former control boards, and the process had started in 1996. The trusts operated under the Marketing of Agricultural Products (MAP) Act (No. 47 of 1996) and had inherited the assets from the former control boards. The Minister had approved the trusts and the deeds of each trust. It was now regarded as an option to retain certain functions related to the industry -- to utilise funds for the purpose they had been collected for. There were currently 26 Ministerial trustees, excluding the South African Wine Industry Trust (SAWIT), and trusts managed in total of over R2 billion worth of assets, mainly financial assets. The NAMC was mandated to manage the communication and reporting processes between the Minister of the DAFF, the Ministerial trustees and industry trusts. It was also responsible to report on annual basis to the Minister of the DAFF through the "Status Report on Agricultural Trusts" on the operations and functioning of the trusts.
Mr Ramabulana said that the appointment of the Ministerial trustees stipulated that a trustee should be a South African citizen, and at least two appointed trustees should preferably be of each gender. The appointees should understand and be able to analyse and interpret financial statements and investments and be knowledgeable and understand the transformation policies of government of the country. The appointees should also possess a desire to advocate for the emerging farmers and the poor, and be sensitive to issues of diversity. The trusts invest funds to various asset managers and disburse the returns to beneficiaries to support industry related functions and activities. They also support transformation initiatives like student bursaries, tree planting projects, communal shearing sheds and corporate social investments. The NAMC had observer status at trusts’ board meetings and other sub-committees to ensure that there was accountability.
The NAMC was proud about level of transformation in the industry, as there were different trusts that were aimed at historically disadvantaged individuals (HDIs). These included the National Lucerne Trust (NLT) where the Taung project was supporting 20 farmers with 400 hectares. The Potato Industry Development Trust (PlDT) was supporting 16 enterprise development farmers, 55 small growers (food security gardens) and farm base training for farm workers, and the Grain Farmer Development Association (GFADA) supported 53 farmers with 4982 hectares in the Eastern Cape (EC), North West (NW) and Mpumalanga (MP). Grain SA was primarily focused on supporting the training of 3 600 emerging black farmers. 120 emerging farmers are on an advanced farmer project within the development programme. The Wool Trust had allocated R1.85 million for the supply of shearing equipment to 76 communal sheds in the EC and 33 856 quality rams had been distributed. The total amount that had been spent on transformation projects amounted to R505 030, and R175 500 had been spent on bursaries and internships.
Mr Ramabulana said that there were various challenges facing trusts that still needed to be addressed, especially in ministerial representation, administration and accountability. The other key additional challenges were on trusts’ funding and project funding. The main challenges on ministerial representation were mostly related to appointment processes, trusteeship experience and appropriate industry exposure, and the need for a more consultative nomination process. The challenges on administration were linked to autonomy from government, domination by pre-deregulation personalities, and also poor demographic representation and male domination. Under accountability, the main issue was its limitation to beneficiaries (the private sector and members); government intervention was often limited to Trusts Deeds; and ambiguity on how much jurisdiction the government has. The NAMC had also identified challenges on trust funding, especially on those sourced from control boards (transferred to trusts), and the trusts’ funds were often insufficient to cover administration (transformation, empowerment and land reform).
Mr Ramabulana concluding by stating that the way forward should be about supporting the funding of transformation activities, in line with government policies and strategies and enterprise development throughout the value chain. There should be a concerted effort to support funding of student bursaries, especially targeting the HDIs. The Ministerial trustees needed to meet the Minister of DAFF in order to work together to address some of the challenges and the way forward. The amendment of trust deeds was crucially important, especially where this was necessary to accommodate the current environment. The NAMC should continue to advise trusts for the development of investment strategies to grow their capital assets, and provide capacity building programmes for Ministerial trustees.
Mr P Mabe (ANC) asked whether there was a strategy in place to address the challenges that had been identified in the trusts. Was there an effort to facilitate and fast-track a legislative process that would assist in the governing of the trusts? It had been indicated in the presentation that trusts managed a total of over R2 billion worth of assets, mainly financial assets. What was the way to ensure that the R2 billion worth of assets would be accounted for? It had been mentioned that the trusts were effectively managed through the Companies and Intellectual Property Commission (CIPC), the Companies Act and the Trusts Deeds. This was a different terrain, and he could not see how the NAMC, as a public entity could get its “hands tied up” in the running of a trust which was managed by a Trust Deed.
