Briefing by Agricultural Research Council & Onderspoort Biological Products on their Strategic Plans for 2008-2009

Agriculture, Forestry and Fisheries

12 May 2008
Chairperson: Mr R Mohlaloga (ANC)
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Meeting Summary

The Committee received briefings from the Agricultural Research Council and Onderstepoort Biological Products on their strategic plans for 2008-2009

The Agricultural Research Council had the mandate to promote agriculture by conducting research, developing and the transfer of technology. Its objectives and strategic goals were tabled. Key issues were to improve management and performance, improve dissemination research results, to conduct customer satisfaction reviews. Training and development was included as part of the mandate. ARC was working with universities in research issues. Loss of staff and inadequate staff were identified as some of the challenges facing the research council. The issue of land and agriculture reform was part of ARC’s deliverables on the government flagship programmes. The research council’s involvement in training and development of graduates to help train emerging farmers was also tabled.  Members raised concerns about the failure to submit an asset register despite the fact that it had been demanded over a long period, and raised queries around the funding, how increased funding would help to better the research, and the sustainability. It was questioned to what extent the Council worked with other similar research institutions and science councils.

Onderstepoort Biological Products (OBP) aimed to be the prime developer and distributor of vaccines for animal diseases. It worked in partnership with the Department of Agriculture in dealing with disease outbreaks. OBP had made recent achievements in terms of accreditation and its products were up to international standards. It had developed laboratories and was working in partnership with universities and unemployed graduates who were helping in the production of vaccines. OBP was challenged by trade barriers as restrictions inhibited its potential to explore the international market. Other challenges included the fact that the provincial governments were not buying from OBP, inadequate funds and outdated technology and mature products at final stages of life span in their shelves. Committee members raised concerns that government was not obliged to buy from it because it was a public entity and questioned whether the figures around market share were correct. The sales and communication policies were questioned. Further queries related to what it was doing to assist emerging commercial farmers, youth and women, its rating on a readiness scale, the 2007 unaudited financial statements, and whether profiles of diseases were kept.

 

Meeting report

Agricultural Research Council (ARC): Strategic Plan 2008/9
Dr Shadrack Moephuli, CEO and President of the Agricultural Research Council (ARC), presented the organisation’s business plan for the financial year 2008/2009. The business plan was guided by the African National Congress’s mandate to promote agriculture, improve living standards and food security.

Key issues raised in the institutional review were to improve management and performance so as to identify necessary changes in operations and to implement them. There was also the need to improve dissemination of research results, as well as to conduct customer satisfaction reviews. Furthermore, it was necessary to review effectiveness in planning and to implement continuous improvement in strategic thinking. The institutional review also made some key considerations that included the need for human capital development, technological and organisational performance improvement. This could be achieved through rewards and incentives to encourage innovation, knowledge and technology generation.  Strategic considerations from the review were stated as the increased focus on fundamental research, and technology transfer with focus on user groups. 

Dr Moephuli tabled the specific strategic goals for 2008/2009 noting that there was a need to revise strategy and objectives when conducting projects in the agricultural business. These included the plan to ensure access to sufficient, safe and nutritious food; eliminating skewed participation and increasing equity in the sector, maximising growth, employment and income in agriculture. He added that South Africa was a resource-based economy that was unsustainable.  Further goals included the ARC’s  commitment to find ways to help in turning the economy into a knowledge based one, adding that human capital development was one of the main priorities.

Strategic objectives of the ARC included the following: to generate; develop and apply new knowledge and technology; make sustainable use of resources; enhance the ability of the agricultural sector to manage and mitigate agricultural risk, undertake technology transfer and achieve organisational growth and sustainability. The ARC also had strategic thrusts that included organisational sustainability and excellence both internally and externally; competitiveness of South African agriculture; support to resource poor farmers, being able to utilise the new and improved technologies using them effectively. Business unit strategies had to be linked and integrated and there was a consistent set of priorities and message across all business units. . Dr Moephuli also stated that there was realignment and implementation of the business units dealing with research and technology.

