The National Agriculture Marketing Council (NAMC) and the Perishable Products Export Control Board (PPECB) presented their 2019/20 Annual Reports to the Portfolio Committee in a virtual meeting.
The NAMC described its achievements in the areas of market access, market efficiency, the promotion of export earnings and the viability of the sector. It had incurred a deficit of R1.9 million due to costs incurred but not budgeted for, and fruitless, wasteful, irregular and unauthorised expenditure had amounted to R125.7 million. The NAMC received an unqualified audit opinion on the annual financial statements and an adverse opinion on report on predetermined objectives.
The organisation continues to deepen its focus on the core mandate: providing advisory services to the Minister in terms of the four objectives of the MAP Act. During the year under review, there has been an increase in volume of intelligence produced and used to provide policy and enable business decision making in the industry. Unqualified audit outcomes are heartening – however, the goal is to achieve a clean audit. Audit findings are being addressed with the guidance of oversight committees and the Council.
Members asked why the NAMC thought it was a good idea for smallholder farmers to be selling products to other producers, instead of linking them to direct markets or export markets, capacitating them or linking them with relevant stakeholders. Why was it focused on training farmers in agricultural production instead of marketing? They also wanted to know how the irregular expenditure would be addressed.
The PPECB reported that it had overseen the export of 2.8 million pallets of fruit, which was slightly less than the previous fiscal year, when 2.9 million pallets had been exported. It explained the main export destinations, and where volumes had increased or decreased. Its actual income had been R431.5 million against the budgeted R468 million, so there was a R37 million drop in income because of the drought. Expenses of R436.2 million were lower than the budget of R467 million, because some projects were delayed and expenditure was controlled. Challenges included its information communication technology (ICT) infrastructure, as it had 32 structures in the remotest of areas throughout SA, so the provision of information was a problem. The seasonality of the industry also made planning extremely difficult, as there were fluctuations from one year to another.
Concern was expressed over the poor management and traceability of animal diseases such as tuberculosis which had affected the red meat and animal industry. If there was good management in the industry, the meat products would not have had problems entering the European and American markets. Members also wanted to know how the PPECB would overcome the challenges around the service delivery model, to assist it in carrying out the developmental aspects found in its mandate. How would the model ensure that the issuing of export certificates helped to grow the export capacity of local produce, particularly with the market opportunities made available on the African continent by the African Continental Free Trade Agreement?
National Agriculture Marketing Council (NAMC) Annual Report 2019/20
Mr Harry Prinsloo, Acting Chairperson, National Agriculture Marketing Council (NAMC), opened with the announcement of the appointment of a new CEO who would lead the NAMC in the five-year strategic plan implementation. The presentation outline followed, which included the annual results of the 2019/20 fiscal year, having received the audit outcomes from the Auditor-General (AG). The issues raised were acknowledged, while appreciating the unqualified audit opinion on the annual financial statement and adverse opinion on the report on predetermined objectives. The NAMC aimed to have a clean audit report in the future audits, with issues raised addressed. The presentation would also touch on the impacts of COVID 19, and how the NAMC planned to adjust the conduct of day to day business because of these impacts.
The guidance of the political leadership of the Minister, and the management of the Department of Agriculture provided to the NAMC, was appreciated. Other members of NAMC present in the meeting included the new CEO, Dr Simphiwe Ngqangweni, who also made the presentation.
Dr Ngqangweni presented the 2019/2020 annual results which were divided into four main objectives of the Marketing of Agricultural Products Act namely:
Activities include research into market access, with outputs such as the agripreneur magazine, used to share the successes and experiences of incoming farmers, and the smallholder market access tracker (SMAT) used to measure the progress of smallholder farmers in accessing markets. These were produced on annual basis. The focus this year was on citrus farmers. Results showed that there was still a long way to go in terms of access to markets, especially by the smallholder farmers (4-5% access) compared to the 90% occupied by established producers. Finances spent on transformation from the statutory levies administered on behalf of the Minister and the industry amounted to R116 million.
Various development schemes were going on, the most common one being the national red meat development programme, which had 17 custom-feeding facilities across three provinces. The programme had benefited over 1 000 farmers from around these three provinces, and generated an income of close to R24 million, and about 3 000 cattle sold in formal and informal markets in the year under review.
Schemes linking farmers to markets were another highlight, with the dry beans industry working in the Free State. Other farmers had been linked to supermarkets and retailers, despite the challenges presented by this task. Market access information was shared with 197 vegetable farmers in Limpopo and Gauteng.
Under the broad market access theme, there was the transformation review committee, which was tasked with monitoring the work of the transformation team and market access, as well as guiding the industries on how much to spend on various functions per the Agriculture Black Economic Empowerment (AGRIBEE) sector codes and the five pillars.
The work of the NAMC in supervising the various industries went beyond receiving reports from the industries, such as visiting the fields to see and verify the work being done. The pork, macadamia, cotton and potato industries were doing well, despite having some challenges of little infrastructure and limited land. There were efforts to expand these projects.
Research was done that was meant to produce advice on how to identify bottlenecks within the market that caused the market not to operate efficiently. To enable the various players in the markets, there was the production of information -- for example, the supply and demand estimate report which was currently based in the oilseeds and grain industry, which received very good coverage in the media. There was also the production of the monthly report on the monitoring of food prices which was done on a monthly basis, the monitoring of input costs quarterly, and issues of labour and economic growth.
