SA Sugar Association on sugar tariffs and SAFDA; Trade and Industry BRRR

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Trade and Industry

10 October 2018
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee continued discussion of the draft Budgetary Review and Recommendations Report. The Chairperson went through the report page-by-page, and discussion focussed on the entities that reported to the Department of Trade and Industry, particularly the South African Bureau of Standards, and potential losses by the Department. The Department of Trade and Industry informed the Committee that the Bureau had received a disclaimer from the Auditor-General. The Committee spent a protracted period of time discussing the issue of localisation and the fact that the busy programme had squeezed out the inquiry into the locomotive saga at Transnet.

The Committee then continued its engagement with the sugar industry. The Chairperson announced the excellent news of the publication of the Notice in the Government Gazette No 41967 9 October 2018 effecting agreed changes to the South African Sugar Association’s Constitution and the Sugar Industry Agreement.

The South African Sugar Association thanked the Chairperson and the Committee for its sustained support of the sugar industry. While there had been many positive events, there were still a number of challenges. He explained that, in the view of the Sugar Association, the international price of sugar was a world dump price. He noted that all countries protected their sugar industry with import tariffs. One example was Mozambique which had a dollar price of $932 per ton. The sugar industry had asked for $856 per ton but had been given $680 per ton and the International Trade Administration Commission of South Africa (ITAC) had applied a cost reduction factor known as REER (real effective exchange rate) which brought the Dollar-Rand rate down to a lower rate and discounted the export duty by 15%. The South African Sugar Association was of the opinion that the tariff did not provide for a sustainable future for the sugar industry and would most likely result in a shrinkage in the industry.

One Member was particularly concerned that the International Trade Administration Commission of South Africa had not understood the predicament of the sugar industry. What had the engagement with the Commission been like? Did the Sugar Association believe that the Commission had a full understanding of the position?Another Member asked why the sugar industry did not wait a year and then re-apply for a tariff review as it appeared that there were some benefits to be gained in the first year? How could the country handle the matter of the sugar on the world stage in the future? How many acres of cane were farmed by black farmers and how many acres were farmed by white commercial farmers? Why had the industry not diversified, in particular, into biofuels? Why had South Africa not come up with something like the bioplastic milk bottle developed by Brazil?

The Chairperson of the South African Farmers Development Association performed a Zulu dance to celebrate the gazetting of the Transitional Arrangements which included formal recognition of the Development Association’s role in the sugar industry. However, he stated that his counterparts were not celebrating transformation and the South African Cane Growers Association had forecast the demise of the Development Association at the end of the first transitional period. He asked that the Committee support a change in attitude. He suggested that government needed to support the small-scale farmers because the cost of farming was greater for small-scale farmers than for large-scale commercial farmers. After the tariff adjustments, small-scale farmers still had a negative income. 40 000 small-scale farmers had already given up farming. He asked that 20% of the benefit derived from the increased tariffs should be given to developing farmers.

The South African Farmers Development Association presented the Strategic Programmes that the South African Farmers Development Association intended to implement to ensure the sustainability of the farmers within its organisation. The five pillars were transformation, land reform and small-scale farmers, growth capacity development, grower financing, and bulk buying diversification and value chain participation.

Members asked for clarification of the sticking points that had prevented the parties reaching agreement of their own accord. What was going to be done to increase the hectarage of black farmers? Considering that there had been transformation in the sugar industry, what government support was the industry getting from the Department of Agriculture and the Department of Land Reform? How were small-scale farmers affected by the fact that their land was communally owned and they could not use the land to leverage loans? What was South African Farmers Development Association’s view on ensuring that small-scale farmers in the sugar industry could own the land that they cultivated? Was membership of the Sugar Association calculated in terms of farmer numbers or tonnage of sugar now that the agreement had been signed? What had happened to the promise of R1 billion in reciprocity by the commercial sector of the sugar industry?
 

Meeting report

Opening remarks
The Chairperson noted that the Credit Amendment Bill had served before the National Council of Provinces the previous day. She requested the Department of Trade and Industry to inform the Minister of Trade and Industry that she was unable to attend the conference organised by the National Regulator for Compulsory Specifications on the Role of Regulators in the Fourth Industrial Revolution as she had received the invitation that morning for the following day. It was impossible for her to arrange to attend at that late stage and yet it was an important discussion that she and Committee Members would very much have liked to attend.

The Chairperson asked DTI whether the SABS audit report had been received.

Ms Ntombi Matomela, Acting Group Chief Operating Officer, DTI, replied that DTI had been informed that SABS had received a disclaimer from the Office of the Auditor-General.

