Agricultural Produce Agents Amendment Bill: NAMC on Agricultural Exports

Meeting report

South African Agricultural Exports and Marketing: briefing by NAMC
Ms Ndiadivha Tempia, NAMC Senior Manager: Markets and Economic Research, said this report provided the status on market access South African agricultural produce, both locally and internationally; market trends in the agricultural sector in relation to production input costs and food prices and the status of food availability in the country. The analysis is mostly descriptive and spans over a period of 10 years:
• The agricultural sector remains the backbone of South Africa’s economy with untapped potential of the sector’s potential in contributing to economic growth, food security, and employment targets enshrined in the 2030 National Development Plan (NDP) as well as rural area development.
• Accessing both local and international markets plays an important role in the national development agenda in addressing inclusive growth, reducing poverty and employment creation.
• This report aims to uncover untapped potential for South Africa both locally and internationally.
• This report demonstrates South Africa has realistic export opportunities for high-value crops.
• South Africa as global player can benefit from trading partners in Africa, Asia, Americas, Europe.
• Through trade agreements, South Africa has made strides in penetrating niche markets.
• However, there remains a possibility to expand the markets even further.

Overview of international of international market access in the agriculture sector
• Export-oriented industries contribute immensely towards South Africa's GDP, most especially the horticulture sub-sector.
• Trends over the past two decades also clearly show that the agricultural sector shifted to off farms jobs in processing and manufacturing as well as intensification and mechanization. The gains in the primary sector were only due to the sector's very progressive export-led component at the current pace of investment in the fruits annuls sector.
• Various markets for specific products have been opened in the form of protocols negotiated on specific products with trading partners during the last 10 years. The following markets have already been opened for these agricultural products:
Citrus - Thailand, Philippines and China
Pome (Apples) - China, Taiwan
Table grapes - China, Thailand and Vietnam

African Continental Free Trade Area (AfCFTA) potential realistic export opportunities
• With the establishment of AfCFTA, South Africa identified strategic countries (markets) that can be tapped into under AfCFTA: East Africa: Kenya, North Africa: Morocco, Egypt, Libya West Africa (ECOWAS): Ghana, Cote d’Ivoire, Guinea, Senegal, Burkina Faso, Nigeria.
• It is important to highlight that trade within the continent is constrained by various other non-tariff barriers such as poor road infrastructure, limited customs capacity, information asymmetries.

South Africa has increased both in product value and quantity for markets opened in 2010-2020.
• There is potential for more expansion in the global market if necessary enabling factors are met.
• In Africa, there are high transactions costs to trading with the continent; however, these can be addressed through policies such as the AfCFTA agreement and investments in infrastructure.
• In Asia, there is a need to negotiate better tariffs as agricultural commodities are protected.
• Non-tariff barriers such as sanitary and phytosanitary (SPS) requirements cannot be neglected as these play a huge role in accessing international market access.

Challenges in the National Fresh Produce Markets (NFPMs)
• NFPMs performance relative to production growth in the fresh produce sector may be attributable to the failure by these markets to respond to deregulated marketing environment challenges.
• These factors include regulatory environment in NFPMs, infrastructure, hygiene, cleanliness and food safety standards, consignment control, safety and security.
• The findings of the report have important policy implications for future operation of NFPMs.

Status of food availability in South Africa
One of the most crucial aspects of every country's mandate is food security.
• Food security is now more than ever at the forefront of most policy deliberations, given expected population growth in the foreseeable future.
• While South Africa is food secure at a national level, it is food insecure at the household level
• The four pillars of food security are food affordability, food availability, nutrition and stability.
• Changes in average food prices, the percentage of the population living in poverty and agricultural import tariffs are all factored into the affordability pillar.
• The availability pillar comprises of agricultural production and supply sufficiency. One of the Agriculture and Agro-processing Master Plan (AAMP) responsibilities is to ensure agricultural producing regions are expanded to preserve food security.

