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AGRICULTURE AND LAND AFFAIRS AD HOC COMMITTEE
27 May 2004
DEPARTMENT STRATEGIC PLAN AND BUDGET: BRIEFING
This report was produced by Contact Trust.
Chairperson: Mr N Masithela (ANC)
Documents handed out:
AGRICULTURE AND LAND AFFAIRS AD HOC COMMITTEE
The Committee received presentations from National Agricultural Marketing Council, Agricultural Research Commission and the Onderstepoort Biological Products Ltd.
National Agricultural Marketing Council (NAMC) submission
Mr M Rathogwa introduced his colleagues, Ms Ndaba and Mr Mvabaza. He gave a brief introduction and then Ms Ndaba gave input on the Outreach programme. She noted that one of the problems for farmers was where to get information. Other problems were infrastructure and transport. Mr Mvabaza then went through the strategic objectives.
The Chair noted that the Act had been passed so the core function of the NAMC was clear. The Budget had been curtailed so the NAMC could spend money on that core function. He asked what they were doing outside of this.
Mr Rathogwa answered that they were also establishing a database - a register of farmers and their work so that they could track the industry.
Mr van Niekerk (DA) asked how the information from the NAMC had been communicated to the people on the ground. He also asked if price monitoring had had ny effect in a free market economy. He asked about the Wool Board and the amount agreed to with the Australian Wool Board. He then went on to talk about the raising of funds by imposing levies for research. He asked if this was a common tendency.
Mr Nel (NNP) asked about the amount of assets going to the Meat Board.
Mr Mvabuza responded that there had been two settlements with regard to the Wool Board. The first payment to the Wool Board's Australian counterpart was R48 million. After that it was seen that the valuator had made a mistake, so a second amount was given. This was an out of court settlement and had not been disclosed. The information would only be available after the Auditor General had approved the report.
In terms of statutory measures, he said that most industries now raised funds this way, as the voluntary route did not work. The NAMC meets with industry leaders who must then apply but this was a slow process and it was still up to them to apply.
Mr Rathogwa said that price monitoring was essential for understanding how food items were priced. It did not mean that they were controlling prices but the industry knew that they were monitoring it and any discrepancies would be revealed. A free market did not mean that people could do as they wished.
He agreed that the distribution of information was a challenge. All information was communicated via booklets and workshops but they needed to improve on this.
On the question regarding the Meat Board, he said that the amount originally transferred to the Trust was R45 million. This amount now stood at R22 million, the balance having funded the SA Meat Campaign and the Red Meat organisations.
Mr Dlali (ANC) asked whether the large amount spent on personnel could be reduced. He then asked about the promotion of black farmers as a key performance indicator for 2003/4. He queried why the meeting with the Minister to clarify roles was marked as an achievement. Finally, he asked whether emerging farmers were being given support and whether there was progress in this regard.
Mr Rathogwa responded that they could not statistically quantify their help, but as a result of their efforts, farmers can now go out to the market more effectively.
Ms Ndaba added that they had core black agents in Johannesburg, and the hawkers market and the Cape Town market in Epping.
Mr Rathogwa said that the meeting with the Minister was an achievement as the Trustees were not achieving and the meeting helped to clarify roles. The achievement was clarity on roles.
The Chair noted that the roles were defined in the Act and the core function defined by the Minister. He asked how often they met with the Minister, and Mr Rathogwa said once per quarter.
Mr Rathogwa said they could not cut the budget for personnel as they had to have administrative costs that could not be cut out.
The Chair asked that they give a projection of personnel costs. Mr Rath said they would do so.
Mr Schoeman (ANC) said the Committee needed to approve the budget which included an allocation for the NAMC. They knew the Act under which the NAMC operated and as the Marketing Boards collapse the NAMC must look at its core function and the Committee must consider if they were the only source of information for farmers. He said that the marketing council was trying to redefine its role and the Committee must also justify it and if it cannot it must relook at the NAMC and something decisive must be done. The question was whether they contributed to the marketing problem. He added that when farmers were ready to market their products they were already commercial farmers. There was no good in providing information that was not useful.
