Land Bank support to developing farmers; SA Veterinary Council Annual Report & APP; Fetsa Tlala: DAFF & Mpumalanga progress report; with Deputy Minister

Agriculture, Forestry and Fisheries

24 April 2018
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

The Mpumalanga Department of Agriculture, Rural Development, Land and Environmental Affairs continues to decrease poverty rates especially in the most prioritised rural municipalities.

It reported this when it appeared before the Portfolio Committee on Agriculture, Forestry and Fisheries on progress in the implementation of Fetsa Tlala targets and budget expenditure for the 2017/18 period.

10 484 households were supported through crop production, 9 smallholders through animal production, and 200 youth through the Fortune 40 farming programme.

Through this government intervention a total of 10 693 families were supported. This intervention touched the lives of estimated 53 465 people, especially when considering an average family of five. This means these people managed to go to bed having had food from their fields or bought by income from farm proceedings.

The Department successfully increased the economic participation of youth in the agricultural sector through the Fortune 40 Incubator Programme and implemented the off-take agreements within the government nutrition programme. The Department initiated poultry projects in its four district areas to give new entrants access to the agricultural value-chains and support from better resourced role players to reach the Medium Term Strategic Framework target of poultry projects to be achieved by 2019.

The Department has created partnerships with commercial farmers and international investors and has facilitated trade relations between the farmers and international investors in Russia, Cote d'ivoire and Angola in partnership with its Department of Economic Development and Office of the Premier. The Department is in the process of finalising partnership agreements with Joubert & Seuns Citrus Farming to support and develop identified land reform farms on citrus and mango production.

Challenges were around limited budget to commercialise more farmers; broken down tractors; short planting season; and projected harsh weather conditions. As a result, farmers are encouraged to practice Conservation Agriculture. Capacity is to be increased in municipalities with the shortest planting seasons. Internally trained mechanics were being assisted with minor tractor challenges, and the department has advised farmers to use the drought resistant seeds.

The Land Bank informed the Committee there is no reliable data available to show clearly how much was disbursed to the emerging sector between 1996 and 2011. But in 2012, billions of Rands were advanced to black farmers in the developmental sector. There has been rapid growth since then from a small base in terms of lending.


The Bank has a sound credit rating and is heavily dependent on accessing the volatile debt and capital markets to fund its asset growth as well as on-going support from the government to strengthen its capital base. The Land Bank procures funding for two distinct business purposes - commercial and development operations. Commercial funding is not guaranteed and is applied for financing primary and secondary agriculture, wholesale lending, and general working capital. On the other hand, the development funding requires government guarantees and is applied for sector transformation in terms of growth, emerging farmers, and agricultural sector growth. The development funding is ring-fenced and has strict disbursement conditions and reporting requirements.

The major challenge for sustainable land reform and agricultural development is the lack of synergy between the Departments of Rural Development and Land Reform; Agriculture, Forestry and Fisheries; Water and Sanitation; provinces; Land Bank; and the private sector.

The South African Veterinary Council took the Committee through its three strategic goals for the 2017/19 period. The Council wants to drive the transformation of the veterinary professions to address the needs of the people of SA more effectively and inclusively; drive an effective communication plan with all the stakeholders so as to position the veterinary professions as the preferred 'go to' source to address the animal health and welfare needs of the SA people; and to restructure the Council so as to be more inclusive of all the members and professions and better serve the needs of the members.

It was pointed out that it is important to restructure the Council but emphasised that institutional knowledge and expertise should be maintained. It is important to maintain high standards of the staff complement and investigate "full-time" appointed and remunerated president per term or a professional veterinary team permanently appointed as staff members. The SAVC structure would be aligned with the current needs of the members to ensure the finalisation of the internal succession plan, revise the mandate of the Council, develop transformation policy, and investigate proportional representation in the Council.

Members wanted to know if the grants from government which are issued as loans are assisting in the sustainability of the Land Bank; asked if the Land Bank has a list of farms it has loaned which are run by women, youth and people with disability; wanted to find out what it is that the Land Bank would need from a farmer to make the Bank feel comfortable before it gives out a loan to a farmer because most farmers do not have collateral; wanted to know how much it would cost to put the plus minus 4000 unused farms into production; asked how much the Bank has invested in technology to assist in farming processes; and wanted to find out if the Bank has been exposed to any risks of providing funding to companies linked to the Guptas.