The Chairperson asked that the Audit Report be submitted to the Committee

Consideration of Minutes
Minutes of 13 June 2018: There had previously been problems with the set of minutes which had been sent back to be cleaned up. The minutes were adopted with the requirement that the correct register be attached.

Minutes of 14 June 2018: The minutes were adopted with the required amendments.

Ms Mantashe enquired whether the resolutions had been carried out.

The Chairperson stated that when decisions were taken during the deliberations on the Bill, the decisions were followed up at the following meeting. She was sure that Adv van der Merwe would have carried out the decisions.

The Committee Content Advisor informed the meeting that the resolution had related to the advertisement of a number of clauses in the Copyright Amendment Bill. The clauses had been advertised and the responses had been presented to the Committee in the previous term.

Minutes of 22 August 2018: The Chairperson noted that a month had been wasted because the International Trade Administration Commission of South Africa (ITAC) had wanted a closed meeting but had finally stated that it was not necessary to close the meeting. It was agreed that the Content Advisor would make the necessary changes and return the set of minutes the following day.

Minutes of 13 September 2018: The Committee adopted the minutes.

Minutes of 14 September 2018: The Secretary was requested to make amendments and to return the minutes the following day.

Minutes of 12 September 2018: The Committee adopted the minutes.

Consideration of the Second Draft of the BRR Report
The Chairperson noted that the Committee had been through the report the previous day and she was hoping that Members would make some proposals for conclusions as she went through the report page-by-page.

The Chairperson reminded the Committee that Parliament had not had the powers to amend a budget before the passing of the Money Bill in 2002. She asked whether the MTEF, together with the power to amend the budget, had been a success. Initially Parliament had been somewhat reluctant to recommend changes to departmental budgets because, where a Committee asked for an increase in the budget for a particular matter, there had to be equivalent cuts somewhere else in the departmental budget.

Entities
The Chairperson noted that the Committee had not met with many of the entities that year because of time constraints. However, there had been extensive engagement with the South African Bureau of Standards (SABS) because, despite the Committee’s best efforts, SABS had, each year, received a qualified audit since the beginning of the current term of Parliament. The Committee spent some time deciding how to present the Committee’s engagement with SABS.

Other issues discussed included the appropriate length of the report on the Department of Trade and Industry compared to entities, and the number of entities that fell under the DTI. Was it 13 or 14 entities? The Broad-Based Black Economic Empowerment Commission (B-BBEE Commission) should have been independent but was funded through the DTI by National Treasury. DTI had intended that the Commission be independent but National Treasury opposed that view. That was the 14th entity.

Ms P Mantashe (ANC) asked why National Treasury was treating the B-BBEE Commission differently from other Commissions.

Ms Matomela agreed to provide the reasons given by National Treasury for not wanting to view the B-BBEE Commission as an independent Commission.

Potential losses
The Committee expressed concern that the DTI was facing the potential loss of R32 million.

Ms Matomela responded that that amount applied to a range of cases that had been on the books for a number of years. It included overpayments, etc. They were not cases of corruption.

Ms Mantashe asked whether the incentives referred to in the explanation of the potential losses related to individuals or organisations.

Mr A Williams (ANC) was concerned about the amount of money that was being incorrectly paid out.

Ms Matomela stated that her reference to incentives was simply an example of the monies outstanding.

Mr D Macpherson (DA) asked whether the funds lost in the Solms-Delta NEF farm case were included in the R32 million.

Ms Matomela responded that the funding for the farm would be recorded in the NEF budget, not the DTI budget.

Ms Mantashe asked for a detailed list of which monies were potentially irrecoverable.

Mr Williams asked how much money had been spent on attempting to recover the potentially irrecoverable funds. What was the spread of irrecoverable funds over the past five years?

The Committee Researcher explained that some of the money might relate to loans given to start-up companies that had not been repaid. She agreed that a list of the origins of the funds would be helpful.

Budget
The Chairperson reminded Members that the BRRR related only to the First Quarter results and therefore the Committee had to determine whether 8% expenditure was appropriate for a First Quarter. 55% of the targeted expenditure for the Quarter had been spent. The Committee was concerned because there was a huge need for funds to stimulate the economy.

Localisation
The Committee felt that there had to be a greater emphasis on localisation. The Committee had agreed to an inquiry into localisation. The terms of reference had been agreed to a year ago and completed by January 2018. Executives had already left Transnet and the Committee would not be able to get to the bottom of the matter.

Mr Macpherson asked why the Committee had not managed to deal with the localisation inquiry. He had not received a response to his letters querying the shelving of the inquiry. He wanted that shelving of the inquiry to be included in the BRRR.