In terms of the amount spent on research collected via levies, an amount of R223 million was spent on research. R70 million was spent on information collection. There was also capacity building training for farmers on market access and good agricultural practice (GAP) which was done in Limpopo that had benefited 20 farmers in the irrigation scheme of Mphaila, and 102 farmers in Makhado Municipality.
Promotion of export earnings
Focus was on the work done in the agricultural trade, with a key publication in the research area called the Trade Probe, which analyses the various markets and identifies market opportunities for South Africa. Research was also done to look at the impacts of the trade promotion expenditure on the economy, and the results showed that it pays to promote products overseas, as it was the only way to grow the market and increase export earnings. An amount of R75 million had been spent to undertake this work. The 2019/2020 work of linking farmers to international markets was focused on the berries market in KwaZulu-Natal (KZN), as well as the grain farmers of Setsoto municipality
Strategic Infrastructure Project (SIP) 11 was a well-known infrastructure programme that NAMC was coordinating. The work was being moved from the NAMC to be coordinated under the Presidency in the infrastructure office.
NAMC had been appointed to coordinate the drafting of an agricultural and agro-processing master plan which looks at bringing together all the partners in government, labour, business and civil society to agree on the sector’s blueprint for the next ten years, in line with the period of the national development plan (NDP). There was now a draft document which would be negotiated and discussed among the four partners in preparation for the sign off by the Minister.
NAMC was mandated to oversee the work of the trust, as some of the money of the trust was used to support transformation. The value of the trust had declined, however, due to the economic conditions across the globe. The value had declined from R2.4 billion in 2018 to R2.3 billion in 2019. The governance of the trust had 82 trustees, with 56 representing the industry and 26 representing the Minister.
Turning to support and corporate services, Dr Ngqangweni said communications highlights included Love RSA Agri promoting the use and buying of local agriculture products, and Youth Agriculture profiling professional agriculture careers to attract the youth. He said the NAMC was active in the media.
Gender representation in the organisation was 51% male and 49% female, and youths accounted for 43% of the staff complement.
Ms Sarah Netili, Chief Financial Officer (CFO), NAMC, made a presentation on the financial statements, detailing the funds allocated, the income generated due to surplus funding, and sponsorship received and utilised. The entity had incurred a deficit of R1.9 million due to costs incurred but not budgeted for. The presentation indicated that fruitless, wasteful, irregular and unauthorised expenditure amounted to R125.7 million.
The NAMC received an unqualified audit opinion on the annual financial statements and an adverse opinion on report on predetermined objectives.
Ms M Tlhape (ANC) congratulated the NAMC for appointing a new CEO, with the hope that his appointment would bring a difference to the entity. She expressed concern at how difficult it was to address the issues of the NAMC, as they dealt with reports and targets, and emphasised the need to have a feel of the field when it came to agriculture. As one of the things that the NAMC had talked about was the publication of magazines, she asked if these magazines had been made available in all the other languages so that people could access and make sense of them. What were these magazines doing for NAMC? Were they able to mobilise more markets through the magazines? Could they see a difference? Did these publications influence policy changes where necessary? Did they share reports of the challenges with the Department?
On the dry beans industry and the linking of farmers to dry beans organisations which were commodity groups, she asked why the NAMC thought it was a good idea for smallholder farmers to be selling products to other producers instead of linking them to direct markets or export markets, capacitating them or linking them with relevant stakeholders. As NAMC had indicated that other farmers were linked to supermarkets, why were dry beans farmers being linked to a commodity group?
She was concerned that despite the issues that were raised and cases that were confirmed by the Auditor- General (AG), there had been no consequences incurred or disciplinary actions involved in the cases of financial misconduct by some officials, as should have been the case. Appropriate steps had not been taken to prevent the unregulated expenditure of R80.7 million, as required. Some misstatements in information were left uncorrected. Why did the NAMC not comply with legislation or correct the misstatements identified by the AG? What was NAMC doing about the internal control deficiencies in the entity which had repeated findings of ineffective oversight on performance? How would NAMC deal with these issues so that there was an improvement moving forward, as these issues would always pull the entity backward if not addressed?
Mr N Capa (ANC) asked about the access of smallholder farmers to the agripreneur facility, whether it had a website or not, and the easy ways that farmers could access them. Would dry beans small-scale farmers be assisted by the organisation? Why were they not part of the organisation? Were they in the process of getting into the organisation? Why was NAMC focused on training farmers in agricultural production instead of marketing? NAMC was not marketing itself well on unemployment, poverty and inequality.
Mr N Masipa (DA) asked why the personnel expenses of 42% had been mentioned, as this was the norm in the industry. Market access was very important and would later help new farmers to enter the market. The rooibos tea industry market had great opportunities at the moment, so how would new farmers be helped to gain entry into the rooibos tea industry, which at the moment had great barriers to entry?
Mr S Matiase (EFF) asked about the mission statement of NAMC, which was to provide advisory services to key stakeholders in support of a vibrant agricultural marketing system. In pursuit of this mission, he thought it would be good for the NAMC to provide such services to informal vendors who were engaged in subsistence farming, who were found in the province of Limpopo and across the country. Concerning the financial performance as stated, NAMC mentioned that they had received an unqualified audit opinion as well as an adverse opinion on predetermined objectives. What were the circumstances that had led to NAMC receiving the adverse opinion?
Ms N Mahlo (ANC) asked how NAMC would improve on the proper record keeping on daily or monthly controls. What interventions would it come up with to ensure proper and full compliance in the view of monitoring and financial performance management? On the AG’s findings and compliance on the legislation, particularly those related to invitations for tender bids and requests for quotations, it was well known that these provided fertile ground for corruption, so the NAMC had to outline to the Committee what had been happening. What informed NAMC to procure goods and services without following the Public Finance Management Act (PFMA) and the highlighted regulations in the documents of the work?
