Integrated Food Security, Nutrition Programmes and Mafisa Project: briefings

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AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
12 September 2006
INTEGRATED FOOD SECURITY, NUTRITION PROGRAMMES AND MAFISA PROJECT: BRIEFINGS

Chairperson:
Ms D Hlengethwa (ANC)

Documents handed out:
Presentation on the integrated food security strategy for South Africa by the ministry of land Affairs
A presentation on MAFISA: pilot project and its credit policy

SUMMARY
The Committee received two presentations from the Department of Agriculture. The first presentation dealt with the Integrated Food Security and Nutrition Programme set up following a summit in 1996. The programme was multidisciplinary, with the Department of Agriculture being convenor and Chair. The constitution stipulated a right to food as a basic human right. The objectives of the programme were to stimulate an increase in food production and trade where agriculture provided key structural input. The participation of the Social cluster was imperative. There was still a need for alignment from national to provincial level. The Integrated Food Security Task Team was responsible for implementation at national level. The Task Team would report bi-monthly to the social cluster. Key challenges were food security, food production, trade income and job creation, nutrition, and food safety. A number of provinces were not participating fully. A further programme on Household Food Production had been integrated into the Comprehensive Agricultural Support Programme in 2005. In the current financial year R30 million from CASP was budgeted for food security to provinces. Challenges and corrective measures were set out. It was noted that South Africa also granted assistance to other SADC countries.

Questions by Members addressed the allocation to Provinces, the structures at district level, how the funding was used by Provinces and why North West had not used any funding. Other questions raised the dependence on food parcels, school feeding schemes, bursaries and learnerships in the Department, staffing and clarity on statistics.

The Micro-Agricultural Finance initiative of South Africa (MAFISA) reported that it was created to address financial assistance to the second economy by accessing funding from accredited partner organisations and on-lending to its target market. It would strengthen the market and offer low transaction costs. MAFISA serviced emerging farming and agricultural businesses, giving short and medium term credit and savings mobilisation. Delivery took place through private and civil society organisations at provincial level, and municipalities and district and local level. Postbank and farmer organisations were also involved. MAFISA was running as a pilot project in Limpopo, Eastern Cape and Kwazulu Natal. The budget for 2005/06 was R150 million. R200 million had been allocated in the 2006/7 financial year.Challenges included the fact that most people wanted a grant, not a loan, lack of managerial skills, and the fact that there was currently no “one stop shop”. Awareness campaigns were running and the time taken for applications was being addressed.

Members raised questions whether the scheme would be extended to livestock farming, the financial constraints, and guarantees on loans. The interest rate was queried by a number of members. Costings, the difference in the budgets, and procedures were queried. Concerns were addressed over late payment to maize farmers, training of Committees for Environmental Coordination, dishonesty by end users, under-funding of businesses and criteria for allocation. The Department stressed that this project was merely in a pilot stage and commented that full statistics and reports could be given in November 2006.
 
MINUTES
Committee business
The Chairperson noted the apology of Mr B Radebe (ANC) sent his apologies for not being at the meeting.

Most members had only just received the Minutes of the previous meeting. The Committee agreed to adopt the Minutes but noted that Minutes should in future be circulated in advance and that presenters must send their presentations to the Committee Clerk.
 
Integrated Food Security and Nutrition Programme: Briefing by Department of Agriculture
Dr Philemon Mohlahlane (Director General, Economic Development, Department of Agriculture (DOA)) stated that issues around food security were not exclusive to South Africa, but were problematic world wide. The Integrated Food Security and Nutrition Programme (IFSNP) resulted from the worldwide food and security summit that took place in Rome in 1996, with participation from 185 countries. That Summit aimed to halve poverty by 2015.

Mr Japhta Magolela (Acting Director, Food Security Policy, DOA) stated that DOA was the convener and chair of the programme, which had a multidisciplinary approach approved by Cabinet to address the increased malnutrition of children and rising food prices. Other stakeholders included the United Nations (UN), world food programmes and other Departments in the Social cluster. Issues around food security were first aligned in 1994 in RDP programmes.
South Africa was one of the SADC countries whose constitution stipulated a right to food as a basic human right.