Ms Tempia ended with some conclusions and policy recommendations:
• Increases in maize and wheat production are largely seen as positive in preserving food security in South Africa, with food availability being a high priority due to the country's growing population. The 2020 wheat production season was remarkable, surpassing 2 million tons and resulting in low import volumes.
• Due to the good weather conditions, additional gains in maize and wheat production are highly anticipated for the coming season. Improved cultivars and good agronomical practices also played a role in significant improvements in harvest. Most summer crops have already started to be planted across the country, with harvest levels predicted to be at all-time highs.
• For SA to maintain food security, certain actions must be taken on numerous commodities crucial for this. These recommendations are provided to unlock the industry's untapped potential.
- Enhancing collaboration between social partners should be encouraged through sharing information such as to buy in bulk before prices go up, to change production systems using less production input costs such as conservation agriculture.
- Strengthening effective government economic policy and management of South African fiscal affairs and government’s constant desire to increase profitability in producers will benefit national food security.
- More research into potential markets, particularly white maize, is critical to ensure export levels are not constrained even in years when established markets have good crops

Agricultural Produce Agents Amendment Bill: briefing
The briefing by Mr Ramasodi Mooketsa, DALRRD Director General, spoke to existing legislation in the regulatory framework; export value chain; export management in the context of legislation; registration: local fresh produce agents; registration: export agents; implementation weaknesses or limitations; the current operational practice for export & livestock agents; operational & regulatory differences / similarities between agents

Implementation weaknesses and limitations of current Act included:
• The current Act effectively only regulates fresh produce agents
• No recourse for producers due to losses incurred through actions of livestock and export agents
• Export and livestock do not keep trust accounts and do not provide security deposits to APAC
• Export agents and fresh produce agents do not take insurance for produce under care
• No inspections, investigations, disciplinary measures can be taken against livestock and export agents
• No indemnity insurance to cover the fidelity funds liability top producers
• Conditions of service, appointment and responsibilities of Registrar not clarified.

The current operational practice for export and livestock agents was described as well as the existing operational and regulatory differences between agents. For example there is compulsory registration with the Agricultural Produce Agents Council (APAC); compulsory compliance to the APA Act and the Rules for Export Agents and those for Livestock Agents. Livestock agents are also required to comply with Biosecurity Rules. A code of conduct is embedded in the rules for both export and livestock agents. However, it was noted that remedies taken by APAC as the regulator require legal action and cannot be dealt through faster and more efficient tribunal processes.

Conclusion
• The Amendment Bill is required for export and livestock agents (outdated legislation)
• Disciplinary focus by the regulator is very important
• Protection of farmer who uses third party services to market his agricultural product is of utmost importance.

Discussion
Ms M Thlape (ANC) said that the reason for this meeting was to align their inputs and the public submissions on the Bill. The focus and primary goal on dealing with exports markets and access should be the improvement of the livelihoods of smallholder farmers. The presenter alluded to the challenges of transaction costs and some barriers on inputs.

She asked NAMC how they are assisting smallholder farmers to access export markets. She is looking at market practices and how they improve production as well as grading which has to do with post-harvest handling. Do they have useful training for smallholder farmers?

Ms Tlhape refers to the NAMC recommendation that 30% of the production should come from black commission agents. These agents should be serving smallholder farmers. She asked how far they are with these recommendations. In the past nine years it was just minimal production. She asked what NAMC is doing to achieve the study recommendations study which NAMC commissioned.

Ms Tlhape talked about the comments made for the different trade agreements. There is always a comment that they should explore untapped export potential. How do they intend on doing that and how far are they in implementing these recommendations? Have they looked into their recommendation of using the African trade area to address the high tariffs? Have they started dealing with this or are they just making recommendations on this?

Her next question was what makes the input costs for domestic fertilizer expensive. She heard the presenter say they are following international trends to save costs.

On food security, she asked if climate change has affected food production. How are the effects of climate change affecting South Africa and what are the imminent strides on food security?

She appreciated the DG's presentation on the existing regulatory framework. The NAMC must be careful that the legislation does not become impediment on what it wants to achieve.

