SA Farmers Development Association challenges with sugar industry & Department response

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Trade and Industry

12 October 2017
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee met with the aggrieved South African Farmers Development Association (SAFDA) to hear its concerns about not being recognised by the South African Sugar Association (SASA) and the South African Cane Growers’ Association (SACGA).

SAFDA outlined numerous challenges facing emerging sugarcane farmers in the industry:
• General lack of economies of scale and scope
• Relatively high inputs costs (chemicals and seeds)
• Lack of access to markets
• No control of logistics and schedule
• Farming marginal and communal lands
• Serious governance challenges especially in cooperatives
• 50 year cane supply agreements
• Declining number of black cane growers from 50 000 in early 2000s to 20 000.
• Lack of access to funding.

On its recommendations and the way forward, SAFDA asked for the immediate implementation of the DTI Director General’s directive. There should be an amendment to the regulations by the Minister to open up participation in the sugar industry structure. There should also be a review of the payment system of the SA sugar industry to effect premium payment for emerging farmers based on local market. SAFDA requested the timelines for the implementation of these recommendations.

Members indicated that the Committee was currently in the introductory phase of investigating the matters that had been flagged by SAFDA and the next process would be now to call the other relevant organisations so as to get the two sides of the story. The position of the Committee is to invite the relevant entities in order to get all the facts. They felt SAFDA and others like them have been failed by Members of Parliament as the work of MPs is to repeal unjust laws. It was embarrassing to see that the sugar industry was operating under Sugar Act of 1978 as the Act should have been repealed long ago. They said there should be an intervention by the Department.

Members proposed that the legal team should peruse the agreements in place to ensure that there is compliance. They said MPs are supposed to represent people on the ground and it was good that the matter was brought to the Committee. They asked the timeframe to deal with the SASA / SACGA matter. It was unclear what the Department had done since the Director General's letter of 24 April 2017.

The Department of Trade and Industry (DTI) provided responses to the SAFDA recommendations:
• DTI was awaiting advice on the immediate implementation of the Director-General’s directive.
• Advice will be sought from the Office of the Minister on amendment of regulations to open up participation in the sugar industry.
• DTI will arrange a meeting between SAFDA and SASA to fund levies from the time SAFDA was formed and on a review of the payment system of the SA sugar industry.
• DTI Transformation Unit will look at industry consultation for transformation and beneficiation in the SA sugar industry value chain.

Members said that the Department response showed that the SAFDA matter needed to be dealt with urgently. There should be a time-frame for when DTI would provide a progress report to the Committee on actions taken to resolve the SAFDA challenges. The Committee should not tolerate the “lip service” from DTI as SAFDA was clear that small farmers are struggling as a result of SACGA and SASA. The focus of the meeting was not to deal with future developments but rather the challenge at the moment. The Minister should be provided with an opportunity to respond to the 24 April 2017 letter by the Director General.

The Committee resolved that DTI should respond within seven days. There should be a progress report to the Committee within 14 days. There should be far stronger action taken by DTI. Members should empower the Minister in the legislation. The Minister should get a legal opinion on the 1978 Sugar Act and a decision taken moving forward. There was consensus amongst Committee members on these proposals.
 

Meeting report

South African Farmers Development Association (SAFDA) briefing
Mr Siyabonga Madlala, SAFDA chairperson, said that SAFDA is a member-based, voluntary non-profit association of like-minded farmers who believe in the development and sustainability of emerging and small-scale farmers. Its main mission is to be a farmer driven partnership for the development of sustainable black farmers and the transformation of rural industries and rural economy. SAFDA was mainly found in KwaZulu-Natal and Mpumalanga. The Sugar Act of 1978 was last amended in 1992 and there was the Sugar Industry Agreement of 2000 in the form of regulations which the Minister has the prerogative to amend.

Mr Madlala stated there were number of challenges facing emerging sugarcane farmers in the industry:
• General lack of economies of scale and scope
• Relatively high inputs costs (chemicals and seeds)
• Lack of access to markets
• No control of logistics and schedule
• Farming marginal and communal lands
• Serious governance challenges especially in cooperatives
• 50 year cane supply agreements
• Declining number of black cane growers from 50 000 in early 2000s to 20 000.
• Lack of access to funding.

