Members of the Portfolio Committee on Agriculture, Forestry and Fisheries met the management of Onderstepoort Biological Products (OBP), the Agricultural Research Council (ARC), the National Agricultural Marking Council (NAMC) and the Perishable Products Export Control Board (PPECB) to hear presentations on their annual performance plans and budgets.
OBP listed the ongoing activities at the institution as upgrading of the manufacturing facility to meet Good Manufacturing Practice (GMP) standards and expanding distribution networks. Its key performance indicators were an increase in sales revenue, completion of the GMP facility, achieving a clean audit throughout and attaining an increase in customer satisfaction levels. It also planned to invest about R78 million into staff training and R12 million to marketing. The key strategic risks facing the company included non-compliance with relevant legislation and prescripts, and insufficient research and development output. Members questioned the low achievement of the equity plan in terms of employing women and people with disabilities, and the long time it was taking to fill the position of CEO.
The ARC highlighted the increase in its scientific output as an ongoing achievement and listed its main strategic goals as a shorter period in coming up with new cultivars and a variety of technologies to enhance livestock breeding, enabling farmers to adopt these technologies, finalising a climate mobile app to enable people to understand weather patterns better, and support for Small and Medium Enterprise (SME) development. Because of budget cuts, the Council said it might be forced to cut down on projects like vaccine development and embark on staff retrenchment. In addition, funding for a Foot and Mouth Disease (FMD) facility requested from the National Treasury (NT) had not been received. In reaction to the Council’s presentation, Members indicated the seriousness of the consequences of inadequate funding of the ARC and promised to take the issue up in Parliament. They also wanted to know the outcome of studies on the listeriosis disease, and asked the ARC to prepare a brief which could be presented at an upcoming joint portfolio committee meeting.
The NAMC described its five programmes, which included the promotion of business excellence, furthering the transformation agenda, development schemes aimed at integrating developing agribusinesses into the commercial mainstream, training farmers in business management, enhancing export earnings by undertaking studies to identify export market opportunities for SA products, and undertaking an agriculture branding initiative to promote a single unified brand for SA agriculture. The increase in personnel costs was due to less use of consultancy services, and greater use of in-house staff. The key issue Members raised was about enabling smallholder farmers to access the market.
The PPECB emphasised the opportunities emerging in the world market for SA agriculture, the key being the change in global eating habits. It said it was possible to adapt to changing climatic conditions, and said that despite the drought, citrus production was at the highest level in years. Members wanted to know what could be done to test imported food as well as that grown locally, for safety. The Board indicated it did not have sufficient capacity for this, but many other departments’ dealt with it.
OBP Corporate Plan for 2018/19 to 2020/21
Mr Ronald Ramabulana, Chairperson: Onderstepoort Biological Products (OBP), said the entity was committed to ensuring customers come first by producing products on time and reducing costs and supporting the government in achieving its objectives, particularly in respect of black empowerment. The Council was also committed to engaging stakeholders, key among which were farmer organisations. Efforts towards this end included monthly publications on products and organised site visits with media houses on agriculture.
Dr Bethuel Nthangeni, Acting Chief Executive Officer (CEO): OBP, said some top facts about the organisation were that it was a leader in the local manufacture of livestock vaccines; was currently expanding distribution networks; was upgrading its manufacturing plant to meet Good Manufacturing Practice (GMP) standards aimed at modernising services; and its product range includedbacteria, viral and blood vaccines.
OBP had 189 employees, of which 88% were African, 0.5% Indian, 10% white and 1.5% colored. In terms of gender distribution, the workforce was 46% female and 54 male. In management, the race distribution was 78% African, 13% white, 0% Indian and 9% colored. The distribution of gender in management was 35% female and 65% male.
Its strategic goals were aligned with government priorities in terms of the National Growth Path (NGP), National Development Plan (MDP), and the Department of Agriculture, Forestry & Fisheries (DAFF) strategic plan.
Based on the strategic goals, the Key Performance Indicators were:
- to increase in sales revenue and from R160 million to R320 million, and profitability from R22 million to R72 million in 2018/2019;
- to complete the construction and modernisation of the current facility to GMP-compliance status;
- target to achieve a clean audit throughout; to produce innovative products and services;
- aim to increase customer satisfaction to 70% by producing in line with customer needs; to train employees for better productivity; and
- being a state owned entity, aim to make its products accessible to all customers including emerging farmers in rural areas.
