Agricultural Product Standards Amendment Bill: public hearings

Meeting report

Opening remarks
The Chairperson congratulated the newly elected President of Brazil on winning the elections and noted that this would be a new dawn of hope for Brazilians and hoped that it would bring stability and growth. He hoped that this would also strengthen the relationship between South Africa and Brazil as members of BRICS and looked forward to seeing the President visit South Africa next year as it would host the BRICS Summit.

These hearings were an important facet of a participatory democracy and an even greater aspect of the promotion of active citizenry, as there were both direct and indirect impacts in any legislation set before Parliament. “The legislative process must ensure that the process delivers what is in the best interests of the public and that minimum standards and procedures are adhered to”, he said. This was in fulfilment of both the Committee’s oversight as well as consumer protection.

Participatory democracy was the bedrock of a healthy society and functional democracy, and the legislation in discussion was a case in point. The responsibility of Parliament as a legislative body was to ensure that they provide producers, consumers, stakeholders, and other members of the public an opportunity to comment, critique or even question any aspect of the proposed legislation. This would ensure that the process would be robust and could stand up to the investigation, review and critique from all stakeholders.

He welcomed all those that would make their submissions on the Amendment Bill, trusting that their participation would be constructive and fruitful and that in doing so, they would strengthen participatory democracy and promote the principle of an active citizenry.

Agricultural Business Chamber (Agbiz) submission
Ms Annelize Crosby, Agbiz Head of Legal Intelligence, said the key constituents of Agbiz included the major banks, development finance institutions, short term and crop insurance companies, agribusinesses, commodity organisations and co-operatives providing services and products to farmers, businesses and associations in the food and fibre value chains in South Africa.

Agbiz's function was to ensure that agribusiness played a constructive role in the country's economic growth, development and transformation and it strived to create an environment in which agribusinesses of all sizes, could thrive, expand and be competitive.

The Agricultural Products Standards (APS) Act allowed the Minister to designate minimum standards for agricultural products intended for sale in South Africa. To facilitate this goal, it made provision for powers of inspection, grading and sampling for quality control. The Act provided for the appointment of assignees to perform some of these functions.

On its comments on the amendments to the Act, the amended definition of assignee was welcomed in the sense that it clarified that that there should be no conflict of interest, whether direct or indirect. The words “interest” and “indirect” were broad and Agbiz suggested that they be defined, and that “interest” would be limited to a financial interest.

On the management control system, the Act should clarify the span of control (from where to where in the specific supply chain) as well as the applicable industries governed by the “management control system”. The Act should also clarify to what extent the “management control system” would apply if the said products were only used for inland consumption and for food grade versus animal feed grade.

On Clause 3 amending Section 3 of the Act, Agbiz supported the proposal that any fee should be calculated on a cost recovery basis and that the assignee be required to submit a business plan and budget. This would be used as the basis for meaningful consultation with industry stakeholders. Any process leading to the determination of a fee would have to comply with the requirements of just administrative action and procedural fairness.

Agbiz also made comments on Clause 4 and made additional proposals on the amendment of Sections 2 and 10 of the Act (see submission).

SA Fruit & Vegetable Canners Association & SA Fruit Juice Association submission
Mr Rudi Richards, SAFJA General Manager, said the SA Fruit Juice Association was the national representative body of the South African juice industry. Their manufacturing members were processors, blenders, bottlers and packers of juice products as well as bulk pulps, purees and concentrates and they included companies associated with and supporting the industry such as suppliers and service providers. This R20 billion industry processed over 1 000 000 tons of fruit annually and the domestic market absorbed 75% or approximately R15 billion, with the remaining 25% of almost R5 billion exported worldwide.

Ms Jill Atwood-Palm, SAFVCA General Manager, said the SA Fruit and Vegetable Canners Association represented the national interest of the processed fruit and vegetable industry. It covered both manufacturing interests, export promotion and market development.

Mr Richards said both associations supported the Amendment Bill for the benefit of consumers and that the legislation matched with both world standards and standardised domestic playing fields. The regulations however needed to be updated from time to time in line with developing technologies and product innovation, as well as best practices in terms of inspection models.

