Awaited documents : ITB APP, + Agricultural Produce Agents Council: Export Agent’s Submission
The Portfolio Committee on Agriculture, Land Reform and Rural Development convened virtually. It was informed by the Minister of Agriculture, Land Reform and Rural Development (DALRRD) that the Ingonyama Trust Board (ITB) would be unable to table its budget for the 2022/23 financial year, alongside its Annual Performance Plan (APP). The Minister indicated that she could not approve the entity’s budget, as not all of the details had been provided to her. As a result, the Committee, while noting the irregularity of the process, agreed to only receive a briefing on the entity’s annual plan.
The Committee was concerned that the annual plan presented did not speak directly to the entity’s budget. Members felt that, by presenting what they described as a non-report, the Board had continued its trend of undermining the Committee. They went further and described the state of the Board as both disappointing and shameful. Certain Members even called for the Committee to consider initiating discussions on the relevance of the Board as an entity, particularly because it has not fulfilled its mandate nor has it served its constituents.
The Chairperson of the Board felt that the criticism received from both the Department and the Committee was unfair, particularly as the Board has received an insufficient budget from the government to fund its operations. He indicated that government’s allocation to the Board for the past financial year amounted to R24 million, out of a total budget of R100 million – with the Board having to subsidise the rest. He questioned whether Members understood the work of the entity, which only provides tenure rights in the form of leases if community members are unable to obtain finance to utilise their land – whereas the Amakhosi and traditional councils are responsible for managing and administering the land on behalf of the communities.
Members took issue with the suggestion that they did not understand the functions of the Board. They highlighted that their role is to provide oversight over the work of the Board. Both the Committee and the Department agreed to have an engagement with the Board, in the hope of finding a resolution to the challenges faced by the entity. In addition, the Minister committed to providing the Committee with a detailed report on the Board’s financials once it has received it.
Thereafter, the Committee proceeded with the first day of its public hearings on the Agricultural Produce Agents (APA) Amendment Bill [B33-2020]. The Committee was informed by both the Fresh Produce Exporters Forum (FPEF) and Agricultural Produce Agents Council (APAC) that the Bill would overregulate the industry, increase costs across the value chain, reduce market access and limit competition for farmers and agents in the country. Both organisations called for the Department to make adjustments to the Bill.
The Committee requested that the DALLRD engage with both organisations, in the hope of addressing the challenges identified in the Bill, so that it is better able to support and strengthen growth in the economy.
The Committee Secretary indicated that, due to the absence of the Chairperson, the Committee would have to nominate an acting Chairperson for the sitting.
She requested nominations from the floor.
Ms B Tshwete (ANC) nominated Ms M Tlhape (ANC) as Acting Chairperson for the meeting.
Mr N Capa (ANC) seconded the nomination.
Ms Tlhape was nominated as Acting Chairperson for the sitting.
The Chairperson acknowledged the presence of the Minister of Agriculture, Land Reform and Rural Development (DALRRD). She then indicated that the Committee would be briefed by the Ingonyama Trust Board (ITB) on its APP and budget for the 2022/23 financial year. The Committee could not deal with the matter in the previous meeting, as the ITB had not tabled the budget alongside the annual performance plan (APP).
Introductory Remarks by the Minister
The Minister of Agriculture, Land Reform and Rural Development, Ms Thoko Didiza, first explained that the budget had not been tabled alongside the APP because it had a deficit. As such, she requested that the Department engage with the Board on the areas of concern. She added that, once the Department has concluded its meeting with the ITB regarding the budget, it will inform the Committee of the outcomes. She proposed that the ITB present its APP to the Committee without tabling the budget.
Ms K Mahlatsi (ANC) recommended that the Committee proceed as proposed by the Minister.
Ms A Steyn (DA) said that, while proceeding would be irregular, she believed that the Committee had to do so, as it has to debate the Department’s and its entities’ budgets and APPs on the 10 May 2022. She requested that the Minister send the Committee the reasons for the delay in tabling the ITB budget, for record purposes.
Mr Capa agreed that the Committee should continue as proposed.
Minister Didiza committed to providing the reasons in writing. She agreed that it is irregular, but reckoned that it would have been more irregular for the Department to approve a budget without knowing all of its details. Presently, the Department is awaiting a detailed report on the ITB’s financials.