Inkosi R Cebekhulu (IFP) asked about the advisory role of the NAMC, noting that the Department had managed to buy farms for beneficiaries who had been forcefully removed from areas such as citrus farms in KZN that had gone down. Would NAMC assist the smallholder farmers to get into the business of successful farming? What role did they play when it came to landowners whose farms were once viable but were no longer productive? The broiler industry had gone down, and a lot of the people who were employed when the industry was vibrant were no longer employed. Would NAMC assist those who were losing jobs through retrenchment?
Ms T Breedt (FF+) asked about the time frame of the agricultural master plan, to ensure it was not left by the wayside.
The Chairperson reiterated the questions and concerns raised by the Members, with strong emphasis on the fruitless and wasteful expenditure of R125 million. Besides the impacts of covid19, what were some of the challenges that NAMC faced when having to deal with the investigations into the previous year’s fruitless and wasteful expenditure? What systems would NAMC put in place to ensure that the percentage rate on case investigations into fruitless and wasteful expenditure was increased from the current 50%? How would it deal with the material findings in the supply chain management (SCM)? How would this process in the future ensure of guarantee active participation of local small and medium enterprises (SMEs) in the procurement process of the Department?
Dr Ngqangweni replied that some of the questions and comments made by the Members would be better answered in writing, as they required detailed responses.
On the issue of the publications produced by NAMC and their impact, a lot of what was done was to assist in the process of decision-making, although groundwork was done on a limited scale due to resource constraints and the fact that the mandate required the provision of advisory services. The publications produced were available on the website, but NAMC also distributed the publications to the targeted consumers of the publications, namely new farmers, through their various formations like farmers’ organisations.
A broad answer was given to the question of the assistance provided to farmers when they had bought land. He replied that the idea of the master plan was to provide a platform for coordinating all the activities that were being undertaken by different departments --for example, the Department of Water and Sanitation, and Science and Innovation, not just the Department of Agriculture, Land Reform and Rural Development.
The master plan was to be signed off by the end of this fiscal year. At the moment, negotiations would soon take place among the social partners to come up with timeframes and targets that all the partners could commit to. Meanwhile, implementation was in line with the timeframe of the NDP, which was 2030.
Ms Khumbuzile Mosoma, Senior Manager: Agribusiness Development, NAMC, said that NAMC worked with the dry beans organisation because when the development scheme was designed, it liked to work with the buyers from production to harvesting because of the reliance on the technical assistance, to ensure that farmers were producing as per the specifications given. This assistance was provided by the organizations, and also to assist in the operationalisation of the facilities for the packaging of the dry beans. Other buyers were approached, but they were unavailable in terms of providing the required technical support, hence the partnership with dry beans organization, which was close to the farmers that NAMC wanted to work with.
NAMC facilitated training on crop production and not marketing, because when facilitating markets for smallholder farmers, the bottlenecks were in the production. Therefore, when a market was identified, efforts were spent on doing a diagnostic analysis on the ground to find out what was affecting the quality and quantity of the produce. Production techniques had been identified as the challenge faced by the farmers which affected the quality and size of the produce, so there was a need to focus on production for better produce required by the market.
The question on the citrus fruit farmers in KZN had been raised before, and the Citrus Growers’ Association (CGA) had been engaged. CGA indicated that they had extension services that were working with the farmers, although there was the challenge of limited resources. However, famers still attended the study groups, the farmers’ day, and the CGA was visiting farms. There were no major interventions due to resource constraints.
Mr Bonani Nyhodo, Senior Manager: Agricultural Trusts, NAMC, replied that the work that was done was financed by statutory levies and the agriculture industry trust, so the agro-ecological zones would to some degree indicate where the beneficiaries would be based. The beneficiary list of each industry gave an indication of the areas’ competitive advantage for the production of each product.
Dr Ngqangweni said that currently, the agripreneur publications were only in English, but the NAMC would see if they could be translated into other official languages. Some of the publications of the research findings were already produced in other official languages, and NAMC would see if the agripreneur publications could be translated into other official languages as well.
Ms Fezeka Mkile, Council Member, NAMC, said that the irregular expenditures issues related to red meat would not be addressed in the meeting, and on the issues related to the former CEO, NAMC had had a long discussion with the AG at which it presented a different view, but had come to an understanding to accept the irregularities. Following recommendations in two investigation reports on the former CEO, proceedings had been instituted against him on several charges, including gross negligence, and he had been suspended by the Council. NAMC had appointed a legal representative to represent them during the proceedings, which started in December 2019. The former CEO was also represented. Before the February 2020 proceedings, the representative of the former CEO had approached NAMC’s representative to have an amicable settlement on his pending disciplinary hearing. NAMC, however, argued that although there was good merit in the charges profiled against the former CEO, no legal representative or initiator in general could guarantee the outcome of the disciplinary process, and had stated that the disciplinary charges against him or management of all high profile entities should at all times be dealt with in a manner that could avoid reputational damage to the institution. The human resources committee had evaluated both circumstances -- the legal advice presented and the legislative provisions. It was of the view that a possible amicable exit agreement for the former CEO would be in the best interests of the organisation to essentially maintain stability and continued service delivery. The settlement had to be considered and approved, and the Council had approved the settlement agreement, effectively bringing the disciplinary process to an end. The costs of the settlement had been incurred by the NAMC, which were later flagged by the AG as irregular expenditures.