He said both associations were committed to compliance as their individual members implemented comprehensive Total Quality Management Systems and had numerous certifications. Their factories were already subject to rigorous inspection audits and approvals by local and export customers and companies, especially those that were branded had extensive consumer feedback mechanisms to ensure they met quality standards. Industry initiatives were also in place to assist, encourage and promote compliance.

They accepted that government also needed to take reasonable steps to ensure compliance and recognized that additional inspection of every product was not feasible, practical nor cost effective. They proposed that the methodology focus on random sampling and checks on consumer products at point of sale in trade as well as auditing the Total Quality Management Systems to assess risk profiles of randomly selected individual companies in line with modern inspection models.

Ms Atwood-Palm said the submission would need to be read in context with their written submission which highlighted the need for clarification of some of the definitions, designation and appointment of assignees, fee determinations, the principles of audits or inspections, as well as the management control system in the Amendment Bill.

Discussion
Ms M Thlape (ANC) observed that there was no fundamental disagreement to the Amendment Bill from the submissions. She asked what exactly they needed to be changed or what their concern was about the assignees. She asked who would need to be consulted and for what. There would always be agricultural products that were regulated by different departments, for example, oil as a cooking substance regulated by DALRRD, and as a medicinal substance regulated by the Department of Health, so the issue of fragmentation was very broad.

Mr N Masipa (DA) asked how much consultation on the Bill was done by the presenters within their industries and how much consultation would be required if there was a need for more. On grain cost recovery, what was the difference in the way the new regulation brought in the new grain assignee compared to the current model of product audits. What were the weaknesses of the current assignees and why was it important for there to be new regulation and assignees? How were the small emerging producers going to be accommodated in the new approach to ensure their products were compliant with market requirements?

Mr N Capa (ANC) asked the presenters to elaborate on fragmented duplication because the Acts spoken of in the submission served different purposes as some related to health and some to product quality. He asked for an example where specific products had to be removed from the shelves and how that could be related to regulatory duplication.

Ms T Breedt (FF+) asked if the organisations had been included in the initial consultation process by the Department. She asked for clarity on the funding mentioned in the submission.

Agbiz response
Ms Crosby replied that the point made about consultation was not about the consultation process for the Bill because there were sufficient consultations on that. The consultation referred to was one that would need to take place when the legislation is implemented – in terms of where an assignee would be appointed and would need to do its work, mandated by the executive officer.

That process held a lot of implications for consumers and the industry alike because there were numerous ways in which an assignee could implement its work, and that could have different cost implications. For example, the number of inspections an assignee would decide to do would have an impact on the cost. Therefore, there would need to be a clear framework in which the assignee would conduct the inspections. The industry and affected parties would need to be consulted when the business plan within the framework is accepted and the budget of the assignee is approved.

She agreed that the were no objections to the Bill, but there were several clarity issues, including the management control system and the new type of assignee envisioned by the Bill, which were not clarified in terms of their functions and the reasons they were required.

On duplication, it was not only about the regulation duplication between government departments and protection legislation, but also about inspection duplication in terms of this Act because inspections could be done on raw products and on the final product, which seemed like duplication and would also have cost implications.

The funding referred to in the submission related to the audit and who would be liable for paying for the auditing because it was not clarified in the Bill.

SAFVCA and SAFJA response
Mr Richards replied they were in support of the Bill and would comply fully, but the issue would only be on how the compliance would be ensured in terms of methodology and the costs. In their understanding, the assignees were not always qualified to do the job and it would be imperative for them to understand the dynamics of the industry and that they would have operating procedures so the costs could be calculated. Both the assignees for dairy and for processed products had their licences revoked, which was a clear indication that the assignees were not qualified for the job. This was the main concern and any appointment of new assignees must take that into account.

On the consultation process, their comments were based on a reflection of what had happened over the last five years, where there were several court cases against assignees on grains, dairy, processed products. In all those cases, the conclusion was that consultation was insufficient. He agreed with Ms Crosby that there were two types of consultation – on the legislation and on the implementation process. The past five years was not about the legislation but about the implementation, which was where they were at loggerheads.