The objectives of DOA were to see an increase in food production and trade where agriculture provided key structural input. The participation of the Social cluster was imperative. Social grants, food fortification for the ill and provision of food by schools could respectively be provided by the Departments of Social Development, Health and Education. Income generation and job creation projects could be led by the Department of Public Works. Food Security and vulnerability monitoring systems would assist all departments in obtaining information to assess how effectively the programmes were.

IFSNP had adopted special programmes for priority intervention. There was still a need for alignment from national to provincial level. The IFSTT (integrated Food Security Task Team) was to take responsibility for implementation at national level. This team comprised the Departments of Local Government, Health, Agriculture and other community based organisations. The Department of Social Development was involved at district level. Terms of reference were developed at national level and quarterly meetings were held. During these meetings issues would include the Task Team’s issues, the status of food security in the regions, vulnerability management systems, and emergency operations. The Task Team would report bi-monthly to the social cluster.

The Task Team’s key challenges were food security, food production, trade income and job creation, nutrition, and food safety. A programme on vulnerability management systems had been run successfully as a pilot project in Limpopo and would be launched nationally on 28 September.

Despite the workshops held country wide, Western Cape, North West, Kwazulu Natal and Gauteng had not attended. At district level the Task Team had encountered many problems in the Special Programme for Food Security. It had therefore also developed Household Food Production Programmes for those households who could not access surplus food. Two officials from the Food and Agriculture Organisation (FAO) were seconded to the Department of Agriculture. The Household Food Production Programme had been integrated into the Comprehensive Agricultural Support Programme (CASP) in 2005. During the 2005/6 financial year R22 million had been spent on 273 projects reaching over 17 000 beneficiaries. In the current financial year R30 million from CASP was budgeted for food security to provinces.

Some of the challenges were lack of water resources in the remotest and poorest areas, a shortage of expertise, especially in agricultural engineering and economics, inadequate support from researchand extension services in provinces, poorly understood procurement procedures, and market access for small-scale producers. Corrective measures included new water harvesting techniques, cooperative programmes to improve bargaining power and economies of scale, retraining and orientation of extension services and bursaries for scarce skills. The DOA would prepare memoranda for all Director Generals, and also for the Premier’s Offices.  A final report would be presented on 19 November.

Finally, Mr Magolela stated that DOA also granted assistance to other countries and Cabinet, over a three year period had set aside R 410 million in humanitarian aid in the SADC region.

Discussion
The Chairperson asked that DOA inform the Committee where any launch of the Food Security Programme would occur, to enable Members to inform their constituency. She also asked where forms for bursaries could be obtained.

Dr Mohlahlane replied that the launch would be on 28 September in Kempton Park. He added that he would like to invite members.

Ms B Ntuli (ANC) asked for clarity on the allocations of finances to the provinces. She commented that the presentation had shown the North West allocation as zero but that there was also mention of rollovers.

Mr Mohlahlane replied that the CASP allocation was independent of the provinces’ allocations for food security. 10% of DOA’s annual funds went to food security in all the provinces. The problem with North West was that they did not know how to utilize their funds. MinMec had now offered assistance in that province.

A Member questioned why there were no structures implemented at district levels.

Dr Mohlahlane responded that DOA had realised and would address that shortcoming by the involvement of Director Generals at district level and by maintaining a close alignment with the provincial Director Generals within the social development clusters.

Mr D Dlali (ANC) asked why the cluster forum, which met on a monthly basis, had not yet corrected the challenges.

Dr Mohlahlane responded that the cluster was busy dealing with them.

Mr Dlali expressed concern that the R30 million CASP expenditure given to the provinces had apparently not assisted them, and asked how it had been used. He also asked why so few strategies seemed to have been implemented.

Dr Mohlahlane responded that DOA would be asking the provinces to compile reports on how funding had been used. DOA had already started to implement some of the strategies outlined in the presentation.

Mr Dlali stated that during a public hearing in 2003, there were a number of related issues raised with the different departments. He wanted to know what the Department of Agriculture had achieved on those decisions.

Dr Mohlahlane stated that DOA would compile a report for the committee outlining what the Department had implemented so far.