The Chairperson noted that the decision had been taken to complete the inquiry by January 2019. She referred to the challenges faced by the Committee, including Bills that the Committee wanted to pass. The Gambling Bill had still not been received. The Copyright Bill had been delayed by the need to redraft the original Copyright Amendment Bill and it had to be completed in conjunction with the Performer’s Protection Amendment Bill. She admitted that the Committee had not achieved that target.

Mr Macpherson said that the Executive was responsible for the Bills and it was not the responsibility of the Committee. The Committee had to prioritise. He requested that the finalisation of the Inquiry be prioritised. It was unacceptable that the Committee should now attend to the National Gambling Bill. It should be left to the Sixth Parliament.

The Chairperson stated that the situation was such that the Committee could not allow an Administrator to continue to run the Gambling Board so the National Gambling Bill was a priority. The localisation issues would be attended to.

Mr Williams asked that local procurement and designations should be investigated in all aspects of business, not just in regard to Transnet. There was a lack of demand because government departments were not buying locally.

The Chairperson pointed out that everyone in the Committee agreed with Mr Macpherson and she personally took responsibility for not getting to the localisation inquiry.

The Chairperson stated that the Committee would attempt to complete the BRRR just before attending to the Copyright Amendment Bill on the following day.

Engagement with the Sugar Industry

The Chairperson announced that the Committee had received excellent news because Members had received copies of the Government Gazette No 41967 of 9 October 2018 containing the Notice in terms of Section 2 and 4 of the Sugar Act, 1978 effecting agreed changes to the South African Sugar Association’s Constitution and the Sugar Industry Agreement.

The Chairperson noted that all Members were committed to the resolution of the challenges in the sugar industry. She noted that it was a transitional arrangement.

The Chairperson acknowledged the large delegations from South African Sugar Association (SASA), the South African Farmers Development Association (SAFDA) and the DTI.

Position on the New Sugar Tariff - SASA
Mr Mr Suresh Naidoo, Chairman, SASA, informed the Chairperson that he would first like to apprise the Committee on the timelines of the intervention in the sugar industry. He read from a briefing note addressed to the Chairperson, headed “Interventions leading up to the promulgation of the draft Transitional Arrangements to SASA’s Constitution and Sugar Industry Agreement (SIA)”, and which presented the various events, initiatives and interventions that SASA had undertaken to reach an amicable resolution.
Mr Hans Hackmann, Vice-Chairman, SASA, thanked the Chairperson and the Committee for the sustained support of the sugar industry. While there had been many positive events, there were still a number of challenges. He provided an overview of the South Africa sugar industry. He explained that, in the view of SASA, the international price of sugar was a world dump price. He noted that all countries protected their sugar industry with import tariffs. One example was Mozambique which had a dollar price of $932 per ton. SASA had asked for $856 per ton but had been given $680 per ton and ITAC had applied a cost reduction factor.

The REER (real effective exchange rate) brought the Dollar-Rand rate down to a lower rate, which discounted the export duty. Mr Hackmann presented a calculation of the Dollar Based Reference Price (DBRP) and the import duty calculation which showed that the implementation of the REER adjustment gave importers of sugar a 15% discount per ton on the US$ 680 DBRP.

The tariff did not provide a sustainable future for the sugar industry and would most likely result in a shrinkage in the industry. There was no incentive for investment in the sugar industry. He noted that SADC countries wanted access to world sugar at the dump prices which could cause a further loss of tonnage to the industry.

He concluded by suggesting that the protection methodology used by ITAC might be flawed. There was a need to review the basis for the protection of the sugar industry. The industry wished to engage with key stakeholders to find a way forward. He presented two short-term solutions that would sustain the industry in the next three years: the first would be to remove the REER from the import duty formula; and the second would be to explore other protection measures applicable to dumped imports.

Discussion
Mr S Mbuyane (ANC) requested that both presentations be made before the Members engaged in discussion.

Mr Macpherson suggested that the presenter was too kind in trying to find the good as the position was a disaster. It was catastrophic. The attempt to see the positive side of things was like a car accident victim who had lost both his arms but was grateful that he had not lost his legs. He understood that the sugar industry could only apply for a change in tariff in three years’ time. What had the engagement with ITAC been like? Did SASA believe that ITAC had a full understanding of the position? How long was SASA’s oral engagements­ with ITAC? ITAC had indicated that certain engagements and processes had taken place, but Mr Macpherson had heard to the contrary, and if that was the case, it would allow SASA to request a judicial review.

The Chairperson cautioned Mr Macpherson against making such statements without proof. He was a little speculative.

Ms Mantashe asked for a further explanation of the REER. Why did the Vice-Chairperson want the REER removed? Would it help the sugar industry? If ITAC could remove the REER or import duties, at what level should the sugar tariff be to protect the industry and prevent the job losses?

