Application for Statutory Levies on Citrus Fruits & Sorghum

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Meeting report


This Report is a Contact Natural Resource Information Service
Taking Parliament to People, and People to Parliament


13 FEBRUARY 2001

Documents handed out:
Application of Statutory Measure on Citrus Fruit - National Agricultural Marketing Council (NAMC)
Application for the Continuation of the Statutory Levy in the Sorghum Industry (NAMC)


Committee members heard the presentation for the continuation of the statutory levy in the sorghum industry and for the introduction of statutory levy on citrus fruit. Both applications were approved.


Chairperson Rev P Moatshe welcomed all those present and wished them a prosperous year ahead. He then introduced Mr G Rathogwa (NAMC) who proceeded to brief the Committee on the application for statutory measures to be introduced in the citrus fruit industry and to be continued in the sorghum industry.

Mr Rathogwa first dealt with the sorghum industry. He pointed out that the levy on sorghum would lapse at the end of February 2001 and that an extension was sought until 28 February 2002. The levy for all producers and traders, who would each pay 50% of the total levy, would be applied country-wide and would continue to be R3,10 per metric ton of sorghum. He stated that funds from the levy would mainly be used to fund research in the industry and therefore the National Agricultural Marketing Council was of the opinion that its continuation should be approved. These measures are also meant to support the realization of the objectives of the Marketing of Agriculture Act, whose aims include efficiency in marketing and an increase in viability for the total agricultural sector. The Sorghum Trust would administer the levy and Adminhouse Agric CC was nominated to carry out inspections and enforce payment. Additionally, a company code of inspection would be adhered to ensure compliance.

Opposition to the levy had come from Sorghum South Africa and the SAB. These organisations felt that producers would find difficulty in contributing if prices were low. However, prices are high at present and therefore the NAMC disregarded their objections.

Dr E A Conroy requested elaboration on how the levy would be administered. In reply, Mr Rathogwa pointed out that the NAMC would demand business plans from Sorghum South Africa and that the Auditor-General would inspect the annual financial statements of that organisation to ensure correct compliance. Furthermore, the NAMC re-evaluates all statutory measures every two years. Dr Conroy however, felt there was a need for the Council to brief the Committee further on the future strategy for the administering of levies. He cautioned members against duplication of functions between regulatory bodies, and that it is preferable to have each industry handle its own affairs independently. He requested that additional strategy planning be done with results forwarded to the committee.

Mr R M Nyakane wanted to know how much employment was created by the sorghum industry and what tonnage the general public consumed. Mr Rathogwa replied that this was difficult to quantify, but that the figures were large in both cases.

Ms B Thompson asked for clarity regarding the opposing views of the SAB and SSA. Mr Rathogwa stipulated that these objectors to the levy were those purchasers who sought to obtain the product as cheaply as possible. Everybody should be forced to pay the levy to prevent free riders from benefiting from it.

Dr Conroy added that opposition comes from people who buy the product, not from producers, because they want to buy as cheaply as possible. He commented that levees can only work if they are statutory.

Mr D M Kgware then proposed the acceptance of the recommendations of the NAMC with respect to the continuation of the levy in the sorghum industry. Dr E A Conroy seconded this, and the recommendations were unanimously approved.

Mr Rathogwa then moved to present the application on statutory measures in the citrus industry. The Citrus Growers Association (CGA) had requested a levy of 1,4c/kg on all citrus fruit intended for export. He pointed out that this amount falls within the limits prescribed by the Marketing of Agriculture Act which regulates that any levy be no more than 5% of the point of sale price. This levy was essential to sustain research and ensure disease-free fruit. Government's decreasing support, in terms of funding, towards agricultural research puts the industry at risk of being overtaken by international markets. As well, voluntary levees have not worked in the past because producers often will withhold funds during difficult periods.

Despite the fact that less than 50% of the industry had been consulted in a referendum conducted by the CGA, the NAMC believed that the imposition of the levy was a matter of national importance as the entire citrus fruit industry was under threat and there was the danger that South Africa would pushed from her traditional overseas markets.

The CGA is well suited to ensure compliance with the levee because it deals directly with citrus issues on a regular basis. CGA will therefore administer the levy but the NAMC would have observer status on its Board of Directors. Furthermore, the Auditor-General would audit the annual financial statements of the organisation.

Mr A E van Niekerk asked who would conduct the research and whether private industry was now being asked to fund research. Mr Rathogwa replied that the CGA would request that tenders (i.e. Agricultural Research Council - ARC) to do the research. He added that although government funds to the ARC had been reduced, a system of cooperation between the government and the private sector was envisaged. The Committee then expressed the view that there was a need to discuss the future role of the ARC and whether it was not advisable to privatize research completely.

Dr Conroy pointed out that the ARC did research in general but that specialists were required for research in a particular industry.

Mr M L Mokoena asked for comment on the financial implications involved in evaluating statutory measures every two years (section 6.1 of application, pg 4), and cautioned the committee against signing a "blank cheque". Mr Rathogwa said that it is difficult to quantify this in advance, but that it could be between R5,000 and R10,000per annum.

Dr Conroy observed that the ARC focuses on generalized research and that funds directed towards this may not be used as efficiently when wanting to research more specific issues such as types of diseases.

Mrs E C Gouws stated that the levy might be too high, as the producers had experienced a disastrous season. Mr Rathogwa repeated that the level is prescribed by the Marketing of Agriculture Act and would only apply to exported fruit, not that sold locally. Mrs Gouws countered that South Africa's lifeline lies with export and that this may be threatened when farmers are not able to afford these standards.

Mr R M Nyakane asked how the benefits of research would filter down to small-scale farmers. In reply, Mr Rathogwa admitted that the CGA consisted largely of white commercial farmers. These had however been warned that they would have to transform their organisation if they hoped to persist with the levy in future. Mr van Niekerk expressed the view that perhaps there was a need to look at extension services to farmers to ensure that emerging farmers also benefited from research. These services need to be improved to ensure that after research is conducted, that all farmers have access to the information. There should be some form of follow-up procedure in place to make sure that information flows back to small-scale citrus producers and does not stay isolated in larger businesses. Mr Kgware expressed the need for the Committee to receive a briefing on the citrus industry, and to hear from the views of the citrus industry themselves.

Acceptance of the NAMC recommendations for statutory measures in the citrus fruit industry was then proposed by Mr M L Mokoena and seconded by Mr R M Nyakane.
No opposition was offered and Chairperson Moatshe moved to accept the application from the NAMC with the recommendations of the Minister.

In a general discussion with which the meeting concluded, the Chairperson was given the mandate to negotiate for the Committee to receive a substantial increase in its budget. It was felt that this was necessary as select committees deal with up to three portfolios whereas portfolio committees only deal with one. Mr van Niekerk asked if funds saved from last year's budget was rolled over to this year's budget. Chairperson Moatshe replied that R13,000 was left over from last year and that the committee was still using that until the end of this month, and that this has not been added to this year's budget.

The next meeting of the Committee was set for 27 February 2001. This meeting will look at the year's program, the budget for 2001/2002, and a possible study tour to Kwazulu Natal to review issues regarding foot and mouth disease and cholera.


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