Presentation on the Status of Transformation in Agricultural Sector - - PowerPoint PPT Presentation

Presentation on the Status of Transformation in Agricultural Sector to Portfolio Committee on Agriculture, Forestry and Fisheries

by DAFF & AgriBEE Charter Council 05 November 2013

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CONTENTS

 Background - Major Milestones  Purpose  The implications of the Section 9(1) AgriBEE Sector Code  The Guiding Principles in the enforcement of the AgriBEE Sector Code  Applicable Enforcement Measures for the AgriBEE Sector Code  Agricultural marketing permits as incentives to enforce the AgriBEE sector code  How Permits are used to enforce implementation of the AgriBEE Sector Code  Important Principles applied during the allocation of Market Access Quotas  Source of Information on compliance to the Code  Homepage of the AgriBEE IT Portal  Status of Transformation in Agricultural Sector  Threshold Study by the National Agricultural Marketing Council  Total Population of Commercial Agricultural Stakeholders and the Sampling approach  Estimated status of transformation & BEE compliance in agricultural sector  Perceptions & viewpoints of agricultural enterprises on BEE & Transformation  Elements of Empowerment: Undertakings by Stakeholders  Concluding Remarks

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Purpose

To brief the Portfolio Committee about the:  Status of the AgriBEE sector code and its implications.  Enforcement measures developed in order to fast-tract the implementation of the AgriBEE sector code.  Web-based system developed in order to facilitate the reports on sector stakeholders’ BEE status.  Status of transformation in the agricultural sector.  DAFF’s contribution to the implementation of the AgriBEE Sector code

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The Background - Major Milestones

 Gazette of the AgriBEE Transformation Charter in terms of Section 12 of the BBBEE Act 53 of 2003 – 20th March 2008  Inauguration of the AgriBEE Charter Council – 5th December 2008  Migration of section 12 AgriBEE Charter to section 9 AgriBEE Sector Code  Gazette of the Draft AgriBEE Sector Code in terms of Section 9 (5) of the BBBEE Act 53 of 2003 – 26th March 2012  Agricultural Sector stakeholders consultations during Draft AgriBEE Sector Code Public Comments 60-day period  Gazette of the AgriBEE Sector Code in terms of Section 9 (1) of the BBBEE Act 53 of 2003 – 28th December 2012

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The implications of the Section 9(1) AgriBEE Sector Code

 The Code has the same legal status as the Generic Codes of Good Practice (CoGP).  The Code is now fully implementable effective from the of publication, i.e. 28 December 2012.  The Code is now enforceable using government measures, i.e. licenses, incentives, etc.  Since the code is voluntary by nature, stakeholders have a right to choose whether to comply or not as they can not be prosecuted for not doing so.

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The Guiding Principles in the enforcement of AgriBEE Sector Code

 The Constitution of the Republic South Africa1996 Section 217 (1); (2); and (3) of the Constitution of South Africa states that:

• 1. When an organ of the state in the national, provincial or local spheres of

government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost- effective.

• 2. Subsection (1) does not prevent the organs of the state or institutions

referred to in the subsection from implementing a procurement policy providing for:

• a. Categories of preference in the allocation of contracts; and
• b. The protection or advancement of persons, or categories of persons,

disadvantaged by unfair discrimination.

• c. National legislation must prescribe a framework within which the policy

referred to in subsection (2) may be implemented.

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 The BBBEE Act 53 of 2003: Section 10 of the Act provide for All Organs

• f State and Public Entities to apply any relevant Legislation and

applicable relevant Sector Code of Good Practice issued in terms of the Act in:

 Determining qualification criteria for licenses, concessions (grants).  Developing & implementing a preferential procurement policy.  Determining qualification criteria for the sale of state-owned enterprises.  Developing criteria for entering into partnerships with the Private Sector.