Dr Moephuli said that the mandate of the ARC including conducting research and transferring development and technology in order to promote agriculture and industry; contribute to a better quality of life and facilitate natural resources conservation. The ARC also was linked to the national priorities, including the Agriculture Programme of Action that had the Land and Agriculture Reform Programme (LARP) as one of its activities. The national priorities also included a National Research and Development Strategy’s ten-year plan for science and technology. The ARC was also committed to working in partnership with New Economic Partnership for African Development (NEPAD). The broad aims of LARP is job creation, poverty eradication and economic growth. The key deliverables of this programme are; Five million hectares of white-owned agricultural land had to be redistributed among ten thousand new agricultural producers. LARP also aimed to increase black entrepreneurs in the agribusiness industry by 10%, to provide universal access to agricultural support services to target groups and to increase their production, to increase agricultural production by 10 – 15 % for the targeted groups as well as to increase agricultural trade by 10 – 15% for the targeted groups.

The challenges facing the ARC as outlined by Dr Moephuli included energy security and climate change. In addition Dr Moephuli raised his concern with the ARC funding, which had reduced significantly. He stated that a large proportion of the ARC’s funds were used for salaries and this was unsustainable. He noted that external funding from the private sector had decreased in the last decade.

Discussion
Dr A Van Niekerk (ANC) asked what the greatest challenge facing ARC was in the next decade and what plan had been devised to deal with it. He wanted to know where climate change featured in the challenge, as well as the question of water shortage and access to productive land in the aim to provide food security in South Africa.

Dr Moephuli said the greatest threat facing the ARC was the retention of the scarce skills and an inadequate budget.

Mr Van Niekerk asked what the reason was for decline in private sector funding with regard to research, adding that he wanted to know if South Africa depended on research of other countries.

Prof. Khan, Board Member, ARC, said the basic research conducted by the ARC had grown slightly, adding that some of the data that ARC used in research was from collaborative efforts with other organisations that were engaged in related work.

Mr Van Niekerk wanted to know why ARC was concerned with funding, and asked if it could be a question of bloated personnel and overcompensation. He said the organisation had shamefully neglected its infrastructure and added that the Committee would like to access the asset register.

Dr Moephuli said that the parliamentary grant for ARC salaries was R500 million in 1992 when the organization had 5 400 employees, in 1998 the the Council had 3 400 employees and received a R280 million grant. He said there had been drastic cuts in financing of the ARC. Mr Khan added that science councils were only funded to cover salaries, noting that the ARC was not alone in the matter.

Mr Gabriel Maluleke, Chief Financial Officer, ARC, confirmed that over 90% of the Parliamentary grant was used for salaries. He said some of the ARC’s personnel were unskilled and some vacancies were vacant. The research council’s capacity required additional support. He noted specifically that the salaries were within the normal range, and there was no overcompensation.

Mr Michael Netsianda, Executive Director: Human Resource and Administration, ARC said the ARC was a labour-intensive organisation with numerous farms and could not attract scarce skills and qualified personnel due to financial constraints.

Ms Jean Davidson, Chairperson of ARC Board, said the asset register would be released at the end of July as currently there is a proper audit being conducted to provide all the necessary detail.

Mr S Abram (ANC) asked why there had not been any land distribution as mentioned in the ARC’s deliverables. He wanted to know if the ARC had a programme for delivery.

Dr Moephuli said no redistribution had been done yet as the ARC was required to seek expert advice on land redistribution. In addition, there were other technicalities involved in the matter, like soil type and compatibility with plants to be grown.

Mr Abram asked about the ARC’s plan in dealing with a certain shrub that grew in formerly cultivated land and was depleting grazing and productive land.

Dr Moephuli said the ARC would make a follow up on the plant mentioned.

Ms C Nkuna (ANC) asked about the ARC’s sustainable capacity, asking what mechanism was being used. She said public entities should stop theorizing. She added that agricultural colleges were neglected and needed capacity.