The consultation on the Amendment Bill was moving in the right direction, but the biggest problem would arise during the implementation process because it would be imperative to have a system that would be cost effective, fit for purpose and functional which was the major issue in the past five years.

Product recalls had nothing to do with the discussion in the meeting as they were not within the ambit of the quality regulation of the APS Act as product recalls were all safety issues. The discussion in the meeting was about quality regulation. Product recalls were unfortunate events and were dealt with by the respective company and respective department.

He said they would be happy to consult with anyone that would require their input.

Follow-up discussion
Mr Masipa asked for the difference between the current fee determinations for the assignees and the envisaged fee determinations for those proposed in the Amendment Bill.

Mr H Kruger (DA) said the biggest challenge for the survival of small businesses around the world and especially in South Africa was red tape. He asked Agbiz if they felt that the Amendment Bill would cause more red tape or less red tape.

Ms Crosby replied what was clarified in the Amendment Bill was how the fees would be determined and the process that would need to be followed for the fee determination. On red tape, she replied there would be a need for mutually beneficial, relevant, practical, and affordable system, and although affordability was important, there was also a need for quality assurance and inspection service. The Act was already in place and provided for the system of assignees, and the Amendment Bill was trying to improve the systems of consultation and oversight.

Mr Richards replied that the fee determination was going to be based on cost recovery. The problem that arose previously was the appointment of private companies with a profit motive. The private companies did not apply the cost recovery basis, which was where the conflict of interest arose. On red tape, in the consultation on implementation, if cost effective modalities were not put in place during the appointment of assignees, red tape would be increased, especially for small companies as the big companies would have enough capacity to put systems in place.

Ms Atwood-Palm replied that the Amendment Bill clearly set out the areas that needed to be covered, but the detail would be required on the methodology for implementation and what process would be followed to ultimately determine the fees. There were several steps that would need to be followed as stated in the Amendment Bill, which was where proper and conducive consultation would need to take effect.

Consumer Goods Council of South Africa (CGCSA) submission
Ms Zinhle Tyikwe, CGCSA Chief Executive Office, said CGCSA represented 9 000 member companies in the Consumer Goods, Retail and Services Sector, which was one of the largest employers in South Africa.

The recommendation of CGCSA to the Committee was that an audit needed to be conducted to determine the inspection capacity of DALRRD, including the job functions of individuals who were still in DALRRD employed to conduct inspection services. They believed the audit would assist in the assessment of whether assignees were still needed, given that they came at a cost to the industry and consumers in an economically challenging environment.

Ms Neo Momodu, CGCSA Executive: Legal, Regulatory & Sustainability, said about a month ago, the Department revoked the services of two assignees, and about two days ago, the Department said it would start conducting inspection services at a cost. Due to this, CGCSA felt that there had been capacity to conduct these services within the Department all along.

The specific comments on the Amendment Bill were similar to the suggestions made by previous presenters, as they also required clarity on the consultation processes, the determination of costs and who would be liable for the fees for assignees.

In a country facing massive socio-economic challenges and worsening inequality, particularly affecting the most vulnerable due to rising food and fuel prices, it was critical that regulators consider the impact of legislative reforms on the economy and population by subjecting such reforms and amendments to a Socio-Economic Impact Assessment System (SEIAS), as prescribed by the Department of Planning Monitoring and Evaluation.

Currently some departments only implemented SEIAS on Bills and not on regulations, but through SEIAS there were opportunities to analyse the potential socio-economic impact of policy and regulations so they could be approved in an informed manner for implementation.

Ms Tyikwe implored the Committee that the policy and regulatory environment should create an enabling environment for businesses and not create regulatory frameworks that impede their success.