 Rules of the Game

 Government must buy from entities that contribute much to BBBEE. (Higher BEE Recognition Level).  The Higher an entity’s BEE Recognition Level, the higher is its contribution/compliance to BBBEE.(Seven Elements).  When this occurs, there is ensured increasing market access by black companies.

The Guiding Principles (Cont….)

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Applicable Measures for the AgriBEE Sector Code Enforcement

 Preferential Procurement Policy Framework Act  Through the Supply Chain Management policies of DAFF  Water Licenses  DWA’s policy water use allocations include compliance to the AgriBEE Sector Code as a requirement  Agricultural trade permit (already implemented)  The policy for the allocation of trade permits for imports and exports of agricultural products requires compliance to the AgriBEE Sector Code  Fresh Produce Market Agents’ certification  The amendments of the Agricultural Produce Agents Act have aligned the certification of market agents to the AgriBEE Sector Code

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Agricultural Marketing Permits as incentives to enforce the AgriBEE Sector Code

 These incentives are provided for selected agricultural products under the WTO market quotas and the EUSATDCA’s in-quota tariff rates  Importers and Exporters are given preferential treatment when trading the selected agricultural products, for example:

 Products under the EUSATDCA are cheese, cut flowers frozen strawberries, canned fruit, fruit juices and wine.  Products under the WTO are meat, milk and cream, vegetables, pasta, maize, wheat, fruits, dairy products, etc.

 These Importers and Exporters enjoy the principles of WTO’s Most Favored Nations (MFN) Clause when trading such products, but the in-quota tariff might be reduced by 50% or 100% MFN.

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How Permits are used to enforce the implementation of the AgriBEE Sector Code

AgriBEE Status Number of Points

Level One Contributor 22 Level Two Contributor 19 Level Three Contributor 17 Level Four Contributor 15 Level Five Contributor 12 Level Six Contributor 8 Level Seven Contributor 5 Level Eight Contributor 2 Non-Compliant Contributor Total 100% or Points

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1. Black Economic Empowerment is the primary requirement for the allocation of marketing permits – i.e. First round. 2. After the points have been allocated in accordance with the point system in the section above, the surplus quota can therefore be allocated starting with companies on level 1 to 8 up to the limit of the average historical market share for each company – Second round

• The average market share system will only apply after the BEE point

system has been applied and the market share system will be applied. 3. If after the first and the second round there is still a surplus (i.e. surplus

• f surplus), the Third round would be to take the surplus of surplus and

divide it by the number of all non-compliant companies.

Important Principles applied during the allocation of Market Access Quotas

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Source of Information on compliance to the Code

 DAFF has developed the AgriBEE IT Portal, which is a web- based information system to be used by sector stakeholders when reporting their BEE status.  Training on the AgriBEE IT Portal was rolled out to all 9 Provincial Departments of Agriculture (PDAs) officials to assist farmers and agribusinesses to upload their valid BEE Certificates & Scorecard information into portal DAFF and the AgriBEE Charter Council will utilise the information from the Portal to write annual reports on the actual status of transformation in the sector. The Portal was tested in consultation with Agricultural Sector Stakeholders and is functional, URL: http://webapps.daff.gov.za/agribee/

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Homepage of the AgriBEE IT Portal

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Status of Transformation in Agricultural Sector

 Currently, there is no actual scorecard based information on the status of transformation in Agricultural Sector.  This is because reliable source, DTI BEE IT Portal, is no longer functional.  However, DAFF and the AgriBEE Charter Council has commissioned a study through the National Agricultural Marketing Council (NAMC) that has provided:  An estimated information on the status of transformation in Agricultural Sector.  Perceptions & viewpoints from agricultural enterprises regarding BEE and transformation  Obstacles and challenges to the implementation of AgriBEE

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AgriBEE Threshold Study by the National Agricultural Marketing Council

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Total Population of Commercial Agricultural Stakeholders and the Sampling approach

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Agro-ecological zones Sub-sector (across value chain) Subtotal Agri- businesses RESPONSES Field crops Anim al products Horticulture Mixed farm ing