Briefing by the Ingonyama Trust Board on its 2022/2023 APP
The Chief Executive Officer (CEO) of the ITB, Adv. Vela Mngwengwe, briefed the Committee on the ITB’s APP for 2022/2023.
He indicated that the ITB has two programmes for this financial year, which are administration, as well as land and tenure management.
Programme One: Administration
The key annual targets of this programme are:
- Unqualified external audit opinion
- The approval of stakeholder engagement strategy
- 100% implementation of internal audits management action plan
- 100% implementation of external audits management action plan
Programme Two: Land and Tenure Management
The key annual targets of this programme are:
- 800 approvals of tenure rights by the Board
- Four quarterly updates in the immovable asset register
- 24 traditional councils exposed to capacity
- Six human settlement plans approved by the Board.
Ms Mahlatsi questioned the relations between Board members of the ITB, as the APP presented was not up to standard. She said it was worrisome that the APP did not speak directly to the budget and recommended that the Board account for why it had not presented its budget. In addition, she asked how the plans, minimal as they were, would be implemented.
On the APP, she asked whether it had passed the required processes for development and if National Treasury and the Auditor-General had been consulted. Further, she asked if the APP is transformative and developmental in its approach.
Ms Steyn said the Committee should consider initiating discussions on the relevance of the ITB as an entity, particularly because it has not fulfilled its mandate nor has it served its constituents. As such, she recommended that the Committee look into having discussions on repealing the ITB legislation. She added that the communities should become owners of the land, whilst the ITB continues doing the work of the Judicial Council.
Mr Capa asked if the ITB had a timeframe on when it expected to achieve its target for tenure rights in the APP.
Mr S Matiase (EFF) said that the Committee should have not entertained a non-report from the board. He described the state of the ITB as both disappointing and shameful. He felt that the Board had continued its trend of undermining the Committee, as it still had not instituted a forensic investigation into the affairs of the trust, as requested. Consequence management, he felt, has to be implemented to prevent the board from further disregarding legislation, as well as the work of the Committee. Following this, he suggested that the Board be sent back to finalise its budget.
Ms Tshwete agreed that the Board be sent back to finalise its budget.
Ms T Breedt (FF+) seconded the proposal that the Committee discuss the relevance of the ITB as an entity, as she believed that sending them back would not correct the issues it faces. She proposed that the Committee have a physical interaction with the Department and the ITB, to agree on a solution.
Ms T Mbabama (DA) said that the APP did not speak to unlocking rural land for the benefit of the communities. The Committee, she said, had never been satisfied with what the ITB has brought forward. Additionally, the ITB has ignored the Committee’s suggestions. She agreed that the Committee have a physical engagement with both the ITB and the Department, in the hope of finding a resolution. She also proposed that the Committee conduct an oversight visit at the ITB, as there has been no progress since the appointment of the new CEO as well as the intervention by the Department.
She asked whether the ITB is still providing leases. In addition, she asked what human settlement plans the APP had referred to, were.
Mr N Masipa (DA) said that, according to the National Treasury framework on Strategic Plans (SP) and APPs, it is important that Strategic Plans (SPs) and APPs are linked to budgets to ensure that key objectives and priorities are budgeted for and achieved. He was concerned that the ITB had not tabled the budget alongside its APP. He added that the Committee could not support the plan presented by the ITB.
He asked what the conflicting and ill-founded expectations that the Chairperson of the Board had mentioned in a previous meeting were. This, he said, gave the impression that there is a trust deficit between the Board, the Committee and the Department.
He agreed that the Committee should conduct an oversight visit to engage on the progress achieved by the Board and also to evaluate the current issues it faces are.
Ms N Mahlo (ANC) said that the Office of the Minister was requested to look into the challenges facing the Board. She suggested that the Department continue to assist the ITB, to ensure that it functions efficiently. She felt that, because the ITB was formed through legislation passed by KwaZulu-Natal (KZN) provincial government, it did not feel the need to listen to either the Committee or other stakeholders.
Inkosi R Cebekhulu (IFP) indicated that land tenure management remained a problem for the ITB, as it had not achieved its targets for the previous financial year. While he recognised the utility of the ITB holding onto land on behalf of the communities, he would also welcome a debate regarding the provision of private tenure of land to community members.
The Chairperson agreed that the Committee should have a physical meeting with the ITB and also conduct an oversight visit, which would allow for Members to see the root challenges and provide recommendations on how to overcome them.