Premier submission
Mr Anthony Stein, a representative for Premier, explained that Premier was a stakeholder in the grain product supply chain with an interest in the regulation of grain products.
Premier commented on the amended definition of “assignee” and cautioned that the definition was under-inclusive in certain material respects and created potential inconsistencies with other provisions of the Act. It also commented on the introduction of the defined term “audit” which was introduced as something separate and distinct from “inspection”, which was already contained in the Act but not defined. It also commented on the amendment of the definition of “management control system”, as well as a new provision for the appointment of an additional assignee solely in respect of “management control systems” in new section 2(3)a)(ii).
Premier cautioned that the Bill’s new definition of “sell” was overly broad and may be considered irrational and ultra vires the purpose of the Act, as well as the new provision on the calculation of assignee fees on a cost-recovery basis. Lastly, Premier commented on the missed opportunity for introducing safeguards and detailed provisions for the exercise of assignee powers.
SA Organic Sector Organisation & Participatory Guarantee System SA submission
Mr Brett Sander, SAOSA representative, said SAOSO was formed in 2009 and still functioned as a voluntary association and recently registered as a not-for-profit company (NPC). SAOSO was the official organic sector body in South Africa. It was mandated by four government departments to develop and promote the organic sector in South Africa through the FRIDGE Study of 2008. In 2019, SAOSO became the country implementing partner of the Knowledge Hub for Organic Agriculture in Southern Africa. He outlined its five core objectives which included to address the production of organic food nationally and help advance producers’ access to market through the growth of the Participatory Guarantee System (PGS) and third-party certification to the SAOSO Standard for Organic Production and Processing.

Ms Colleen Anderson, SAOSA representative, said they read the Amendment Bill with reference to organic regulations and would have liked to know where they stood within the regulations because a document was drafted in February 2008 by the Department of Agriculture, which regulated the sale of organically produced products, but it was never passed. It was understood that the regulations were replaced by the SANS 1369: 2016 Organic Standard, which referenced Participatory Guarantee Systems.

SAOSA sought clarity on the stance on the Participatory Guarantee System and its representation in the Bill. In Section 1(a), it wanted to know what the definition of “indirect interest” would be and would other members of the PGS group be considered as having an indirect interest in the product.

In section 1(b), would the PGS audit process by other members of the PGS group be considered a “functionally independent examination”?

In section 2(a) SAOSA requested that the Minister designate PGS South Africa as the body “having particular knowledge” and assign to it recognition as the knowledgeable body.

Mr Sander said the requirements for organic inputs to be certified must be within organic standards of the world. The current waste management system and inputs into agriculture all need to have a similar system so South Africa could follow through on organic or regenerative agricultural practices under whatever management system control emanates from the Amendment Bill.

Discussion
Mr Masipa said the Consumer Goods Council had a concern about the socio-economic impact assessment that was not done, which implied the need for that to be considered. There was also a concern about the need for the appointment of assignees because DALRRD had the capacity to perform the task on its own. It requested an investigation to ascertain the extent to which the Department did have the capacity. He asked which of these CGCSA considered the most important. Considering the number of court cases the Department had lost, he was worried that DALRRD did not seem to care and continued to pursue constitutionally delinquent matters.

Mr Masipa said Premier did a good job of analysing the Amendment Bill and confessed that he understood it much better. He asked if Premier was suggesting that the Bill needed to go back through the consultation phase with industry or if there were proposed amendments that would need to be added to the Bill.

Ms Breedt agreed with Mr Masipa that the Committee needed to hear some suggestions from Premier.

Mr Capa asked what the relation would be between organic farming which could be considered 100% organic, and the indigenous knowledge systems (IKS) which may not be 100% organic. In his understanding, the IKS to a great extent were organic until the situation changed. What would be the link between the two and in what way could the process be made non-discriminatory in the Amendment Bill?

Ms D Mahlatsi (ANC) asked CGCSA if its request for the Department to take over the assignee process was not an overreach in terms of what the executive was expected to do. If industry stakeholders were brought into the regulatory process, they would be both the referee and the player because they would be regulating the same market they were involved in. She asked Parliament Legal Services to assess if there were inconsistencies in the Amendment Bill and how material they were.

Ms Tshwete cautioned the stakeholders against digressing from the Amendment Bill because it would create problems tapping into other matters such as Department administrative matters. As much as the Committee appreciated the inputs and suggestions, these needed to align with what the Bill sought to achieve. She asked the stakeholders to stick to what they were in the meeting for.