Members further remarked the Council’s presentation did not address the problem of animals in peri-urban areas that roam the streets and eat things they are not supposed to eat; wanted to establish if the Council has an idea of where the unemployed animal health technicians are located and asked if there is an over-supply of them; wanted to know if it were possible to get a list of animal diseases in the country because this could affect people if these diseases are not under control; and asked if the University of Pretoria is the only university offering veterinary science.

Members also wanted to know from the Mpumalanga Department of Rural Development Land and Environmental Affairs how far the Fortune 40 farms are in terms of progress; asked how involved the Department is in the maintenance of tractors so that they do not disappear; wanted to know what the results were regarding the drought resistant seed given to the farmers; wanted to establish why the agriculture contribution to employment has declined; asked who is responsible to lift the moratorium that makes it impossible for the Department to recruit permanent extension officers; wanted to know how the Department is going to till the land because 90% of the tractors are not working because of missing items; and asked for an update on the Kruger Mpumalanga International airport.

Meeting report

Land Bank Presentation
Mr Tshokolo Nchocho, CEO: Land Bank, informed the Committee there is no reliable data available to show clearly how much was disbursed to the emerging sector during the period between 1996 and 2011. But in 2012, billions of Rands were advanced to black farmers in the developmental sector. There has been rapid growth since then from a small base in terms of lending.

In 2012, the Land Bank launched its then REM Unit (Rand Emerging Markets) to cater for emerging farmers that would ordinarily not be able to secure access to funds from conventional markets. The Bank then adopted a Wholesale Financing model as a strategy to mitigate the risk associated with this market segment, and this saw various controls and support mechanisms put in place in order to advance the success rate of this target market. DAFF provided a R150m Wholesale "Financing Support Facility' that was used to subsidise lending rates to emerging farmers at 4%.
In addition to the financing through the REM Unit, further loans and investments were undertaken through other divisions within the Bank. The Bank has 30 branches throughout the country through which it lends money. The Bank has made progress to transform the loan book, but this has required aggressive acceleration in a risk-responsible manner. The transformational component of the loan book grew by 430% from a very low base in 2012 compared to the remainder of the loan book which grew by 81% over the same period. The projected growth would increase the percentage of the loan book devoted to transformation assets from 11% to plus minus 30% over 4 years. There is an agreement with National Treasury and this has the approval of the Board.

The major challenge for sustainable land reform and agricultural development is the lack of synergy between the Departments of Rural Development and Land Reform; Agriculture, Forestry and Fisheries; Water and Sanitation; provinces; Land Bank; and private sector.

The Bank has a sound credit rating and is heavily dependent on accessing the volatile debt and capital markets to fund its asset growth as well as on-going support from the government to strengthen its capital base. The Land Bank procures funding for two distinct business purposes - commercial and development operations. Commercial funding is not guaranteed and is applied for financing primary and secondary agriculture, wholesale lending, and general working capital. On the other hand, the development funding requires government guarantees and is applied for sector transformation in terms of growth, emerging farmers, and agricultural sector growth. The development funding is ring-fenced and has strict disbursement conditions and reporting requirements. Over the last 30 to 36 months, the Land Bank has significantly diversified its sources of funding and raised extensive sources of development funding from multilateral institutions. The Bank has also started negotiations with the AFD (French Development Agency) for possible assistance and relevant due diligence processes are currently underway.

The Land Bank uses an Internal Risk Based ratings model to assess its credit risk across 24 risk rating bands. Its cost of funding is influenced by point in time macro-economic factors; investor appetite and yield expectations; political environment; and policy related matters. On key constraining factors, their capital adequacy is quite thin and is raised from capital markets. It requires capital enhancement to reach its capacity.  There is limitation on borrowing, and National Treasury has warned them no to over-run their borrowing capacity. The Bank is unable to provide cheap or concessionary funding unless it is subsidised by the government. The Bank has submitted a subsidy proposal to DAFF and National Treasury so that government could consider an insurance scheme for emerging farmers. Also, discussions with sector departments need to make progress in order to realise unused state farms to be released.