Mr Prinsloo replied that on the issue of red meat, there had been a meeting with the Minister who had indicated that NAMC was not in its mandate. Currently, the red meat project was in the process of being handed over to the Department.
Ms Netili replied to the other issues of compliance that had been raised. She said that when the AG raised those findings during the audit of 2018/2019, there had been transactions that were already incurred in the period from April to July relating to them not going out on tender and requesting procurement through quotations, because they were using a preferred list of suppliers. That was stopped after the audit findings, and the irregular expenditure that were presented in the presentation were related to those transactions that were incurred before the audit findings by the AG.
There was also the issue of irregular expenditure relating to a contract extension. She said that as an entity, they had also tried to address those findings during the 2018/2019 period, so that after the contracts expired they did not renew them and entered into new contracts to ensure that they complied with Treasury regulations, as recommended by the AG. The Department had renewed one of the major contracts they had in this new financial year, because it expired in July 2020.
On the question relating to new rental space, NAMC had received approval from the Treasury to renew the contract, because that process was not done in the past. The irregular expenditure relating to contracts would not appear anymore in NAMC books in contract extensions, because they had addressed those findings.
She also replied on the irregularities of the Department when requesting quotations instead of going out on tender, and said this had been rectified in 2019/20. For example, when purchasing feed, they had applied to the National Treasury to participate in a transactional contract. It was approved, and all the purchases of feed were done through correspondence with National Treasury.
On the issues of irregular expenditure about construction that had to go out on tender, NAMC had rectified that in 2019/20, and all construction-related procurements had been subjected to the tender process, and NAMC was no longer doing procurement through quotations.
NAMC had indicated the 42% on personnel expenditure not to raise any alarm, but just to indicate to the Committee that their major expenditure was on personnel, as compared to administration and operational expenses.
The adverse opinion in the report was because the AG had indicated that there was no clear and logical link between the indicators, the targets and the strategic objectives, and also that the indicators focused on reports produced while the strategic objective focused on the promotion of efficiency of the marketing of agricultural products. NAMC had also addressed that, because it had now reviewed its strategic plans and its annual performance plan to address the issues that had been raised by the AG. Luckily, the issues had been raised before the Department had finalised its strategic review, and the findings that were raised had been addressed.
There had been a bit of delay in the Department of Agriculture paying the invoice for the 80% increase in liabilities, but at the year-end, a sum of R32 million was paid into NAMC’s account to implement the transitional plan.
Referring to the R125.7 million irregular, fruitless, wasteful and unauthorised expenditure, Ms Netili said that Ms Mkile had highlighted one of the issues that led to the irregular expenditure of R36.6 million, which involved a contract that had been signed without following a delegation of authority. There had also been irregular expenditure of R108 million which was related to the overpayment of the settlement package for the former CEO, and legal fees. The contract extension was also part of that, but NAMC had indicated they did not anticipate repeat finding in terms of most of the contracts at NAMC except for the contract on office rentals, because they need to account for the expenditures that had been incurred before the renewal of the contract as irregular expenditure. However, that had been addressed in the current financial year.
NAMC had designed an audit finding matrix which was reviewed now and then, and reported every quarter to the Council and the auditor and his committee. The audit findings matrix was reviewed by the internal auditors to track if NAMC was addressing those findings. Currently, NAMC had addressed 84% of the audit findings that had been raised by both the internal and external audits.
Regarding what had informed NAMC to procure without following the procurement processes, she said she had already indicated that most of those findings looked like repeat findings because those were the transactions that had been incurred before the AG raised the findings. However, NAMC had addressed most of them, and were currently monitoring their internal control system. NAMC was also ensuring it capacitates the SCM division to make sure that they dealt with all issues of compliance that related to the supply chain.
The Chairperson thanked the CEO for his input, and asked Mr Prinsloo to ensure that the Committee was sent the responses in writing so that they could pose the follow up questions that they were not able to ask during the session due to limited time. He requested the Committee Members to submit their follow up questions to the Committee Secretary for them to be sent to NAMC.
Perishable Products Export Control Board (PPECB) Annual Report 2019/20
Mr Lucien Jansen, CEO, PPEBC, introduced the chairperson of the board, Mr Clive Garrett, who took over to introduce the presentation.
Mr Garret started by expressing his thanks to the management and staff of the PPECB for remaining at work throughout the lockdown, rising to the challenge, and continuing to render services to the perishable products sector around the country. The PPECB had been challenged by the lockdown in the country. The shortage of fruit, especially citrus, had put pressure on the finances of PPECB. However immediate action had been taken. Costs were reduced and projects delayed where possible, thus allowing them to absorb the impact of the reduced income.
He outlined the PPECB’s goals for next year. These were:
- To continue creating a stable information communication technology (ICT) infrastructure, including increased cyber security;
- To become more efficient and contain costs;
- Become more customer-centric;
- Focus on digitisation projects;
- Support market access initiatives, especially in South East Asia, by creating confidence in South Africa’s exports certification;
- Commit to the development of the staff, with special emphasis on female employees.
He said that in 2019/20, a new board had been appointed, of which five members had remained for continuity.
The board had overseen the export of 2.8 million pallets of fruit, which was less than the previous fiscal year, which had exported 2.9 million pallets of fruit. The markets included the European Union (EU) which took 34% of the fruit, Asia 20% (dropping down from 21%), UK 13%, the Middle East improving from the previous year to 15%, Africa 6%, North America 5%, and Russia 7% (going down by 1%).