Mr Masipa countered that this was a participatory process where industry members were making inputs into the legislation, so the Committee could not be prescriptive on how the process unfolded. He asked the Chairperson to make a ruling on the matter.

The Chairperson referred to the meeting agenda and the Committee was there to receive submission on the Agricultural Product Standards Amendment Bill. Stakeholders were to make submissions on the Bill and not on the Department and its work. Members were within their rights to comment when they felt there was a digression from the purpose of the meeting.

CGCSA response
Ms Matlou Setati, CGCSA Executive: Food Safety and Sustainability, replied that she was previously a department inspector during the implementation of the Act and was a food science and technology expert. From the onset of the implementation of the Act in 2017, a proper analysis of the challenges was not done or if it was done, it was not publicly provided to stakeholders to say the department inspectors were not doing a good job and the impact of that was not presented.

CGCSA proposed a relook at the entire inspection process to prioritise the sectors that needed focus, and if there was lack of capacity, the key risky sectors could be pulled together to share resources to ensure that education was provided to the producers. The inspectorate needed to be relooked at and synchronised so that the cost impact could be limited.

The requirements of the assignees also needed to be deliberated on. The only way to get small businesses to a different level was if they were equipped with both education and enforcement. If enforcement was done without the inclusion of education, then many of them would be left behind. People who already knew and would support the sector could have been given the opportunity to assist small businesses with the education, and legislation could have been used to prevent them from being both referees and players at the same time.

Ms Momodu replied the Act foresaw there would be a need for the involvement of other departments such as National Treasury. Section 16 of the Act states, “a regulation prescribing fees shall be made with the concurrence of the Minister of Finance” which meant that the legislature foresaw a situation where a regulatory framework would be needed in the future. The court cases would be unsustainable going into the future, and this was an opportunity to implement what the Act foresaw as needed. CGCSA did not believe it was an overreach to ask to have accountability and governance structures put in place to enable them to perform their duties in a manner that would create certainty for the industry.

When an industry or any individual pays for government services, it is important that everyone is on the same page from an accountability perspective so that everything that happens can be reviewed. The Department terminated the services of two assignees, and then turned to say it was going to handle the inspection services on its own. This raised the question why the Department did not perform inspection services in the first place if it had the capacity all along.

There was a need for industry members to assess their current state so they could save costs for the industry, and ring fence the services that should have been provided by the Department in the first place. This would give taxpayers a sense of comfort that the administration would be doing what it was supposed to do and that there was oversight and accountability.

Premier response
Mr Stein replied Premier did not put the proposed amendments in the oral submission due to the time limit but it had put these in its comprehensive written submission. He then explained the grammatical inconsistencies in the Amendment Bill and requested much more refined or precise ways to define the terms to prevent confusion. He suggested the redrafting of the Amendment Bill to fix these inconsistencies and then possibly another opportunity for further comment.

SAOSA and PGS SA response
Mr Sander replied that the organic standards currently in use were completely inclusive and only excluded the use of agro-chemicals and agro-pesticides from conventional agriculture. If the natural and organic systems were implemented in the production methodology of the farms for a minimum of 18 months, then organic certification was a possibility. The audit as discussed in the submission would be required and would be a much cheaper mechanism of bringing the standards closer to emerging farmers as also being considered with the PGS SA system. This also needed to be looked at broadly in the Act because there were no clear definitions of organic farming in it, which left a lot of deviation.

Chairperson’s concluding remarks
The Chairperson thanked the stakeholders for their submissions and the discussion. The next step was that the Committee would receive a response from DALRRD next week on all the oral and written submissions.

Stakeholders had commented and raised questions and concerns but there was nothing wrong with because legislation did not operate in a vacuum. Whatever was raised before the Committee related to how the Bill would be implemented once it became law, its implications for the industry and the consequences for the consumers.

He implored everyone to remain open-minded during the proceedings and said the Committee would keep the door open for further written submissions and those would be engaged on with the Department next week.

He thanked Members for their participation and robustness in upholding their mandate. He thanked all the guests and the media for ensuring that the process was captured correctly and provided to the public to consume.

The meeting was adjourned.