DALRRD response to public submissions on Agricultural Produce Agents Amendment Bill; with Minister

Meeting report

The Chairperson greeted and welcomed Members and officials to the meeting. He said the responsibility of the Committee is to engage with the responses it will be receiving from the Department of Agriculture, Land Reform and Rural Development (DALRRD) on the public hearings. Some submissions on the Agricultural Produce Agents Amendment Bill were written submissions, and some were oral submissions

Minister’s opening remarks
Minister of Agriculture, Land Reform and Rural Development, Ms Thoko Didiza said her Department appreciates the presentations made by several stakeholders on the Bill, which has been in the making for a while. The Department has tried to respond to the issues raised, and trusts it will enable the Committee to finalise its deliberations and advise on the way forward.

Mr Mooketsa Ramasodi, Director-General (DG), DALRRD, said some of the stakeholders made new comments which were incorporated into the Bill and some of those comments were from when the Bill started. The Portfolio Committee will be taken through a series of comments received from stakeholders. Most comments were from an exporter’s point of view. The Department will delineate what the comments were.

The Department will summarise if comments are recommended to be accepted or not, as some comments reached the Department late. There is probity needed when there is a new comment on the table from a legal point of view and also from a socio-economic point of view. The Department will also request guidance from the Portfolio Committee as some comments are substantive and are new.
 
DALRRD briefing on Agricultural Produce Agents Amendment Bill, 2020
Ms Kwena Komape, DALRRD, gave the presentation, which comprised a summary of the key responses the Department wanted to share with the Committee. She said the Department wanted to present the context of the Bill, where it started, and how it came about. She encountered some connectivity challenges at the onset, so Mr Ramasodi had to complete the presentation.

The main purpose of the Agricultural Produce Agents Act (APA) is to protect farmers by regulating the occupations related to fresh produce, export, and livestock agents. Farmers operate in a risky environment characterised by natural disasters, unpredictable climatic conditions, pests, and market risks such as price risk, theft, and quality deterioration, to mention a few. The Department said the risk is worsened when farmers transfer produce to agents to sell on its behalf without transferring the risk of loss. As such, the agents charge fees/commissions on the produce it sells on behalf of the farmer, but barely take any responsibility for failure to sell. The risk of loss rests solely with the farmer while the benefits of gain are shared between the farmer and the agent.

The amendments to the Agricultural Produce Agents Act were informed by the National Agricultural Marketing Council (NAMC) and the Inter-Ministerial Committee (IMC) recommendations. The Department developed a draft Agricultural Produce Agents Amendment Bill to address the recommendations. It was also sent to the Office of the Chief State Law Advisor (OCSLA) for a preliminary opinion, which recommended the development of a new Bill which would repeal the Agricultural Produce Agents Act of 1992 in its entirety. The Amendment Bill proposed extensive amendments to 30 of the 35 sections of the Agricultural Produce Agents Act and almost all 30 sections were amended in their entirety. The Agricultural Produce Agents Act is a pre-Constitution Act, which appears to be inconsistent with the Constitution of the Republic of South Africa, and other laws.

The Department developed the Agricultural Produce Marketing Agencies Bill, the new Bill, with the assistance of the OCSLA. This Bill was abandoned because of concerns about its constitutionality. The Department had to go back to the amendment of the APA Act, which is the process it is currently engaged in.

DALRRD’s responses to public comments on the Agricultural Produce Agents Bill
Mr Douglas Mosese, Deputy Director: Market Information and Capacity Building, said the comments received on the Bill were quite a voluminous submission by the industry. The Department tried to go through all of these and respond accordingly. As the comments were studied, the Department noticed most of the submissions were of a tactical or technical nature. According to the Department's reading of this, it seemed the major area affected by most of the comments, and which will have a substantial impact on the purpose of the Bill, is the part dealing with the marine and fidelity insurance for export agents.

The second part which is of critical importance to the Bill, because it affects the operation of the value chain, is the requirement of task account for export agents.

The third issue relates to every director registering with APC. These three issues are quite critical, so making any change to it changes the direction the country needs to take.

The Department and APC had a lengthy discussion on fidelity and marine insurance, and the agreement was that having such kind of insurance will cost the country certain markets, especially the African and Russian markets. These countries do not accept consignments to some regions, therefore enforcing this part will make it difficult for exporting agents to export to these countries. As such, it was agreed the entity would relook the Bill, and it agreed.