The Bank is trying to get into a partnership with the Department of Rural Development and Land Reform (DRDLR) for the release of land for production or farming. There is not enough equity on the part of the emerging or developing farmer. Government grants could be repurposed for Equity Fund Support; and there is a need for dispensation of water licensing.

(Tables and graphs were shown to illustrate cost funding trends; investor base; sources of development funding; Agri-BEE Fund; DAFF Funding Programmes; Land Bank distribution channels; and total bank portfolio)

SAVC Presentation
Mr John Adam, SA Veterinary Council (SAVC) Member, stated SAVC has set three strategic goals for the 2017-19 period. The SAVC wants to drive the transformation of the veterinary professions to address the needs of the people of SA more effectively and inclusively; drive an effective communication plan with all the stakeholders so as to position the veterinary professions as the preferred 'go to' source to address the animal health and welfare needs of the SA people; and to restructure the SAVC so as to be more inclusive of all the members and professions and better serve the needs of the members.

With regard to transformation, they are trying to access and evaluate relevant research so that they could source and develop educational material for children and lobby with the Ministers of the Departments of Basic and Higher Education and Social Development, and to be involved in school farming projects. The Council is looking at transforming the student level and developing further discussions with the students to see how re-curriculation could be processed in order to achieve the One Health concept which advocates that human and animal health cannot be separated from the environment. The entity is looking at providing training in the SADC region and promoting research and publishing, and to encourage training institutions to conduct climate survey.

At the veterinary professions level, the Council is looking at collaborations with the Animal Health Forum and implementation of the Private Public Partnerships plans. The SAVC has held workshops to change how the profession thinks, educate the public about the profession, and make people aware of services to the veterinary profession. The veterinary profession needs to be regulated because sometimes most lay persons do veterinary work and this causes problems. Another problem in the country is research. More money is needed to advance technologies.

The communication strategy includes stakeholders that have not been currently involved like the Animal Health Forum, industry, animal owners, consumer organisations, scientists, and Ministries of Social Development and Basic and Higher Education. An urgent communication plan needs to be developed to look at communication at three levels: upstream, lateral, and downstream.

The upstream strategy would look at communication with government, registrars and managers of the Acts, and importance of specific issues. The lateral strategy would disseminate information on a constant basis in a form of newsletters, workshops, experience sharing sessions, and mini surveys. It would also look at the Veterinary Professional Life (VPL) and personal wellness and needs. It would provide a forum to channel acknowledgement and verbalisation of challenges, and further rejuvenate and clarify the terms of reference and action-plan of the Joint Public Relations Committee in order to ensure there is a permanent PR person, communication support structures and platforms, build relationship with the media and relevant stakeholders, and cooperate with regional and international bodies. The downstream strategy would build relationship with the end-users, create communication platforms and support structures, provide proactive media and communications, and generate continuous loyalty by the public.

On restructuring the SAVC, Mr Adam pointed out it is important to restructure the Council but stressed institutional knowledge and expertise should be maintained. It is important to maintain high standards of the staff complement and investigate full-time appointed and remunerated president per term or a professional veterinary team permanently appointed as staff members. The SAVC structure would be aligned with the current needs of the members to ensure the finalisation of the internal succession plan, revise the mandate of the Council, develop transformation policy, and investigate proportional representation in the Council.

Mpumalanga Department Presentation
Ms Sindi Xulu, HOD: Mpumalanga DARDLEA, presented a report which sought to provide progress in the implementation of Fetsa Tlala targets that were set for the 2017/18 planting season, including budget allocated and utilisation.
She reported they have successfully increased the economic participation of youth in the agricultural sector through the Fortune 40 Incubator Programme and implemented the off-take agreements within the government nutrition programme. The Department initiated poultry projects in its four-district area to give new entrants access to the agricultural value-chains and support from better resourced role players to reach the MTSF target of poultry projects to be achieved by 2019.The department has improved the agro-processing value-chain through the establishment of Agrihubs in each district to enhance access to markets by farmers and developed a database of farmer cooperatives that has started to supply fresh produce of the Government Nutrition Programme as per the Cooperative Preferential Procurement Policy for local cooperatives. 682 individual farmers including 4 Fortune 40 farms continue to supply the Government School Nutrition since June 2017. It has supported 5 fruit production projects to form part of the pilot fruit production supplying programme to Highveld Fruit Market. The support included land preparations, irrigation systems maintenance, inputs applications, harvesting, transportation, and packaging and exporting.