Mr Dlali asked how far DOA was in alleviating individuals’ reliance upon food parcels and social grants, and how it empowered individuals.

Dr Mohlahlane replied that the Department had embarked on job creation projects in an agricultural context, where individuals, especially those from the former homelands, were encouraged to grow their own produce to sustain their families and to sell. DOA offered training on self help groups and co-operatives.

Mr Dlali mentioned that the public hearing referred to earlier had also resulted in DOA being instructed to embark on research as to which people were eligible for food stamps, and the kind of food to be given. He asked for a status report.

Mr A Van Niekerk (DA) commented that South Africa had infrastructure potential that was not presently being used. The lowest income and density of population was on the eastern shores and northern parts of the country, where there was also the highest potential for agriculture. He asked what DOA had done to address this issue and train people, and what it was doing to limit the dependency on food parcels.

Dr Mohlahlane replied that the biggest obstacle was the Department of Land Affairs’ restrictions on land access. The research and development plans would be shared with the Committee at the next meeting.

Mr P Ditshetelo (UCDP) questioned how successful the implementation of the food security programme was. He also queried why North West had used no CASP funding.

Dr Mohlahlane replied that food security was a mobile issue. It was easy to work with an organisation but very difficult to monitor people. CASP in provinces was only represented on the budget in relation to food security in terms of the budget. The zero meant that there had in fact been no allocation and expenditure in terms of that province for food security.

Mr Ditshetelo asked how DOA would monitor bursaries and working conditions to ensure that bursary holders would be the catalyst for future development. 

Dr Mohlahlane confirmed that DOA had both internships and bursaries to train people in the related fields.

Mr A Nel (DA) asked for assurance that food in fact reached the needy people.

Dr Mohlahlane said that DOA was doing everything in its power to ensure that food reached all who needed it.

Mr J Bici (UDP) expressed concern that many departments, some of whom had not been successful in the past, were involved. He asked how often food parcels were distributed and to whom, and enquired how successful the school feeding schemes really were.

Dr Mohlahlane responded that the new monitoring systems would allow DOA to categorize individuals, to clearly see what could be rectified, to identify those in need of assistance and to assess how food was allocated. He commented that DOA only dealt with food production, not distribution, so he could not comment on school feeding schemes.

Mr S Abrams (ANC) enquired about the total staff for the programme. He commented that the documents, reports and programmes already dated back five years and he expected substantial measures to have already been taken.

Dr Mohlahlane responded that the Department of Agriculture had in total 21staff members. DOA had advertised for the eleven vacant positions and would shortlist the candidates this week.

Mr Magolela added that the staff turnover mostly occurred at entry level, and candidates would move to other organisations after being trained. However, the University of Kwazulu Natal had now developed a specialised programme in food security, so that DOA would no longer be entirely dependent on on-the-job training.

Mr Abrams asked what stumbling blocks DOA had encountered along the way.

Ms L Ngwenya (ANC) questioned the presenters on how they were intending to solve the issues of shortage of expertise. She wanted clarification as to their use of water harvesting techniques.

Mr Magolela replied that in relation to food parcels, DOA had nearly finalised the food security draft legislation to be tabled shortly in parliament. Water harvesting techniques involved more rain harvesting, which DOA was researching together with Agricultural Research council (ARC) and the World Food Organization

Dr Mohlahlane said that it was difficult to comprehend a food surplus when so many people were without food. He also commented that the NGOs would have to be involved in issues of food security and the right to food.

Mr T Ramphele (ANC) commented that the statistics presented were misleading. He commented that North West was indeed a poor province, dependent only on agriculture and afflicted with low rainfalls. In some villages the average family income was less than R500. He was concerned also that bursaries and internship allocations were not carefully structured, and suggested DOA make more careful allocations per province.