Ms Tlhape asked the DG if there is any of the existing legislation that they would still want to review. She asked if the Committee have some work to do to achieve the type of legislation so that they ease the burden, increase access and expand agriculture for smallholder farmers.

Ms Mbabama (DA) asked NAMC what are the enabling factors for South Africa to expand its global markets as it spoke about South Africa having the potential to expand in the global markets.

Ms Mbabama referred to the mandatory online training and asked who was the service provider who created the online training and exam. She asked what benefits do they receive from each exam and if the benefits increase per exam and towards what purpose is the exam fee used.

Ms Mbabama asked why each director or member must obtain a registration certificate and why should they write an exam. Should it not be done every two years?

Her next question was how it proposed that an exporter who occasionally sells produce on the local market implements both rules applicable to a fresh produce agent as well as an export agent. A previous version of the export agent rules stated that an export agent would only have to comply with export agent rules if its exports accounted for more than 50% of its total sales. She asked why the original inclusion of a minimum threshold was removed.

She noted that local agents are disciplined internally and the export agents are disciplined in court. She is interested to know why there is a difference in these processes. She asked what role the fresh produce exports forum plays in that disciplinary process.

Mr Matiase (EFF) said that the Amendment Bill was introduced into Parliament in 2020 and the reason for the delay was due to factors such as Covid-19. During the last two years, the Committee had received presentations made by credible food security activists in the agricultural sector such as Kangela Empowerment Trust. It is important to acknowledge these presentations and the questions that were raised before the Committee. A point made in these presentations is that there has been a major shift in the South African citrus industry towards the integration of farmers to global and local markets. Government established an agency to facilitate the interface between producer and global and local markets. The question is what role if any does this agency play in the proposed recommendations that the Bill seeks to effect.

Mr Matiase said another point by Kangela is that in the citrus industry, the additional costs in the value chain are carried by the citrus growers themselves and affect the profit margin negatively and increased input costs are in excess of the consumer price index. There is an outcry of how to ease the burden put on the growers in the absence of some form of subsidies that government can offer. These are important questions that perhaps NAMC and the DG could answer.

Mr Matiase pointed out the need for a regulatory mechanism between the growers and the agents as most of them are linked through the internet and other advanced methods of engagement. These agents are located in other countries and some of their credentials are unknown. Growers run the risk of exposing themselves to unethical agents. What is the proposed regulatory mechanism to accredit agents in foreign countries and what effective instruments will the Bill put in place to ensure untrustworthy agents will not have access to citrus growers and that the growers are not exposed to unethical agents far away in foreign countries.

Ms Mahlo (ANC) asked if the Department had systems in place that assist smallholder farmers to access the markets.

Mr N Masipa (DA) said that the President was clear in his State of the Nation Address on red tape reduction. With the Bill before them, he thinks they are on the right track about the red tape.

He noted previous conversations on enabling factors and how NAMC supports farmers at the local level to ensure they get access to the market. The Bill does not address some of those things. He stressed that it would be important to address the enabling factors.

He noted the earlier 2013 Bill was rejected and asked what particular amendment was rejected.

When products are exported one knows that the reality is there is a risk. The export agent acts on behalf of the producer. The export agent carries a risk on what international commission terms are selected for a specific transaction. The presentation highlighted that it is important to move with speed as there is a danger of struggling to get certain markets.

There are risks in consignment sales, fixed price sales and minimum guarantee price sales as typically the producer carries the risk of inherent defect in the product when it arrives, but the export agent carries the risk for external contributory factors.

Mr Masipa asked how the proposed amendments differentiate between each of these instances and alleviate some of the pressure of the challenges. They have to be able to answer how the fidelity fund is going to ensure protection against risk. How will such contributions be calculated and in what currency, given that products are sold across the world in different currencies?

In the case of expert agents who also sell locally, will they be required to contribute for both local sales and exports and, if so, in what proportion. The Bill does not give that kind of engagement.