The department has created partnership with commercial farmers and international investors. It has facilitated trade relations between the farmers and international investors in Russia, Cote d'ivoire and Angola in partnership with its Department of Economic Development and Office of the Premier. The department is in the process of finalising partnership agreements with Joubert & Seuns Citrus Farming to support and develop identified land reform farms on citrus and mango production.

With regard to food security and farmer support, farmers have been provided with production inputs, mechanisation services, and technical advice. 10 484 households are benefiting from agricultural food security initiatives. 18 852.93 hectares have been ploughed and planted on communal land and land reform projects and has involved the full participation of traditional leaders. It has partnered with the House of Traditional Leaders. COGTA bought tractors for them. The land belongs to Amakhosi, and the department has given land that has been lying fallow to youth for production. 178 jobs have been created through Phezukomkhono Mlimi and 1 983 food gardens were established and supported. The department is working closely with COGTA on the use of the tractors and implements under Amakhosi.50 smallholder farmers were identified for commercialisation. 10 484 smallholders were supported and provided with training on production, agri-business management, and marketing. Female farmers were developed to the level of National Female Farmer Entrepreneur winners. The Agricultural Infrastructure has established 40 jobs while Land Care has created 140. The total number of jobs created so far is at 318.Young farmers under Fortune 40 in 14 farms have been trained on soft agricultural technical skills. The training is on-going. Development has commenced on 14 farms which were found to be viable for farming activities. Four projects received SA- GAP certification during 2017/18 as a vehicle towards commercialisation. For 2018/19, DARDLEA has set aside R13m as part of funding with Land Bank and commercial banks towards commercialisation of smallholder farmers. This is done through the blended funding model.

On state veterinary services, the department has recruited three state veterinarians in January 2018 who were bursary holders. It is also in the process of recruiting other veterinary officers after the approval for exemption from the provincial moratorium. The department has for the third time implemented the Compulsory Community Service for veterinary graduates this year. The graduates are receiving mentorship and training from the veterinarians in the department, and when they complete their year's programme, they would be allowed to be fully registered independent veterinarians.

Ms Xulu pointed out that challenges were around limited budget to commercialise more farmers; broken down tractors; short planting season; and projected harsh weather conditions. As a result, farmers are encouraged to practise Conservation Agriculture. Capacity is to be increased in municipalities with the shortest planting seasons. Internally trained mechanics were being assisted with minor tractor challenges, and the department has advised farmers to use the drought resistant seeds.

Discussion
Land Bank
Mr S Mncwabe (NFP), first, wanted to know if the grants from the government which are issued as loans are assisting in the sustainability of the Land Bank. Second, he asked if the Land Bank has a list of farms it has loaned which are run by women, youth and people with disability because he said he asked the Minister if the Department has a plan in place seeing that most farmers are ageing. Third, he wanted to know what the role of the DRDLR is in Land Bank. Fourth, he wanted to establish the number of successful cooperatives the Bank has funded and which had access to markets.

Mr Nchocho reported that any grant that comes to the Land Bank is not lent out as a loan. Money that comes from DAFF is used as part of the blended finance.
 Regarding ageing farmers, they have funded some projects for young people. The Bank has conceptualised a programme for women, youth and disabled. The results are not showing anything at the moment because the programme is still in its infancy.
Their interface with the DRDLR is around land. The Land Bank is of the view that land parcels under the DRDLR should be given to emerging farmers to put it under production. There was a proposal to pilot a programme in each province, but things driven by government take time to materialise.
On cooperatives, he admitted they have not done a lot of work with emerging cooperatives, but only funded a few in Free State. Ms A Steyn (DA) wanted to know what the Land Bank would need from a farmer to make the Bank feel comfortable before it gives out a loan to a farmer because most farmers do not have a collateral. She further wanted to know how much it would cost to put the plus minus 4000 unused farms into production. She also wanted to establish how much money has been used as a loan to assist emerging farmers because AgriSA has set aside R331 million for its transformation programme to train and assist emerging farmers.