Mr Madlala noted the significant decline of small scale farmers and this was at its peak in 2015 due to drought. The emerging growers are facing both cost and yield challenges. Division of proceeds in the SA Sugar Industry were outlined. SAFDA was formed to focus on the unique challenges facing emerging growers in the sugar industry. The current interventions about the structure of the industry have been ineffective in addressing these unique challenges. SAFDA is the voice of the voiceless and marginalised emerging black sugarcane farmers who feel excluded from effective participation in the historical industry structures. Emerging farmers have taken a conscious decision and proactive action to solve these challenges to ensure that there is “nothing about us without us”. SAFDA has over 2 500 registered members across KZN and Mpumalanga but the support was broader than these two provinces. SAFDA said that certain sections of the sugar industry regulatory instruments were impeding growers’ freedom of association and imposing a prohibitive arrangement in the SA sugar industry. SAFDA is not recognised by the South African Sugar Association (SASA) and the South African Cane Growers’ Association (SACGA).

Mr Madlala said that SAFDA had engaged SA Sugar Association and industry partners asking for recognition as far back as 2015. There was a recognition march organised by farmers on 25 August 2016. The agreement between SAFDA and South African Cane Growers Association (SACGA) was signed on 24 November 2016 and cancelled on 10 March 2017. SACGA took SAFDA to court to silence and crush the constitutional right of all to be represented.

SAFDA recommended:
• Immediate implementation of the DTI Director-General’s directive.
• Amendment of the regulations by the Minister to open up participation in the sugar industry structure.
• There should be a review of the payment system of SA sugar industry to effect premium payment for emerging farmers based on local market.
• SAFDA requested for the timelines for the implementation of these recommendations.

Discussion
The Chairperson appreciated the briefing and suggested that the Committee should have brought together DTI and the Sugar Industry to get to the bottom of the challenges experienced by SAFDA. The Committee was currently in the introductory phase of investigating matters that had been flagged by SAFDA and the next process would be now to call the other relevant organisations to get two sides of the story. The position of the Committee is to invite the relevant entities to get all the facts.

Mr M Dlamini (EFF) said that entities like SAFDA are failed by Members of Parliament as the work of MPs is to pass laws and repeal the unjust laws. It was embarrassing to see that the sugar industry was operating under the Sugar Act of 1978. The Act should have been repealed long time ago. The Committee should avoid the situation where black companies are accommodated by white companies as it was not a favour for black companies to participate in the industry as this was required by the law. The white established firms are the ones controlling the industry and therefore “muscling” out small players. The whole Executive had been captured and therefore it was impossible to expect them to help small players like SADFA. Parliament was probably the only institution that had not been captured and therefore should play a major role in helping smaller players. He found the DTI Director-General letter to be the worst form of cowardice. The suggestion by the Chairperson to call other organisations to get both sides of the story was acceptable but there should be a firm decision by the Committee that there should be an immediate intervention by DTI.

Mr G Cachalia (DA) commented that the normal procedure is to call in the other organisations so as to get both sides of the story. There should be freedom of association as this right was enshrined in the Constitution. It is indeed the responsibility of MPs to repeal laws that are unjust. The matter flagged by SAFDA required to be dealt with urgently.

Ms L Theko (ANC) said the information shared by SAFDA was not sitting well with her. There were lots of agreements agreed to but that failed to be implemented. The law makers should play a role in amending those old acts so as to be relevant on the ground. The people on the ground are suffering and this matter needed to be referred straight to the Minister as soon as possible. The legal team should peruse the agreements in place to ensure that there is compliance. MPs are supposed to represent people on the ground and it was good that the matter was brought to the Committee. The Committee would still need to invite other organisations so as to get both sides of the story. What was the timeframe to deal with the issue?

Ms S Van Schalkwayk (ANC) stated that she shared the same sentiments as the previous Members especially on reviewing the agreements in place as there is lack of implementation. The Committee should be provided with progress in relation to the court case with SACGA. It was unclear as to the action that was taken by DTI in regard to the letter by the Director-General dating back to 24 April 2017. There is still a lot that the Committee would need to do before moving towards the position to be taken on moving forward. The main objective of the Committee is to see the poorest of the poor developing and getting benefits that are provided by government. There should be someone taking the responsibility on the issues that had been raised by SAFDA.

Mr Madlala appreciated that responses of the MPs and this showed that there are people who are feeling the pain of the organisation. The responses by MPs showed that indeed Parliament cared about people on the ground. SAFDA was told not to attend the court-case with SACGA and was even told to pay for the dues of the court. SAFDA was ordered by the court not to disrupt the meetings with SACGA. There was not provided deadline on when SAFDA should come back to the court. SAFDA thought that the letter by the Director-General was immediate and to be enforced in order to be implemented immediately but this was unfortunately not the case. The reality is that the organisation had exhausted all avenues in order to get through this problem and Parliament was the last resort.