Mr Matsobane Gololo, Chief Financial Officer (CFO): OBP, said the organisation planned to invest about R78 million into staff training and R12 million into marketing. The funds received from Treasury were shown in the balance sheet in the form of capitalided assets for upgrading the facility to GMP standards.
Dr Nthangeni said the key strategic risks facing the company included non-compliance with relevant legislation and prescripts, which had to be guarded against, and insufficient research and development (R&D) output. The profits to be realised would be reinvested into R & D. The company had come up with a fraud prevention plan, including the adoption of a hotline on fraud where they intended to follow up and investigate. Control mechanisms, including internal audit, had also been put in place.
Ms A Steyn (DA) asked if the whole amount of R500 million received from National Treasury (NT) had been used. How far was OBP on getting compliant? On the risk, what legislation was the entity at risk of non-compliance? On research, was it possible to combine the Agricultural Research Council (ARC) and OBP research efforts? On marketing in rural areas, how far had this been implemented? Had there been a recall of a product?
Mr A Madella (ANC) asked what the plan to fill the CEO position was, to avoid the situation of people being in an acting capacity for a long time. Was the employment plan in compliance with the national equity plan, for example, on employees with disability?
Mr L Ntshayisa (AIC) asked what the criteria were for selecting people to be trained. Also, why was the percentage of women in management so low?
Mr N Capa (ANC) asked why OBP was targeting only 70% of customer satisfaction instead of 100%. What could be done differently for rural performance of vaccines?
Mr P Maloyi (ANC) wanted to know who the biggest customers of OBP were, in case there was a need to follow up on satisfaction. As the main manufacturer of vaccines, could there be one for influenza, and if not, why? Was the GMP facility going to be ready this financial year? He also asked the presenters to expand on mitigation factors in each of the areas of risk they had indicated. Given the resources at the disposal of the entity and its plan for improving human and animal health, was there a guarantee this would be achieved?
The Chairperson wanted to know why the position of CEO was not filled yet, and the plans for balancing employment equity in terms of gender and people with disability. On the risks presented and the emerging threat of climate change, did the entity have the capacity to deal with these challenges?
Mr. Ramabulana responded that on filling the position of the CEO, interviews had been slotted in for today,but had had to be pushed due to the day’s engagements. This would, however, be done before the end of April.
On funding, OBP had received R492 million from the Treasury to upgrade facilities. The money was being used for the demolition of old buildings, placing orders for the facility and training staff on handling the new facility. This money had been ring-fenced and audited by the Auditor General (AG) and was not being used for unintended purposes. Since OBP had requested R1 billion but had received only R500 million, they were working on how to fund the deficit, including utilising increased profits.
On customer satisfaction, it was correct to aim for 100%, but farmers wanted a product that worked at the time they needed it, which made it hard to satisfy everyone. A target of 70% was reasonable.
Dr Nthangeni, responding on the key strategic risks, said the inability to fund operations was a risk since the OBP relied on profits and had to ask for funds from Treasury in situations where it could not raise revenues. The current plant was very old plant and it was difficult to sell abroad due to inspections, so the need to keep being compliant was a risk. He also said that brucella had been recalled due to a problem with the inside package only.
OBP had achieved the requirements of the Equity Plan in terms of people with disabilities, and was working towards addressing the number of females in management. The new organisational structure involved revisiting staffing, and positions opening up would be targeted for priority groups.
On who was targeted for training, OBP had come up with an innovative way of training where this was not done for in-house staff only. All the people working with products would be trained on GMP, including a selection of people from rural areas to put them into a programme of learning on production. These would also serve as crucial contacts in the value chain, and would be sent to various rural areas and given products to distribute. This enabled the vaccines to be available widely, while also creating jobs.
The large increase in projected revenues was due to expected high productivity. The organisation used to have production problems, but these had mostly been resolved through the funds received from Treasury which had increased capacity, so there were more products for sale. OBP was also targeting registering more products on international markets, which would improve revenue growth.