Mr Mabe asked whether there was a way in which the Public Finance Management Act (PFMA) could ensure that the trusts were organised in a way that there was greater accountability. What was the kind of mechanisms that the NAMC was using to ensure that all the trusts across the board were implementing a sound transformative agenda that was supported by the current government? It was indicated that in order for people to benefit from the trusts, they needed to have an understanding of finance, but the understanding of finance and going to school to study finance were two different things. The person who had been running a spaza shop had an understanding of finance, but not to the same extent as a person who was a chartered accountant. Was consideration given to the difference between academic and basic understanding of finance?
Mr C Maxegwana (ANC) wanted to know about the process of identifying beneficiaries for bursaries and internships. He had hoped that NAMC would have presented the legal opinion on the government’s jurisdiction on trusts’ assets to the Committee, so it could be noted. What was the way forward to address all the challenges that had been highlighted in the presentation?
Ms A Steyn (DA) said that she was disappointed that the trustees had not been invited to be part of the meeting, as they could speak for themselves about the challenges that had been experienced in the trusts. Was there any particular reason that the trustees had not been invited?
The Chairperson responded that the trustees had not been invited because the Committee had decided to firstly hear from NAMC about the progress and challenges in the trusts, and would then invite the trustees to speak for themselves.
Mr Maxegwana felt that the issue that had been raised by Ms Steyn was inappropriate and irrelevant at the moment, as it was supposed to have been raised internally and not in front of the delegates. It was important for the Committee to work together as a Committee, and not as individuals.
The Chairperson asked whether it was possible for NAMC to provide a breakdown of the money that had been going into research projects, as this was something that the government had not been doing. How much money was going to Research and Development (R&D)? It was important for the Committee to know whether the government was giving away funds to any trusts. The presentation was particularly silent about how the funding was allocated to the trusts. The issue of transformation was critically important, as had been highlighted in the National Development Plan (NDP) and by the Members. However, it was disappointing that there was very little that had been done in terms of transformation in the majority of the trusts. The NAMC had presented a skewed presentation, as there were lot of issues that had been left out.
Mr L Ntshayisa (AIC) wanted to know about the broad requirements of the Ministerial trustees, as this had not been mentioned in the presentation. He asked whether it was possible to get the contacts of people that were located in the Eastern Cape areas, including Flagstaff, Lusikisiki and Mqanduli, who had been given financial assistances, in order to perform oversight on the progress that had been made.
Mr M Filtane (UDM) asked why the NAMC was reporting on industry trusts on an annual basis instead of quarterly, as this was important to check progress. How were the benefits of the trusts shared? How did people benefit from the trusts? Was there a particular formula according to which the trusts were distributed? Was there enough capacity in place to ensure that the money from the trusts was used efficiently and effectively? It was generally disappointing that some of the trusts – for example, the Citrus Industry Trust -- had not been complying with transformation guidelines. What were the criteria that had been used to prove that transformation had taken place? How was it possible to link up to every trust that was under the NAMC? How did NAMC ensure that the trusts adhered to the PFMA in terms of capacity and compliance? It was important for NAMC to fast-track the legal opinion process so as to know the government jurisdiction on the trust’s agenda.
Mr Maxegwana expressed disappointment that the presentation was particularly silent on the issue of gender equality, and hoped that this matter would be rectified.
The Chairperson asked whether the guidelines on transformation had been presented and adopted by the trusts, as this was important legislation supported by Parliament. There was no doubt that there was enough money in the country to foster the transformative agenda and improve the lives of the majority of South Africans. What was the direction that had been taken by the trusts to develop the people of South Africa?
Mr Bheki Cele, Deputy Minister of Agriculture, Forestry and Fisheries, said that there were many stories that came from individual boards talking about the functioning of the trusts, and it was the responsibility of the Department and the Committee to do oversight to ensure that there was compliance and accountability. He agreed that there was indeed a need to fast-track a legislative process that would assist in the governing of the trusts, especially to ensure that there was a way to account for the R2 billion worth of assets, mainly financial assets. There was often an issue of lack of facilities for female-owned companies, and this needed to be rectified to ensure that there was gender equality.
Mr Ramabulana said that in the past there had been a lack of information regarding what the trustees had been providing to the trusts, since there was no status report on the agricultural trusts. The better part of the presentation had touched on the issue of transformation, as this was important legislation that had been supported by the NDP and Parliament. Most of the Trust Deeds had been developed prior 1996, and this meant they had failed to include the issues related to transformation. He wanted to correct the misconception that the introduction of legislation would ensure that the money from the trusts would be accounted for, as some of the trusts wanted to spend the money, but if they spent it on issues that had not been reflected in the Trust Deeds, then they would be required to pay tax.