Mr Nchocho informed the Committee the Bank needs capital enhancement in order to take risks. The Bank last received capitalisation around 2008 and 2009 when it was collapsing. It requires periodic capital enhancement. Farmers need equity support. The Bank always does a viability study to see how much or what percentage to finance, and if the farmers do not have the rest of the money, then the blended finance comes in to meet the farmers halfway.
He further indicated they have not done calculations on unused farms. Of the R331 million from AgriSA, R5.3 million would be invested to black farmers while R4m would go to the drought scheme. Other details would be sent to the Committee.

Mr N Paulsen (EFF) asked how much the Bank has invested in technology to assist in farming processes. He also wanted to know if the Bank invests in urban farming.

Mr Nchocho stated they are not investing in new technologies but have collaborated with a few technologies to run pilots with the private sector on some of their new clients. They have not yet financed anything on urban farming.

Mr P van Dalen (DA) wanted to know if the bank has been exposed to any risks of providing funding to companies linked to the Guptas.

Mr Nchocho explained they have not funded any business from the Gupta family. The Land Bank has a strict policy that it follows and does due diligence before dishing out a loan.

Mr A Madella (ANC) wanted to find out how many black farmers have been subjected to land dispossession due to difficulties in paying loans back.

Mr Nchocho stated that Land Bank reduces the risk at the beginning. It states that farmers must have the balance to fund the loan. The Bank makes responsible lending. It does not rush to dispossess. It makes alternatives first.

Deputy Minister Sfiso Buthelezi added that in their interaction with the Land Bank there has been a balancing act where there are strict policies before granting out a loan to and dispossessing the farmer. There are grants in place to deal with the challenges of equity and blended finance.

Due to time constraints the Committee asked the Land Bank to respond to other questions from the Members in writing.

SAVC
Ms M Chueu (ANC) remarked that the presentation did not address the problem of animals in peri-urban areas that roam the streets and eat things they are not supposed to eat.  These animals are not in good condition for human consumption.

Mr Adam stated this is the biggest problem in townships. The only thing that could be done is that the local authorities must take action and have the animals controlled. The problem could not be solved with a single factor. The animals are under-fed and not healthy. The matter needs to be addressed by a number of departments. The city or municipality needs to be involved in curbing stray animals. In this case, the municipality could use animal health technicians who are in the employ of the state. An educational awareness campaign needs to be done, but this means someone has to pay for it.

Ms Steyn wanted to establish if the SAVC has an idea of where the unemployed animal health technicians are located and asked if there is an over-supply of them. She also commented the state veterinarians are experiencing transport challenges in order to do their work. She wanted to know if it were possible to get a list of animal diseases in the country because this could affect people if these diseases are not under control.

Mr Adam said he did not have the figures on unemployed animal health technicians. Another reason could be that the training of these technicians is not appropriate for what they are doing.
The issue of transport is not a problem for provinces like the Free State and Northern Cape but is a concern for other provinces and the matter is being looked at.
Regarding diseases, the SAVC and DAFF need to inform and make the public aware of the animal diseases affecting humans. A better plan is needed in terms of diseases. In the Western Cape the diseases are better managed. Other provinces do not have available data on diseases.

The Chairperson commented that a strategy to deal with the diseases is needed to indicate how the new diseases are going to be managed in order not to affect people and how people should manage them because in the townships animals eat plastics and things they are not supposed to eat. A change of human behaviour towards animals is needed.

Mr Adam added that One Health is something we should be doing because it looks at the relationship between human health, animal health, and the environment.

Mr Capa asked if the SAVC has engagements with DAFF.

Mr Adam stated they have a major liaison with DAFF on many matters. Constant meetings with the Department on issues of transformation were held and it is well on its way to be where it should be.