Dr Moephuli said different training programs were being run, including some on behalf of certain universities. He added that ARC scientists also worked  as lecturers in some of the universities. The ARC was working with agricultural colleges and universities in sharing expertise and training from both sides. The colleges and universities also used the ARC’s research farms.

Mr D Dlali (ANC) said the mandate and deliverables of the ARC did not match, with specific reference to the intention to increase black entrepreneurs in the agricultural sector by 10%. He wanted to know how this was to be done.

Dr Moephuli said the presentation was not as detailed as it was aimed at providing a broad overview of the business plan, however, he added that the ARC business plan document had outlined detailed programmes showing how its projects were to be carried out.

Mr Dlali asked what was to be done to achieve food security considering the current food crisis.

Ms B Ntuli (ANC) said the ARC presentation was puzzling. It had been said that allocations from parliament and private sector grants were declining, and she was concerned that research that was supposed to contribute to the promotion of agriculture and industry and the improvement of life standards was being jeopardised. She wanted to know how the increased funding would result in improving what the ARC set out to do.

Dr Moephuli said that a workshop was held on the feasibility of projects and was attended by Department of Agriculture officials.

Mr Abram said he was disappointed and worried that an institution like the ARC did not keep a proper asset register, as it was not professional not to do so. He added that the organisation should inform the Committee about its needs as that would allow for better sourcing of funds from parliament.

Ms. Jean Davidson committed to the end July date to provide the assets register, she further reiterated the immediate availability of the assets register. She however preferred that it be prepared as a presentable document, which would then require more time to have the document tabled.


Onderstepoort Biological Products (OBP) Strategic Plan Briefing
Ms Nozibusiso Shabalala, Chairperson, OBP briefed the Committee on the organisation’s strategic plan. She said that OBP was a  Bio-pharmaceutical /bio-processing company that concentrated on developing, manufacturing and distributing more than 50 different vaccines for animal diseases against viral, bacterial and protozoal diseases, and other biological products such as therapeutic serum and diagnostic reagents. Its main focus and expertise was in tropical diseases, including re-emerging and trans-boundary diseases, as well as those that had been spreading into new areas, such as Bluetongue and Rift Valley fever. It aimed to strengthen its position in specific new areas such as the poultry market. is to develop and distribute vaccines for animal diseases, to ensure a domestic capacity for production of animal health products to deal with disease occurrences and outbreaks and to establish an efficient and economically viable manufacturing plant applying good manufacturing practices.

As part of its mandate OBP aimed to improve and expand existing product line through continuous investigation and development of market driven new generation products, and introduction of products that would enhance productivity, profitability and competitiveness in the South African livestock industry. In addition the OBP ensured easy accessibility to their products to the communal and emerging commercial farmers in South Africa. The mandate also included ensuring that intellectual property of OBP was protected.

OBP’s budget was entirely dependant on sales and there was no government grant given to it. There was an increase in internal sales during the financial year 2007/08. Export sales went up by 69.4% and local sales dropped by 3.9%. Ms Shabalala stated that the OBP had achieved ISO accreditation in the year. Its production systems were now up to international standards. It had achieved compliance in Good Manufacturing Processes,  and a proposal for funding had been drafted. 

Ms Shabalala explained that in the local market there was a continuation of the traditional business practice and a plan wasin place for the commercial sector, emerging sector and export sector, the latter mainly dealing with Africa and Latin America. OBP had registered the first patent on Blue Tongue vaccine. The laboratories had been upgraded, there was a plan for a vaccine bank to deal with shortage of vaccines and this plan had been well received by the Department of Agriculture. OBP had approached some European Union and African countries in a brokerage role for procurement of vaccines not produced locally. OBP had a programme for emerging farmers, following the mandate of the Department of Agriculture. There was a need to make vaccines available in abundance as well as to improve effectiveness through audit reports. Emerging farmers were sold vaccines at subsidised prices and this strengthened sales and marketing relations.