The trust account issue is extremely important, mainly because of the impact it has made on the local market. The fresh produce agents are currently required to open a trust account, which is an account which will be used for producers’ monies. As agents selling for the producers, the accounts will be used to deposit to the producers whenever sales are made. This trust account is separated from the business account of the agents, which makes it extremely easy for APC to investigate in the event of a complaint from a farmer. Prosecuting the agents who mishandle the farmers’ money has been a huge success over the years, and a lot of money was recovered on behalf of the farmers. The trust account made it easy for APC to do its work without any limitations or delays such as legalities. This is very important and has to be part of the Bill at all costs because it protects the farmers.

The third point on the producer exporter is comments saying the entity has to make the changes on the Bill to allow for registration of what it calls the export farmer. This would be somebody who farms and also has a trading company which exports the produce on its behalf. The Department found this one very difficult to accept mainly because if the farmer trades for himself or herself, the farmer does not fall within the ambit of this legislation. The reason for this is, that this Bill seeks to protect the farmers who sell produce through a third party or through the agents. So, because the producer exporter sells produce, there is no need to protect them. These are some of the considerations which were looked at.

The Chairperson interjected, saying at this juncture, the Committee is not only seeking responses to the background of this Bill. It is a technical Bill and the Committee has an obligation to go through all subsections and not to pick and choose what is preferred. There were substantial submissions made both written and oral. The Committee would like some responses to what was submitted.

Mr July Mokoena, DALRRD, took the Committee through the comments received. The focus was on salient issues, giving clarity and more emphasis on some of the issues which were already made in the Bill.

[See annexure on response to comments]

Discussion
Ms M Tlhape (ANC) welcomed the response from the Department and summary of the issues. She noted entities or organisations who came to present, especially for oral submissions, were APC-affiliates as these participants were talking more or less the same thing. Protection of producers still stands out and it is the responsibility of the Committee, as government, to ensure producers are protected. This raises concerns because the Bill has been there for seven years now without being processed.  She wondered what the beneficiaries of the Bill are saying about the delay. Technically, there is a balance between responses on acceptance and non-acceptance.

Ms Tlhape said foremost, she was guarding the issue on insurance because if markets were to be lost, then it would not deal with the mandate of the Department. She is happy the Department has accepted the proposal on issues of insurance. She questioned how the Department will deal with the issue of producers dealing directly with the agents to prevent exploitation. She wanted to track the interaction between the sector or the industry and the Department since, from the start of the Bill, the oral submissions seemed to suggest there was minimal interaction between the two. The stakeholders seemed to not know where this thing started or where it is going; it was more like lamenting to the Committee and asking for help, while on the other hand, the Committee needs to strike a balance.

She got the sense the playing field is balanced because of acceptance and non-acceptance here and there. She wanted to know from the Department how it started; when it introduced this Bill to the sector; and if there was interaction with APC. She asked why all of a sudden it was like a new thing to the Department. The presenter said in some instances it wanted legal consultation on some aspects where it was unsure - she asked when this will be responded to. This is because after the Department's response, the Committee needs to consider the report tabled before it and the responses, so Members can make an informed decision on this Bill. She asked when this legal advice would be available and how it will give expression to the issues being dealt with.

Ms A Steyn (DA) shared the sentiments and the concerns raised by Ms Tlhape because this Bill was first published in 2013 and is nine years in the making. She asked the role players what the interaction with the Department before the Bill came to Parliament was like. It was clear from all the comments and concerns what the roles of the various role players were. Even listening to the Department at the present meeting, it was clear the Bill was not dealt with immediately.  The comment made about amending the Bill again during the next consultations spelt out that the Department sat on the Bill and now pushed it to Parliament quickly to fix it. Now it is in the Committee’s hands to get it right, but the Department did not meet with the industry to consult. It is clear it would have taken a month or two longer to meet with the industry and bring the Bill to the Committee in a more acceptable draft.

She expressed serious concerns on the issue and recommended the Department retracts the Bill to fix it, in consultation with the industry, and implement all the matters it told the Committee it would attend to during further consultations. She suggested all the fixing is done immediately so if the Committee does not agree on the Bill and it needs to be fixed again next year, there will still be time. Either this or Members take the Bill as a Committee Bill and have further consultations with the public to fix the Bill properly.

She proposed the Department retracts the Bill, fix it properly, and bring it back to the Committee within six months, so Members can pass it following proper consultation with the industry.

Mr S Matiase (EFF) noted concern about Parliament once again being proven ineffective in processing legislation and ensuring there is a sense of stability and confidence in the sector.