Mr Rathogwa said that he believed that the Board should be more involved in assisting marketing in general, adding that other countries had such organisations. He said that the NAMC was involved in assisting and that the lead Dept in this was DTI. He added the they believe they have a role to play.
Mr Radebe (ANC) asked about the challenges and the establishment of the database. He asked whether, if they had that challenge, they would be able to deal with two economies.
Mr Abram (ANC) asked whether the results of the research could be made available. The Chair added that that this question should be responded to in writing. He then asked how the NAMC saw the challenges facing the industry. He also asked about the request from the gaming industry and if they would be able to look at the negative aspects of the gaming industry. Mr Mvabaza confirmed this.
In terms of challenges, the NAMC representatives talked about the provision of information.
The Chair stopped them saying that this was the role of the Portfolio Committee. He asked what the NAMC was doing? Mr Rathogwa said that they were continuing with their investigation and still saw the provision of information as important.
The Chair asked the NAMC to check Programmes 3 and 4 of the Department of Agriculture's specific programmes. He then asked the NAMC to provide within seven days a programme fitting in with the Presidents State of the Nation address. It would be important to convene a meeting with them to discuss functions.
Agricultural Research Council
Ms Tau-Mzamane made the presentation (attached).
The Chair noted that he was not sure that they could achieve their aims within the amounts allocated in the budget. In the previous year, the ARC had come to the Committee to discuss the issue of salary increases and this had been dealt with. The amounts from Parliament were less than the amounts from the private sector and he asked if this was sustainable.
On the strategic vision, Mr Dlali asked about the three pillars especially pillar 2: how do they envisage dealing with the challenges posed by the second economy and lessening the gap between the first and second economies?
In terms of the second economy, he asked for comment on the reference to the inability to earn and increase incomes, inability to access markets, and the lack of access to capital.
He noted that one of the challenges faced according to Mr Guma was an over reliance on external income to fund the ARC's activites and maintenance of strategic capacity, as the second economy issues do not bring in money. He asked how they were going to deal with this and the consequent imbalances.
He referred to another challenge mentioned in the presentation - the lack of researchers and resulting lack of capacity to take advantage of the opening of markets as a result of SA joining the community of Nations and NEPAD. He asked for comment on this issue.
Mr Schoeman asked if there was a blue print for agriculture in SA and what the role for the ARC was in this. He asked if the ARC was actually involved in creating the vision for Agriculture in SA , noting that this was not in the presentation and there was a need for substance.
Mr Ramphele asked about the extent to which they service the 2nd economy, and the extent o which emerging farmers were supported contextually.
Ms Tau-Mzamane said that with regard to the closing of the gap between the 1st and 2nd economies that ARC scientists were being taken into the provinces where they were a quick conduit for information. She added that the ARC does not work with individual farmers although they do work with some groups of resource poor farmers in high tech projects.
She also said that often scientists would not have worked with resource poor farmers in the past and so the ARC gives them the tools they need in order to research the second economy effectively.
In terms of the capacity to take on NEPAD she noted that even though the mandate has increased their capacity has decreased, but one way of dealing with this was by developing partnerships with others which the ARC was doing.
On the question raised by Mr Schoeman she said that the ARC in conjunction with the Dept Agriculture had developed the Geographical Referencing Information System which gives information on what to grow and where. They have also heightened relationships with the municipalities.
In terms of the vision and strategy she noted that the ARC was custodian of significantly manpower and was working to defining its strategic direction.
Mr Ramphele referred to an occasion where he had not been able to get information that he had requested from the ARC. He asked what systems were in place for people in the constituency to get the information they need.
Mrs Tau-Mzamane relied that the Provincial Agriculture Departments have extension services who provide information and who the ARC has contact with. She noted that there were still weaknesses in the system but that the ARC's mandate was for research. She added that there were also issues of literacy and language. She went on to say that the ARC was working with the Land Bank to provide information tools.
