Role of the Private Sector in Agricultural Development: hearings

Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
10 June 2003
ROLE OF THE PRIVATE SECTOR IN AGRICULTURAL DEVELOPMENT: PUBLIC HEARINGS

Chairperson:

National Agricultural Marketing Council (NAMC)
SA Ostrich Producers Organisation
Primary Agriculture Education and Training Authority
Agri SA
Milk Producers Organisation (MPOSA)
Surplus People Project
CANEGROWERS
Capespan
Land Bank
Land For Peace
Africa-Bio
Agricultural Business Chamber
South African Wine & Brandy Company (SAWB): Statement
South African Wine & Brandy Company (SAWB): Submission
Banking Council of South Africa Presentation
Banking Council of South Africa: Submission
transcript is available]

MINUTES
National Agricultural Marketing Council (NAMC)
Mr M Rathogwa, Chairperson, explained that the role of the NAMC is to provide strategic advice to the Minister of Agriculture on the application and coordination of agricultural marketing policy. It facilitates the implementation of requested statutory measures aimed at improving developments in agricultural industries. These include collection of levies on service charges of which 80% must be spent on core business such as research. A further 10% they envision spending on empowering black farmers. This would include spending on training and exposure to the market. Sixty workshops have been held so far aimed at educating black farmers about the marketing environment.

Discussion
Mr S Farrow (DA) asked if the NAMC was going to be looking at an enhancement of their product in the future, and whether or not they cooperate with cooperatives. He noted that NAMC has no liaison with the Department of Land Affairs, and wanted to know why this was so.

Mr Rathogwa replied that the NAMC has not looked into any enhancements as yet. Regarding cooperatives, he has not done so due to a lack of resources. Also, the relationship fostered is with the Department of Agriculture, due to Land and Redistribution for Agricultural Development Programme (LRAD) commitments.

Mr D Maluleke (DA) asked if they do follow-ups when referring farmers to other parastatals.

Mr Rathogwa said that, yes, feedback is given and sought.

Ms A Sigwacu (ANC) wanted to know NAMC's demographics.

Mr Rathogwa explained that it is a 50/50 split in terms of race, and two out of every ten employees are women.

Land For Peace
Mr R Roman described Land For Peace as a network of like-minded land owners, coming together on the issue of land reform. It has since inception expanded to non-land owners. Mr Roman maintained that the national effort thus far towards land reform was not good enough, and that only 2-5% of land had been transferred to black owners.

He described the objectives of the organisation as:
- working together with land owners to mobilise them towards land reform;
- strengthen partnerships between core stakeholders;
- establish a policy of 'best practice' for land reform;
- educate and promote awareness, particularly amongst land owners

Discussion
Dr A Schoeman (ANC) maintained that a Prof Cassiem had stated that the notion that land breeds good economy is wrong. He said that the only way to fight poverty was through the creation of wealth. In the SA context, wealth and economic wellbeing is not going to be created through land ownership or reform. Is this, in Mr Roman's opinion, a fair assumption?

Mr Roman conceded that he agreed in part to the statement. Land reform is useless when not accompanied by something developmental towards sustainability. Land is not only economic, but also political, a 'place to call home'. Mr Roman gave the example of his own farm where, in 1999, he transferred one-third of the land to 20 families that at that time resided on it. Of those 20 families, 13 are now seen to be supported by their own agriculture, and are certainly commercially and economically viable.

Mr D Maluleke (DA) asked how Mr Roman had brought together all the 'roleplayers' involved, and what the response has been.

Mr Roman indicated that a project has been launched. He cited the example of the forestry industry, in which the millers who owned land were approached. Initially, these owners were reluctant to discuss the notion of land reform, saying it had nothing to do with them. However, after discussions and interactions, Forestry and Agri-SA are coming together to look at the issue in more detail.

Mr S Abram (ANC) pointed out that churches in SA are the largest land owners after the state. Has there been any interaction by Mr Roman with these churches?

Mr Roman replied that contact has been made. The churches owning the most land were the white Christian churches, and though they acknowledged the need to do more, were reluctant to give up land. Mr Roman alleged that so far these have proved to be the most problematic group. One reason is the fact that the churches derive much-needed income from rents on the land.

Surplus People Project
Mr David Mayson, Research and Policy Manager, noted that the organisation is based in Cape Town, and since 1985 have been instrumental in opposing land evictions. They have newly moved into the arena of land reform, helping the landless to acquire and manage land.