Mr Ramabulana reiterated that the presentation was precisely meant to give more information about the issue of transformation within the trusts. The NAMC had provided information to DAFF regarding the legal opinion and there was already a legal team that was drafting a new MAP Act. He hoped that this Act would be tabled to the Minister and the Deputy Minister of DAFF, and then reached the Committee for debates and deliberations. The information that was in the presentation was coming directly from the status report on the agricultural trusts, and each and every trust administrator had been mandated to write a section on their own trust and then send it to NAMC, and the information had been compiled without any verification. The NAMC would develop a document to be sent to the trusts to confirm whether the information that had been compiled was a true reflection or not.
The issue of a legislative review had been raised before. The process of developing a new Marketing Act had been going on for a while, and this issue would be addressed by the Ministry and DAFF. At the moment, the government was not providing any assistance in terms of funding to the trusts, as the funding that had been coming from government was merged with funding available from agricultural trusts for the projects. It was important to highlight that the agreement, when the trust was set up, was that they should invest the capital and live off the interest, therefore the capital that had been provided in the first place was the part that had been growing. Some of the trusts had been growing very well because their investment strategy had been good -- with the right funding managers and assets, some had managed to earn better returns compared to others. Some of the trusts were just generally small and this meant it was always difficult to grow their assets and do something meaningful. The assets of the CIT were very small, but the amount of money that had been collected through levies from the Citrus Growers’ Association (CGA) was much higher, meaning the research component that had gone into Citrus Black Spot (CBS) had been done using levy money, rather than the trust’s money.
Mr Ramabulana said guidelines had been developed regarding transformation and had been approved by the Minister and in line with the Agri-BEE, and each and every industry that had been collecting levies needed to comply with those guidelines. The NAMC had been working closely with the trusts to guide and assist them to adopt those transformation guidelines, but it was always difficult to enforce them.
Mr Zamikhaya Xalisa, Senior Manager: Agri-Trust Division, NAMC, indicated that when he had come on to the board, there had been huge resistance to change and transformation and the meetings were often done in Afrikaans instead of English. There was a need for legislative power that would enforce transformation in the industry. In the past, bursaries were often given to students that were enrolled in former “white universities,” like the University of Stellenbosch (USB) and University of Free State (UFS). Things had been changing, as most of beneficiaries for bursaries and internships were now from the former “black universities,” like the University of Fort Hare (UFH). There were members who had been participating in the Bursary Working Committee so as to raise awareness about the bursaries that were available at particular universities. The criterion that had been used to choose the beneficiaries of bursaries was normally based on overall student performance at school or university.
Mr Xalisa said that the trusts were not giving any financial assistance to individuals, but was giving the money to the Mohair Empowerment Trust as a beneficiary, and then the Trust would be the one to identify the projects and the needs and support it in terms of buying from the best breeders in order to support well trained smallholder farmers. This was one of the strategies to develop smallholder farmers into becoming commercial farmers. The NAMC had developed some guidelines on the appointment of the Ministerial trustees so as to make the process fair possible to reach where the farmers are, and this process also involved other community members. The NAMC chose the Ministerial trustees based on academic performance or standards, and understanding of both the industry and financial management. These guidelines were crucially important to ensure that the responsibility for allocating funds had been given to the people who understood the government policies and could handle the finances properly and efficiently.
Mr Ramabulana said that the NAMC had established two trusts. These were not industry trusts and had been established because it was difficult to change the Trust Deeds of the existing industry trusts, and therefore it was a big challenge for those trusts to foster transformation. In essence, the two trusts were basically not functioning but had been created as a vehicle to facilitate transformation. He promised that the Members would be provided with a breakdown of the trusts’ funds in a written response.
Mr Xalisa said that each of the Trust Deeds provided a composition of each trust, and therefore the trustees that had been appointed by each trust were determined by the Trust Deeds. The NAMC had been doing a lot of work with the municipalities to raise awareness about the funds that had been available from the trusts, and some of the big beneficiaries today had been reached through to the presentations and awareness programmes that had been done by NAMC.