In terms of certification, 337 870 containers were refrigerated, overseen and exported. 34 281 of these were rejected (10%) mainly due to dirty, damaged or tainted containers, and technical errors. If these containers had left the country, it would have lost R1.3 billion. Commodities exported included 135.4 million cartons of citrus fruit, which had gone slightly up (2%) from the previous year. 58.3 million cartons of table grapes were exported, 5% down from the previous year, mainly due to rain damage. 48.9 million cartons of pome fruit were overseen and exported (1% up from the previous year). 14.9 million cartons of stone fruit were exported, and 13 million cartons of avocados were exported, which was down from the previous year, where 20 million cartons had been exported. This decrease was mainly due to drought. Maize, at 1.5 million tons, was also down from the previous year due to drought.
Certification had seen an increase of 7%, with 156 336 certificates processed, of which 8 007 were cancelled and 7 636 were found to be incorrect and had to be rectified before the process could continue.
Orchard inspections were conducted for the EU programmes. Over 15 202 orchards were inspected, amounting to 51 782 hectares and the issuing of 30 874 certificates. For food security, the laboratory had analysed 22 228 samples, which was 15% down on the previous year, mainly due to the drought experienced.
For food safety, 864 South African good agricultural process (SAGAP) audits were conducted.
The PPECB was also active in research and developing projects within the industry, and had contributed to two major projects. One was on citrus fruits, in collaboration with the citrus growers association (CGA), and the other with the table grapes industry.
Mr Johan Schwiebus, CFO, PPECB, said there was a financial deficit of R4.7 million, mainly because of the drop in income, which was lower than budgeted. The actual income was R431.5 million against the budgeted R468 million, so there was a R37 million drop in income because of the drought. Expenses of R436.2 million were lower than the budget of R467 million, because some projects were delayed and expenditure was controlled. Because of the deficit, there was a cash flow shortage which was funded from the cumulated reserves and cash on hand. R418 million cash was received, with R319 million paid towards employees, and R118 million used on purchasing and payment to suppliers, and assets of R1 million. Despite the shortfalls, PPECB was still in good financial health, with the working capital covering the working liability by 2.7%. It had received an unqualified auditor’s report, despite the deficit that was incurred.
Performance against indicators
- For the period under review, 82% had been spent to pay Broad-based Black Economic Empowerment (B-BBEE)-registered suppliers;
- 50 students were trained in agricultural export technology, and this training was set to continue in the future.
- 249 smallholder farmers were trained in the use of pesticides for SA GAP and food safety, and was done in collaboration with the respective provinces.
- The customer satisfaction rating was received at 85%
- 55 smallholder farmers were certified for exports in terms of the SA GAP certification programme.
- 1 000 beneficiaries had benefited from the corporate social investment (CSI) initiatives.
- ICT infrastructure -- the PPECB had 32 structures in the remotest of areas throughout SA which remained a challenge in terms of the provision of information.
- The seasonality of the industry made planning extremely difficult, as there were fluctuations from one year to another. However, the PPECB was working to adjust and improve to meet the demands as they came along.
- The PPECB was in the process of replacing its legacy, information and management system with an enterprise resource planning process, to improve efficiency.
Ms Tlhape commended PPCEB for having improved their performance of last year from 71% to 79% for the year under review, and for an increase of 2% of generated revenue, from R423 million to currently R431.5 million. If there was the best model for entities, they must benchmark with the PPECB. Even though the PPCEB did not get funds from the Department, and if this was what happened if entities were not funded, then they probably had to extend their research and see what it was that they could learn from such models.
She asked about the R1.3 billion loss that would have been incurred had the 34 000 containers been exported. Why would there have been such a massive loss? Would they have been penalized? She wanted to understand what happened if they had a defective export.
Did the PPECB understand why National Treasury had not condoned its irregular expenditure, so that they did not rush to submit a request for condonation? They needed to know why it was not condoned so that it became a lesson moving forward.
She also congratulated the NAMC for recovering the wasteful expenditure of about R2 000 as part of consequence management. This was what people wanted to see in reports -- that if there had been wasteful expenditure on the part of an official, the funds could be recovered.
The Chairperson informed the Members that today's sessions had been allowed to proceed till 2pm, instead of the usual three hours. Therefore, he would take all questions for the PPECB, but would revert to the NAMC presentation for any follow-ups that people may have.
Mr Capa appreciated the PPECB’s input and the 85% customer satisfaction, although it was possible to go beyond that. The PPECB had indicated that they also trained students, and he asked for clarification as to which institutions they got these students from, and where these students ended up.
Mr Masipa complimented the PPECB on the work it was doing, especially on the quality assurance of the products they were exporting. He expressed concern over the poor management and traceability of animal diseases like tuberculosis which had affected the red meat and animal industry. If there was good management in the industry, the meat products would not have had problems entering the European and American markets.
Ms Breedt commended the PPECB for a good job. She reiterated what Mr Masipa had said -- that was something that they needed to focus on.
Mr M Montwedi (EFF) asked how the NAMC assisted with access to the market where there were new entries to the market, and where there were issues of industry transformation. It appeared that black farmers in the macadamia nuts sector had always entered into production very late. Therefore, what was it that NAMC was doing to ensure that if there was an instance were macadamia nuts or raisins were fetching a good price, black farmers could enter that particular market immediately and not enter it later, when everybody else had entered?
Many farmers who received state land were unable to have off-take agreements for their produce, so how was NAMC going to assist beneficiaries of state land? The Department should tell NAMC who they had allocated the land to, and NAMC should know what it was they must do so to assist some of those beneficiaries.