He described their core roles as helping people in access to land, credit and markets. Much of agricultural development is centered upon large-scale and commercial farming. He believed that any process towards developing the agricultural sector needs to be made with the consultation of small-scale farmers, and women farmers in particular.

Discussion
Mr S Abram enquired about Mr Mayson's experiences with negotiating loans from the Land Bank, and asked if it was a good idea to rather set up a trust, into which the private sector and banks could donate money, from which to issue loans. He also asked about their experience with small-scale farmers in large co-ops.

Mr Mayson replied that the Land Bank is a key role player in his organisation, and his personal feelings on a trust was that it generates much trouble in itself. Regarding co-ops, Mr Mayson has seen many a small farmer dominated by the large co-ops. He believes that the best route is an alliance of small co-ops, to have a bigger voice and much needed bargaining power in the larger co-ops.

Adv S Holomisa (ANC) referred to a statement made by Mr Mayson in which he made reference to the Department of Agriculture's 'shortcomings'. He wished to know what these shortcomings were.

Mr Mayson's fundamental issue was what he described as a lack of vision. Commercial agriculture is the Departments main focus, and as such so many small-scale growers are neglected. It sees its role as mainly technical and supportive, rather than exploratory.

South African Wine & Brandy Company (SAWB)
Mr C Van Rooyen, CEO, presented to the committee. He outlined the Wine Industry Plan (WIP), a strategic initiative to increase global competitiveness, generate equitable access and participation, enable environmentally sustainable production, and to promote socially responsible consumption of wine and wine products.

The major strategic focus areas would be:
- economic development and empowerment;
- social development and upliftment;
- human resources development;
- market development and promotion;
- knowledge and information;
- technology innovation.

Mr F Mafilika, head of SAWB's Black Economic Empowerment Unit, gave a short presentation of the aims of the unit. These include project management, social upliftment and the promotion of human resource (HR) development, mainly to address the backlog of skilled workers.

Ms N Taylor, CEO of the newly launched Wine Industry Ethical Trade Association, described its aims to be improved working conditions and the adoption of a wine industry Code of Good Practice.

The association, Ms Taylor feels, is well-geared to addressing the imbalances prevalent in the wine industry. This is due to its unique leadership: a board of executives governed by three union representatives, three wine producers, two NGOs, and one representative from the Department of Labour.

Discussion
Ms J Ntuli asked about the HR development, and how many people were currently being trained by SAWB.

Mr van Rooyen replied that he did not have any definite numbers at this point, as training is carried out at various institutions such as the Vineyard Academy. He suggested the submission of a document to the Committee after an investigation is done on the issue of numbers.

Mr S Abram asked if a levy cannot be applied to exports as 177 million litres of wine was exported in 2001. He maintained that a levy of 50c per litre could be put aside to aid the private sector in agricultural development.

Mr van Rooyen agreed, but stated that three levies already exist. He was unable to comment directly, as he felt it would be irresponsible to commit without consultation with producers, and research into the idea.

Dr A Schoeman (ANC) maintained that the perception within the wine industry is one that many farms are bought and controlled by international interests. Does SAWB have any idea of the extent of such foreign buying, and what is their policy towards that?

Mr van Rooyen could not reply categorically, as no list was available that showed the amount of farms under foreign control. His feeling was that so long as they contributed towards free enterprose, they should not be discouraged. Mr Van Rooyen would, however, investigate the possibility of such a list being made available to the committee.

Prof H Ngubane (IFP) asked about SAWB's aims of introducing a socially responsible consumption of wine. This she felt went hand-in-hand with the governments policies on Moral Regeneration, and the committee would benefit from any knowledge that could be gained in this area. Prof Ngubane also wished to know how far the industry was with regards to producing a South African champagne.

Mr van Rooyen replied to the first issue, saying that they supported the Association for Responsible Alcohol Use. He maintained that a focus was on spreading the word that consumption of wine is healthy and relaxing. A huge campaign is currently underway towards that end. With regards to champagne, Mr Van Rooyen was very firm in stating that the production of champagne in South Africa is illegal. Similar products, for example sparkling wine, is therefore produced.

Africa-Bio
Africa-Bio is a non-profit bio-technology organisation. It was formed in 2000, and serves as a platform for debate on biotech issues:
-ethical and responsible research;
- factual reference point,
- provides accurate information to consumers, media and others,
- interacts with governments,
- feedback to members on biotech issues.