Mr Masipa asked if export agents will be prohibited from selling products in the market where it is impossible or too expensive to obtain credit insurance, even where such markets represent up to 40% of the export market. They know that the majority of their African market or Middle East market is Bangladesh which has called these credit arrangements a problem.

If they were to implement such a rule, they will take away up to 40% of the export market. The DG said that the market can be very fragile. Once you lose a market it is very difficult to get it back. It will take another 10 years to start negotiating and engaging to get that market.

Mr Masipa asked how it is proposed that the trust account is administered in the instance of an export agent. For example, fast advances and production loans are granted to the producer by the export agent to enable crop production prior to any funds being received by the export agent.

The Committee has to understand that there is a time factor for exports. The farmers will wait for perhaps two years to get their money from the exports. During that period, when the shipment is still crossing the sea, the farmer needs to continue work and most of the time, the export agents subsidize this. How will this Bill address some of these issues. He noted that the administrative task of handling the fidelity fund is going to be costly.

Mr Masipa brought up reciprocity as NAMC indicated it has problems with tariffs of up to 77%. What is NAMC doing to address this to ensure that they find reciprocity in dealing with this matter.

Ms Breedt (FF+) said that she sees the Bill adding more red tape. She saw a number of red flags which her colleagues have addressed. Mr Masipa referred to the 2013 Bill which was subsequently retracted by the Department. The current Bill was tabled in 2020 and it has many similarities with the Bill that was unconstitutional in 2013. She asked why they are seeing minimal changes to the 2013 Bill. She asked if the Department has addressed those concerns in the current Bill. In her opinion the fidelity fund and the concerns identified with that have not been fully encompassed. She asked the Department to explain how they came about this current Bill as she feels that the Bill needs some working on.

It is worrying that the early warning systems for exports are still flawed. She spoke about the different plagues and how the OBP does not have the necessary vaccines in place to deal with this. How will this impact exports? How are they ensuring that they do not get into a problem where they do not have vaccines to combat these plagues and diseases which could end up in losing certain markets?

Ms Breedt asked what happens in instances where the agent, the producer and the farmer are all one and now they have compulsory insurance and compulsory BEE requirements that cannot be met. She asked in these instances where one is the agent, producer and farmer, if they will be refused to export.

NAMC indicated that 30% must come from black producers. She asked what happens if they have a market that does not have 30% black producers. They should focus on professionalising this environment, streamlining and ethical behavior.

Ms Breedt asked how the fidelity fund and insurances would soften implementation and the financial situation with market losses. Both the industries could lose as well as the country could lose economic output. This could impact the country’s struggling economy negatively. In her opinion this Bill is not going to contribute to economic viability, economic improvement and economic growth.

Ms Breedt referred to funds and insurances that have been administered that have not benefited producers and farmers and have not profited the economy. She asked for the financial implications for the Bill's implementation and the financial implications for the producers and agents.

Mr N Capa (ANC) asked if the level of public participation was satisfactory or insignificant.

He commented on the European Union practices. He wanted to understand if these practices were reciprocal where they can do the same thing in terms of inspection. He asked if they are equal partners with European Union.

He talked about the dominance in the market by a few role players. He wanted this to be clarified

Mr Capa referred to slide 14 of the presentation on the 30% for local fresh produce market. He wanted to ensure there is mechanism to withhold this if it is not adhered to as it could lead to implications for the producers

Mr Capa referred to slide 19 on the increase in the price of fertilizers. This increase was concerning. There is a conventional practice internationally that where the primary producer produces, the prices of the input is not determined by the producer but by someone else. At the end of the production when it is time to market the product, the price is again determined by someone else. He asked for the implications of this on the producers.

Mr Capa asked if the current American, European Union and Russian relations will have an impact on this matter of agricultural exports.

Ms Tshwete (ANC) said her concerns were covered by Mr Capa.

The Chairperson reminded the Committee that it is not deliberating on the Bill as yet but it has requested these briefings to assist in the deliberations on the Bill. The Committee will still hold public hearings on the Bill and the Department will respond.