She asked if the APP was drafted with the current court order against the ITB in mind, particularly because it has to be honoured by the entity. She also asked if the ITB has sufficient resources, including human capital, to implement its programmes for the current financial year.
The Chairperson of the ITB, Mr Sipho Ngwenya, mentioned that, over the years, the ITB has been criticised for the work it has done. He admitted that the ITB’s budget had a deficit, and explained that this was because it has had to subsidise the allocation it receives from the government to conduct its work. However, the ITB cannot continue doing so. Government’s allocation to the ITB for the past financial year amounted to R24 million, out of a total budget of R100 million. The allocation received is only used to pay the salaries of the staff, as they currently amount to R2.7 million per month. He added that the entity would have to reduce its staff complement drastically if it did not receive an increased budget.
He did not understand why the ITB had been criticised by the Department, especially since it has not provided additional money to the entity.
Regarding the conflicting and ill-founded expectations, he said that the Committee did not know what the functions of the Board are, and what it has done thus far. He explained that the Amakhosi and traditional councils, not the ITB, own the land on behalf of the communities. The Board only provides tenure rights in the form of leases, if community members are unable to obtain finance to utilise their land. Prior to approving a lease to a member of the community, the ITB sends an in-house surveyor, owned by the trust, to survey land. After doing so, the trust, with the assistance of the community, verifies the boundaries of the land.
On the human settlements, he indicated that community members are allocated land for various purposes, in line with customary law. These need to be documented through the Geography Information System (GIS) by the land surveyors.
He explained that the traditional leaders are under the competency of the Department of Cooperative Governance and Traditional Affairs (CoGTA), while the land is in the hands of the DALRRD. The Committee, he stated, had not met with either the King or the Amakhosi, to find how they administered the land. He recommended that much of the Committee’s concerns should be raised with them and not the ITB. He felt that the Committee’s criticism of the entity was unfair.
Regarding the original legislation governing the ITB, he mentioned that the original ITB Act adopted by the KZN provincial government was amended by the National government, thus making it national and not provincial legislation.
Touching on the forensic investigation, he indicated that the Board did not have funds to institute one. If the Board were to be provided the funds, it would do so.
Referring to the court case, he stated that the ITB is mindful of the court judgement. Due to the judgement, the ITB has been unable to administer leases for land to community members. However, the judgement did not indicate that all leases of the ITB cannot be issued.
Ms Steyn did not appreciate the ITB telling Members that they did not understand its work. The Committee’s work, she mentioned, is to ensure oversight of the Board’s work.
Ms Mahlatsi also took issue with the comment made by the ITB. She asked whether the Department’s interventions had yielded progress, as it seemed that the issues at the ITB had gotten worse.
She took issue with the suggestion that the Committee should meet with the Amakhosi, as its duty is to conduct oversight only on the work of the Board.
Mr Matiase mentioned that the Committee makes recommendations for the Department to implement. Furthermore, the Committee speaks on behalf of all South Africans. He said that, if the ITB conducts its business within the prescripts of the law, it would not receive criticism. He implored the Board not to create a parallel system of unaccountability and for the Minister to act when it does not comply. He added that the Department is also to blame for the challenges the ITB currently faces.
Mr Capa asked the Department if it needed the entity to perform its current functions. If so, he asked if it had a prepared budget to share with the Committee as evidence.
Mr Masipa said that Members of the Committee are lawmakers, and the ITB should share any recommendations on legislative changes that would make its work easier.
Closing remarks by the Minister
Minister Didiza agreed that the Department, the Committee and the ITB need to have an engagement.
She explained that the initial legislation governing the ITB, implemented by the KwaZulu government prior to 1994, was intended to protect land where the Zulu Nation resided. In 1994, this legislation was endorsed and affirmed by the national government. In 1997, Parliament set out legislation to assist the trust, particularly the trustee, with the management of the assets.
Still explaining the history, she said that at the ITB’s inception, government had not held discussions on how it envisaged the structure of the Board and how it would manage the land.
She explained that the ITB receives funding from government to support the Board in assisting the trustee in managing the land and separate funding that is used for the development of communities. Central to discussions between the Department is whether the management of the land should be paid for by the trust. She added that, in one instance, both the Committee and the Department could not access information on the resources of the trust. Also, there were issues between the Auditor-General and the Board, when it tried to conduct an audit of the entity’s finances.
