Transcript ABC

Submission of Agribusiness on the
Transformation of
South African Agriculture
Portfolio Committee
17 September 2010
Agricultural Business Chamber
Background
• ABC a voluntary and dynamic association of agribusinesses
- positions for an enabling agribusiness environment
- plays a constructive role in the country’s economic growth,
development and transformation
• Turnover/exposure of members in excess of R150 billion pa
• ABC members active in all the major agro-food value chains
• ABC actively involved in negotiating the gazetted AgriBEE
Transformation Charter, and now in AgriBEE Charter Council
• Land Reform and Post Settlement Support (PSS)
• ABC represents the views of its members in a number of
national structures and bodies, both statutory and nonstatutory.
Food Security
• South Africa has a highly diversified agro-food
industry
• Net exporter of agricultural products and has
provided national food security since the start of
the 20th century (Population: ~4,0 million), right
through to the 21st century (Population: ~49
million, ~60% domiciled in cities).
• Household food security is however a problem.
• SA has of the most affordable, safe and nutritious
food in the whole world, and this needs to be
recognized as a major asset to this country.
SA Agriculture Policy Environment
• Since 1994, SA’s agricultural policy has primarily been
informed by Government’s White Paper on Agriculture
(1995), the Strategic Plan for South African Agriculture
(2001) and recently the MTSF.
• Number of Acts (~60) provide execution of agricultural
policy, of which the Marketing of Agricultural Products
Act, no. 47 of 1996, deregulated the broader industry.
• Global agro-food system is a market economy, though
highly skewed in trade and support measures.
•
SA Agriculture of least supported (OECD PSE system)
•
Constraining environment for growth and new
•
entrants.
SA Agriculture Policy Environment
Currently the ABC believes that in general terms current
government policy on agriculture is correct
(deregulated market economy driving efficiency and
competitiveness through competition), but that
effective support for agriculture and implementation
of agricultural policy by government is severely
lacking in many instances.
Agriculture’s Performance and its
Contribution to the Country’s Economy
• Primary agriculture’s shrinking contribution to GDP
now at ~2.5%
• Lack of growth in primary agriculture over the past
10 years – see graph
• Contribution of the agro-food industry to GDP?
• Gross value of production per sector increased in
nominal terms
• Net farming income under pressure, esp. for smaller
farmers
•
Competitiveness Status Index & Factor Analysis
Contribution of Primary
Agriculture to GDP (Source: Statssa)
%
SA economic growth: Tradable goods
sectors lag the non-tradable goods sectors
GDP Index per Sector of Economy
250
200
GDP
INDEX
Agric
Mining
150
Manufacturing
Construction
100
Trade
Transport
50
Finance
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: StatsSA
Performance of Sector
Gross Value of Production in R million
Crops
60000
Horticulture
Animal products
R'million
50000
40000
30000
20000
10000
0
2001/02
2002/03
2003/04
Source: DAFF, 2009.
2004/05
2005/06
2006/07
2007/08
Performance of Sector
Gross and Nett Farming Income
Gross Farming Income
Nett Farming Income
120 000
Rand X1 000 000
100 000
80 000
60 000
40 000
20 000
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Source: DAFF, 2009.
Seasons
ABC Agribusiness Competitive Status Index
2.00
Government support,
Low interest rates,
Low inflation
Sanctions,
Marketing boards,
Droughts,
High interest rates
Economic growth,
Deregulation
(Co-ops to Comp’s),
Weaker Rand,
New markets
1.50
2.50
2.00
Stronger Rand,
Drought,
Administered
prices
Drought,
Political
uncertainty
1.00
1.50
1st phase
deregulation
1.00
0.50
0.50
20
07
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
19
75
19
73
19
71
19
69
19
67
19
65
19
6
19 1
6
19 2
6
19 3
6
19 4
6
19 5
6
19 6
6
19 7
6
19 8
6
19 9
7
19 0
7
19 1
7
19 2
7
19 3
7
19 4
7
19 5
7
19 6
7
19 7
7
19 8
7
19 9
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
08
-
19
63
19
61
-
(0.50)
(0.50)
Agribusiness Executive Survey:
Factor analysis
Cost of doing business
3
Aids
Labour
2.5
Crime
Infrastructure
2
1.5
Labour policy
Capital
1
0.5
Land reform policy
Technology
0
Trade policy
Market size
Local suppliers of primary
inputs
Market growth
Electricity supplies
Financial institutions
Scientific research
2004 institutions
2008
2010
Agricultural support systems
and institutions
• Two critical issues in agro-food industry:
- Financing
- Research & Development (R&D)
• Principal supporting institutions being the Land
Bank and the Agricultural Research Council (ARC)
respectively.
