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Update on Transformation of Agricultural Sector

October 4, 2010

Department of Agriculture, Forestry and Fisheries

The parliamentary portfolio committee on agriculture, forestry and fisheries has been holding public hearings on transformation in the agricultural sector.

A variety of organisations have made representations to the committee, including the AgriBEE charter council. The department of agriculture, forestry and fisheries has also reported on the current status of transformation in the sector.

According to director general of the department, Langa Zita, the council is in the process of aligning the AgriBEE transformation charter with the requirements of a section 9 code of good practice as set out in Broad Based Black Economic Empowerment (BBBEE) Act 53 of 2003. When the charter was gazetted in March 2008, it was aligned to section 12 of the act and is therefore not binding to enterprises. This has made reporting on the sector’s transformation difficult.

The director general has indicated that – once approved by the minister of trade and industry – a section 9 code of good practice for the agricultural sector should be gazetted by the end of this year for comment. It is hoped that key stakeholders will have signed it off before the end of March 2011. As a section 9 code of good practice, it will be legally binding.

The AgriBEE transformation charter provides guidelines for any enterprise that derives the majority of its turnover from:

· the primary production of agricultural products;
· providing inputs and services to such enterprises;
· beneficiating agricultural products, whether of primary or semi-beneficiated form; and
· storing, distributing and/or trading and allied activities related to non-beneficiated agricultural products.

Currently, enterprises with a five-year moving average annual turnover of between R5 million and R35 million qualify for BEE compliance measurement in terms of the indicative AgriQSE scorecard.

The AgriBEE council comprises representatives from government, agribusinesses, agricultural processors, farmers’ organsations, labour unions, farmers’ unions and civil society organisations. One of its functions is to advise the minister of agriculture, forestry and fisheries on BEE-related matters. The council reports to the minister of trade and industry and the black economic empowerment (BEE) advisory council on BBBEE within the agricultural sector.

During the public hearings, the Agricultural Business Chamber (ABC) reported that, amongst its members:

· 50% would consider selling a stake in the ownership of their enterprises;
· 67% would consider a joint venture;
· 90% would be prepared to mentor and assist emerging farmers;
· 63% have already implemented BEE initiatives;
· 30% have completed a valid BEE scorecard; and
· 50% are in the process of doing so.

Regarding elements of the scorecard viewed as priority issues:

· 100% of respondents have identified skills development;
· 97% preferential procurement;
· 94% socio-economic development; and
· 87% enterprise development.

Management control, ownership and employment equity are largely considered as lesser priorities. In 2007, these elements of the scorecard were rated as priorities.

The BBBEE status of ABC members has tended to be low-to-average for all elements except enterprise and socio-economic development, which are “generally good”.

ABC pointed to the need for better coordination and effective partnerships between agribusinesses, government departments and state agencies if BEE compliance in the sector is to improve. The submission from Agri SA endorsed this view.

The National Agricultural Marketing Council reported that emerging producers find integrating their businesses into formal, established supply chains for local and export markets difficult. They believe that this is due largely to lack of market knowledge (particularly regarding the export environment), low product volumes and difficulty in accessing certification.

In its representation, Agri SA stated that the transformation charter has tended to polarise the agricultural sector rather than transform it.

The National African Farmers’ Union – a National African Federated Chamber of Commerce (Nafcoc) affiliate – pointed to lack of capacity, limited access to finance and difficulty in accessing markets as major constraints to transformation in the sector.