Bio Onderstepoort Products and Perishable Products Export Control Board Annual Reports: briefings

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Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
26 October 2005
BIO ONDERSTEPOORT PRODUCTS, AND PERISHABLE PRODUCTS EXPORT CONTROL BOARD: BRIEFINGS

Chairperson:

Ms D Nhlengethwa (ANC)

Documents handed out:
Bio Onderstepoort Products Ltd Annual Report
Bio Onderstepoort Products Ltd briefing
Perishable Products Export Control Board Annual Report
Perishable Products Export Control Board briefing
[these documents will be available shortly]

SUMMARY
Bio Onderstepoort Products Ltd (OBP) and the Perishable Products Export Control Board presented their Annual Reports to the Committee. Delegates explained their Governance Report, Company Performance for 2004/05, Human Resources Report, as well as their Financial Performance for 2004/05. The Committee applauded the company’s impressive financial performance as well as their good work on establishing strong research and development on vaccinology, progress on employment equity, and establishing healthy trade relations with the international market.

The Perishable Products Export Control Board (PPECB) then briefed the Committee on their legislative mandate, governance and structures, business model and strategic emphasis, and their Annual Report and financial statements for 2004/05. The Committee thanked the PPECB for their good work, noting that they looked forward to seeing the issue of equity and transformation further addressed.

The Chairperson said the Committee would be hosting public hearings on the Genetically Modified Organisms Amendment Bill [B34-2005] during the first term of 2006 and that all interested parties should make submissions before 18 November 2005.

MINUTES

Bio Onderstepoort Products Ltd Briefing
Dr M Madikizela (Acting Board Chairperson) introduced their Board of Directors and elucidated on their corporate governance procedures so that the Board retained full and effective control of the company. The Board was committed to good corporate governance and had conducted assessments of the Board, the Board Committees and the individual Directors.

Dr L Makuleni (Managing Director) highlighted the company’s performance for 2004/05, stating that Bio Onderstepoort Products had become a respected leader in its niche market with regards to the production and sales of animal vaccines and related biological products. The company had experienced annual sales growth since its inception of 2001. They had provided pamphlets and leaflets in all South African languages, and interacted with the Department of Agriculture on articles to raise awareness of disease management.

As far as export markets were concerned, the company had explored co-operation with Southern African Development Communities (SADC) countries on transboundary diseases, and with countries such as Zambia, Nigeria, Senegal and Tanzania. Furthermore, they had serviced European Union countries and presented technical papers. The company had continued to broaden its research and development partners both in the international sphere and at local academic institutions. Their continuous streamlining of production processes had sustained their high production process at a rate of 90%. Their operations included the upgrading of their facilities and sourcing international expertise.

Dr Makuleni informed the Committee that since their last presentation where they had requested an amount of R15 million for the construction of an experimental animal facility, they had since constructed a state-of-the-art animal facility, which had been visited by Dr Vallee of the World Organisation of Animal Health. Dr Vallee had explored the possibility of inter–African co-operation in the use of the facility.

In terms of total quality management, the company had experimental animals and its Animal Ethics Committee implemented a biosecurity system. There had also been supplier and Black Economic Empowerment (BEE) quality audits.

Ms A Bokwe (General Manager of Human Resources) stated that in terms of their Employment Equity status, the company had reported a 40% male and a 60% percent female staff composition, while their racial composition was structured with a majority black African employees, followed by white, then coloured and then Indian staff. The company employed individuals with disabilities; offered adult basic education, bursaries for employees and customised learning interventions.

Mr M van Jaarsveld (General Manager of Finance) stated that in terms of their income statement, their cost of sales had increased from R25.4 million in 2003/04, to R43.2 million in 2004/05 (a net increase of R17.8 million). The company had been operating for five years but had seen positive growth in financial, human resources, operational processes and its client base. Furthermore, it had played a significant role in the New Economic Partnership for African Development (NEPAD) regarding eliminating transboundary diseases.