The second issue is, that the only way there can be predictability on what the sector is doing is if there is regular and effective legislative oversight, which is lacking in this case. The two factors talk to one another and this is a primary concern for most of the Members. For a long time, the sector has remained untransformed precisely because there has been no effective legislation and no effective oversight ensuring there is a thorough transformation in the sector. A lack of transformation means the sector remains white and male-dominated, and it stands no chance of ensuring black people and Africans, in particular, find expression in whatever is happening in a sector.

Until there is legislation of this nature, which there has not been in the public domain yet, and until Members of Parliament take it seriously, the issue of transformation or the transformation agenda in a critical sector such as this one, will remain evasive for the majority of our people. It is important this legislation addresses the question of transformation, and ensures transformation for people with disabilities, women, youth, and previously disadvantaged groups. If there is no practical work towards ensuring transformation, then the Committee will be repeating what has been repeated in the last 27 years. Later, the Committee will be sitting again, seeking another amendment on a Bill which Members could have ensured gives expression of the deeper needs of our people in a transformative agenda.

Ms B Tshwete (ANC) noted the Department said there are certain applicable legal opinions but also that it still has to consult - this makes one wonder if the Department has been consulting for the past seven years. Nevertheless, this Bill is very important, more so to the actual farmers. The Committee should not merely tick the boxes. It must do due diligence on what needs to be done, properly. The fact is, the Bill is from 1992 and needs to be amended in line with the Constitution for democracy. What has been presented to the Committee does not do the Bill justice.

She recommended the Committee allow the Department to finish the consultation and to further invite other stakeholders.  She was not convinced the Department has done justice regarding consultations and stakeholder involvement. The Department should finish its work and come back to the Committee later.  

Ms T Mbabama (DA) wanted to know what motivated the Department to table this Amendment Bill to Parliament at this particular time, considering not all the recommendations were sufficiently consulted, researched, and interrogated. She asked what informed the urgency.

Ms T Breedt (FF+) agreed with the previous speakers who said the Department needs to retract this Bill and do its homework. The Department needs to consult, and take the stakeholders into confidence. It must do all it indicated at the present meeting.  The Department has been selective in its answers, it did not respond appropriately to the issues raised by stakeholders through written and oral submissions. Lack of consultations and engagements with stakeholders has come out quite strongly. For example, the South African Fruit Promoters (SAFPRO) highlighted a joint and thorough process it was involved in with the previous registrar of APC between 2012 and 2017.

Apart from the issue surrounding credit and insurance, the result of the process was a proposed Amendment Bill which provided the required projections without undermining the industry. SAFPRO, including the other stakeholders, further reported a proposed Amendment Bill before Parliament was introduced to the original from 2012 to 2013, without considering all the work which was done between 2012 and 2017, including the impact the originally proposed Bill will have on the industry. The Department did not clearly respond to this, except to mention the Bill was advertised in 2013 and public hearings were carried out in 2015.

This morning, the Department sent the Committee a background document on consultations. However, this document refers to the Agricultural Produce Marketing Agencies Bill of 2013 and not the Agricultural Produce Agents Amendment Bill currently before the Committee.  She asked if the Department can explain the confusion and further indicate if the consultations regarding the Bill currently before the Committee were done, and when it was done.

Ms N Mahlo (ANC) said as much as one would like to acknowledge the work done by the Department on the Bill so far, it seems it has not done enough as it is still saying it needs to consult with the legal team. This means the work is not finished. The work it has done so far is commended, but as was suggested by the previous speakers, the Department must go back, work and refine the Bill for Members to make a well-informed decision. Much of the Department’s work is commended because when she was listening to the presentation, some of the points raised on non-acceptance are good points which prevent friction among South Africans and is preventing fraudulent behaviour and exploitation. To some extent, the Bill has certain good points. The Department must just go back and finish it fast, as it dates far back and should already have been passed by Parliament. The Bill is long overdue.

Mr N Masipa (DA) said the Department kept using words such as “accepting the proposals”, “requires more consultation”, “will look at the amendments”, “will consult further”, and “needs further engagement". According to his understanding of how the Committee works concerning bills, once the Department introduces legislation to Parliament, it becomes the Committee’s Bill.  What has been mentioned by the Department means the Department has introduced this legislation without really completing its work. As such, he agrees with the other colleagues’ request for the Department to finish its work first so when it is done, the Department can come back to the Committee with the Bill. Today’s invitation to the Department was to give Members perspective on implementation of this particular law. It was important for the Department to respond and to understand how to separate its role from the Committee’s role.