The research and development programme was in place and was conducting collaborative projects and exchange programmes in partnership with the University of Cape Town and the University of Pretoria. OBP was also building a relationship with the African Union to form a Pan African vaccine consortium so as to improve research capacity by supporting young scientists through levy grants. OBP had identified many unemployed graduate scientists, who would be used in research. Animal health technicians were developed through attendance of conferences to keep up to date with scientific trends with focus on research. Ms Shabalala said there was capacity building and skills development in the human resources sector of OBP, adding that the employment equity status was where it should be.

Mr A Ntsho, Chief Financial Officer, OBP, then presented the budget and income statement for 2008/09 and the following years. Revenue was budgeted at R79 million and the gross profit at 31%. This would rise by 2010 to R102 million and 34% profit. He noted that  the business model had changed thus OBP had to be dynamic to keep up with scientific trends.

The summary of intents and aims was given, as well as a SWOT analysis. He concluded that the challenge arose in lack of support from the Provinces.

Discussion
Mr Van Niekerk (DA) asked where OBP was as a viable and modern vaccine production institution on a scale of 10.  With reference to climate change and the break out of diseases he asked how OBP was ready to deal with the problem.

Ms Shabalala said that rating of OBP could be broken down into three parts- technology, equipment and readiness for disease outbreaks. She said that in terms of technology OBG would rate 6/10 as there were some products that were produced only by OBP. She would describe the equipment viability as only 3/10 since equipment was old, which was the reason for the appeal to the Department of Agriculture for funding. In terms of readiness for breakouts, she said OBP was always the first to know about outbreaks. The vaccine bank dealt with outbreaks when stocks had been replenished. OBP had rated diseases according to possibility of outbreak.

Mr Abram said the income statement for 2007/08 of OBP showed an unaudited sum of R70 million for production costs, R46 million from sales,  and a gross profit of R23 million. He asked for clarity and asked for details of the expenses. He also wanted to know the relationship between operation costs and sales.

Mr Ntsho said the expenditure report was unaudited and the auditing, which had started today, would   be ready by the end of June. He noted that operation costs amounted to R3.5million and that in 2007/08 there was interest income of R7.7 million.

Mr Abram said that the OBP claim that it had 62% of market share was questionable, as it did not produce this percentage of vaccines. He said Intervet was the major holder of sales stock, and he thought that OBP products were very limited in range. He said the poor marketing by OBP, including their policy of payment before supply, could be the cause of their poor performance in sales. He enquired about  the marketing strategy used by OBP and how early warnings of outbreaks were managed.

Mr Ntsho said the 62% market share claim was based on information from South African Animal Health Association and it included a segment of certain medicines for specific animals. The marketing plan was influenced by two strategic sessions with a company that marketed pharmaceutical products, as well as participation in commodity fairs and publishing of articles in magazines and displays at exhibitions.

Ms L Ngwenya (ANC) asked who benefited from OBF. She enquired how the firm provided active support, noting that she was unaware of their activities in her province.

Ms Vuyelwa Penxa, Managing Director,  said OBF was involved in capacitating of people through an initiative involving women and youth in agriculture, in partnership with animal health technicians and advisors. She added that OBP was involved in provinces by doing needs analysis. She cited the horse sickness which broke out in certain areas but which was handled with the participation of the Department of Agriculture.

Ms Ngwenya asked why OBP did not train people to, in turn,  train emerging farmers who needed assistance to become successful.

Ms Penxa said OBP had a database where they kept a record of unemployed graduates, who were offered bursaries to study in fields like chemistry, biotechnology and some branches of sociology.

Mr Dlali wanted to know what was the South-South cooperation between OBP and the Indo China region.

Ms Penxa said that trade barriers were a problem. Application for registration abroad had restrictions, thus the need for partnerships with certain countries.

The Chairperson asked if OBP had a profile of disease occurrence to determine what vaccines had to be in the vaccine bank.

Dr Tshabalala said there was surveillance of diseases through the collection of blood samples to monitor disease occurrence, and she said that the Department of Agriculture was involved in the exercise.

The meeting was adjourned.

 

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