Briefing by South African Poultry Association (SAPA)
Mr Kevin Lovell, Chief Executive Officer (CEO), SAPA, indicated that the poultry industry was the largest agricultural sector, and represented the majority of broiler and egg producers. There was a long term potential growth for both broiler meat and eggs, as they presented a best value proposition for consumers. Based on international data, the industry could grow substantially and address food security as well as job creation. The potential growth was dependent on economic growth. The broiler and egg industries were currently going through tough times, and there was export potential for the two industries if there were fair trade conditions. SAPA was working closely with DAFF, the Department of Trade and Industry (dti) and the Department of Rural Development and Land Reform (DRDLR), and provincial government relationships had improved.
The poultry industry was now the world’s largest and most exported meat type. Only 13% of production was exported and 50% of global trade value was in dark meat surpluses. The total exports were worth about $18 billion a year and seven countries supplied the bulk of the exports. South Africa was the ninth biggest importer in the world, importing 20% of consumption mostly as surpluses and waste products, and was exporting 2% of production. South Africa represented less than 2% of global production, and was at risk from “dumping” and other low cost imports from the “big players” like the USA and Brazil. The country was extremely vulnerable, because in South Africa people eat all parts of the chicken, unlike the developed world. There was a need for an enabling environment to drive further transformation. The Food and Agriculture Organisation (FAO) estimated the global food production needed to increase by more than 40% by 2030 and 70% by 2050 in order to feed the growing population.
Mr Lovell stated that the current Anti-dumping Duties (AD) application against three European (EU) countries had been finalised, but was still problematic. The alternate measures to deal with the EU were required. The effect of imports on job creation was massive as every 10 000 tons of meat imports equated to the loss of approximately 1 000 local direct and indirect jobs. The soya growth strategy, and the general grain market, needed a strong local poultry industry. It was important to highlight to the Members that the import prices were a secondary weighting to job creation -- local producers are job creators, and importers are job destroyers.
Opportunities for frozen broiler and shell eggs exports were hampered by Sanitary and Phytosanitary (SPS) measures and Non-Tariff Barriers (NTBs) which applied to South Africa. The dti was driving market access issues through the Department of International Relations and Cooperation (DIRCO) and DAFF and was targeting countries like Jordan, United Arab Emirates (UAE), Qatar and Angola. The SPS risk analysis was identified by the World Organisation for Animal Health/Performance of Veterinary Services (OIE/PVS) report as a local weakness and DAFF, the University of Pretoria (UP) and the Poultry Disease Management Agency (PDMA) were working together to resolve the SPS regulatory requirements. Extra veterinary export assistance would be appreciated.
The African Growth and Opportunity Act (AGOA) had been of no benefit to the industry in South Africa, but the renewal was supported by the local poultry industry for national interest reasons. The AGOA was a unilateral agreement, so the USA could basically do what they wanted, but had no reason to harm the South African industry and economy. The local producers had met a US delegation in Atlanta and Washington last week to try and find an acceptable concession. The DAFF was actively involved in this exercise and the Minister, Mr Zokwana, was aware of the issue. The Department of Trade and Industry (dti) favoured direct industry-to-industry negotiations between the SAPA and the United States of America Poultry and Egg Export Council (USAPEEC).
The SAPA believed that there was a need for regulation in the brining process, and the concerns that had been raised were related to technical issues, as the current draft was flawed. There were also socio-economic impacts with brining, including the fact that the consumers would be paying more, there was a negative impact on nutrition and food security, and a potential collapse of the industry causing widespread unemployment. Brining improved the eating experience, as it improved the texture and succulence and also made the product cheaper and was the most effective marinating technique. All the products sold locally had to be safe according to the Foodstuffs, Cosmetics and Disinfectants (FCD) Act, and this was whether the product was brined or not. There was no evidence that current brine-based marinade formulation posed any health risks.
A transformation committee had been established and there had been engagement with the dti’s Black Economic Empowerment (BEE) Unit at the instruction of Minister. The industry was committed to improving market access, and several companies already had good stories to tell. Transformation could be accelerated if imports/ “dumping” and brining issues were resolved, and there was a need to work with DAFF and sector departments to set targets. SAPA was also working with DAFF to introduce new preferred breeds and was requesting assistance to get poultry declared a designated product for government procurement.
It was recommended that the Committee should help SAPA to maintain a national organisation for the promotion, development and guidance of the poultry industry by helping to enforce SPS measures. The Committee could also help to ban all illegal imports and exports from the EU and elsewhere -- countries like Australia and New Zealand had banned all imports for years. The USA currently banned SA exports of chicken for spurious SPS reasons and was encouraging DAFF to ensure compliance at all ports of entry, especially Durban.