The Chairperson stated that NAMC highlighted infrastructure as one of the challenges, particularly for equitable market access and the participation of small scale farmers. He asked how the Department is addressing infrastructure challenges, specifically to ensure that small scale farmers are represented in export markets.

He said that both NAMC and the Department's presentations focused more on plant based export products, which is understandable as they are the biggest export contributors by volume compared to livestock products. While the representation of black producers in export markets is minimal, black farmers own most of the livestock in this country. He asked how the Department is assisting livestock owners in particular in rural areas to ensure they gain access to untapped export markets for livestock products, notwithstanding the animal disease challenge that the DG alluded to.

People in rural communities are continually subject to injustices, particularly when there is drought. Those privileged few will rush into rural areas to buy livestock at minimum prices and sell them for a fortune after that. How is DARLLD ensuring it handle the challenges communities are facing and develop the livestock sector to ensure that they are able to contribute to the export markets.

The Chairperson asked for an understanding of the reasoning behind the existence of the different marketing agents. Are fresh produce and livestock only sold domestically or what agricultural products do expert agents market?

Responses
Mr Simphiwe Ngqangweni, NAMC CEO, replied on how they are assisting farmers to access the untapped export market. This linked to the question on enabling factors for South Africa to expand into the global export markets. There are a number of factors that one would have to look at in creating an enabling environment. The DG will touch on some of those but he will talk to one or two of the factors.

NAMC is directly monitoring and coordinating with the industries on export promotion. It is very important that a part of the investment goes into looking for new markets as export promotion. NAMC administers the industry statutory levies and part of those levies gets spent on export promotion. However over the past few years this matter is not very well coordinated between government and the industry and NAMC has now started discussions with the Department of Trade, Industry and Competition (DTIC) which has some programmes it is funding on export promotion. They will have a targeted approach where they will meet with the industries that have promotional requirements in the export markets, and they will assist in how those programmes can be rolled out. It will be very important to talk to the industry and look at ways in which NAMC can assist.

Export promotion is very important. They have done a study on export promotion within the horticulture industry to see if it is beneficial. The analysis showed very clear causality in the investment made on export promotion and the benefits. Export promotion investment does indeed pay. That was on of the enabling factors. The other factor is more of a matter of policy which the DG will touch on about the negotiations that need to happen.

It is very important that once markets are secured, they need to be ready to supply those markets. All types of farmers should be included as smallholder farmers are usually at a disadvantage.

On how NAMC assists smallholder farmers also to benefit from opportunities created in export markets, the CEO admitted that this is a big challenge. Given NAMC resource constraints but also issues of mandate, it has been able to do some work but on a collaborative basis with other government and private sector entities, where they have assisted farmers be trained on grading and post-harvest handling. The actual investment needs to go into making sure these farmers are export ready which becomes the responsibility of the provinces. NAMC has been working with provinces on that.

The NAMC CEO said that there was a question on smallholder farmer access to national fresh produce markets where a 50% target was recommended by the Section 7 studies that it did. The study was done quite a number of years ago and if one looks back at the number of years that have gone by, they are not really where they need to be. NAMC has had discussions on this with APAC. He thinks between APAC (which is the body representing the agents) and the markets themselves and government, they need to work on a system where they are able to first trace very accurately the origin of the products so that the measurements are well informed and then they track progress.

Secondly, they need to put measures in place to ensure they provide training to black agents because one of the realities is that there are established relationships between producers and existing agents who trade in these markets. This will make it difficult to break into but one of the strategies would be to train black and upcoming market agents to access this space. The CEO clarified that these are discussions that are ongoing with APAC at this stage.

The CEO stated that they have just done an analysis of what will happen due to the Ukraine-Russia situation escalating and how it is likely to have quite a major impact more so than they are seeing now on the price of fertilizer.