In short, the business of Africa-Bio is raising awareness for genetically-modified (GM) crops and foods. Africa is prone to drought, disease and pests. Scientists within Africa-Bio and other organisations are attempting to rid Africa of these problems through GM crops. The presented maintained that these GM crops have been tested for many years, and despite fears, have been deemed safe. Organic farming as it stands is not sufficient to meet Africa's needs. Biotech is seen as the next step in the evolution of farming.

Africa-Bio's activities in Africa thus far have been the increasing of awareness, through workshops and training. Capacity building towards understanding the mechanisms of GM foods are instrumental, as well as interacting with governments across Africa. Africa-Bio also maintains a biotech database that can be acessed for ready information.

Discussion
Ms J Ntuli enquired as to how Africa-Bio trains , especially in the light of differing educational levels and fields.

The reply was that capacity building starts at secondary schools, where many across Africa are introducing the awareness of GM crops. It is also possible to obtain a post-graduate degree in GM foods and practices.

Dr A Schoeman asked for examples of GM crops in use at this time.

The reply was that 24% of yellow maize and 6% of white maize grown in South Africa is biotech. However, these are currently being used for livestock feed, and not direct human consumption.

TEBA Bank
Mr T Dozi explained that TEBA Bank was initially incorporated as TEBA Savings Fund which served the mining industry, seeing as much as 800 000 accounts, and R10 billion in transactions per year. In 2000, the Fund acquired a banking licence, and styled itself as an entry-level banking institution, serving the so-called 'unbankables'. TEBA Bank achieved recognition in 2002 and 2003 as one of the top 300 national companies in a survey conducted by the Department of Trade and Industry.

Its primary function is to act as a low-level bank, offering only a savings account, with a debit card option, and it issues loans at low interest to those qualifying. No collateral is needed to apply, only a credit rating based on the individual's saving record. This fills an important niche in the market. No monthly bank charges are accrued to the accounts, no fees for depositing, and only a nominal fee to withdraw.

Discussion
Mr A Botha (DA) enquired about the bank charges. He asked how it is possible to keep it lower than most competitors.

Mr Dozi replied that as the bank is entirely focused on high-volume, low-value transactions, the technology employed by the bank can be kept to a basic scale. Because of this, returns required by other banks are not needed.

Ms NF Mathibela (ANC) asked for a breakdown of demographics for TEBA's client-base. She also enquired as to the availability of loans for historically disadvantaged individuals (HDIs) who have their potential and nothing else.

Mr Dozi maintained that of the 70 000 accounts opened since the bank started serving non-mineworkers, one-third of these are women. With regards to loans for HDIs, loans are given to those with the ability to repay. It is imperative that the applicant first keep a savings account with TEBA, which is assessed over a 6-month period. Entry qualifications are not stringent, as only the person's ability to control the savings account, and the record over 6 months, is considered.

Ms J Ntuli asked if the amount lent has a direct bearing on the savings account balance.

Mr Dozi replied in the affirmative, that savings is an indication of an individual's ability to repay.

Land Bank
Mr M Fandeso (CEO) presented a lengthy document, with full financial balance sheets, to the Committee. As it was not the first time the Land Bank was before the committee, Mr Fandeso did not find it necessary to give an introduction to the Land Bank, and instead launched into the key area of presentation: how much has been advanced for agricultural development.

In answer, Mr Fandeso quoted an amount of R76 billion advanced over a four year period. He added to this details of a project whereby four farms were identified and allocated to 'young' farmers. Of these farms, the one in the Northern Cape is now operational, and the farm in the Western Cape is almost on stream. The other two are in the North West and the Free State.

A further point stressed, was the inauguration of 'mobile banks'. These mobile facilities have been rolled out in the last two years, in conjunction with the National Development Agency. These are now operational in 64 areas across all provinces.

Discussion
Prof H Ngubane (IFP) asked, in relation to a comment by Mr Fandeso on farmers 'able but not willing' to pay back Land Bank loans, how such farmers are these identified?

Mr Fandeso divided them down into two categories. One are the commercial farmers, who continually view the Land Bank as the last institution which requires paying. Also, a second sector represents those farmers who have a culture of non-payment, customarily viewing the loans as 'just government money'.

Mr A Botha (DA), on reviewing the Land Bank's financial pages, commented on the paprika project. He asked why the value of grants per beneficiary is 3-5 times higher than others.