Dr van Niekerk (DA) noted that there were declining numbers of researchers but lots of tasks in terms of developing commerce, agriculture and NEPAD. He added that the funding from outside sources was commissioned and not directed at needs. Funding was provided by the State and the Dept of Agriculture. He asked what the ARC's relationship with the Dept Agriculture was. He then said that on the one hand there was a Dept that was not funding as much as the ARC needs, but on the other hand there seems to be evidence that the ARC was not using its existing funds effectively. He gave the example of the Citrusdal research station which was delapidated and perhaps should be sold. He said he understood the ARC's position but said also that if there was to be land reform the ARC needs twice as many researchers. He wanted the Committee to support the ARC in getting more money.
The Chair noted that even if the ARC collapses, NEPAD will achieve its objectives. However it was very important for the Portfolio Committee to support the key objectives of the ARC.
The Chair added that on the issue of dilapidated research stations, it was not always the best option to sell them.
Mr Abram commended the ARC on their work. He said that the State of the Nation address identified the issues that need to be addressed. He added that it was important to look at cost, and not only human resources, but also logistics, both regionally and individual. He went on to say that he was aware that the ARC engages in research on behalf of the Commercial farmers and he asked if they paid for this. He also asked if the ARC does soil tests, and whether they charge and if the charges were market related.
Mr Radebe agreed with Mr Abrams and went on to ask additional questions. Firstly he asked about the lack of reference to indigenous fruits and vegetables, and noted that marketing these would help the second economy.
On the issue of lack of researchers he noted that the government negotiated bilateral agreements with other countries, and he asked if was possible for the ARC to do the same, and so share resources with others.
On the question of the Parliamentary grant, he noted that there was an over reliance on outside monies, and added that he felt that the issue of funding would compromise the needs of the country.
The Chair added to this asking if the ARC could provide its projected needs over the next 10 years.
Mrs Tau-Mzamane said that, especially in the last few months, they have been working with the Dept Agric to identify core issues. Some may not be addressed in this financial year.
On the question of staffing she said that they had given some increases, but staff were often tempted to move to other organsations.
On the question of indigenous fruits she said that they were exploring the ways in which to get indigenous fruit and vegetables to propogate faster, as they were slow to mature. There was always the issue of funding.
Mr Ngema echoed the compliments of his colleagues. He added that in the strategic plan the Dept enumerates that the Public entities report to the Minister. He asked if there was any implications for this if the ARC was financially independent.
The Chair was concerned about the directions of the questions as it involved changing policies - moving to a private enterprise.
A member asked about the references in the presentation to the benefits derived from the ARC and the reference to what SA would lack if the ARC did not exist. He asked about the groundwater contamination and whether research had been done and if samples had been taken.
A member asked about the reference to ageing technology, and the fact that the ARC was getting less money from the Parliamentary grant than outside sources. She noted that the ARC had also raised the issue of salaries, but there was no reference to a shortfall in maintenance costs. She asked what the cost of this would be.
The Chair stopped the questions, and asked the CEO of the ARC to provide the Committee with a projection of how much it would cost to run the ARC, looking at the core mandate of the ARC.
Ms Tau -Mzamane said that they would, by the 8th June. She added that the issue of scientists was simply that they could not do their work without the scientists.
Onderstepoort Biological Products submission
The Board Chairperson, Mr S Makama, emphasised the importance of Onderstepoort in controlling outbreaks. He noted that when they first made a presentation to the Committee they were still a young outfit and did not have a full complement on their Board or Executive.
He went on to outline the structure of the organisation and some issues relating to corporate governance. He also gave some insight into the company's financial performance, saying that sales had steadily increased, both for local and export markets.
Dr Makuleni (MD) went on to say that in 2000 the Board had been tasked with making the organisation profitable. They had tried hard to generate revenue and profits. Their market was the Pharmaceutical Industry (NB. Biotechnology), both domestic and international. They were involved in animal health for both the commercial and emerging sectors. They have well established competitors, and a price sensitive market and stringent Regulatory requirement as well as well informed customers. Their distribution channels were profit margin driven
He outlined the profile of the company and then outlined their business plan for 2004/5. Indicators of company performance were attached in Appendix A.
Dr Schoeman asked how much they spent on consultants. He then asked about the amount they spent on R&D, questioning whether the 6% was sufficient, and whether they benchmarked their spending vis a vis other organisations.