Mr Christo Joubert, NAMC Agricultural Economics Researcher, explained that South Africa produces about 20% of its fertilizers, and they import about 80%. In the past it was not really viable to produce some of those fertilizers and now they are having serious trouble although they are a world exporter of phosphate and also phosphoric acid. Some of the reasons the price of fertilizers have start rising last year are due to world demand and also the exchange rate. Fertilizer production is not so easy and it is also very capital intensive.

He is not sure at this stage what the impact will be of the Russian-Ukraine situation and they need to see how long this whole conflict is going to last. He also is not sure if Russia will close the export programme to South Africa.

Mr Moses Lubinga, NAMC Senior Economist: Trade, answered the questions on climate change and its impact on food security. Climate change is a multi-faceted phenomenon and within South Africa, it is affecting food security, through mainly the livestock or poultry sector. When they had the prolonged drought between 2014 and 2016, they saw how productivity dropped in the grain sector and also the oil seeds. This affected animal feeds that alone raises the cost of production for poultry and other livestock products. This affected food security as many are not able to afford a proper food basket for their households. This is how they can observe climate change is affecting the people.

The CEO noted the work NAMC is doing with APAC to track the dynamics around the access of smallholder farmers into national fresh produce markets. NAMC is working with the IT company responsible for data coordination in fresh produce markets to actually put a system in place to check those volumes. That will be a very important starting point in managing the situation they find themselves in.

Mr Angelo Petersen, NAMC Chairperson, said he thinks it is very important in the Committee deliberations to take into account the concerns raised about increasing red tape. The fresh produce export industry has essentially been self-regulatory for the last 20 odd years since the dawn of democracy. As far as he is aware, there have been limited losses to produces in dealing with the export market.

Mr Petersen noted the DG outlined the export value chain. The process is fairly simple in its simplest forms, but it becomes a lot more complicated when one deals with the international market. For example, they currently have fruit destined for the Russian market. This fruit is now going to be diverted, repacked and will have to go through different protocols. The complexity of the international marketing of food should not be underestimated. Whoever drafts the Bill needs to understand the implications of the Bill in terms of impact and operationally how they market production.

He appreciates that they need to create compliance and ethical behavior, but most export organizations belong to the Fresh Produce Exporters' Forum (FPEF) and they can make their own representations. To a large extent they will argue that there has been ethical behavior. However, he can appreciate that as the Department, they need to ensure mechanisms are in place. His appeal would be that they have to be careful how they go about that.

Mr Petersen spoke about reciprocity and special markets and he believes it is an opportunity and the way they negotiate is something they need to consider.

The export market is not particularly geared to smallholder farmers as one needs to be a certain size and volume, particularly in marketing fruit. What happens is there is cooperation between the Department and the commodity groups via the Agricultural Trusts. They receive training on good agricultural practices, international commercial terms (Incoterms) and such. There is currently a collective or collaborative approach in assisting smallholder black farmers access to international markets. It is a value market so you want people to move off the local market and eventually go to higher paying markets. Mr Petersen said this very important. It is important to know that international trade happens around Incoterms and that is what has been the basis for export interaction over the last 20 years.

Mr Petersen said that the drafters need to look at the different Incoterms used to export products and in agreements between a producer and an export agent. He declared that it is important that they find a balance between regulation and the free market system in what makes South Africa competitive. It is important that it considers what other countries are doing and how it affects competitiveness.

Mr Francois Knowles, CEO of APAC, answered the questions on implementation. Regulation should never serve as a barrier to trade but rather as a mechanism to ensure ethical, economic business practice. APAC is responsible for the execution of the current Act of 1992. The tabled Bill, if it is so enacted, will do this.

Mr Knowles said that the primary focus is the protection of farmers, producers and growers in three areas: fresh produce agents, livestock agents, and export agents. It is clearly understood that livestock and export agents are not being regulated as comprehensively as fresh produce agents are currently regulated in South Africa. The interpretation of the Bill from a technical side is purely to ensure a level playing field for agents. APAC focuses on addressing unethical rogue players in the industry. If the industry did not have such people, APAC would not have a lot of work to do.