Mr Williams asked why SASA did not wait for the first year and then re-apply. It appeared that there were some benefits to be gained in the first year. Perhaps the industry should just wait instead of approaching the Committee, not that SASA should not approach the Committee.

Mr G Cachalia (DA) understood that some producers were flouting the World Trade Organisation (WTO) rules and were engaging in dumping. South Africa should adhere to the WTO rules while those who subverted them had to be held to account. South Africa needed to champion the adherence of WTO rules. He did not believe in protectionism, but that South Africa had to build a strong competitiveness without unfair assistance or unfair competition. He asked how the country could handle the matter on the world stage in the future.

Mr B Radebe (ANC) appreciated the presentation that gave cold facts. He supported Mr Mbuyane’s call for the second presentation before the discussion as a lot of things were interlinked.

The Chairperson agreed with the principle of hearing both presentations but she believed that the Committee needed to first get an understanding of the technical issues. She had difficulties with two issues. There was no information on how many acres of cane were farmed by black farmers and how many acres were farmed by white farmers. Given the situation that they were currently in, that was important information, and she knew that SASA had the figures. She assured SASA that the Committee would be seeking the assistance of DTI or the International Trade and Economic Development Division (ITEDD) at DTI to explain why the REER was used.

There was a reference to a short term and a long term outlook. She would not go into that until she had heard the next presentation but the Committee was mindful of the lack of transformation, the tariffs being addressed, and the fact that the shelf-life of the legislation was over. The Committee had raised the issue of sugar when the sugar tax had been introduced and the negative impact that it would have, but Members had to agree with the need to be healthy.

The Chairperson informed SASA that she had found a milk bottle that had been produced in Brazil from sugar compounds that was plastic and recyclable. She asked why South Africa had not come up with something like that. SASA had to face the reality and ask what else could be done with sugar. SASA could not just sit back. Seven years previously, in that very room, the Committee had heard how the Brazilians had created jobs in the sugar cane industry and had used sugar for a range of products. The number of jobs created was phenomenal but the cane had not all been intended for the production of sugar. SASA had to get beyond the current problems. The Committee would tackle the tariffs but she had wanted the facts first. She did not want the policy responses.

Response
Mr Ackermann responded to Mr Macpherson’s question. He explained that ITAC would review the tariff in three years’ time but the industry could apply for a review in a year’s time if it had something new to bring to the table. In response to Mr Macpherson, he stated that there had been significant engagement as there had been a ministerial task team where SASA members had sat around a table with downstream users.

Mr Sifiso Mhlaba, National Marketing Executive, SASA, explained he had sat on the Ministerial Task Team. SASA and downstream users, as well as DTI, were on the task team. It was unique as it was the first time there had been a Ministerial Task Team. There was a lot more engagement than on previous occasions. The ITAC team had spent half a day with the sugar industry going through the numbers.

Mr Ackermann explained to Ms Mantashe that if REER were removed, the price of imported sugar would increase by R700+ and the industry would be sustainable. He told Mr Williams that waiting a year was an option but the industry wanted to go into the economic methodology of determining the import duty and that would take time. The industry was sustainable for the next 12 months.

How to give credence to WTO rules? Mr Ackermann stated that SASA did not want to be seen as a topped-up industry, and one that was uncompetitive. ITAC was very strong on the WTO bound rate and when SASA had asked for R 856, ITAC had stated that it would take sugar way above the 105% limit. That was when the price was based on the world price of R345 a ton. When the world price attained a more normal rate, SASA’s requested price would be much lower that the 105% of world rates. SASA understood that the industry had to adhere to what ITAC approved. Did dumped rates apply to the WTO? Mr Ackermann did not know.

Mr Mbuyane stated that it was against the WTO rules to dump. He asked DTI to confirm. He noted that clarity had been given around the R680 projection. Would there have been a difference if the R860 rate had been applied?

The Chairperson asked DTI, to explain how South Africa had previously fought dumping cases at the WTO.

Ms Mantashe asked DTI if removing the REER was a big problem.

The Chairperson explained that DTI could not answer that question as REER fell under ITAC and not DTI.

Ms Elizabeth van Reenen, Chief Director: International Trade and Economic Development Division, DTI, explained that South Africa might not be exceeding the bound rate when the world price was low, but would exceed it when the world price was higher. However, the industry would not have a problem when the world price was higher. The industry had a problem when the price was lower.

She added that dumping was prohibited and should be addressed through trade remedies such as an anti-dumping remedy. That was a process that would be implemented by ITAC following an investigation. There had to be proof that there was dumping and the causality had to be shown before an application could be made for the dumping to be addressed.

Mr Mbuyane requested that there be an agreement in the House that there be no talk of dumping as there was no evidence of dumping until the investigation had been completed. It would be wrong to speak of dumping at that stage.