The Department’s role was complete, so the amendments and all that followed were now in the Committee’s hands as lawmakers. While he agrees the Department should retract the Bill and redo it, the Department has to be very careful with this particular Bill because it can create a very big monopoly of the producer exporter led industry. Small emerging farmers will not have the opportunity to participate, especially in the export market because of the tighter regulations. It is important for the Department to review the Bill and look deeper into markers, transport, shipment, regulations of various countries, financial instruments, and regulations, both domestic and international. He supported the proposal made regarding two bills being considered, one focusing on the local markets and the other on export markets. The export market is very complicated. He applauded the Department for making a concession on insurance, which he said will “kill the market”. He believed strongly consultations need to take place.

Mr N Capa (ANC) shared the sentiment that all issues which need consultation should be consulted on as fast as possible. It is not helpful for the Committee to continue with a Bill in a situation where Members might even end up leaving Parliament through passage of time, without having completed the legislation. The Bill is intended to be completed to achieve a purpose. He wanted to know if the Department finds some things too difficult, if it is not paying enough attention to the Bill, or if it is a mere coincidence that the implications of this Bill, as he gauged from the presentations and the input made, seems to affect to a very great extent, predominantly the white sector. This might have implications in the future when the Committee is considered to have approved a Bill which has glaring signs of non-transformation. Unless the Department can explain the Bill has nothing to do with this, or there is nothing which can be done to the Bill to redress this, it is a norm or natural phenomenon.

Mr M Montwedi (EFF) shared the same sentiment as the other Members but wanted to find out from the Department how the amendment is addressing the issue of the agents not sharing the cost of the losses with the producers. He asked how the producers are affected by the insertion of the Fidelity Fund into the Bill. There must be interaction with the stakeholders in the sector as this will eliminate any issues of concern, since this is a technical Bill which requires the participation of those players.

The Chairperson said, regarding the producer trust account, stakeholders have highlighted the rules which do not take into consideration the commercial aspects of the export industry. This makes the implementation of this rule impossible.

The very nature of the business is, each overseas market and client has its own very different terms. In many instances, exporters disperse funds to service providers, shipping lines, and producers in advance of receiving the funds. The livestock agents and auctioneers, for example, have highlighted trust accounts are not required for most auctioneers. As auctioneers from KwaZulu-Natal, for example, pay the sellers before collecting money from the buyers, the financial risk is borne by the agent or auctioneer, which renders the use of a trust account inappropriate. Since the Department insists it feels strongly about the introduction of the trust account, he asked how it plans to address the different aspects of the export environment, livestock, and auctioneering industry. He asked how it proposes to implement such a clause in light of the challenges highlighted by the different agents, without collapsing the industry. There was also a recommendation for obligations on export agents to comply with local fresh produce agent requirements, which should apply only if the fixed threshold is exceeded regarding local volumes supplied. He asked what the Department's view is on this. The Department has emphasised its intention to protect farmers in this regard, and he asked if the Department can submit to the Committee a detailed list of the different farmer categories who have access to fresh produce markets, export markets, and auctions, including how farmers can access these different markets.   

Department response
Mr Ramasodi said his understanding was the Bill was now in the hands of Parliament and Parliament will be guiding the Department on issues.

Ms Komape made a general comment on the issue of rushing the Bill to Parliament, on the issue of the Bill needing further consultation, and the issues to be dealt with in the next review. She said most of the comments made by the Department regarding dealing with the issues at the next review or the need for further consultation, refer to new issues which arose at the tail-end of the process. For the Department to look at these issues and see their implications on the Bill, the Department has to apply its mind. As the Director-General has indicated, the Department will be guided by the Committee on the required timeframes. In essence, the Department did not just say it wants to continue with amending the Bill at a future stage. The comments came at the very tail-end and are very new, which is why the Department said it wants to consult on it.

On the issue raised by Ms Breedt on consultation with the APC, she said she was not aware of the Department being part of those consultations and there is no report on this. The consultations carried out by the Department have been clearly outlined and the entity can provide the minutes for it. On the ones Ms Breedt alluded to, the Department does not have minutes however she stands to be corrected if she missed those minutes. 

Mr Mosese, speaking on the consultations and the Agencies Bill of 2013 versus the Bill currently being looked at, since 2013, there have been several engagements. The Bill was published and was sent individually to various stakeholders within the sector. The role-players at the time were requested to indicate if they would like to have oral engagements with the Department on the Bill. After receiving the intentions of the role players, consultation sessions were arranged by the Department, and several consultations were carried out with various stakeholders who made oral submissions on the Bill. Stakeholders also wrote to the Department and the comments were considered when the Bill was being prepared over the seven years referred to. The Department has the report on the consultations it carried out.