Discussion
Mr Radebe (ANC) sought clarity on the risks they had identified. He also enquired on the agreement between the company and their shareholders and their low return on investments. Lastly he inquired whether the company had penetrated the market in the East, since China exceeded the USA in terms of its growth in agricultural production.

Dr M Madikizela replied that in their identification of risks, they identified not spending sufficiently on Research and Development (R&D), and entering the export market.

Dr Makulene replied that the agreement with their shareholders was that for an interim period; the profits earned would be reinvested into the company. They had the opportunity to travel to the East, specifically India, to assess their markets. India’s bioproduct industry had many research institutions to develop specific strains of vaccine for specific diseases in their local market. They had held a recent meeting to discuss travelling to China to examine penetrating that market.

Dr R Schoeman (ANC) asked how the company had dealt a possible Avian Flu breakout, since the disease had recently had a tremendous impact on the ostrich farming industry. Mr van Jaarsveld responded that they were undertaking research on the Avian Flu breakout, and planned to have a specific team allocated solely to that research.

Mr Rampele (ANC) inquired about company capacity building and training in the areas of science and technology, and about progress being made in R&D. He asked why they had not advertised on local radio stations. How did their Human Resources division recruit people with disabilities?

Mr van Jaarsveld stated that they had advertised on radio stations such as Mutsweni FM, Ukhosi FM, and local Zulu and Xhosa radio stations. However, radio advertising was costly. With regards to capacity building, they supported capacity-building in the SADC region by training vets in those countries. They worked with the State Veterinary and Technicians Board.

Mr J Bici (UDM) sought clarity on labour costs and salaries. Ms Bokwe responded that the Human Resources team had identified the appropriate remuneration to attract key staff. They decided on this by going through a benchmarking exercise.

Perishable Products Export Control Board briefing
Mr Neel Hubinger, CEO of PPECB, provided the Committee with an overview of their legislative mandate, governance and structures; business model and strateges

; Annual Report, and financial statements for 2004-2005.

In terms of their

legislative mandate, the (outdated) PPECB Act 9 of 1983 provided for control and management of the South African Perishable Products Export Processes Act 119 of 1990. The designated assignee in terms of the Agricultural Products Standards Act ensured export food safety and quality standards of agricultural products were complied with. The Public Finances Management Act (PFMA) 1 of 1999, regulated financial management and good governance in government and public entities.

The presenter explained that their 2005 – 2006 Strategic Emphasis was structured on transforming sustainability through the

creation of market confidence, closing the gap with stakeholder expectations, implementing risk-based assessments through an integrated food safety and quality management system, and transferring skills.

 

 

 



 

Discussion
 

Mr Radebe stated that he had enjoyed his visit to their premises in August. Since the Employment Equity Act had come into effect in 1998, what was the organisation doing to fast-track the process of transformation?

Mr Ramphele expressed concern that 37% of South Africa’s agricultural land with potential on the East coast had not yet been tapped into. Mr Ramphele asked the presenters how the PPECB assisted in capacity building, and how it could expand services to the East coast and the Northern Cape’s second economy. Thirdly, he sought background on an article he read on South African exported grapes being mixed with Iranian grapes, and then labelled as a product of South Africa. He asked if this was correct and what could be done to solve this problem. Lastly, he inquired about the process of labelling South African products.

Mr Hubinger stated that in terms of capacity building, they were partnering with other organisations to build capacity. Currently there was a conference taking place in Stellenbosch for the Market Assessment for Agricultural Products, in which he had earlier chaired.

Mr Martin added that with regards to capacity building, their 42 offices and 11 regional offices promoted the extension of services to surrounding areas. Staff and partner organisations were encouraged to cluster and monitor competitiveness.

The Chairperson asked whether there was a branch in Mpumalanga. Mr Hubinger explained that the PPECB’s head office was in Cape Town, but they had 42 offices and 11 regional offices throughout the country. These offices were located where the products were most centrally located.

Mr Johan Schwiebus explained that their costs had increased by 16% per annum as a result of this decentralisation. They were searching for further opportunities to partner with individuals/organisations. On the issue of labelling and branding for the second economy, they were willing to partner with organisations specialising in these initiatives.

