National Agricultural Marketing Council Budget and Strategic Plan 2008/09

Meeting report

National Agricultural Marketing Council (NAMC) Budget and Strategic Plan 2008/09
Mr Tshililo Ramabulana, Chief Executive Officer (CEO), National Agricultural Marketing Council,  briefed the committee on the Strategy and Budget for 2008/9. Mr Ramabulana indicated that the NAMC was an advisory Council to the Department of Agriculture. It therefore assisted the Department of Agriculture (DOA) in achieving its objectives as set out in the strategic plan and the Land and Agrarian Reform Project (LARP). The objectives of the NAMC were to increase market access, to promote efficiency in marketing agricultural products, to optimise earnings from agricultural products, and to enhance the viability of the sector. It did so by providing advice, supporting developing farmers, leveraging centres of excellence and strategically positioning the sector in dynamic global markets.

The first page of the presentation was essentially a grid outline of the Farmer and Agribusiness, and related to both the first economy commercial farmers and the second economy emerging farmers, setting out the challenges they were facing on the supply-side, the demand-side and their business environment needs.

The NAMC commented that there were problems faced in agriculture because of the rise in food retail prices, agricultural input costs and land reform costs. The most effective means of dealing with these was to embark on an aggressive campaign to increase production. Not much could be done to regulate or bring down agricultural input costs, namely fuel prices and fertiliser costs, as they were determined by global economic trends.

The objectives of the NAMC Council were set out. The new members were introduced.

Mr Ramabulana then went on to set out some of the areas of research, indicating the objectives and indicators for each. He described the mapping, understanding and quantifying value chains, the trade analysis, linking farmers to markets, risk management and information management systems. He also set out the efforts for outreach and conferences.

Mr Ramabulana noted that the NAMC worked with industry partners. It expected to achieve fairness to all producer segments, response to industry challenges, a focus on long term planning, good financial management and clear communication. There was currently investigation ongoing into which of five statutory measures would be appropriate. In the area of agricultural trust, the NAMC would facilitate appointment of trustees by giving advice to the Minister. It was investigating the  closure of control Maize Boards and the transfer of their assets to trusts. It was monitoring the crop estimation process in South Africa.

In the area of Agribusiness Development, NAMC was facilitating the implementation of development schemes to integrate emerging producers in the commercial mainstream. Farmer business support models were being developed. Fifteen agribusinesses were being supported to attend international trade shows, as well as local shows and interact with buyers. Levy Administrators were being assisted to develop and implement best practices on transformation. NAMC was also offering training courses in the next financial year.

In the area of corporate services, NAMC had to provide effective and efficient financial management systems and services. The corporate governance was operated through the Council, an audit and risk committee and the HR and Remuneration Committee. The budget for the following three years was set out, broken down across the various programmes. 

The NAMC commented that the current mechanisms to fund emerging farmers were inappropriate, as some of the farmers were having difficulty repaying the loans. The emerging farmers needed to be given access to affordable credit. He added that appropriate funding mechanisms were crucial to successfully turn the emerging farmers to commercial farmers. The current funding available to farmers in the second economy was a crucial problem that needed to be debated at a broader level to find a long-term solution. The MAFISA funding needs to be increased and redirected to agriculture. 

Discussion
Dr A Van Niekerk (DA) commended the NAMC for its thorough and comprehensive presentation. He referred to the Farmer and Agribusiness Need grid, in the introduction of the presentation, summing up the problems being faced. He commented that the NAMC appeared to have focused more on the demand-side rather than the supply-side. He asked to know the extent to which food supply was at risk, since there was a plethora of local farmers leaving for neighbouring or other countries. He also asked whether this trend had been addressed through any policy decisions.

Dr Van Niekerk aired his concern over the continuous rise in agricultural input costs. He gave the example of input costs in potato farming, which had risen from R30 000 to R70 000 in a very short period.

Dr Mohammad Karaan, Vice Chairperson, NAMC, replied that the agricultural input costs, such as fuel and fertiliser, were determined by global trends and not much could be done in terms of regulation except increasing the production output.

Dr Van Niekerk asked for clarification on the NAMC objective to stabilise food prices.

Dr Karaan replied that it was not possible to stabilise food prices, but it was imperative to find a way to work within the market economy and have it respond to the emerging agricultural sector.

Dr Van Niekerk commented that there was currently 30% of South African Agricultural land that lay idle and was not being utilised. He asked to know if the NAMC had any intentions to utilise this land in addressing food crisis and unemployment.

Ms B Ntuli (ANC) asked for clarification on the indication that the Trade Agreements would in the future include emerging small farmers.