On the Agencies Bill of 2013 versus the Bill currently looked at, he said it is basically the same thing because, during the development phase, the Department had several interactions with the Office of the Chief State Law Advisors. The initial intention was to amend the principal Act but the Department was advised to develop a new Bill, which was developed and published in 2013. Following the publications, several consultations took place and thereafter the Department relooked the Bill based on the comments received. Thereafter, the Chief State Law Advisors were consulted again about the Bill and the second piece of advice was given, suggesting the Agencies Bill be turned into an Amendment Bill instead of creating a new Bill altogether. Based on this advice, the Department turned the document into an amendment rather than a new Bill.

The content and the direction the Department would like to take regarding legislation are similar in the two bills. Only the regulation of the market facilities was changed because the Department was advised one Bill would be in contravention of the Constitution. The State Law Advisors said it would encroach on the sphere of local government. This is the background which led to where the Department is, but the content and direction are similar.

The environment created in the Bill is riskier for farmers than agents, because if there are losses the farmers bear the responsibility, but if there are gains or profits then both “smile all the way to the bank”. The Bill protects the producers from a possible occurrence which may be perpetrated by the agents, such as theft or dishonest conduct. If the farmer supplies the market and it loses produce because of theft or dishonest conduct by agents, then the Bill empowers APC to intervene and investigate the agents, ultimately ensuring there is recourse for the farmer. This is how the Bill protects the farmer.

The Department acknowledges there are other aspects or eventualities which may lead to losses, but unfortunately, there are currently no legislative instruments governing this because when talking about the issues such as quality deterioration, it is possible farmers may lose, especially when the farmers’ products sit on the market floors. In these eventualities, the rules published by the Ministry say agents need to communicate with producers within certain timeframes to alert producers of anything happening to the produce. If the produce is downgraded from grade A to B, such information must be communicated to the farmer.

On the issue of the trust account being introduced to export agents and not livestock agents, he said as has already been highlighted by some Members, for the livestock agents it may not be necessary because when auctions are conducted, it is done on the spot. At the end of the auction, everyone receives a cheque or is paid for whatever was sold. It is more like the produce is sold in the presence of the farmer. Even initially there were no issues with the requirements of the livestock agents having a trust account.

Mr Sitembele Kelembe, DALRRD, noted comments on the trust account and said the Department intends to protect the producer whose produce is with the export agent. The reason for taking the route of the trust account is to provide for instances where there is a problem with a particular agent. For example, there may be an attachment of the agent's account for whatever reason. The agent may be going into liquidation, as such mishaps can happen in the course of business. The problem is if the money belonging to the farmer is in the business account, then the producer has no protection regarding what is due to him or her. This is essentially why the Department is going for the requirement of a trust account on the part of the export agent. However, as the sentiment seems to go, if there are alternative ways of protecting the farmer, the Department is open to such suggestions. These will be considered, if indeed the Committee gives the Bill back or instructs the Department to work on some of these issues.

He said there have been consultations with APC however, because of the length of time it took for the Bill to be where it is now, it so happens the registrar of APC, who was there at the beginning, is no longer there. There is a new registrar at the APC, and the Council itself. This is the gap which led to the feeling that there has not been much consultation with APC. The Department has indeed consulted with APC and it will continue doing so on the developments of this Bill.

Mr Ramasodi said the only issue left is the consultation part. What is being seen is the contestation of what was agreed on by the then Registrar, consulted broadly, and what is currently going on. Most of the issues were part and parcel of the discussion with the previous Registrar.

He noted Ms Breedt referred to the input made at the Committee during the consultation and referred to the input made by the Deputy Registrar which, as a Council, it would not have knowledge of what the previous Registrar was engaged in and how this comes through. There was an element coming through regarding the current Council, especially the sub-committee within the Council which deals with export agents. This is currently addressing issues around export agents. Some of these issues which came through are very new. It becomes very difficult, even if the Department would have done a broader analysis, to respond to issues which were not brought to the table during a particular period and therefore would not have been considered. It would be a futile exercise if the Department does not test the veracity of what is being proposed because some of these issues may be solutions for the Department. The sector has experienced this before, where there has been divergence on how a particular Bill is being viewed and this Bill has issues. He asked if a decision has been taken. A very strong indication from the Committee on the expectation of the Bill is to see it come back very early because the Department would not like to be at a point where there are delaying tactics within a broader perspective of consultation. This prevents the Bill from coming to Parliament earlier, as would be instructed.

The Chairperson thanked the Minister and the officials from the Department for the responses to the report on the public hearings. He deferred other items of the agenda to the next sitting, for prioritisation.

The meeting was adjourned.