Briefing by Association of Meat Importers and Exporters (AMIE)
Mr Georg Southey, Member of AMIE, indicated that the main objectives of AMIE were to promote and protect the interests of the members, and to confer and collaborate with all bodies controlling and administering the meat industry in the country. More importantly, AMIE conveyed the views and recommendations to all concerned in order to improve meat imports and exports, Imports always brought about affordable alternatives for the consumers and supplemented local production by providing a balance between supply and demand, and enhancing food security. The size of the South African market was about two 2 billion kg per annum, and was worth about R35 billion. Imports accounted for less than 10% by volume and value, while there had been 144 million kg of bone imports in 2013, representing less than 7% of local consumption.
Mr Southey said that the import sector was also a catalyst for job creation, as it had created 5 000 local direct jobs and 10 000 indirect jobs. The domestic products left highly mechanised factories in retail-ready packs. The imported product arrived in bulk and had to be converted into retail-ready form. The domestic advantages included avoidance of export costs, freight clearing costs and duty. imports also had to go through the SPS requirements. All imported containers were subject to t inspection and certification, with laboratory testing for pathogens and bacteria. The import requirements were among the most stringent in the world and the importers were willingly complying with all these requirements.
The issue of food security in South Africa was a concern, as low income households spent 48% of their income on basic foodstuffs, of which chicken (animal protein) was the largest portion. The chicken inflation – above 8.5% -- was higher than the South African Reserve Bank’s (SARB) 6% target. The AMIE believed that consumers should not be forced to pay more than necessary for basic foodstuffs.
Mr Southey said that brining was performed mainly by large producers and the barrier to entry for new entrants was because of a lack of access to technology and capital. There were concerns around increased sodium levels (health concern), as this was not cheap chicken but expensive water. AMIE supported original proposed 4% brining limit. The current tariff structure of the industry supported a flawed business model and the model needed to change to be able to pursue global competitiveness. Since 2012 the cost of feed had decreased to R7 billion per annum, and natural import protection had resulted from the depreciation of the Rand by between 27% and 33%. There were many challenges to the industry, including avian influenza and Newcastle disease. SAPA had returned to great profitability and there were more stable labour relations.
Mr Southey concluded by mentioning the opportunities that could be exploited, including exporting to Southern African Development Community (SADC) countries, including Mozambique, which was imported expensive chicken from Brazil. There was a need for the formulation of a Chicken Industry Development Plan to guide all the role players in the industry.
Mr Maxegwana welcomed the presentation as a lot of issues had been covered. He wanted to know where people could find the brine chicken in the outlets, as customers often chose cheaper products. The SAPA had given information about the jobs that had been created for people, whether directly or indirectly, and AMEI had also indicated that 15 000 jobs had been created through imports. However, it was important to differentiate between permanent and temporary jobs, and the quality of jobs in terms of conditions and treatment, as workers worked under different conditions. He asked both the AMIE and SAPA to unpack the issue related to “anti-dumping” tariffs, and said Mozambique seemed to be benefiting from the chicken imports from Brazil.
Ms Steyn expressed disappointment that SAPA and AMIE were not aligned together, especially on the issue of exports and imports. The relationship between other industries also needed to be addressed so that there could be coordination on how the industry functioned. How far was the industry in dealing with the issue of diseases and avian influenza in domesticated birds? How far was the country on the imports of chicken? She opposed the idea that the county could put protectionism against imports and exports, and suggested that there was a need to open up the markets to allow competition, especially in around pricing. She wanted to know from SAPA why it was claimed that the country would be paying more for imported chicken.
Ms Steyn wanted to know whether there was any impact of brining on the market, as the AMIE seemed opposed to the process of brining. What had been done by the DAFF to prevent the illegal importation of chicken into the country? Why was the country battling to prevent the issue of illegal imports, as it was affecting the local industry? Which countries were these illegal imports coming from? South African had imposed “anti-dumping” tariffs of above 100% since 2000 on certain products derived from chicken carcasses. Why was the issue “anti-dumping” still in place?