Ms Mantashe asked who had to investigate whether there was dumping in the country.

The Chairperson stated that any Minister could request an investigation by ITAC. She added that earlier that year, it had been proven that shiploads of duty-free sugar had been dumped in the country. In her view, that was dumping. The Committee had raised the issue with the South African Revenue Service and to that day, the Committee had not received an official response. It was a very serious issue. She was stating that sugar had been dumped by Brazil in previous years. It was the reality and she would not shift from that position. She believed that the problem might be that there was not enough monitoring in South Africa and so other countries were able to dump on South Africa’s shores. Maybe one could say that those countries were smarter than South Africa, but she would not allow another shipload of duty-free sugar in the country under her watch.

Ms Mantashe suggested that the International Trade and Economic Development Division (ITEDD) of DTI should be working with SARS to monitor products coming into the country. The Committee’s time was being wasted because people were not doing what they were paid to do.

The Chairperson agreed that there should be alignment between departments and entities. They should work together. One could not say that it was not his or her mandate. One had to alert one’s colleagues if one was aware of such matters.

Mr Macpherson stated that unless one was prepared to stand in the port and check every ship that came in, it could not be done. He commended the Chairperson’s fighting spirit but no one in SARS was prepared to take responsibility and at the Committee meeting at which SARS was present, there had been a lot of blame shifting by SARS and there had been no indication that it would not happen again. It was not ITEDD’s responsibility, but the responsibility of SARS. Unfortunately, SARS got away with it without having to account. The Committee needed to ask SARS for a detailed written explanation and a guarantee that it would not happen again.

The Chairperson stated that the Committee had done the best that it could in the current environment. There were no guarantees, but they could expect SARS to do its duty. She pointed out that Members were very passionate about the issue but the meeting would move on to the crux of the matter. SASA members might believe that the Committee had not done its job to get the requested tariff. The Committee believed that it had done the best it could in the current environment. After tea, she wanted to know if SASA had done the best it could.

The Chairperson thanked Mr Hackmann and Mr Naidoo for the technical presentation. She invited the South African Farmers Development Association to present.

2018-20 Transitional Arrangements and Sugar Tariff Protection - SAFDA
Mr Siyabonga Madlala, Chairperson, SAFDA, was so excited about the gazetting of the amendments to the Sugar Industry Agreement and the constitution of the South African Sugar Industry, which formally recognised SAFDA that he performed a Zulu dance before beginning his presentation.

He began by discussing the transitional arrangements, stating that the DG of DTI had achieved a wonderful result as it gave SAFDA legitimacy in the industry. However, his counterparts were not celebrating transformation and the South African Cane Growers Association had forecast the demise of SAFDA at the end of the first transitional period. He asked that the Committee support a change in attitude.

Mr Thandokwakhe Sibiya, Head: Stakeholder Affairs, SAFDA, presented the Strategic Programmes that SAFDA intended to implement to ensure the sustainability of the farmers within its organisation. The five pillars were transformation, land reform and small-scale farmers, growth capacity development, grower financing, and bulk buying diversification and value chain participation.

Mr Madlala commended ITAC for expeditiously dealing with the sugar tariff protection matter and appreciated the support of the President, the Portfolio Committee, the Ministers and the dedicated staff of ITEDD at DTI. However, it was clear that the SAFDA growers were not yet out of the woods. He supported the industry’s call for a review of the sugar tariffs. He suggested that government needed to support the small-scale farmers because the cost of farming was greater for small-scale farmers than for large-scale commercial farmers. After the tariff adjustments, small-scale farmers still had a negative income. 40 000 small-scale farmers had already given up farming. He asked that 20% of the benefit derived from the increased tariffs should be given to SAFDA farmers.

He ended by saying that SAFDA needed ongoing monitoring and support from government.

Discussion
Mr Radebe appreciated the three presentations given that afternoon. He asked the Chairperson of SASA to clarify the sticking points that had prevented the parties reaching agreement of their own accord on 18 August 2018. The points of disagreement had to be addressed. He agreed with SAFDA’s focus areas. The diversification into biofuel was critical because government wanted clean fuel and electricity. They could provide municipalities with clean fuel. Renewable energy was in the hands of whites who had been empowered before, but biofuel, a sunrise industry, should be grasped by black farmers. He asked about the hectarage of the black farmers. What was going to be done to increase the hectarage of black farmers? The first person to have formed an association for small-scale black farmers was Inkosi Albert Luthuli. He had passed on in 1967 and the country was still grappling with the issue in 2018.