• Critical role of other support/enabling structures,
such as DAFF (e.g. Act 36 of 1947), OBP, PPECB,
NAMC, IDC, etc.
Farming Debt (X R1 000 000)
Land Bank
Commercial Banks
Agribusinesses
TOTAL
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2000
2001
2002
Source: DAFF, 2009.
2003
2004
2005
2006
2007
2008
Insight into the AgriBEE Charter
• ABC role in development of AgriBEE Transformation
Charter (20 March 2008), and in Charter Council
• ABC has continuously created awareness:
- 2007 ABC/IDC AgriBEE Survey
- 2010 ABC AgriBEE Survey
• Latest survey to determine contribution of ABC
members falling under the scope of application of
the AgriBEE Charter, to transformation.
• Reports case studies on establishing black
commercial farmers (ED – 1 of 7 elements)
2010 ABC AgriBEE Survey
• Progress on B-BBEE’s CoGP by Agribusiness?
• Questions on the contribution by agribusiness
toward transformation of South African Agriculture.
• ABC commissioned study and survey amongst its
members in 2009. Only those in AgriBEE scope.
• 30 respondents (R66.7 billion turnover; 21 000
permanent employees).
• 9 case studies selected to showcase development
programmes (ED) by ABC members.
• Objective of presentation: to present main findings
Attitudes towards B-BBEE
• 50% will consider selling ownership stake
• 67% will consider joint venture
• 90% prepared to mentor and assist emerging
farmers
• 63% have already implemented BEE
initiatives
• 30% have completed a valid BEE scorecard
• 50% still in process
Priority Elements
Elements of scorecard viewed as priority by respondents:
- Skills development (100%)
- Preferential procurement (97%)
- Socio-economic development (94%)
- Enterprise development (87%)
Elements largely viewed as lesser priority:
- Management control
- Ownership
- Employment equity
(These were all viewed priority areas by members
in 2007)
B-BBEE Status of ABC Members
B-BBEE Status of ABC Members
• The scores for Management Control are low
• The scores for Employment Equity are very low. This is due to
a combination of very strict measurement criteria and a lack
of available skills at higher management levels in the market.
• The scoring for Skills Development is average to low. This
due to both the high targets and the poor employment
equity profile of employees.
• The scoring for Preferential Procurement is average. This
element is complex with a heavy administrative burden.
• The scores for Enterprise Development are uniformly high.
This indicates a positive move to broad based empowerment.
• The scoring for Socio Economic Development is generally
good as companies have historically focused on this type of
corporate social investment.
Main points from case studies of
development programmes
Credit, input and market access
• Members of ABC provide and serve SA agriculture with
large agricultural infrastructure
• Most farmers are within reasonable distance of depots,
trading stores, silos, etc.
• Advisory and extension services are available
• Management, financial and credit systems in place
• Many black farmers are already making use of these
services (especially buying inputs on cash/credit and
delivering commodities to depots, auctions, silos)
• ABC’s biggest problem: nobody knows how many Black
farmers make use of these services
Constraints preventing scaling-up of
development programmes of ABC members
• Security of land tenure/property rights
• Thus no collateral – ABC members not able to carry full risk
• Limited partnership with the State/no State guarantees for
farmers with non-formalised rights to land
• Innovative models are implemented to overcome this
constraint but are costly and management intensive
• This is especially problematic in livestock and field crop
production but not so much with broilers, sugarcane, cotton,
etc.
• Solution: Agribusiness presents ideal vehicle to channel all
government grants in a sustainable, responsible and
accountable way to Black farmers.
•
Will avoid double dipping and will enable scaling-up.
How to ensure sustainable B-BBEE
enterprise development by Agribusinesses
• Need clear and transparent governance arrangements and
management models
• Provide accountable and business directed coaching,
mentoring and counselling support to beneficiaries
(“farmer incubators”)
• Clear and dedicated funding arrangements with the Land
Bank and other State agencies
• A clearly defined role of the State in providing support to
agribusiness initiatives such as State guarantees and
channelling all State support to targeted farmers through
Agribusiness firms
Concluding remarks
• Some significant progress on BEE compliance since 2007
• Interesting picture of Agribusiness initiatives to support
Black farmers
• Lack of coordination between agribusiness, government
departments and different State agencies is evident
• There is a need for proper partnerships and coordination to
implement a comprehensive agricultural development
effort across South Africa
• Otherwise all efforts will just be tinkering on the margins.
Thank you
www.agbiz.co.za