Mr Filtane asked SAPA why the industry was currently going through a “tough time,” as highlighted in the presentation. What was the rand value of trade in the industry? It had been pointed out that South Africa was the ninth biggest importer in the world, importing 20% of the consumption, mostly as surpluses and waste products. How good was that in terms of the wellness of the people and growth development? What was the rand value of the 2% of the exported products? Was there enough stock in the country to be able to be exported? What could the Committee do in terms of providing an enabling environment to drive further transformation? He asked SAPA to provide more information regarding the need for desiring a partnership to capacitate extension officers.
Mr Filtane stated that it was disappointing that the AMIE presentation failed to touch on the issue of transformation. This government often lacked the appetite to invest in entities that did not factor in the issue of transformation. Education was one of the important parts of sustainable transformation. How could consumers differentiate between local and imported products?
The Chairperson mentioned that agriculture was the second priority of the government in revitalising the economy and creating jobs. It was good to hear that financial assistance was not given to individuals, but rather to trusts in order to avoid a situation where money was used recklessly. She also wanted more information on the brining process. Who was mainly benefiting from the industry, as this was not quite clear in the presentation? She had expected that the SAPA and AMIE would give detailed information regarding transformation. What had been done to tackle youth unemployment in the country? What was the position of the entities regarding the issue of a National Minimum Wage (NMW?). The Committee needed to know where the sector could be assisted so as to be able to grow the economy of the country. Who had been benefiting from the brining process?
Mr Sol Motsepe, Senior Executive: Broiler Liaison, SAPA, welcomed all the questions that had been asked by the Members and mentioned that the issue of brining was very complicated -- he had taken almost a year in order to fully understand the process. The industry needed to create awareness in the communities and the general public so that they had an understanding of what brining was. There was an agreement that there would be a meeting at the end of 2014 on how to bring about awareness on the issue, but for some reasons this had not materialised. The Committee was welcome to visit the facilities where the brining process was performed in order to observe the whole process personally.
Mr Lovell responded that both DAFF and the Department of Home Affairs (DOH) had regulations on what could be said on the packaging of products, and all products had labelling stating what was in them. There was a label in front of the chicken product on whether it was brined or not, and how much had been brined. All the jobs in the industry were on a permanent basis, with the exception of one small category of job -- the “catching team” -- and it was only the bigger companies that had a permanent “catching team”. The table which dealt with broiler industry basically talked about the categories of employment, using the Paterson grading system, to see how many people were Paterson A and B (junior staff) or Paterson C and above (supervisory and senior staff). The entity did not provide a similar table for the egg industry, because it had a lot of inaccurate information. The local industry had been employing more people from the breeding process, slaughtering and processing and the distribution of the final product. In essence, the local industry had been employing more people per ton of meat than what the importers had been saying.
Mr Lovell said that the country was working as a collective with the SADC countries in order to develop the industries within the region, to become better producers. There were big South African companies that had invested in the SADC region, and the exports were mainly in the form of money and expertise, rather than product. The new mills that had been provided by the dti, with subsidies, were meant to assist the companies which were grilling soya. There had been existing mechanisms to curtail the impact of avian influenza in the poultry industry in South African, and this had been put on the formal agenda for the “USA and South Africa discussion” last week. The South African Veterinary Authority (SAVA) had issued 38 veterinary control certificates in the last couple of years. and the USA had responded with only four certificates. In other words, South Africa had done a lot more work in this case than the USA. South Africa had not had any cases of avian influenza or Newcastle disease, but this did not mean it could not affect the industry, and Newcastle disease was often difficult to control.
Mr Lovell said that the question on whether consumers paid more for imported products should be looked at from the viewpoint that there was no such thing as “cheap food” if there were no jobs available, and SAPA could create more jobs with local production than by importing chickens with better prices. Most of the countries allowed the brining process. It was an American technique and South Africa had imported European equipment to do it. It was an international practice, but was not universal. For example, Brazil brined their turkey but did not brine the chickens that were to be exported to South Africa. The levels of brining varied from country to country, and in most of the developed countries -- including Brazil -- fresh chicken was the primary food, not frozen chicken.
Mr Lovell said that there was lack of information on where the illegally imported products were coming from, and these concerns had been raised with DAFF. The “anti-dumping” tariff was still in place because the USA was dumping in South Africa. The “anti-dumping” duty had been brought into effect in 2000 on an application that had been made in 1999. It just happened that within the same year, the African Growth and Opportunity Act (AGOA) and the Trade Development and Cooperation Agreement (TDCA) between the European and South Africa had been signed into force. The “anti-dumping” duty had to be renewed every five years, and the USA had not participated properly in both of the renewal cycles, as it had failed to follow the rules. The industry had been going through “tough times” because the bulk of what had been produced had to be planned 22 months prior to consumption, and the imports had been fluctuating a lot on a monthly basis. The planning cycle of an importer was a lot shorter than that the cycle of a local producer and this had been creating a mismatch in the local industry. The SAPA compared the food and feed prices in the USA, Brazil and South Africa, and the local industry paid more for maize than the USA and very close to what Brazil had been paying, and paid more for soya than both of those two countries.