Ms Makgoro Mannya, NAMC council member, replied that a lot was being done by the NAMC to expose emerging farmers to local and international markets through trade fairs and road shows. Nonetheless a crucial challenge remained in terms of quantity and quality. She added that emerging farmers would on occasions manage to secure contracts to supply overseas markets, but would fail to meet their end of the contract in terms of quantity and quality. The challenge was being addressed through the Land Bank and other initiatives targeted at women to encourage commodity co-operatives to meet the demand in the overseas contracts.

Ms Ntuli asked to know the incentives the NAMC recommended to encourage efficiency and productivity amongst the emerging farmers.

Ms Ntuli asked to know the findings of the food price monitoring, in particular the food prices in the rural areas. She commented that the escalation in food prices and input costs was impacting on the emerging rural farmers whom the government was trying to assist. She asked for NAMC’s recommendations to alleviate the impact of these trends.

Dr Karaan replied that the agricultural input costs, such as fuel and fertiliser, were determined by global trends and not much could be done in terms of regulation except increasing the production output.

Ms Mannya added that the emerging rural farmers were indeed vulnerable and were being affected by the escalating input costs which hindered their production capacity and ability to meet  the demand in their contracts.

Ms Ntuli commented that the agricultural levies and tariffs were likely to hinder the development of emerging rural farmers.

Ms Ntuli asked to know what assistance was being given to emerging farmers other than the training.

Ms Ntuli asked for more elaboration on the weaknesses and challenges identified in the Maize Board scheme. She asked to know what would replace the Maize board.

Dr Karaan replied that all the maize schemes were dissembled. The Maize Board was the only institution that still remained, and it would soon be dissolved.

Ms Ntuli referred to the Grain Development scheme under the Agribusiness development programme. She asked to know if the NAMC would be providing anything more than advice, indicated in the presentation, in particular whether there would be farmer support.

Ms Ntuli asked for more elaboration on the Agribusiness Matter Training Course that would be provided to 30 women owned businesses.

Ms Ntuli asked for a gender breakdown of the 27 NAMC staff.

Mr Ramabulana replied that the NAMC would provide the gender breakdown of its staff complement in writing.

Mr A Botha (DA) and Mr D Dlali (ANC)  asked to know whether NAMC played any role, through the Food Price Monitoring Initiative that began in 2003, in exposing the recent bread price scandal.

Dr Karaan replied that there was a central theme involving three issues in the escalation of bread prices. The three issues involved were unexpectedness, changes in operations and various explanations as to why the phenomenon occurred. He added that bread prices had increased by 90 cents in the last two weeks and were expected to continue rising.

Dr Karaan commented that the most effective means to deal with the various agricultural problems, relating to increase in prices and costs, was to embark on an aggressive campaign to increase production, rather than attempt to regulate the prices. Not much could in fact be done to regulate or bring down agricultural input costs, namely fuel prices and fertiliser costs, as they were determined by global economic trends. Production output must therefore be increased..

Mr Botha referred to the Trade Analysis research conducted by the NAMC that produced information on agricultural tariffs. He then commented that there had been reports on dumping of overpriced wheat in the past few years, yet tariffs had not increased by more than 2%. This had therefore led to wheat price increasing three fold and maize price increasing two fold. He asked to know what advice the NAMC had given to the Minister of Agriculture in this regard.

Mr S Abrahams (ANC) commented that the NAMC had the role of monitoring and assisting agricultural schemes. All agricultural schemes were interrelated. He added that there had been a 2003 Quality of Life report on the beneficiaries of Agricultural programmes implemented between 1994 to 2001,  which indicated that there had been 1 214 beneficiaries from the 835 programmes, which had succeeded in redistributing 1 777 000 hectares of land. An article in the Sunday Times on 16 March 2008 however stated that the Director-General of Land Affairs had indicated that that 50% of these programmes had failed or were heading for failure. He asked to know how many case studies had been conducted on the integration of emerging black farmers and whether these had focused on any of the 835 programmes.

Mr Ramabulana replied that the findings of the 2003 Quality of life report produced evidence that it was a wrong decision to place all the emerging farmers on one farm. This was a crucial factor behind the failure of the post-1994 programmes during the Settlement Land Acquisition Grant era. He added that there were currently initiatives in some provinces, including Limpopo Province, to rectify the problems by removing the emerging farmers from the single farms on which they were originally placed.

Mr Abrahams asked to know the outcome and success of the collaborative work between the NAMC and the Department of Agriculture (DOA)

Dr Karaan replied that the NAMC did not have a mandate to enforce or regulate legislation, but to monitor agricultural trends and provide information on the agriculture market.

Mr Abrahams asked to know whether the NAMC viewed the funding currently given to emerging farmers as adequate.

Mr Ramabulana replied that the current mechanisms to fund emerging farmers were inappropriate, as some of the farmers were having difficulty repaying the loans. The emerging farmers needed to be given access to affordable credit. He added that appropriate funding mechanisms were crucial to successfully turn the emerging farmers into commercial farmers. The current funding available to farmers in the second economy was a crucial problem that needed to be debated at a broader level, in order to find a long term solution. The MAFISA funding needed to be increased and redirected to agriculture. 