Mr van Niekerk asked about their interaction with the Institute and also asked whether 6% was enough.
Mr Radebe asked about the extent to which they used E-commerce to support their marketing. He then asked how their products were protected and whether they were patented.
Mr Abrams asked about their involvement on the continent and whether they have products that serve the needs of other countries in Africa. He also asked if they were producing products which were competative.
Dr Makuleni responded that the consultant fees were less than R100 000 but the information that comes from their employment adds great value to the organisation. However they were cautious about consultants.
In terms of the R&D budget it was noted that most organisations spent between 3 and 6%. Pfizer spends 6%. It was also noted that they have strategic alliances with other instiutitons in terms of research.
On the issue of markets the institute was exploring the e commerce possibilities.
Vacinnes were mostly produced around 1968, so they cannot patent them as they were already in the market. However there were initiatives in terms of managing intellectual property.
Mr Makama said that they would possibly approach the committee for further discussions.
Dr Makuleni said that they see themselves as a resource for expertise and the production of vaccines in Africa, and were looking at different agreements in this regard.
The Chair thanked them for their presentaiton and encouraged them to proceed. He emphasised the need for them to have good facilities.
The meeting was adjourned.
APPENDIX 1: Onderstepoort Biological Products company outline
100 million doses p/a - Total capacity 180 Million doses p/a
Control + 50 different diseases
+ 8 Vaccines - sole/ main producer World Wide
"To be a centre of excellence in developing, producing and marketing biological products - serving Africaâ€¦Serving the world."
The stafff complement was 187.
There was an equity plan in place.
There were Human resource development structures in place and skills development was achieved via EBET, bursaries, multiskilling in house training and a management development programme.
Production Success Rate: 75% to 90%
Physical Infrastructure audit
Facility Upgrade plan
Streamlining production Plan
RESEARCH AND DEVELOPMENT:
Establish and Strengthen Research and Development Capacity
3 Functional Departments
Increase Number of Scientists
Increase R & D Expenditure (5% of sales)
Broaden Research and Development Partners:
Local - Academic Institutions
3 Research and Development projects on Trans-Boundary disease
TOTAL QUALITY MANAGEMENT:
Positive report from Registrar of Act 36/47
Two new products submitted
Experimental Animal Facility
MARKETING AND SALES:
Sales Revenue growth over last year
Appointment of Technical Manager
Disease Management training
State Veterinarians and Animal Health Technicians
Expert Panel Meeting
Information/ farmers' Days
Product Promotional activities
Grow Customer base
Europe (Italy, France, Spain)
Africa (Rwanda, Mozambique, Zimbabwe, Morocco
Active participation in International Congresses (e.g. OIE Bluetongue conference)
Intervet (direct competitor)
ECO Animal Health
COMPANY DIFFERNTIAL ADVANTAGE:
Well established organisation
Capacity, capabilities and expertise
Broad vaccine Range
KEY CRITICAL SUCCESS FACTORS
Good manufacturing Practice
Sales and marketing
NON-FINANCIAL STRATEGIC OBJECTIVES
Build marketing capabilities
Research and Development-2 new products p/a
Quality Control tests
Good Corporate Governance
Annual Risk Assessment
2004/05 = R75.68m
2005/06 = R93.84m
2006/07 = R107.921m
Obtain 8% return on sales
Â· Total expenses R65m (R45m 2003/4)
Â· Increased depreciation R6m (from capital)
Â· Increased repair & maintenance R2m
Â· New positions/ vacancies R2m
Â· Annual salary increase R2m
Â· Salary adjustments to market: R2m
Â· Additional R & D R2m
Â· Travel to export market R1m
Â· Administrative R2m
Â· Facility upgrade R13m
Â· Equipment replacement & upgrade R25m
Key challenges and opportunities:
Upgrade of facility
Increase sales volumes
Intellectual Property Management
Advancement in Technology
Centre of Excellence - vaccinology
Government Tender Business
Value to South Africa:
Ensure domestic competencies in vaccine products
Farming community able to respond swiftly to disease outbreaks
Establish economic viable vaccine business
Develop and retain skills and expertise in vaccinology
Establish strong Research and Development capability in vaccinology
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