Mr Macpherson stated that previously one of the Committee Members had stated that there could be no government support without transformation. Now that there had been transformation, what government support was the sugar industry getting from the Department of Agriculture and the Department of Land Reform? He assumed that the white commercial farmers had title deeds and owned the land that they farmed on. He assumed that the majority of SAFDA members farmed on communal land and therefore did not have the same ability to secure their businesses and to raise capital against the land that they owned. How did that affect small-scale farmers? What was SAFDA’s view on ensuring that small-scale farmers in the sugar industry could own the land that they cultivated?

Mr Mbuyane checked how the membership was being calculated. Was membership calculated in terms of numbers or tonnage after the signing of the agreement? He was touched by the language of sabotage that SAFDA would not see the sunshine, etc. One was talking about transformation, one was talking about people who were united and were working together. If swear words like that were used, he had a challenge.

He added that there had been an undertaking by SASA that it would assist SAFDA by giving R1 billion. None of the presentations had referred to that.

Mr Williams appreciated the presentations, and the dance. He wanted to assure everyone that the Committee would do oversight on the transformation in the sugar industry. He believed that the Committee should allow the sugar industry to sort out its own problems but if it failed to do so, he committed the Committee to intervening in the transformation of the industry as without transformation, there was no hope for growth in the country. He assured SAFDA that the Committee would not abandon the farmers at that point.

The Chairperson appreciated the sentiment that SASA and SAFDA were reasonably content with the tariff issue but there were countless reservations by both SASA and SAFDA but the reservations seemed to be different.
She referred to the point made by SAFDA: Tariff covers the producers of 90 % of the cane crop, our lot producing 10% of the cane crop are not covered. She assumed that the SAFDA farmers’ costs were not covered by the tariff. That related to the question of how many hectares SAFDA farmers farmed. The Chairperson commended SAFDA for actively looking at diversification. The stimulus package could help but one would have to see how it could benefit the farmers.
She appreciated the cartoon which suggested that the person with the least needed much more help than the one with the most. She asked Mr Madlala to spell out what the cartoon meant in terms of the sugar industry. She had said government would not help unless ‘x’ was done. There had been progress but she needed SAFDA and SASA to be frank about where they were in respect of the transformation. The issue of transformation had to be resolved in an equitable manner.

Response
In responding to Mr Radebe, Mr Madlala said that it was a difficult question to answer because when they were sitting in consultations, SAFDA had been told that it was a ‘bottomless’ pit. The sugar industry could not continue to be funding SAFDA because it was a bottomless pit. It was a question of entitlement because commercial farmers had 90% of the cane growing land and the gross tonnage. If they said that there had to be an equitable share of levies, it meant that there had to be cross-subsidization. SASA had been collecting levies from those who had been making a profit for years. They did not want to cross-subsidize. That was causing the advantaged members of SASA to object.

His association had been told that his members were a bottomless pit. That was where the negotiations had stopped and the DTI had intervened. His organisation was supposed to develop the poorest of the poor but how could they be developed when they were not given anything. It was a question of equity and equality. That cartoon said it all. He sometimes thought that expropriation without compensation was the solution.
The land lost was a lost opportunity. It was an opportunity cost. It was the sense of the entitlement that had caused the negotiations to stop.

SAFDA would press on with transformation initiatives and would not stop. Although he was now a commercial farmer, he knew what it meant to work the whole year and make no money. He knew the pains of a poor farmer. The small scale farmers were actually subsidising the millers. SASA was proud of the 22 500 farmers, of whom 90% were black farmers, but the black farmers only produced 10% of the crop because they did not have land. Even if government bought land for the people, they would say that they did not have the skills, but no one would assist them to be effective commercial farmers. Whatever land was restored had to go to black farmers and be farmed by black people so that it could help change things. They could not sit at 12%. In fact, the black farmers had dropped to 10%. When black farmers went out of business, the land was not for sale, it just went out of business and the black farmers lost their income. They could not sell their land and it went back to the communal ownership.

Regarding government support, SAFDA was currently in talks with the Department of Agriculture, Forestry and Fisheries and the Department of Rural Development. Government policies were a hindrance because government had to go through tender processes as per the procurement policies and those tenders were tenderpreneur driven processes that did not come at the right time. Those people only came in January when the fertilisation period was over. That was why SAFDA wanted to be an intermediary. SAFDA did not want to have to go through tender processes because the tenders were given to people who did not know what they were doing.

Land tenure was a sensitive area, especially in KwaZulu-Natal, when the government was currently talking about the Ingonyama Trust land. Mr Madlala said he did not want to speak about it because he did not want to answer to his king. He was loyal to his king and he did not want to tap into that land. That was not the issue. It was about the sharing of other private pockets of land. The small scale farmers should be given titled land. Small-scale farming did not enrich a black farmer.