These are matters, she indicated, that will be discussed in the Committee’s proposed meeting. She believed that, during the engagement, all three parties should look into re-examining the various statutes that govern the ITB.
The Chairperson mentioned that the Committee will need to conduct an oversight visit, as well as organise a physical meeting with the ITB. The Committee, she said, will not shy away from conducting oversight over the resources allocated by the ITB to administer and manage the land.
She indicated that the Committee would be briefed by the Fresh Produce Exporters Forum (FPEF) on its submission regarding the public hearings on the APA Amendment Bill.
Public hearings on the Agricultural Produce Agents Amendment Bill
Fresh Produce Exporters’ Forum (FPEF) submission
Mr Anton Kruger and Ms Luzanne Brink presented the FPEF views on the APA Amendment Bill.
Mr Kruger indicated that there are the purposes to the Bill, the protection of farmers, the promotion of market access and to ensure a level playing field for agents. However, FPEF does not believe that this is what the Bill will achieve, instead, it will:
- Increase red tape;
- Reduce market access and limit competition;
- Increase the costs across the value chain;
- And skew the playing field for agents and farmers.
He explained that the Bill will do this because both it and the Act have been drafted with local market agents (fresh produce agents) in mind, whereas export agents operate on a completely different basis.
Ms Brink highlighted that the Bill’s requirement that export agents obtain credit insurance will reduce market access, as several countries do not have credit insurance, and in others, it is too expensive. Though, the biggest risk identified by FPEF is the fact that the Fidelity Fund contributions/provision of security cannot protect against non-paying importers.
She then outlined the FPEF’s solutions, some of which were:
- That the Department draft new legislation aimed specifically at export agents only
- That the legislation corrects and clarifies the definitions of an agent, fresh produce agent and export agents.
Agricultural Produce Agents Council: Export Agent’s Submission
The Chairperson of the APAC Export Agent, Ms Leizl Gelderblom, briefed the Committee on the organisation’s submission regarding the APA Amendment Bill.
Ms Gelderblom said that the Bill, in its current form, does not underwrite deregulation in the industry, nor does it promote the South African economy. Rather, she felt that the restrictions in the Bill would not support growth in the industry. To this regard, she highlighted several issues, three of which will be mentioned: one, that applying a blanket requirement for credit insurance would restrict market access and adversely lead to the closure of pivotal export markets, attributing to 50% loss of market share. Two, the Bill does not cater for advances, production loans, pooling systems and the majority of Incoterms. Three, the Fidelity Fund does not cater for the most extensive risks associated with exports, such as the redirection of consignments, market loss and in-transit delay.
Ms Steyn asked whether the organisations had discussions with the Department during the drafting of the Bill. In addition, she asked whether their inputs had been taken into consideration.
Ms Breedt said that the presenters, like the Committee, had raised the issue of local producers versus exporters. She asked whether the Bill is viable and how it would be implemented. The Bill, she believed, will not fulfil the purpose of deregulating the industry.
Ms Mbabama appreciated the recommendations provided by the two presenters and said that the Committee will discuss them, going forward.
Mr Masipa thanked the presenters and encouraged the Department to engage with them to identify the risks associated with the Bill, particularly the 50% market share that will be lost because of the consignment requirement. He was concerned that the Bill, in its current form, will add further red tape and stifle the industry, which is already under pressure.
Inkosi Cebekhulu welcomed the efforts by the Department to assist small producers in the industry.
The Chairperson asked what would be an adequate notice period for exporters.
She asked how the Bill would create further red tape for the farmers.
Referring to the floods in KZN, she asked whether the proposals on insurance will assist farmers affected by such disasters. She then asked how the organisations define fresh produce agents and export agents. Additionally, she asked what concerns they have regarding producer trust account requirements.
Mr Kruger, on the notice period, said that at least 30 days would be adequate, taking into account the activities the exporters are involved in.
Regarding the definition of an agent, he mentioned that currently, the Bill views all employees within an export agency as agents. An export agent, he explained, is a company with salaried staff. It is the company that earns the money and not each individual employee.
Touching on the consignments, he indicated that time and temperature are the two most important factors in ensuring the quality of the product; the delay in arrival of consignments in the market may lead to quality loss. Whilst a local agent can quickly settle their payments with the producers, as they supply the produce in a day or two, an exporter can only do so by 10 weeks at least.