He also asked about the lucerne exports, as this was an area that was handled by NMAC. There were crop farmers in Taung who had planted lucerne in an area of about 1 800 hectares out of a total of 3 500 hectares that was currently under irrigation. All that lucerne was taken by white farmers in the Northern Cape who were the ones who did the direct export of that produce from that area to China. How did NAMC assist communities and farmers like these, where there was a problem with the export market? He said in his area, the names of cooperatives he used to be part of were in the list of exporters to China, even though they had never applied when they were there. Their names were being used by somebody else, and this may be a situation with other farmers as well.
He asked how NMAC did the monitoring and evaluation of the impact of their advisories in the sector. Whatever they got to advise the Minister on, how did they monitor and evaluate to see if it was indeed working? How had it advised on policy development and the improvement of government policies? He felt that this was an area NAMC could also venture into.
He commended and appreciated the good work that the PPECB were doing, even though there were some areas they could improve on as an entity.
Ms Mahlo also commended PPEBC on the improvement from 71% to 79%. She agreed with Ms Tlhape that the model used was good. The model showed that they used the International Organisation for Standardisation (ISO), because the ISO was what made business flow.
She noted that in the PPEBC presentation they had highlighted the issue around service delivery models which was good, since one of the mandates for the entity was to issue export certificates for the perishable products of the country. She asked how they would overcome the challenges around the service delivery model to assist it in carrying out the developmental aspects found in its mandate. How would the services delivery model ensure that the issuing of export certificates helped to grow the export capacity of local produce? She was looking mainly at market opportunities made available on the African continent by the African Continental Free Trade Agreement.
The AG had found one financial statement submitted without errors, and the number had increased to two when they investigated the matters. What was the cause of the error, and how would the PPECB guarantee that the financial statements would be submitted without errors in the future?
Ms B Tshwete (ANC) had an additional question for PPECB. In their presentation of 2018/2019, even though they had not reached their target of 70%, they had indicated that the vendors refused to change their systems from TITAN to TITAN 2.0. How far was PPECB in getting the vendors to operate on the same system of TITAN 2.0?
Mr Montwedi asked how the PPECB would ensure that in the next Annual Report, the migration process would not be a challenge in meeting the specific target, because they had said that they could not reach their target for capturing cartons due to system migration this year.
Ms Tlhape asked the NAMC the kind of reputational damage they would have incurred, except the one that the AG had expressed concern about. Was it not about the personal reputational damage of the outgoing CEO? If there was someone who would have suffered reputational damage, it would have been the outgoing CEO, because nobody in the private sector wanted to leave their institution with a cloud over their head because they had been found wanting, charged or dismissed, or anything of that kind. The entity had come before the Committee and said the institution could have suffered reputation damage, and she wanted them to explain further.
The Chairperson also repeated what Ms Tlhape had raised, particularly because as a country they were seen to not be taking corruption seriously, and were not doing much to investigate issues centred on corruption and fruitless and wasteful expenditure. He also wanted to understand in detail what had moved NAMC to conclude a payout with the former CEO, instead of putting the charges to the test and letting the full might of the law take its course and get closure to the matter, rather than getting a settlement in closed boardrooms. He asked the NAMC to clarify this issue to the Committee members.
He also had a few questions for the PPCEB. He applauded it for the work that it had been doing, with more than a decade of successive clean audits. Its track record was impressive and needed to be noted. PPCBE reported as one of its major disappointment the postponement of the acquisition of the enterprise resource planning system due to the cancellation of the tender. He asked it to provide an explanation for the cancellation of the tender and explain the status of the enterprise resource planning system for the current financial year.
He also asked about the funding of the joint venture that the PPECB had with the Department that had seen an annual transfer of about R500 000 from the Department to the PPECB for transformation and development come to an end in June 2020. Similarly, an annual transfer of about R585 000 for the agri-technology program had been halted in 2018/2019. What were the reasons for the Department’s funding withdrawal from the two programmes? Was there a new venture or collaboration in this regard? If not, how was the PPECB planning to fund the programmes in the future?
Mr Prinsloo replied that he could only add from the information presented on the table from the legal advisors that it had been in their best interest to take the decisions that they took. He added that in the agreement they also laid the charges at the South African Police Service (SAPS), and it was an ongoing process, so if any other irregularities were coming forward, they would be dealt with in the future. As the chairperson, he was satisfied that NAMC took the right decision at the time, according to the legal advice, and if there was anything more that he could add, he would provide the Committee with full documentation of the process and how they got to the end of the issue with the CEO.
Ms Mkile added that although the process of the CEO was concluded from NAMC’s side, there was still a case in with the SAPS and the Public Protector, because they had not left matters at him exiting, and the consequence management in following up on the allegations was still going on.
Dr Ngqangweni replied to questions by Mr Montwedi on the impact of the advice they give and their participation in policy development. He said it becomes difficult to assess the impact of the advice they give, as it depends on whether the advice is used positively or not. NAMC could only point to some evidence that they had been following -- for instance, the issue around the approval of trade remedies, as they play a crucial role in advising what should be approved and what should not be approved. NAMC had an example of the poultry tariffs, where the entity researched the maximum levels to which those tariffs could be increased, and when the Deputy Minister announced the imported poultry tariffs he had quoted the figures that NAMC had provided, and published those as new tariffs for the two cuts of poultry coming into the country. That was just one of the examples he could give, but they did have other examples that they monitored regularly. However, it was difficult to measure the impact of the advice at a broader level, and they had to look into ways to measure that aspect because it was quite important, so they took that as input from the Committee.