Mr Madlala turned to the gazetted agreement. One man one vote was not accepted by SASA because although there were many SAFDA farmers, voting worked on tonnage. The 80% agreement was a disjuncture between how democracy worked and how the small scale farmers were treated. Democracy should prevail. The 80% agreement did not work because one farmer could veto a decision. The R1 billion promised by SASA was off the table because the tariff was not what was requested. Meanwhile SASA had said R1 billion was a minimum commitment when they went to government. He wanted reciprocity as that would help black farmers to get out of the negative figures when it came to income.

He commended the management and leadership of SASA but the members were not as accommodating. SAFDA and SASA were in a forced marriage so there would have to continued oversight. There would be no transformation without taking a bit from those who have had in the past.

Further discussion
Mr Cachalia stated that the Committee was pleased to support SAFDA. His party agreed with the cartoon and the juggling of the boxes in that there should be equality of opportunity but not necessarily equality of outcome. The outcome should be beyond the scope of engineering. Government had to come to the party. Government could not be a hindrance. The Committee would continue its oversight.

Ms Mantashe asked for an honest answer. When the R1 billion was offered, it had not been dependent of the tariff. Why did SASA renege on that point. What was the problem?

Mr Radebe stated that commercial farmers had been given support by the apartheid government and even preferential interest rates to become successful even old farmers had been given loans as they had been able to pass the loans on to their heirs. In 1996, the Constitution had been adopted and the Constitution stated that those who had been disadvantaged had to receive help. If SASA members did not help the black sugar farmers, they were anti the Constitution of the Republic. Were SASA members anti the Constitution? The farmers were all in the same ship. If the industry collapsed, they would all lose. It was the ordinary members who would make decisions. Those people were in the marriage with SAFDA. What programmes did SASA have in place to educate its members that they had to empower the historically disadvantaged farmers? There had to be a change of mindset.

Mr Radebe stated that there was a transitional agreement but asked what would happen down the line if the Committee did not have the foresight to ensure that there was real transformation. If people were not willing to transform, it would not happen. The government stimulus package was a pie that could be shared by all farmers and they should hunt together.

Mr Williams was disappointed by the point about the R1 billion. Every time that SASA had appeared before the Committee, it had showed slides of what the money was to be spent on but there had been no indication that it would not happen. Now it seemed to be off the table. Did the SASA management have the mandate to come to Parliament to tell the Committee that there was a commitment to transformation? They had come to Parliament and made promises but now there was no money and insulting terms like ‘bottomless pit’ had been used. He was sceptical about whether SASA had a mandate to talk to the Committee as nothing that they had promised was happening. Was it all just nonsense? He would like SASA to tell the Committee if they had just been talking nonsense.

The Chairperson asked for concise responses, beginning with SAFDA.

Responses
Mr Madlala indicated that the questions had been addressed to SASA and he was comfortable. He had nothing more to say.

Mr Naidoo stated that as Chairman of SASA, he could categorically state that it was inaccurate to say that there would be no transformation because the tariff implemented was not the one requested. SASA was 100% committed to transformation. Mr Jack, who was responsible for the transformation programme, had been invited to join them and he was in attendance. At one of the meetings, the industry had informed the Committee that it would put up R172 million for immediate assistance for small and emerging farmers and that had been committed and was being rolled out as he spoke. The industry would be making its presentation on transformation later in the year. Mr Jack was developing a transformation strategy. SASA consisted of sugar millers, cane growers and SAFDA. SASA would fulfil on the undertaking.

The Chairperson noted that the tariff reciprocity commitment had been R1 billion. SAFDA had said that the tariff reciprocity commitment was in question because the tariff had not been at the requested level. Committee Members had not had the understanding that the commitment was dependent on the tariff. How much was SASA actually going to give to black farmers? A number of the smaller, emerging sugar farmers were suffering pain because they were coming out with a negative income. Could Mr Naidoo provide some assurance that what was stated in the previous Committee meeting would come about? Members were not satisfied that the commitment was there. The majority of Members wanted some re-assurance.

Mr Naidoo stated that the first commitment of R172 million was being rolled out. Vuyo Jack was putting together a transformation plan that would encompass all the issues. SAFDA had raised a number of issues that would be in the plan. They had to be careful not to put the cart before the horse and so he did not want to put a price on the plan. They might be able to buy more with the money available. He believed that everyone would be pleased with the plan. Once everyone had bought into the plan, it could be rolled out.

Mr Mbuyane said he had asked about the commitment of the R1 billion. What had happened to it?

Ms Mantashe stated that a promise had been made in Parliament that the small scale farmers would be helped to get on their feet. There was no condition. There was no Vuyo Jack at the time. There was a commitment and they could go back to the recordings because SASA had said it under oath. The Members were not joking. The Committee requested that SASA stick to its commitment.