Still referring to consignments, he added that insurers are not willing to provide insurance to all destinations – for instance, all African states, as well as countries like Russia and India, are not eligible for credit insurance. As the Bill states that for every consignment there must be credit insurers and marine insurers, exporters will not be able to sell to those markets. Thus, they would lose 50% of the market share. He called for the Department to open access to new markets, as the current ones cannot absorb the new produce coming into the market.
He indicated that FPEF did not believe that the Bill’s requirement that every director, be it an executive or non-executive, should write an exam every two years on the consignment. Furthermore, every individual engaged with the farmer must also write the exam. Producers will also be required to have audited financial statements, which are expensive and will affect the sustainability of the businesses.
He mentioned that FPEF only had communication with APAC’s legal representative and not the Department, during the drafting of the Bill. Furthermore, not all the proposals made were taken into account when the rules for export agents were published in 2018.
Ms Brink mentioned that the insurance spoken of in the Bill does not relate to disaster situations. Instead, it touches on protection against what could possibly go wrong in the logistical chain where the fruit is exported from one country to the next. If something were to go wrong in a transaction, either the farmer or the export agent has to carry the cost. However, if the producer elects not to obtain credit insurance, due either to unavailability in the receiver country or the high price, the risk is carried by the exporter, who will have to pay the farmer. She added that, in such an instance, the farmer only has to ensure the quality of the product being sold.
On the definition of an agent, she said that the Bill refers to local agents as fresh produce agents and exporters as export agents. However, both deal with produce. FPEF, she indicated, suggests that the Bill refer to them as either a local market agent or an export market agent. In certain instances, an export market agent will sell produce in the local market because it has been rejected for export. However, the Bill will require that, even if the export sells a small percentage on the local market, he/she will be required to register as a fresh produce agent, meaning he/she will have to comply with rules relating to exports as well as supplying local products.
The agent, she added, would have to contribute to the Fidelity Fund (for local market sales) as well as to security (for export market sales). In addition, he/she would have to have a producer account and trust account, one of which will be audited, while the other will not. All of this would mean that he/she would have to run two sets of businesses to comply with both requirements. Farmers would bear additional costs and burdens, which would make it expensive to run their businesses.
The FPEF, she said, has requested that a new Bill be drafted, instead of using one that speaks to local agents acting on a municipal market because the market has changed over time. She felt that the Bill is trying to copy and paste sections to regulate export agents, which will not be practical and implementable.
She mentioned that FPEF’s inputs have not been taken into consideration when drafting the Bill, but it will continue to offer input on the Bill during the public hearings.
Ms Gelderblom, regarding the assistance provided to farmers in KZN, said that the produce affected would most likely not be classified as an export product. As such, it will be catered for either by the contracting affording agent, or one of the service providers involved in the chain (who would cater for damages and losses for product). There are also service agreements with role players, which assist farmers affected by a disaster. She added that any insurance that the Bill requires would not be applicable in such an instance. She asked Members if the fidelity fund would assist in such a case.
She informed Members that marine insurance is catered for by the existing legislation, and the terms of sale would specify where the marine insurance is for the seller, the farmer and the buyer at the point of destination. She believes that the Department should look into legislation that will allow for the industry to self-regulate itself, as applying the restrictions contained in the Bill would not be conducive to its growth.
Ms Breedt asked why the APAC – which was established in terms of the Act that is being amended by the Bill, to regulate agents on behalf of the Department – has raised concerns, and if this meant that the Department did not engage with it before tabling the Bill.
Ms Gelderblom mentioned that input and consultation were provided to the Department, but she felt that the contributions made could have been more substantive and gained greater recognition in the Bill.
The Chairperson said that this Amendment Bill is one of five pieces of legislation that the Committee has to deal with for the year. She was pleased by the input made by various stakeholders on the Bill, with the Committee receiving 70 written submissions. In the following days, the Committee will receive oral submissions from those same stakeholders. Following the public hearings, the Committee will schedule a meeting with the Department for a response to all the inputs made by stakeholders on the Bill, both written and oral. She believed that the input would help Members, going forward.
The Committee then moved to the next item on the agenda.
Committee minutes dated 25 February 2022
The minutes were considered and adopted.
Committee minutes dated 01 March 2022
The minutes were considered and adopted.
Committee minutes dated 22 March 2022
The minutes were considered and adopted.
The meeting was adjourned.
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