Cape Fold Region (WC, KZN) Sam ple size RESPONSES

2,722 100 33 4,138 153 91 1,825 68 354 1,297 48 128 9,982 369 60 6 151 (151) 131 737

Interior Region (FS,EC) Sam ple size RESPONSES

1,762 57 10 7,621 248 266 1,181 40 47 839 27 51 11,404 372 374 98 (98) 32 40 6

High Veld Region (Gauteng) Sam ple size RESPONSES

671 125 7 259 48 16 450 84 4 319 59 10 1,699 316 37 37 (37) 18 55

Kalahari Lim popo (Lim , NW) Sam ple size RESPONSES

1,552 77 58 4,069 201 34 1,040 51 44 739 37 43 7,400 366 179 86 (86) 20 199

Eastern Plateau (Mpu) Sam ple size RESPONSES

1,062 103 12 1,285 125 29 712 69 27 506 49 17 3,566 346 8 5 59 (59) 3 8 8

Nam a Karoo (NC) Sam ple size RESPONSES

496 33 16 4,302 286 89 333 22 14 236 16 7 5,367 357 126 28 (28) 21 14 7

Total population

8 ,265 21,674 5,541 3,9 36 39,4 17 4 58

Tota l sa m p le size

495 1061 334 236 2,126 (458) 258 4

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Estimated status of transformation & BEE compliance in agricultural sector

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Perceptions & viewpoints of agricultural enterprises on BEE & Transformation

I am not considering a BEE strategy for my business I first want to “test waters” and “see where things are heading” before committing myself to a BEE strategy I am considering the implementation

• f a BEE strategy as soon as possible

491(30%) 775 (47%) 157 (10%) 209 (13%)

I have already developed a detailed BEE strategy and have to implement it in my core business

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Obstacles & challenges to the implementation of AgriBEE Sector Code

Number of responses

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Pages Element Agri-Industry Undertakings Government Undertakings

12-16 Ownership (Land and Equity) Sell equity to black people Make land available for sale or lease Fund black people to buy equity in enterprises Implement land reform 16 Management Control Promote black people to board and management positions Enforce the Implementation

• f

the Employment Equity Act 14 Employment Equity Employ black people at management positions Enforce the Implementation

• f

the Employment Equity Act 14-20 Skills Development Spend 85% of total skills spend on core, critical & scarce skills Enforce the Implementation

• f

the Skill Development Act 20-21 Preferential Procurement Procure goods & services from BEE companies Enforce the Implementation

• f

the Preferential Procurement Policy Framework Act 21-24 Enterprise Development Spend 3% of NPAT on ED Fund ED initiatives using CASP, MAFISA, etc 24-26 Rural Development, Poverty Alleviation and CSI Spend 1% of NPAT on SED Support SED initiatives

Elements of Empowerment:

Undertakings by Stakeholders

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Facilitation by DAFF in implementing AgriBEE Sector Code

 Implementing the AgriBEE Fund to support Black ownership of equity in the commercial enterprises.  Implementing CASP Fund to support enterprise development for Black people.  Piloting an incubation project in Limpopo where 50 smallholder women tomato farmers are undergoing training through the mentoring programme.  This incubation pilot project is the collaboration of DAFF, LDA and SEDA (Timbali Incubator).

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Conclusions

 The AgriBEE Sector Code is the law and has the same status as CoGP.  The AgriBEE Sector Code has the “teeth” which are aligned to the Constitution and the BBBEE Act 53 of 2003.  AgriBEE IT Portal is functional and the sector stakeholders can now report their BEE status.  Estimated status of transformation suggest that the agricultural sector is on level 4.  The Department is currently implementing:  CASP to improve enterprise development in the sector.  AgriBEE Fund to improve equity ownership on Black people in the entire agricultural value chain.  Skills development in Limpopo through incubation of farmers.