Department of Trade and Industry (DTI) response
Ms Ncumisa Ntsunguzi, DTI Chief Director: Agro-Processing, said that the Sugar Industry is governed by the Sugar Act of 1978 and the Act makes provision for the establishment of a South African Sugar Association (SASA) to administer the affairs of the industry in South Africa. SASA is mandated to oversee the operations of the sugar industry in the country. The main problem identified by DTI is that black farmers, although since the repeal of the 1936 Sugar Act in 1978, are no longer illegal, they are still treated as second class citizens by SASA. The sugar milling sector remains totally untransformed. There has been a general decline in sugar cane production in the country over the past 15 years due to adverse weather conditions. There is diminishing profitability in growing cane given the input costs versus financial returns and limited capital availability. There are 14 cane producing areas in South Africa in Eastern Cape, KwaZulu-Natal and Mpumalanga. The 6 sugar millers also own some sugar estates, which represent about 7% of sugar cane growers.

In response to the SAFDA recommendations, Ms Ntsunguzi said that DTI was still to advise on the recommendation for the immediate implementation of the Director-General’s directive. Advice will be sought from the Office of the Minister on the amendment of the regulations to open up participation in the sugar industry. DTI will arrange a meeting between SAFDA and SASA to address the DTI recommendation to fund levies from the time SAFDA was formed and also to address the review of the payment system of the SA sugar industry. DTI's Transformation Unit has been consulted and a process is unfolding with industry consultation on transformation and beneficiation in the SA sugar industry value chain. Policy oversight for supporting sugar production is within the mandate of the Department of Agriculture, Forestry and Fisheries and Department of Rural Development and Land Reform. DTI in collaboration with these two departments is committed to addressing the binding constraints currently faced by the sugar industry.

Discussion
Mr Cachalia said the DTI comments showed that the matter raised by SAFDA required to be dealt with urgently. There should be a time-frame for a DTI progress report to the Committee on the matter. The Committee should not tolerate the “lip service” from DTI as SAFDA was clear that small farmers are struggling as a result of SACGA and SASA. The focus of the meeting was not to deal with future developments but rather the challenge of the moment. The Minister should be provided with an opportunity to respond about the Director-General letter sent on 24 April 2017. DTI should provide the Committee with progress report on actions taken to resolve the challenges flagged by SAFDA.

Ms Van Schalkwayk thanked DTI for the commitment shown as the matter needed to be resolved as soon as possible. The time-line provided by DTI to deal with the matter at the end of the financial year was too late as the intervention was needed immediately. The talk of dealing with the matter in May 2018 was absolutely unacceptable as urgent intervention needed to be taken by the Ministry. There should be legal grounds to implement the agreements. The arrangement of meetings with SACGA, SASA and DTI would just be another talk show without any concrete plan to implement. There is already arrogance from SACGA and immediate intervention was also needed in this context. There should be a monthly report from DTI before Parliament goes into recess at the end of November 2017 on the intervention.

Ms Theko urged DTI to intervene immediately. There should be a timeline for the interventions. The Office of the Minster should be briefed on the SAFDA concerns. She supported the proposals made by Members on the way forward.

Mr Dlamini commented that the characteristics of a failing state is when those in power like DTI are unable to take action as empowered by legislation. DTI was allowing the “bullies to bully” the small players in the sugar industry. The issue was mainly about the regulation of the industry and it would be impossible to allow the big players to self-regulate. SACGA was clear about the reluctance to comply and this was a fact. The Committee should be concerned about the loss of cane growers in the industry with 30 000 already lost. The proposal to have more meetings was a complete waste of time as SACGA was the one clearly not interested in complying with regulation in any way. The playing field at the moment was unequal with SACGA using bullying tactics. The country currently had a 27% unemployment rate and therefore the industry could not be allowed to shed more jobs. The person who wrote the letter should be regarded as a coward as he was begging for the accommodation of black companies instead of coming up with laws that would address the challenges flagged by SAFDA.

The Chairperson thanked the prompt response of DTI as there was a short notice for the scheduling of the meeting today. This matter was a crisis and therefore should be treated as such. The old Sugar Act should be reviewed as the Act dated as far back as 1978. There should be workshops even on Saturdays or Sundays if there is no time in the schedule as this used to happen in previous Parliaments. There should be a reflection by everyone as everyone was responsible for the crisis faced by SAFDA including MPs. DTI should respond within seven days. There should be a progress report within 14 days. There should be far stronger action taken by DTI. Members should empower the Minister in the legislation. The Minister should also get a legal opinion on the 1978 Sugar Act and make a decision on this moving forward. The Committee cannot take a decision in the meeting today as some of Members are absent but can take a position based on the proposals made.

There was general consensus from Members on the proposals made. It was emphasised that SAFDA would have to appear at the Committee meeting with the other relevant organisations and DTI as the matter was serious.

The meeting was adjourned.

 

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