On NAMC's participation in policy development, he replied that they were proud of their participation in several forums that were hosted by their mother Department to provide input on various policies and strategies that the Department had put in place. The latest of those was the master plan, whereby they had been given full coordination responsibility, and had been allowed to influence the plans of the sector for the next ten years.
Ms Mosoma replied to the market access questions, and said that this was a case of ensuring that the farmers had access to market information, where they were made aware of the available market access. This was to partner with industries through the transformation programmes, where they would be able to share information on the available markets with the farmers through their stakeholder engagement. This was also where they partnered with the Department of Agriculture, Land Reform and Rural Development (DALRRD) and its provincial Departments of Agriculture by attending their workshops and farmers’ days, and present available opportunities. They were not limited to communicating with the farmers through these platforms, NAMC also engaged directly with the officials in the provinces after identifying a demand for certain commodities. They ensure that they share the information they have at hand as much as possible
In the past, NAMC used to have a market information programme, where they had a service provider who would provide the market information, available opportunities, and what was demanded on the market that week. The programme was presented through Phalaphala FM, but they could not proceed with the programme because it was getting expensive to pay for the slot. They were currently exploring alternative channels, and in the future, they were considering the use of SMSs in order to share information with the farmers.
On the question of projects that had benefited the state land beneficiaries, she pointed out that there was a project called the National Red Meat Development programme that had awarded several state land beneficiaries with market access opportunities. Several auctions had been facilitated, and that was where most of the state land beneficiaries participated for market access. Most of them were able to send animals to the market, and their study indicated that they were able to generate more than R100 000, depending on the number of cattle they supplied.
NAMC also linked several state land beneficiaries to market access such as abattoirs and the butcheries, especially in the Eastern Cape, and some of the Eastern Cape farmers had been able to participate in the export market to Mauritius. So there were some projects that they had implemented, and the reason they had access to these beneficiaries was that every time they identify a market opportunity, they go to the provinces to help them identify the beneficiaries that might be able to supply that market. Most of the time, the farmers available to supply those markets were farmers who had benefited from the Department, and were able to be supported with technical support and production input.
Another project that she gave as an example was the Vineyard Development Scheme which NAMC implemented in partnership with the Department of Agriculture in the Northern Cape. The state land beneficiaries participated in this project, and the Department had allocated funds to support them in establishing the trading system, planting the vines, and market access. This was done in collaboration with various stakeholders, including the buyers, the industry, the Department of Agriculture, NAMC and the Industrial Development Corporation (IDC).
There was also another project that was being implemented in collaboration with the Department of Agriculture in the Western Cape, where NAMC was supporting the producers of stone and pome fruit to produce and export. The beneficiaries were linked with producers and partners so that they could export their produce and be supported with market information, as well as technical support on how to prune and apply fertiliser, and how to handle the whole production process from the planting to the harvest.
Mr Nyhodo replied to Mr Montwedi's question on the issue of lucerne and the Chinese protocol. He pointed out that a week back, the Department had shared a list of farms and persons approved on the China protocol, and if there were concerns at some of the approved facilities regarding conduct issues, the colleagues in the Department would be able to deal with that information and could provide the necessary linkage to them. The issue around the structure of the lucerne value chain involved the infrastructure requirements to some degree, and issues of relationships. He contended that the black farms in the irrigation schemes that were being assisted by the big farmers was because of infrastructure requirements, such as the cutting and baling of the Lucerne, and the problem of the conduct was that the cooperatives that were operating in those structures had contracts with the big producers. This was an issue that NAMC had highlighted to the lucerne national trust in the areas of the transformation support that was provided to farmers in the Taung area. He acknowledged that the comment raised around the structure in the lucerne industry raised by Mr Montwedi had been spot on, and NAMC was attempting to address the matter.
Mr Schalk Burger, Senior Manager: Statutory Measures, NAMC, commented on the issue that was raised on Rooibos tea. He explained that Rooibos tea was produced mainly in the Western Cape, with maybe a small percentage in the Northern Cape. It had a long history of huge price fluctuations. Four years ago, it was R4 per kg, had moved to R8 kilogram, and was currently at R12 per kg. This was mainly due to fluctuations in production -- when prices were high, people started to plant Rooibos and when prices were low, people stopped planting. His division worked mainly with a statutory measure which included statutory levies. The Rooibos industry did not produce currently to all statutory measures, but he was aware that they were doing some work on transformation -- there were many black Rooibos farmers -- and he believed that maybe the farmers should be given time to work away from the surplus production, and then they would see if the prices would increase again.
The Chairperson announced the conclusion of the discussion on the NAMC presentation, and moved to responses from the questions addressed to PPECB.
Mr Jansen started by thanking the Members for their questions and their observations on the improvement of performance. He said there was still room for improvement, and the PPEBC was committed to continually improve its year-to-year performance.
The 34 000 containers had been rejected in South Africa by the PPECB due to technical errors, and not simply for not being up to standard. They had made a sample calculation that the average worth per container with fruit exported was around R400 000, and if one multiplied that by the 34 000 containers, it brought the figure to about R1.3 billion. So, if PPEBC had not stopped the export of those containers in South Africa, technically the industry would have lost R1.3 billion. When the entity was being asked to quantify the value of the PPEBC by the industry, that was one of the examples that they used.
He thanked Ms Tlhape for the note on the 85% customer satisfaction rate, and said that they continuously strived to improve on that figure.