MAFISA funding: Presentation by the Department of Agriculture
Ms Jenetha Mahlangu (Director:Agricultural Development Finance, DOA) reported that the Micro-Agricultural Finance initiative of South Africa (MAFISA) formed another part of the CASP scheme. There were six main pillars to CASP, being information and knowledge management, technical advisory assistance, financial assistance, training and capacity building with private companies, marketing business development, and on and off farm infrastructure. MAFISA was created to address financial assistance to the second economy by accessing funding from accredited partner organisations and on-lending to its target market. It would strengthen the market and offer low transaction costs. The target could not access other funding because of inadequate market activities, low levels of physical human capital; high transaction prices and high interest and inadequate access to financial services.

MAFISA serviced emerging farming and agricultural businesses. In order for these to yield and harvest their produce, they required short and medium term credit and savings mobilisation through local financial institutions. The delivery channels for MAFISA were the network of private and civil society organisations at provincial level. At district level municipalities helped MAFISA in terms of planning, gave coordination and monitoring support to the provincial departments and general credit support. At local level municipalities dealt with savings and credit commitment capacities. Postbank helped with savings mobilization. Non-financial service providers helped with the research for capacity building and other technical support. MAFISA worked closely with farmer organizations.

Ms Mahlangu stated that MAFISA was piloted in Limpopo, Eastern Cape and Kwazulu Natal. The production loan was R100 000, at an interest rate of 8%. Government assumed 100% capital risk and it was limited to the public sector institutions. The loans were generally for 12 months, except for perennial crops such as sugar cane. Farmers would access MAFISA services through Land Bank and DFI, and extension officers would assist in compiling basic reports on farming activities.

The budget for 2005/06 was R150 million, of which 3% was allocated to administration costs and overheads.  10% was allocated to capacity building of member based financial institutions and participating intermediaries R200 million had been allocated in the 2006/7 financial year, of which only 1% was allocated for administration costs and overheads.

MAFISA’s challenges included the fact that most people wanted to be given a grant, not a loan. Funding had to be rolled out in all provinces, but there was a lack of managerial skills. So far, MAFISA was not established at a “one stop shop”. MAFISA had attempted to address these challenges by running awareness campaigns. Attempts were made to address the length of time taken for applications. Successful provincial or district initiatives would be used as models elsewhere.

Discussion
Mr S Abrams (ANC) was concerned that the programme’s sole focus was on crop production, which was risky in terms of a 12-month repayment. He asked why it did not also focus on livestock farming.

Ms Mahlangu responded that the pilot project had focused only on crop farming, but it was possible that, depending on the results, other farming ventures could be added.

Mr Abrams commented that he did not see how the government would benefit from the interest rate being lower than that of LandBank.

Mr Abrams questioned the Department whether it had determined the number of projects still in operation and what their financial constraints were. He suggested this could be used for DOA to be able to tailor a package solution.

Ms Mahlangu replied that she did not have the statistics presently, but they would be given in the final report to be presented in November.

Mr Abrams asked what the Department proposed should be done about people owning land who could not service their loans. He felt that the price of commercial land should increase and that the current programme was detrimental to the farmers.

Ms Mahlangu said that she would present this comment to the Department so that it could investigate and formulate recommendations to solve the problem.

Mr Abrams asked also for a report on whether any study had been conducted on emerging farmers who were currently experiencing difficulties.

Mr Abrams commented that merely setting up the groundwork had already used 10% of the budgeted amount from CASP, and believed that the Department was not addressing the challenges.

A Member commented on the budgeted R20 million for commercial farming, and the budgeted administration costs of 1%. He noted that this was very different to the previous year’s budgets. He further criticised that funding from different donors would encourage a borrowing syndrome, which would contribute to failure as many farmers would simply borrow from different sources, rolling over one loan to pay off the next. 

Ms Mahlangu replied that MAFISA planned to have “one stop shops” where borrowing would be monitored and controlled, and farmers would generally get the support and information they required to succeed.

A Member sought clarity on procedures in the system, and asked if individuals were subjected to the credit evaluation criteria.

Another Member asked whether extension officials would assist in completion of forms. He queried the collateral, and asked how MAFISA would gauge if the farmer would succeed.

Ms Mahlangu responded that MAFISA could not know for certain if the farmer would be successful but that it took a risk in taking on 100% of the farmer’s loan. In relation to collateral, the processes would allow MAFISA to generate their own interest.