Mr Fandeso replied that the grants are based on the viability of the project. In this case, a group of prospective paprika farmers had taken the step from primary agriculture into secondary agriculture, by the acquisition of a processing plant.

[The meeting continued after 5pm for which a transcript is available]

Other organisations who submitted written or oral submissions to the committee:
Communicon
Biowatch South Africa
Pioneer Foods
MPOSA
Agrid SA
Usuthu Agriculltural Coop
SA Ostrich Producers Organisation
Agri Afrika Consultants
Capespan
Agricultural Business Chamber

[email protected] for map.

In total Teba Bank has 135 outlets throughout the country and operates through an agency arrangement with in TEBA Ltd. (the recruiting and social services arm of the mining industry), in providing financial services to the designated target group where no Teba Bank outlets exists. The TEBA Ltd infrastructure comprises about 65 offices situated in the rural labour supplying areas, primarily Eastern Cape, Lesotho, KwaZulu-Natal and Mozambique. Other areas serviced are Free State, Swaziland, Northwest, Northern Province and Botswana.

3. Envisaged involvement of the Teba Bank on Agricultural development

Part of the expansion strategy that the bank is currently pursuing is the development of loan instruments that are targeted at SMME development and support. If the focus that the Bank has, as encompassed in the mission statement (rural and small town South Africa) is taken into consideration, it becomes clear that part of the client base to benefit from these products will be those that are agriculturally based.

The Bank recognises that because of the limited infrastructure currently it might not be able to have the desired outreach to begin with. To this effect the bank is exploring getting involved in partnerships with institutions, NGO's included who have the capacity to do this. In this regard two initiatives are currently in progress: -

(a) Bee-hive Entrepreneurial Development Centre

Beehive is an NGO based in the Mpumalanga province which provides financial assistance and support to SMMEs including those that are agricultural based. They have had a considerable success over the years in providing this support to emerging entrepreneurs. Teba Bank has embarked on a partnership arrangement with beehive on the basis of the Bank providing Beehive with a facility for them to on-lend to their clients. Discussions are currently taking place to develop other products which will be based on risk shearing.

(b) Mpumalanga Sugar cane small-scale farmers

The Bank is embarking on a Black Economic Empowerment initiative with the Mpumalanga Small-scale growers association which has a membership of about 2000 farmers producing sugar cane on between 7 and 20ha. The aims of this initiative are as follows:

Provision of financial services and products (savings and credit) to service the diverse needs of the farming community.
Consolidation of the small-scale farmers economic muscle through promotion of ownership of assets, control and business management.
Promotion of private and community partnership in rural financial services.

A due diligence assessment of this initiative is being undertaken currently.

4. Relationship with the Department of Agriculture and Land Affairs
The Bank has held various discussions with the National Department of agriculture and Land Affairs regarding interventions that the Bank might make to assist with some of the Department's initiatives.

One of the interventions that the Bank and the Department are currently exploring is with regard to the Financial Services Co-operatives (FSCs). The Bank was invited by the Department recently to make a presentation at an FSC summit hosted by the Department. Areas that were identified where the Bank might play a role in this initiative include providing capacity to FSCs on various financial disciplines, agency arrangements, IT support and product development.

Appendix 1 : Teba bank

SUBMISSION TO THE PORTFOLIO COMMITTEE ON AGRICULTURE AND LAND AFFAIRS
TEBA BANK
4 JUNE 2003
Background

Teba Bank has its origins in the South African mining industry. Until 2000 it operated as Teba Savings Fund, providing savings and loans to workers on gold and platinum mines as well as savings to the retired mineworkers and worker's dependants in the rural areas. At its height the Fund handled over 800,000 accounts and processes more than 20 million transactions a year, to a value of R10 billion.

In 2000 Teba Savings Fund received a full banking license and became known as Teba Bank. Currently, Teba Bank has positioned itself as an entry-level banking operation providing financial services to lower-income clients. Teba Bank's current operations and product mix are tailored to cater for the needs of the "under-banked" sector of the South African population. Expansion both in terms branch network and new products is taking place to service this sector more effectively.

In 2002 and 2003 Teba Bank achieved recognition in a survey conducted by the Department of Trade and Industry as one of the top 300 national companies and also managed to attain a savings portfolio in excess of R1b in 2003.

2. Mission statement
" To be the provider of affordable, accessible and quality financial services, principally in rural and small town South Africa and make positive contribution to those communities where we do business"

3. Geographic spread
Editorial Note: Contact