Mr Martin noted that in terms of the Agricultural Products Standards Act, every product needed to be identified by its country of origin. This "mixing" of two products from different origins and the marketing of those products as being that of one country, did contravene this international law. Where an incidence of this nature was brought to their attention, they would investigate the matter.

Ms Da Gama noted that they were very committed to transformation, and planned on redress within the next three years.

The meeting was adjourned.
Mr Hubinger stated that in the past ten years, they had transformed their Board; acquired new leadership; adapted to a deregulated marketing environment and performed a stabilising role in South Africa’s product standards; and sustained international confidence in quality South African perishables. They had also contributed to dynamic growth in exports, extended the ‘menu of services’ in the "farm to fork" chain; modernised business systems, and integrated statutory supply chain services. The PPECB had also received various international certifications and standard accreditations, such as ISO 9001, ISO 62, ISO 65 and ISO 7025, BRC and Nature’s Choice, established "value adding" partnerships with government, industries, and established customers established internationally as South Africa’s "quality assurance partner" in with the Food Standards Authority.

In terms of their future transformation, the PPECB had embarked on an integrated strategic transformation process for the next five years to meet stakeholder requirements. They would continue to hone their risk-based integrated food safety and product quality management system (IFSPQMS). Their organisational design and resources plan would be revised. Re-training and development of employees was linked to legislative review processes, capacity building, and extension of services internationally.

Mr Dean Martin (PPECB Executive: Inspection) elaborated on their 2004/05 Annual Report by stating that in terms of operations and cold chain services, the PPECB would shift from conventional operations to a more focused value approach. A total of 192 million cartons of fruit had been inspected (including citrus, deciduous, subtropical, melons, pineapples and others), compared to 194 million cartons in 2003. Porthole containers had been phased out during this period and the demand for integral equipment had increased substantially.

In terms of their customised services, their pesticide initiative programme (SA PIP) had been launched. A substantial number of adaptive research projects had also been contracted with industry stakeholders for R4 million. Seven instead of the three intended SA PIP information events targeted at emerging farmers had taken place during the year

The PPECB had also invested in ISO 17020 accreditation, which would enhance PPECB’s credibility on the local and international markets. This was also in line with PPECB’s stated purpose to instil confidence in their food safety and quality assurance services. Furthermore, they had also been contracted to perform certifications against the ‘Nature’s Choice’ standard of Tesco supermarkets in the United Kingdom. Their implementation of South African food safety standards had been postponed until May 2005. The PPECB had been appointed assignee by the Department of Agriculture for the implementation of this system.

Ms Bridgette da Gama (PPECB Executive of Human Resources) stated that the PPECB had implemented organisational redesign and thus reviewed regards to remuneration, performance and job designations. They had addressed skills and talent development, and leadership behaviour. In terms of Broad-based Black Economic Empowerment (B-BBEE), they had made significant restructuring changes in equitable representation, skills development, capacity development and organisational renewal. PPECB was committed to achieving total transformation in its ‘B-BBEE scorecard’. Their milestones included the publication of a B-BBEE position paper and the publication of a comprehensive employment equity plan. Their experiential learning programme had targeted 34 new learners. The organisation was still white male dominated, but they were working aggressively to increase the racial and gender representivity ratio. There there had been increased appointments of black women between August 2004 and August 2005.

Ms Portia Adams (PPECB Communications Manager) stated that in terms of international relations, they and had hosted visits from delegations from Namibia, China, Pakistan, various unions, and were in were in communication with these bodies.

Mr Johan Schwiebus, Executive of Finance and IT, provided an overview of their Annual Financial Results for 2004/05. In 2004, their net financial result was a surplus of R2.4 million, while in 2005, they had experienced a shortfall of R4.1 million. He attributed this to a 6 % average increase in income, and a 14% increase in expenses. The PPECB would search for a new model to support the Second Economy with a systematic approach to share co-responsibility, align legislation, build capacity, provide information, and strengthen relations.

 

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