He explained that the Agricultural Export Technology Programme was an in-house development programme that they had started developing in 2008. It was a National Qualifications Framework (NQF) Level Five accredited programme that recruits students who had just finished an agriculture diploma or degree with no work experience, and each year they recruit between 40 and 50, depending on the budget. Most of the students were recruited from across the provinces of South Africa. Their records showed that 90% of these students, once they completed the training, were more employable than those who had just come from college or university, and that 90% of these students were employed by the PPEBC in some way or another. The other 10% were also provided with assistance, and they provided those names to the industry on referral.
For the improvement of the service delivery model, the big issue was that they were focusing on creating a more efficient software system by moving to a more digitalised system, process and platforms wherever possible. They foresaw that going forward they would create a model that would also introduce digitalisation as part of smallholder farmers’ training within the export value chain.
The report dealing with the vendors’ software system had been based on the previous year. The migration had started in December 2019, and the challenge that the vendors had was that it was just before the grape season and they had pointed out the significant amount of risks involved if they migrated to Titan 2.0. As from 6 April, most of the improvements to Titan had been made, so they could assure the Committee that going forward most of the vendors had already got on to the system. So far, eight vendors had successfully integrated with Titan 2.0, and for that reason they were sitting currently on 116 million cartons that had been processed by using Titan 2.0, so there had been an improvement compared to the previous financial year.
They had also improved their engagement with the vendors by establishing a tripartite forum representing the industry, the Department of Agriculture, which was driving the E-certification platform, and the PPEBC. They were able to track the progress of the vendors, making sure that they got on board. They understood the challenges that had been pointed out to them, and would make the necessary changes.
In terms of the enterprise resource planning (ERP), he would ask the CFO to respond as to why they had decided to cancel the tenders. There were good reasons for their cancellation, but their aim for this financial year was to get an implementation partner for ERP, and they had started the process already. So far, they had completed the data analysis process by about 95%. They had started with the migration of their business systems to the i-cloud, which would make it easier for the ERP when it got on board. Their target for this financial year was to get a partner appointed and get some of the work done on the introduction and implementation of ERP. They had also started with the change management process throughout the organisations that had been continuing, and were looking forward to getting work done within the financial year period.
Referring to the R500 000 and R589 000 that had been lost or discontinued with the joint venture, Mr Jansen assured the Committee that both of the projects were continuing and that they had been informed by the DALRRD at the time that the funds had been reallocated. However, with the board’s approval, the PPEBC decided to fund these projects because the board understood the importance of the programs and PPEBC had continued to fund the programmes, so their objectives had been met since the board committed the funds. However, going forward, it had submitted an application to the Agriculture Sector Education and Training Authority (AgriSETA) for funding to sustain the two programmes.
Mr Schwiebus responded to the first question on the R1.5 million in irregular expenditure. The background to that expenditure was that there was laboratory equipment available on the market from a project similar to PPECB that had been shut down. It had been informed that they had a second-hand machine available at a good price. They had researched the market, gone to the board, and justified the acquisition of the machinery based on a sole supplier scenario that it was a unique opportunity to obtain second-hand equipment in the market. The board had approved, and they had purchased the equipment. They had then approached the National Treasury to condone the purchase process, but Treasury did not condone it because they disagreed with the sole supplier aspect and also in terms of the special instructions programme that any other purchases must be condoned by Treasury before the purchase. They had accepted that decision, and in future would obtain condonation or approval by National Treasury before any transaction. He confirmed that the procurement had been done transparently, and the board had approved the transaction before the PPEBC had purchased the equipment.
Referring to the cancellation of the ERP tender, he said it had been a closed tender process, and they had followed the requirements and asked for information. It had been a two-part process -- they had requested information and then invited some suppliers to provide them with details on the tender. There were two reasons why they had decided to cancel the tender. Firstly, they had decided on the Microsoft software system for products and in the initial tender, Microsoft had indicated that they could provide them with the human resource solution. It had subsequently changed the total solution package, and the human resource model had been excluded. PPEBC had therefore concluded that there had been a deviation from the original tender that they had posted, because they had wanted the ERP contributing to a fully integrated system so that they could improve their efficiencies within the business.
The second reason was that when they had negotiations with the supplier and looked at their implementation plan, they realised that the supplier that had tendered could not implement the solutions, but would get subsidiaries to implement them. This was a deviation irregularity, and so they had decided, after legal opinion to cancel the tender.
He said they were looking at improving efficiencies by reallocating budgets to other priorities, and the process had to translate into financial savings which they could channel to other programmes. Efficiencies from the ERP would enable savings to be rechanneled to other priority areas, like the transformation programme. They were already rechanneling money to other programmes that were of strategic importance.
DAFF Annual Report 2019/20
A letter had been sent to the Speaker of the National Assembly from the Minister, and was later referred to the Portfolio Committee, where the Minister had indicated that the 2019/20 Annual Report of the former Department of Agriculture, Forestry and Fisheries (DAFF) would be tabled by 16 November. In light of this tabling, the Committee scheduled had consideration of the Annual Report for 20 November.
Mr Mooketsa Ramasodi, Acting DG, DAFF, said that the Report could not be tabled on 16 November, as the Auditor-General had to look at some aspects that had been added to improve the Report. However, the Minister’s parliamentary liaison officer (PLO) had confirmed the Report had been tabled, and therefore the Committee would proceed to engage with the Report on 20 November, as earlier scheduled.
Adoption of Committee minutes
The minutes of 6 and 10 November 2020 were adopted.
The Chairperson thanked the NAMC and PPECB for making their presentations, and reminded them that the secretariat of the Committee would await their written reports.
The meeting was adjourned.
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