Mr Dlali asked how often the two corporate governance committees, the Audit committee and the Human Resources Committee, met and whether the members were paid for attending the meetings.

Mr Ramabulana replied that the committees met four times a year. He added that the Committee Chairpersons and members were paid according to guidelines provided by the Department of National Treasury.

Mr Dlali asked to know why a committee indicated on page 14 of the NAMC Annual Report was not indicated in the presentation.

Mr Ramabulana replied that the Agrosupply Committee was not included in the presentation as it only convened on request.

Mr Dlali asked to know if there was a paid ministerial representative in the Committee boards

Mr Ramabulana replied that there was DOA representative in the Council board, but not a ministerial representative. The representative was not paid for attending meetings.

Mr Dlali commented that the NAMC was expected to be an independent monitoring body of the various agricultural trust funds. He asked to know how many the trust funds the NAMC was monitoring, and what it was doing to address the challenges and issues identified within them.

Dr Karaan replied that there were a total of 17 trusts, involving a total of R1, 7 billion, being monitored by the NAMC. Most of the funds were in the Maize Trust,  which had in excess of R700 million. The NAMC received regular expenditure reports from the trust funds, after which it would give the Minster of Agriculture advice. The monitoring exercise also placed high emphasis on the manner in which funds were spent. He added that the current work in progress included recommendations to initiate new trust funds and efforts to reach a compromise between the trust funds and the NAMC. The NAMC took the view that the money in the trust funds was public money, yet the funds tended to view it as belonging to the trust. There was nonetheless a positive relationship between the NAMC and the trust funds.

Mr Dlali asked for clarification on the researchers used by the NAMC.

Mr Ramabulana replied that the research conducted by the NAMC was linked to the rural price monitoring exercise. The NAMC had developed its own internal research capacity and used data collectors, rather than researchers in the academic sense.

Mr Dlali asked to know the lessons learnt since the publication of the 2003 Quality of Life report, and the policy advice given by the NAMC since then.

Mr P Ditshetelo (UCDP) asked whether the NAMC used other communication means to reach emerging rural farmers besides the indicated radio shows. He pointed out that there were rural areas with no access to radio.

Mr Ditshetelo asked to know the research methodology used by the NAMC in gathering its information.

Mr Ramabulana replied that the research conducted by the NAMC was linked to the rural price monitoring exercise.

Mr Ditshetelo asked whether there was really any fairness between the emerging and established farmers.

Dr Karaan replied that there was clearly no fairness between emerging and established farmers in the agriculture market. It was a challenge that needed to be resolved by the trustees.

Mr Ditshetelo aired his concern over the rate of interest charged by institutions that provided financial aid to emerging farmers.

The Chairperson aired his concern over the need for stabilisation of food prices, in particular bread prices. The Competition Commission had fined Tiger Brands after finding evidence of bread price-fixing. However, bread prices still increased by 40 cents, thereby implying that the consumer paid for the fine. He asked if whether the NAMC regarded the use of fines as an effective mechanism and whether it had recommendations on areas needing reinforcement.

The Chairperson asked for more explanation on how the NAMC would address the lack of a shared vision amongst the role players in the Agricultural sector.

The Chairperson asked for elaboration on the high cost of compliance to labour legislation amongst the first economy farmers, as indicated in the presentation.

Dr Karaan replied that continued escalation in labour costs was definitely a disincentive to agricultural production. He added that labour intensive agriculture was experiencing a shortage of skilled labour, which was a worldwide phenomenon, and would lead to mechanisation of the industry.

The Chairperson asked whether there was reception and consideration, amongst stakeholders, of the policy recommendations made by the NAMC.

Dr Karaan replied that the Departments were partially receptive to the recommendations given by the NAMC. There was however a clear separation between the DOA and the NAMC marketing strategies. The NAMC had an advisory role and had recommended that the Marketing Act be revised, as it contained some ambiguities. The NAMC was still waiting to see the outcome of the recommendations.

The Chairperson asked whether the NAMC viewed the current Agricultural Institutional Framework, including the DOA and DLA structures, as the most appropriate to enhance the performance and viability of the agricultural sector in a dynamic economic environment.

Dr Karaan replied that the NAMC did have a coherent position on the appropriateness of the current institutional framework, as well as the DOA and DLA structures. The NAMC worked more with the DOA than the DLA. There were clearly tensions between the two structures that needed to be resolved, although joining the two departments was clearly not the right solution.

The Chairperson asked for the NAMC’s recommendation to address the South African Wine Industry Trust (SAWIT) problems.

Mr Ramabulana replied that the NAMC had recommended that the Minister dissolve SAWIT in its entirety and resolve the challenges in the wine industry through setting up a new structure. 

The meeting was adjourned.