Mr Knowles said it is important to reiterate that agents who represent farmers are representing their livelihoods. The industry must be an inclusive industry for all. On the public participation process, they made really sure that APAC informed all role players. It is really important that all role players partake in this process if they want to get to the ultimate truth. APAC sees the process as ongoing. In this process, they are learning a huge amount from the people they talk to as well as listening to the Committee, and they are noting all the concerns and problems.

For training, Mr Knowles replied that they use a service provider, but the intellectual property (IP) of training programmes belongs to APAC and it is pivotal in the development of the training programmes. Simply they want to convey professional conduct to the agents to make them the best that they can be. People have to undergo this training – this also alludes to the question about the directors – it is once off training and the training simply explores the current legislation and conveys that content to the agent. The intent of APAC in the training of directors is to upscale and up skill them so they understand the intent of the legislation and help regulate what is required.

Mr Knowles replied that APAC does not have internal processes to discipline export agents. They have to go to court if they find unethical agents who are not properly registered and do not serve the industry as they should. It is important to touch on local market versus the export market. The protection of farmers through the fidelity fund is for the local markets where this protects them against theft and fraud.

Mr Knowles answered Mr Matiase saying that there is always the risk of unethical agents but one must remember that APAC’s focus is on ethical behavior. That's a very definite goal of the Bill and they would like to ensure that farmers will make use of the aggregated services of APAC registered agents where they are protected against people who will take chances and disrupt the livelihoods of these farmers. One must be very sensitive about the farmers that are protected in this way.

He certainly believes that APAC needs to try and reduce the red tape to get the job done and protect the farmers out there. How the fidelity fund will work for exporters and livestock agencies is something that must still be worked out in deeper detail to provide protection.

Mr Knowles replied about what exchange rates are achieved overseas and how that is disseminated to the farmers and the growers. Those are all important aspects that APAC currently regulates anyway and it is contained in the sets of rules that give effect to the Act where transparency for the farmer is really important. A farmer cannot continue his business if he does not know if it will be profitable or not. How the fidelity fund is apportioned is APAC uses a sliding scale based on the success of the agency. This is determined by APAC's 18 council members. These are decisions are made at that level and it serves the industry as a whole.

Mr Knowles spoke of the difficult issues contained in the Bill which is certainly the credit insurance. APAC has given an opinion on that in its written public participation comments. One needs to ask if this is viable, and APAC made a comprehensive input on that.

On shipment and communication with the farmer and how they are paid. Through the public participation process, they have learned that there are really new processes that they should be aware of, and that they should be very sensitive about it.

Mr Knowles answered Ms Breedt's concerns about red tape. APAC is in agreement that they need to make it as streamlined as possible. He does not know why the Bill in 2013 was retracted however the Department can answer that.

On the finances for implementation, APAC is awaiting the feedback from the Committee and they are exploring possibilities on how implement. He admitted that they do not have the current recourses to deal with the objects of the Bill but that does not mean they will not be ready and vigilant if there is a change on the way

In reply to Mr Capa’s question about the level of publication participation, Mr Knowles said again that APAC tried to communicate on a regular basis as widely as possible to make people out there aware of this Bill.

In reply to the Chairperson, Mr Knowles said that APAC only deals with agricultural products. It is properly defined in the current Act as livestock and fresh produce, which are fruit and vegetables.

The question of how APAC protects livestock in rural communities. Currently, APAC has lost its status at the OIE (World Organisation for Animal Health) because of the outbreak of Foot and Mouth Disease in November 2019. One of the goals of the Bill will be to protect rural communities and make use of the aggregated services of livestock agents.