Responding on the question of who OBP’s main customers were, he said that they could sent a list of all their customers to Committee Members. On whether OBP’s work contributed to the influenza vaccine, OBP continued to in partnership with other private companies to limit disease outbreaks.
Agricultural Research Council (ARC) strategic plan and annual business plan
Ms Joyce Mashiteng, Board Member: ARC, introduced the Council’s delegation and invited the acting CEO to make the presentation.
Dr Shadrack Moephuli, CEO: ARC, said the institution’s action plan was aligned to the national priorities, and its contribution towards this end was through improved agricultural production, enabling the country to adapt to climate change, contributing towards smallholder farmer development and job creation across agricultural value chains.
The ARC had shown improvement in its scientific impact over the years through the increased number of publications in terms of both quality and quantity. On the Science Council front, there had been improvements in scientific innovations, skilled scientists and engineers, science ratings, the number of doctoral and post-doctoral fellows and intellectual assets. In agricultural development, there had been enhanced linkage between innovation and economic well-being, applied research, food and nutrition, environmental sustainability, export promotion and new products like vaccines and cultivars.
Key outcomes under ARC’s strategic goals included a shortened period in coming up with new cultivars (for example, the launch of a new cultivar of seedless grapes in Berlin Germany and the release of wheat cultivars that improved yields); enabling farmers to adopt these technologies; the identification of the fall army worm disease and working with pesticide manufacturers in coming up with a pesticide to curb the threat (first to do so in the region and alerted other neighboring countries); developing new vaccines and disease control strategies; coming up with a variety of technologies to enhance livestock breeding; managing the highly pathogenic Avian influenza disease; coming up with a climate mobile app for people to understand weather patterns better (with the help of funding from the Dutch government); drought monitoring and alerts; involvement in providing advice and training, in partnership with the Department of Rural Development and Land Reform; Small and Medium Enterprise (SME) development and support through the use of technologies from ARC; support for post-graduate students carrying out research within ARC, and also the training of its own staff.
Mr K Maake, Acting Chief Financial Officer (CFO): ARC, said the planned budget cut amounting to R252 million in the Parliamentary grant over the Medium Term Expenditure Framework (MTEF) would lead to a further R40 million loss of revenue through lost opportunities. Further implications were a reduction in the number of students supported by ARC through the Parliamentary grant, a cut in projects like vaccine development, and staff retrenchment. As such, ARC was operating in a very constrained environment while the operating expenses were going higher, especially those like electricity. The problem was further compounded by a reduction in externally funded projects. The Foot and Mouth Disease (FMD) facility was still unfunded, although the institution had asked for money from Parliament. This was despite the reported outbreak of diseases. As a result of the funding issues, ARC’s planned activities and outcomes would not be achieved easily.
Mr W Maphanga (ANC) asked whether there was hope in winning the battle against the listeriosis disease, and how long would this take.
Ms Steyn, as a follow up of the issue of listeriosis, said that there was a joint portfolio committee on the coming Wednesday, abd asked if ARC had been invited as an opportunity to present on the steps to contain the disease? She also wanted to know if the country was still importing foot and mouth disease (FMD) vaccine from Botswana. The ARC should provide a list of all the facilities that needed upgrading. On research output published, who guided the Council on what research to do? How far was the filling of the position of CFO? It was a key concern when finance people resigned all at once -- had a forensic audit been done on the department? She also expressed her concern as to whether ARC was now getting into politics, since they had held a meeting with certain political leaders.
Mr Madella asked if the Council had met the requirements of the Equity Plan in terms of the absorption of people with disability. He also suggested that Agrista could fund interns at ARC in light of its current financial difficulties.
Mr P Maloyi (ANC) suggested that ARC should not respond to Ms Steyn comment on political involvement, as this would divert attention from the agenda of the day. He expressed concern that ARC should not lack resources and it was necessary to interact with the department on this, given the implications of the budget cuts, which seemed scary. There was a need therefore for the Portfolio Committee to indicate to Parliament that this was not acceptable. On the listeriosis outbreak, ARC should prepare a brief on the outcome of the work done so far so as to present it to the joint portfolio committees on Wednesday.
The Chairperson asked whether ARC had sent a business plan to the Committee, who would then forward it to Tresury for easier facilitation of funding for the FMD facility.