Mr Mncwabe asked if the University of Pretoria is the only university offering veterinary science. He also asked for clarity on why black students have been referred to as Black Fellows.

Mr Adam stated there is a shortage of veterinarians in the country, especially that of veterinary nurses and dairy veterinarians. There is a rumour that Fort Hare University would be offering veterinary studies. This issue needs the attention of the Higher Education Department because it is costly to establish a veterinary faculty.

The Chairperson remarked it is a good idea to engage the Higher Education Department because there is a need to find out why it discontinued veterinary studies at the former Medunsa University. It needs to be re-opened. DAFF is trying to ensure there are mobile veterinary clinics, but veterinary services are still a problem.

Mr R Ramasodi, Acting DG: DAFF, indicated that the issue of veterinary services remains unresolved, especially at provincial level. They have tried to have agreements with veterinarians that have agreements with the Department.

Mr Adam, On Black Fellows, stated he did not know the full story that happened at Pretoria University and he would find out and report to the Committee. The matter might have been blown out of proportion.
He noted that veterinary studies are difficult and those coming from an under-privileged background were struggling to cope.

Ms Chueu pointed out veterinary studies are not difficult because they were offered at Medunsa and there are many blacks that have veterinary qualifications. The veterinary science faculty was closed down for reasons not known to the Committee. Anatomy studies are not difficult. It is only white broeders that have a strategy to delay the progress of black students.

Mpumalanga Presentation
Mr Capa, first, wanted to know how far the Fortune 40 farms are in terms of progress. Second, he asked how involved the Department is in the maintenance of tractors so that they do not disappear. Third, he remarked the department seems to be under-rating the performance of the province in the creation of jobs. Fourth, he wanted to establish if the department is making use of service providers outside of the provisional grants.

Ms Xulu replied that the Fortune 40 farms are all productive and continue to supply the Government Nutrition Programme and Spar. They are working with Amakhosi on tractors and farmers are being trained to be mechanics in order to fix the tractors.
The figures that were presented for jobs are for Fetsa Tlala, and they are not using any service provider, but make use of only those they buy seed from.

Ms T Gasebonwe-Tongwane (ANC) wanted to know what the results were regarding the drought resistant seed given to the farmers.

Ms Xulu said there has been an increase in the number of tons harvested.

Mr W Maphanga (ANC) wanted to know why the agriculture contribution to employment has declined; and who is responsible to lift the moratorium that makes it impossible for the department to recruit permanent extension officers.

Ms Xulu reported the decline in agriculture contribution to employment has been there for a long time. As a result, they are trying to make the unemployed and elderly see value in the importance of agriculture. She indicated she did not know when the moratorium would be lifted on extension officers.

Ms Chueu remarked that a big value chain is needed in the commercialisation of farmers. In Gauteng, farms are given to people, but they are not making profit. New markets have to be opened up for these farmers in order to create jobs for people. The department needs to come up with a new spatial framework for the 50 farms that have been found to be lying fallow.

Ms Xulu said their commercialisation programme has included women and one of them is exporting to China. The government hubs are for opening markets for the new farmers.
The 50 farms that are lying fallow belong to the Department and Department of Public Works. Just like Fortune 40, the Department intends to employ young people to run these farms.

Mr K Robertson (DA) asked how the department is going to till the land because 90% of the tractors are not working because of missing items; and he asked for an update on the KMI airport.

Ms Xulu re-iterated that farmers are being trained to be mechanics so that they are able to maintain the tractors and not wait for the government. She said the KMI airport would help them to be able to export their products to foreign countries like Russia.

Ms Steyn stated she is happy the Marapyane College is functional and operating, but the presentation has not mentioned anything about the Agrihubs the Committee visited during its oversight. She further commended the department for working with Grain SA because it is a good thing to partner with commodity groups.

Ms Xulu informed the Committee the Marapyane College is open for training purposes. 50 farmers have been trained on the technical know-how for few weeks. The Huntington Packhouse has been completed and it is working. It has got a borehole. The only problem was that it did not have a water licence.

The meeting was adjourned.

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