Mr Stanford Manthata, DALRRD Director: Marketing, replied about the rejection of the initial Bill. There was a challenge at the time as the 2012 Bill amended 30 out 35 sections in the Act and the legal opinion they obtained at the time was that, effectively, it meant they should come out with a new Act altogether. That was not going to be practical moving forward and there was an concern around the impact of those changes. There was a proposal to move the current APAC into an agency to look at transformation and the conduct of agents. It was felt at the time that may not be in line with what APAC was supposed to be to be doing. The Department decided to withdraw the Bill and go back to the drawing board and develop new proposals. It was proposed at that time that they rather focus on the conduct of both the export and livestock agents. The retraction was more of a technical issue as the legal opinion was to come up with a new Act altogether, which was not desirable at the time.

The DG responded about the regulatory framework the Department will use to deal with the challenges in the export environment. Quite a few pieces of legislation were introduced into Parliament such as the Plant Health (Phytosanitary) Bill [B14-2021] and the Agricultural Product Standards Amendment Bill [B15-2021]. They will bring amendments to the Marketing of Agricultural Products Act as well as the Animal Welfare Bill. They also have to deal with the Perishable Products Export Control (PPEC) Act. The PPEC Board is making inputs to Parliament to make the Act more aligned and updated. Those are the areas that need immediate engagement.

The DG replied to Members' concerns about smallholder farmers saying that DALRRD has an Import and Export Services unit that deals with smallholder farmers in the import and export arena. They also have the horticulture programme running with Japan that is looking at areas for sustainable horticultural development in the country. This is to ensure that they have a systematic way of dealing with smallholder farmers.

On the blended finance team that Ms Breedt indicated a concern about, the DG thinks that there is a lot of positivity in that area of work. There is still funding they have to advance to some of the service providers.

The DG replied to Mr Masipa’s concerns on the ease of doing business. There are two issues that one has to look at and that is consistency in decision making and ensuring that at the end of the day, you have redress when certain things are happening within the system. If those two criteria are met they are bound to find the sweet spot in the legislation, ensuring it is not acting as a barrier but as an enabler in an area that they need to transform.

He addressed Ms Breedt’s concerns on early warning systems for diseases. This is market intelligence you need to have if you have a trading partner where there might be changing conditions and you will be given a heads up on what is coming and address that. The DG agreed that they really need to look at that and the Portfolio Committee needs to assist with a discussion on how they deal with the vaccines.

The DG referred to reciprocity which various Members raised. One is the negotiating environment, where you sometimes have to slide with the punches and go according to what you are provided with. In negotiations, you must always play by the rules and see how far you can get.

On Ms Breedt’s concern for the financial implication of the Bill, the DG said it is something to be looked at – not only in terms of implementation of the Bill but also how it is going to cost the role players within the engagements.

The DG referred to Mr Capa question about sporadic inspections they have with the EU. Unfortunately, due to Covid-19 they have not done it yet on the import of poultry into South Africa.

The DG said the domination of stakeholders in a particular area is currently being addressed by the Department, the industry and sector partners, including labor and civil society. Once completed, we will be able to share the Master Plan document with the Portfolio Committee.

The DG replied about Mr Capa's question about Ukraine-Russia. There are a few documents available on the impact for the agricultural sector, where they are importing a lot of wheat from that particular region which is 30% to be exact. They also have citrus. They are having a meeting soon with certain industry players to look at the options and build a scenario plan, starting from the easiest to the worst case scenario. They need to see how they deal with it because it can become a food security issue. On export and trade, it can negatively affect the markets to the point where they might have to find new markets.

The DG addressed the Chairpersons' concerns about the challenges they experience while dealing with infrastructure in the country. In this context, they have begun with the National Red Meat Development Programme, which was presented to the Portfolio Committee. They are also dealing with aspects such as how to build infrastructure and how to bring expertise, as well as how to localize these value chains and ensure that they have local auctions. The goal is also for those who might be unethical in getting money out of the system, that they would find it difficult to do so.

The DG said the issue around how people utilize this National Red Meat Development Programme is that they are looking at having Custom Feeding Facilities run through the Agricultural Research Council (ARC). This is on top of other engagements they are having at a government level on financial interventions, including the comprehensive agricultural support programme, and also the land development support.

The Chairperson thanked the respondents who addressed the Committee's concerns.

The meeting was adjourned.