The CFO responded that ARC had forwarded the request directly to Treasury, but the Committee could get it immediately as the document was ready.
Dr Moephuli said it was still not clear for how long containing the listeriosis disease would take, as a lot depended on how well the food processors were adhering to food safety. He attributed part of this to the cut in the number inspectors of food in factories and restaurants which had resulted in outbreaks, since some businesses were taking shortcuts. ARC would be happy to make a presentation and provide data during the joint Portfolio Committees’ meeting.
On FMD vaccine imports, the department was still paying for the import of FMD vaccine; costs for this could be provided to the Committee. On obsolete facilities, failure to replace the facilities would mean the country may be unable to export. The Council had previously submitted an asset register of the facilities but could still provide an updated one.
In terms of filling positions, the CEO said that the Council had recently hired some personnel for vacant positions and had advertised, interviewed and identified a person for the CFO post, and was only waiting to make an offer.
On forensic audits, ARC had engaged the Auditor General of South Africa (AGSA) who had assured them there was no basis for conducting the audits. The institution was still sitting below the 1% of the employment equity plan, but was working to increase the employment of people with disability. As a clarification, the students being funded through the Parliamentary grant were the ones affected due to the budget cuts, and not the interns.
Ms Mashiteng rounded off the ARC responses by indicating that funding issues were causing instability in the Council. It was losing capacity and facing staff resignations, and ARC was finding itself in a position of being unable to retain them.
The Chairperson stressed the importance to the ARC delegation of the implementation of the equity plan regarding the employment of women in management.
National Agricultural Marketing Council (NAMC): Annual performance plans and budget
Prof Phineas Chauke, Chairperson: NAMC, introduce the Council’s delegation and invited the CEO to present.
Mr Zama Xalisa, CEO: NAMC, said the entity’s main objectives were to increase market access to all market participants; more efficient marketing of agricultural products; increased export earnings from agricultural products; and enhanced viability of the agricultural sector. The five NAMC programmes for the year 2018/19 were:
Promoting business excellence through the different departments of the institution.
Market access. Baselines on the beef and potato sectors had already been done and the focus now was on the transformation agenda by monitoring and reporting on progress in implementation and also tracking and reporting on expenditure on transformation by industries that utilised statutory levies; another area of focus was designing and implementing development schemes with the aim of integrating developing agribusinesses into commercial mainstream.
Key activities were to conduct agri-food chain research on food inflation, supply and demand estimates, farm-to-retail margins; training farmers on business management through annual training in collaboration with training providers, and national and provincial departments, AgriSETA and the financiers; and to coordinate the implementation of statutory measures across 22 agricultural industries to support marketing efficiency.
Enhance export earnings by undertaking studies to identify export market opportunities for SA products; financing of export promotions and quality control and facilitating business linkages by enabling smallholder farmers to produce exportable products
Enhancing sector viability through coordination of integrated strategic projects; registrations, records and returns for information collection; and an agriculture branding initiative to promote a single unified brand for SA agriculture
Ms Sarah Netili, CFO: NAMC, presented the organisation’s financials, and emphasised that a big chunk of the budget was going to personnel since NAMC had opted to reduce its use of consultancies and most of the work, including research and marketing, was being conducted by the in-house staff.
Ms Steyn asked if there was a correlation between the NAMC and the DAFF in terms of the commercialisation of farmers. She also wanted to know what the project for a database of farmers’ registry was. How far was the smallholder market access tracker in implementation? She also reminded the Council not to engage in politics, referring to the meeting she had indicated had taken place with ARC as well.
Mr Maphanga, commenting on the programme under market access, wanted to know if there had been any progress in achieving integration of SA smallholder farmers in the commercial mainstream.
Mr Capa commented that there was a clear linkage between programmes 2 on market access, with programme 4 of the DAFF that needed to be harnessed
Mr A Madella commented that access to markets was a critical issue, and it was very important for smallholder black farmers to gain that access.
The Chairperson asked how NAMC measured transformation, since it was a broad term. How far was it in being implemented?
Mr Xalisa responded that on the issue of market access, NAMC was working in collaboration with a number for institutions, especially the mother department, DAFF, to ensure that the 450 farmers were commercialised. He also stressed the role of NAMC in drought management, where farmers were being taught best practices and citrus fruit production was highest in the year despite the drought situation.