Mr K Van Niekerk (DA) believed that DOA’s reversion to the old system of state funding was a very good move, since private banks could not write off loans. He was concerned that the interest rate of loans was approximately 2% lower than those of private banks. He also commented that the applicants received their money at a later stage than required, which would put the maize growers in difficulty. Crops were mostly planted between October and December and receiving money in January would not assist the farmer, especially since he would have to pay back the loan in one year.

Ms Mahlangu responded that when MAFISA had concluded its surveys it could determine whether the interest percentages were too high for repayment. This would enable a further evaluation of the rate. She understood the concerns about late receipt of funds and commented that DOA would then look for ways to improve the current system.

Ms B Ntuli (ANC) commented that there were four categories of farmers, being commercial farmers, small scale farmers, emerging farmers and subsistence farmers. She asked for a breakdown of their representation and what procedure was used by the Committees for Environmental Coordination (CECs) in allocating funding and balancing the systems. She pointed out that not all had financial skills and enquired who appointed the CECs and how they were going to assess the applications.

Ms Mahlangu responded that the CECs were appointed by their provinces, following the Department’s guidelines. She agreed that they needed to be taught financial management. She said at present no criteria were in place for selection of these officers. They would normally receive applications, via CASP, and would refer applicants on where necessary.

Ms Ntuli asked how the Department dealt with dishonest end users, since from experience she knew that some would renegotiate the price of goods from the quoted amounts but would make the farmers pay the original price. The bulk of the loans to be paid went directly to suppliers.

Ms Mahlangu responded that MAFISA aimed to protect farmers from buying through the suppliers. MAFISA was a loan system and therefore also attempted to give protection to borrowers.

Ms Mahlangu stressed that the project was in a pilot phase, which would only be completed in November 2006. She welcomed suggestions for improvement on the current models. MAFISA had received guidance from provinces who had identified node points in districts with the potential for agriculture.

Ms Ntuli expressed concern that the interest rates were too high.

Ms Mahlangu responded that currently the percentage was flagged for investigation. MAFISA had a risk of lending funds without the assurance of ever getting them back.

The Chairperson asked what happened to people failing to pay the bank loans and whether MAFISA’s policy incorporated secure methods to deal with those who did not pay.

Ms Mahlangu responded that MAFISA worked through the provincial institutions in terms of payment.

Mr Van Niekerk asked whether crop was considered part of collateral.

Ms Mahlangu agreed that crop was taken as part of collateral.

Mr D Ramphele (ANC) asked if product estimation could be used as part of collateral.

Ms Mahlangu replied that this method was not implemented in the pilot project but that it could be investigated for the future.

Ms Ntuli suggested that DOA must investigate whether farmers were in a business partnership, since often one party would shoulder the burden of debt while another reaped the rewards.

A Member was concerned that most businesses were under funded and that applicants failed to give details on their forms of other loans or debts not yet paid.

Ms Mahlangu replied that DOA would investigate these issues and suggest some solutions.

Ms C Nkuna (ANC) wondered whether there was a criterion in place for allocation of funds for the farmers’ salaries. She asked how DOA managed the transport problem.

Ms Mahlangu replied that there was no criterion for funds allocation in place. DOA currently did not have a solution for the transport problem, but would in future liaise with the Department of Transport.

Mr J Bici (UDP) asked if there was a possibility of duplication of funding and schemes, since some other projects seemed to overlap.

Ms Mahlangu answered that there might be some common policies and rules because the other institutions were in place before MAFISA, but that it would take some years before the scheme became full operational and able to meeting the needs of their customers.

Mr Abrams asked whether the Department had conducted a survey to determine how many of the farmers were in trouble.

Mr Ramphele questioned whether the Department had proved that it was feasible to expect loan payments within one year. He asked how selection procedures for the pilot projects were carried out. .

Ms Mahlangu replied that the results of all statistical surveys would be contained in the final report to be presented in November. However, officials from the Departments of Agriculture and Land Affairs agreed that in terms of MAFISA and the pilot project they still had much research to do and much to set up in terms of safeguards protecting the Departments and the end users and the monitoring of the progress.

The meeting was adjourned

 

 

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