In 2014, the rand value of imports had been just under R4 billion, which was a huge turnover and way bigger than any poultry industry. He highlighted that both the local and the imported products occasionally had either chemical or microbiological issues outside of limits, but there was certainty that the imported products were always older as there was a particular microbiological measure which could give one an idea of the age of the product. The local products were always fresher, but this did not insinuate that the imported products were of lower quality on average than the local products. He did not have information regarding the value of exports in rand but would try to get the exact figure and then send it to the Committee. The industry needed the businesses to be sustainably profitable so as to be able to invest in transformation, and sustainably profitable meant the industry would need to grow by a margin of 5% to7%. This was unlikely to happen, when one considered the unexpected maize drought throughout the country.
Mr Lovell said that what made food security more stable in South Africa was because of the breeding process -- within a few months, the country could add approximately 15% to its production capacity. It would require more time to build up the breeding stock and the investment in the poultry industry in order for the country to move beyond that 15%.The industry had been trying to bring in small farmers in order to sell the chicken that had been produced by the HDIs at the higher prices. To do this, it would require the Treasury to give the industry concessions within the Public Finance Management Act (PFMA).
The SAPA would do a follow up on the issue of land reform. The issue was that knowledge in agriculture had been privatised and private companies had been selling knowledge to their clients, and the extension officer services were very important to bring about transformation in agriculture. There had been commitments from both the DAFF and dti officials to work together on compliance with the competition laws so that whatever concessions that had been made by the industry were used for transformation purposes. The rule had been that if the product was pre-packed, then it should bear the name of the country of its origin, but if it was a Daily Star product, then it was impossible to know whether the product was locally produced or imported.
The Chairperson thanked SAPA for the responses provided and indicated that the Members would be provided with the date on when the DAFF would be coming to respond to some of the outstanding questions. She reiterated that it was important for the country to deal with the issues of poverty, unemployment and inequality and this was an industry that had the capability to tackle these challenges.
Mr Southey indicated that that if he was duplicating some of the responses that had been provided by SAPA, it was because AMIE had views that were mostly complementary, but slightly different, to SAPA’s.The regulation in terms of the Agricultural Products Act and the Consumer Protection Act determined the labelling that should be on all products. The labelling regulation according to AMIE was redundant, as it was mostly understood only by those with science degrees. The jobs that were created through imports were permanent and quality jobs, and the entity would provide a detailed report with a table on the division of the jobs that had been created though imported products. It was estimated that 70% of the jobs in the industry were in formal retail,,and 30% in food service and informal retail.
Mr Southey said that Brazil had not been “dumping” products in Mozambique, as Brazil was selling their whole chicken into Mozambique at higher prices than the South African prices for chicken. In essence, Mozambique paid a higher price and duty for the imported chicken from Brazil than what they would pay on the South African market. It was clear that the local South African chicken industry was “inward thinking” rather than “outward thinking,” because of its current production model. He suggested that it was important for either DAFF or dti to take the lead in getting together all the relevant role players, from the government and the industry, to debate critical issues on the way forward. Brining was happening not only in South Africa, as already pointed out by SAPA, and in most parts of the country brining was highly regulated in terms of limits and labelling. However, in most countries where brining was allowed, the limits were substantially less than South Africa, but it was on a limited scale.
Mr Southey said that less that 2% of the total imported chicken products in South Africa had been brined and came mostly from Denmark. Every product that had to be imported to South Africa had to comply with what the local producers had to comply with, meaning the limits of brining for the local products would also apply to the imported products. There had been interactions with AMIE and other bodies to prevent the issue of illegal imports in South Africa and there could have been more success on the issue if there had been a joint effort between SAPA and AMIE. The imported products were also inspected and went through laboratory tests to check for pathogens and bacterial levels, and whether they were ready for consumption. The local products were fresher because they had been produced locally and therefore could reach the retail shops quicker than the imported products.
The Chairperson thanked everyone who was present at the meeting.
The meeting was adjourned.