On integrating smallholders into the mainstream of the economy, NAMC was trying but it was difficult to do extensive wok since its role was primarily facilitation, by bringing actors together.
On transformation, all departments collecting levies were obliged to distribute these across the actors. Regarding the database of farmers’ register, this had been a once-off norms and standards project commissioned by DAFF that had already been completed and submitted to the DAFF.
Ms Steyn observed that due to the outbreak of diseases, there was a possibility that the country might stop slaughtering for pork, and asked if NAMC could update the marketing study on the implications of this for a discussion at the upcoming joint portfolio committee meeting on Wednesday. NAMC committed that this would be done.
The Chairperson reiterated that the work on access to markets by smallholder farmers was a priority. NAMC responded that the work was being done in collaboration with the National Treasury.
Perishable Products Export Control Board (PPECB): Annual Performance Plan and Budget
Mr Angelo Petersen, Chairperson: PPECB introduced the Board’s team and indicated that despite the drought, the PPECB was ending the year in a surplus position.
Mr Lucien Jansen, CEO: PPECB, highlighted the effect of changes in exchange rates on the export market. In addition, there were emerging opportunities for SA products in the global market driven by changes in global eating habits, giving the example of avocados. There was an opportunity in the use of droning technology at the production level to increase outputs. In the environment of operations, Citrus Black Spot (CBS) remained a concern, False Codling Moth (FCD) was now regulated, and farm outputs and exports had been dampened by drought.
Programme targets for 2018/19 included achieving a customer satisfaction level of 80%; staff retention of 95%; and analysing 24 000 samples under food safety services. Under transformation and development services, 10 smallholder farmers would be certified and 40 Agri-Export Technologist Programme (AETP) students supported.
Mr Johan Schwiebus, CFO: PPECB, presenting the financials, stressed the importance of technology development at the Board, indicating that 50% of income received was spent on developing technology. The 21% increase in other services was also largely due to technology development.
PPCEB had done well in the transformation agenda, and it remained a focus area. The Equity Plan was also a focus area, as the number of disabled employees was below 1%. Market access was a target area for growth in SA exports, as well as fitting well into the transformation agenda through helping smallholder farmers to access markets.
Mr Maphanga asked what measures had been put in place to combat the Citrus Black Spot disease. He also wanted to know why the number of certified smallholder farmers was only 10 under the transformation agenda, and whether this was the desirable target,
Ms Steyn asked how one could ensure that the food that was eaten locally was safe, since that which was exported was covered under inspection checks. Was this something that had been discussed with DAFF? What was needed in terms of budget to build capacity for testing what comes into the country, as well as the food produced locally?
The Chairperson asked what the plans of the Board were in ensuring continued activity, given the challenges of climate change. She also expressed concern about harmful chemical sprays that affected people’s health.
The CEO responded that on the issue of CBS, the PPECB and the DAFF had increased the resources and controls to catch it before produce was exported. The small number of targeted certified farmers referred only to the farmers certified through the PPECB, as many of the other farmers would rather go for commercial certification.
On inspection of foods locally, there were already many local departments that dealt with this. PPECB’s mandate was mainly on exports and with its capacity, it would not be able to deal with this fragmented aspect.
On climate change, producers were able to change practices to still produce, despite the effect of climate change. A case in point was that the citrus produced this year was more than in other years in spite of the drought. Thus it was possible to combat the challenge.
On the management of chemical sprays, this spoke to the issue of certification, and farmers who were not complying with best practices should not be certified.
Ms Steyn asked whether there were any concerns on the part of PPECB, given the loss in markets due to residue testing.
The CEO responded that there was capacity to carry out the activity of testing for now. PPECB had invested in a laboratory in the north, although with the planned growth, there was room for improvement in terms of capacity.
The meeting was adjourned
- Perishable Products Export Control Board (PPECB): 2018/19 Annual Performance Plan and Budget
- Agricultural Research Council (ERC): implementing Strategic Plan for 2015/16 to 2019/20 and annual business plan: 2018/19
- National Agricultural Marketing Council (NAMC): annual performance plans and budget 2018/19
- OBP corporate plan 2018/19 to 2020/21