Mr Williams did not believe SASA. He wanted to see a report on the expenditure of the R172 million. He wanted to see where the money was going. Who had made the bottomless pit remark? It seemed to him that there was no buy-in of transformation by the SASA members. Transformation was not happening on the ground. He did not believe that SASA leadership had kept its promise. He did not know why SASA had not joined with SAFDA and had said, collectively, that without an adequate tariff, they could not do their business. It seemed that SASA was doing the minimum that it could do to get protection from the state via tariffs.

The Chairperson directed the meeting’s attention to the point made by SAFDA that there was a benefit of R2.5 billion to the industry. SAFDA was asking for 20%. Could that be done? Could SASA consider and unpack that issue?

Response
Mr Naidoo stated that reciprocity was part of a bigger package. One could not look at parts as one would get a biased view. Only when the whole picture was available could SASA say how much it would cost.

Mr Mbuyane asked where the R1 billion was? They had been told of Jack, Jack, Jack. Who was Mr Jack and who had appointed Mr Jack?

Mr Hackmann noted that there were a lot of questions around the R1 billion over three years that had been linked to the tariff application. The Committee had asked SASA to develop a plan before the tariff increase. That was the R172 million. Of the R172 million, R145 million had been spent. SASA had been told by the Committee that that amount was to be spent and was to be de-linked from any affordability. The organisation was also told by the Committee to put together a detailed transformation plan. SASA had hired Mr Jack to assist SASA to put together that transformation plan. The amount of money to be spent had been R1 billion over three years.

The plan was now bigger and stretched over five years and had incorporated the various sections of the industry. Mr Jack had spent a lot of time with millers, cane growers and with SAFDA. SASA owned no cane lands and no sugar mills. The real transformation had to take place in the growing sector and the sugar milling sector. SASA could only facilitate by getting money from its members to support the plan. The plan would be over five years and he personally believed that the funds would be over R1 billion. The industry was committed to transformation and he was urging Mr Jack to complete the five-year plan because SASA was under pressure to present the plan.

Mr Madlala said that the R172 million was de-linked to transformation. The R1 billion was a reciprocity commitment of what SASA would give back to the black people. That money was not for transformation. It was funding to level the playing field and to make things more equal for black people. He did not believe that the money was going to be given.

Mr Madlala stated that the person who had called them bottomless pit was in the meeting. It was the Chairperson of the Millers Association. To Mr Madlala and his people, a bottomless pit was a toilet. His members were crying. His counterparts were undermining SAFDA by saying that the farmers had to get cash when SAFDA wanted to encourage discipline and put the money into growing requirements. That had caused a disruption. The actual running of SASA was also a problem because anyone could veto any decision.

Mr Radebe said that the issue was whether SASA abided by the Constitution. The indignity with which people had been treated by calling them a bottomless pit showed that they were not committed to the Constitution. He was happy with the responses of the Chairperson, but he had also asked about what transformation or educational plans were in place to transform the members themselves. Something had to be drilled into the heads of the members so that they accepted transformation. Members could veto the plan and so the members themselves had to be transformed. Someone had to bring the glue. He liked the fact that Mr Jack had engaged everyone and not drawn up a plan in an office. He liked the fact that SASA was the growers, millers and SAFDA. However, he was sceptical about what was happening on the ground. More work had to be done. It was too early to celebrate.

The Chairperson noted that it was probably the last time that the sugar industry would appear before the Committee again that year. There were two issues: one issue was the transformation issue and the second issue was that of the tariffs. There had also been a request that a certain amount of money needed to be put on the table immediately.

The whole thing had gone off course because the tariff was not what everyone had wanted. She stated that R2.5 billion would be gained by the industry. SAFDA was not asking for 50% of that money, but had asked for 20% of the R2.5 billion. SAFDA knew that it provided a small percentage of the sugar. She requested SASA to send a report to the Committee early in the new year, before elections.

The Chairperson was happy that progress had been made but one had to adhere to the Constitution and the Constitution stated that discrimination was unfair unless the discrimination itself was fair. That was the issue that SASA had to unpack. She understood that SASA was producing the sugar, but the organisation needed to understand that it had to assist the country and the people living in the country. Neither the government nor the Committee wanted to see commercial farming collapse. Different parties had different ideas but all wanted a strong agricultural sector.

The Chairperson had not been in the meeting where the comment about a bottomless pit had been made so she could not comment on it, but if there was any element of truth in it, people should be careful about what they said and the comments that they made.

Closing remarks
The Chairperson was made aware that the Committee programme included a return visit by SASA on 27 November 2018. She thanked SASA, including SAFDA, Mr Jack and all the Committee Members for the engagement.

The meeting was adjourned.

 

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