Amendments to the Marketing of Agricultural Products Act

Meeting report

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This Report is a Contact Natural Resource Information Service
Taking Parliament to People, and People to Parliament
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The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

LAND AND ENVIRONMENTAL AFFAIRS SELECT COMMITTEE
31 October 2000
AMENDMENTS TO THE MARKETING OF AGRICULTURAL PRODUCTS ACT

Documents handed out:
Implementation of Proposed Statutory Measures in the Deciduous Fruit Industry - submitted by the National Agricultural Marketing Council (NAMC)

SUMMARY
Committee members heard a presentation from the National Agricultural Marketing Council (NAMC) on the reintroduction of statutory levees in the deciduous fruit industry. This levee will effect only table grapes and stone fruit as the application from the pome fruit sector was withdrawn due to lack of support. After a question and answer period, the committee accepted the amendment to the Marketing of Agricultural Products Act and signed the document.

MINUTES
National Agricultural Marketing Council (NAMC)
Mr Trevor Smith explained that in 1997 the deciduous fruit industry was deregulated and all statutory levees were abolished in place of funding on a voluntary basis. It was found that a problem arose to do with "free riding", such that those who choose not to submit voluntary funds still receive the benefits of research information that others paid for. This is the reason that statutory levees must be re-introduced into policy.

On 23-30 August 2000 the Deciduous Fruit Producer's Trust (DFPT) held an industry-wide referendum to ensure that every producer had the opportunity to cast his/her vote. On 5 September 2000, the referendum results were finalised (please refer to Appendix 1). Subsequently, the DFPT submitted an amended application withdrawing the application for statutory measures on pome fruit (apples and pears) due to the low level of producer support. The application now stands for only stone fruits and grapes. Mr Smith pointed out to the committee that levee levels are all below the 5% of total selling price level recommended by the Act. On 1 November 2000 the Act will have been implemented for four years and will be reinvestigated after two years.

Discussion
Ms Dlulane asked why the deregulation took place in the first place.

Dr. D E Conroy (NNP) expressed a feeling of déjà vu. He said the committee has encountered this kind of phenomenon before where if something is made voluntary, people will invariably choose to receive the service for free instead of providing funds. Some people will always choose to ride on the backs of others, and all industries are affected by this problem. He observed that voluntary levees should not have been established in the first place.

Chairperson Reverend Moatshe asked for clarity on how the levees are below recommended levels. He also asked for explanation as to how this proposal has been "accepted by the Minister" as Mr Smith had mentioned.

Mr Smith responded that deregulation was a result of the ANC desire to abolish the undesirable controls that had previously been constraining the agricultural sector. In 1997, producers and the industry chose voluntary funding over mandatory levees to address this undesirable control. Benefits that are accrued include research information regarding production practices and agricultural technologies. Once this research is established it is difficult to withhold it from being utilized. The Marketing of Agricultural Products Act states that levees may not exceed 5% of the selling price, this price is taken as an average over 13 years of sale. All the proposed levees are well below this percentage. Regarding the concern on support from the Minister, Mr Smith clarified that the National Agricultural Marketing Council has submitted a report to the Minister but she can't approve it without feedback from both committees.

Ms B Thompson (ANC) asked how the funds from levees will be used.

Ms R A Ndzanga (ANC) inquired about the referendum that took place in August. Were producers the only group present or were local small-scale fruit sellers also consulted? Why is the levee on apricots higher than that on other fruits? Are local fruit sellers expected to pay levees as well?

Mr Smith replied that levees will be compulsory as stipulated by the Act and fresh produce market producers, export agents and retailers will be expected to pay fees. These three groups must also submit to a register in order that levee activities may be tracked. These levees will not affect the price to the consumer. Mr Smith also stated that the referendum included all effected groups, including unions and retailers.

To reply to Ms R A Ndzanga's concern, Mr Smith said that the levee on apricots appears high because research has already been done on this fruit. Current levels don't cover the cost of this completed research which still must be funded. The levee will be gathered when fruit is sold to retailers, the export market or to producers.

Mr E A Conroy then asked what pome fruit is, referred to in the referendum results.

Mr Smith responded that pome fruit is basically apples and pears. He also said that 60% of pome fruit producers voted against the levees which is why the submission on pome fruit was withdrawn. This sector will continue to be funded on a voluntary basis.

Mr Smith indicated that the NAMC would have liked their recommendations to be processed on 1 October 2000 but due to complications this didn't happen. They sent their recommendations on 10 October 2000 and asked the committee to respond by 9 November 2000.

Mr A E Van Niekerk (NNP) asked how levees would be collected. Is there capacity in place for this?

Mr D M Kgware noticed the lack of support from the Northern Cape and asked what their specific concerns were.

Mr Smith responded that collection from exporters, fresh produce markets and retailers will be undertaken by the DFPT. The DFPT has been in place as a collection agency for the past 3 years and there is no problems regarding capacity. Regarding the Northern Cape, Mr Smith mentioned that this region does not support the reintroduction of levees because they are concerned about the level and quality of input from the local community that took place during the decision making process. In particular, there is a concern around representation regarding previously disadvantaged communities. The NAMC believes that reconstituting the decision making process will deal with this, there will be greater emphasis on collected input from all affected parties and smaller communities will have more say.

Mr A E Van Niekerk wanted clarity on what is meant by "more say".

Mr Smith responded that there is no problem with funding for these areas of concern.

Mr D M Kgware asked what effect new produce technology has on the quality of fruit (i.e. "fast-growing" produce).

Mr Smith replied that genetic manipulation is definitely one of the areas being researched at the moment. There is a problem with maintaining the quality of taste of the fruit while increasing the plant's efficiency. He stipulated for the members that he has no experience with the field of genetics and cannot comment further on this issue.

Mr M L Mokoena (ANC) asked who decides the price of levees. Mr Smith replied that the producers themselves set the level of levees, and that budgeting for research is adjusted towards predicted volume fruit harvest. Mr Mokoena then asked at which stage does government comment on contributions and can the Department influence the cost of levees or are they just able to approve/reject the proposed legislation.

Mr Smith stated that the NAMC can influence the level of levees and is able to make recommendations in this regard. There are limited financial implications for the government in this proceeding. But although there is no cost to the Government if proceedings are delayed, the cost to the industry is high should a delay take place as they are currently in the process of preparing for the upcoming fruit season which has already begun.

Dr. E A Conroy noticed that previous levee levels were set by the Marketing of Agricultural Products Act. He asked how new levels will be established.

Mr Van Niekerk noted that the Act includes a clause which necessitates the consultation of Parliament to be consulted on any changes made to the levees. This clause serves to protect against a major impact on newcomers to the industry. There is no sinister purpose to this clause.

Mr Smith stipulated that the Public Finance Management Act requires levee collectors to report funding information. Funds must only be used by the industry and for the benefit of people in it.

Mr D M Kgware asserted that the committee does not want to create the impression that they are against the proposed amendment. The concerns come because the committee has had problems in the past with consultations regarding levees.

Mr E A Conroy clarified that he is in support of the amendment, however there should be strong regulations that stipulate how this application will be carried out. Any changes must be properly regulated.

Mr M L Mokoena noted that the regulations are for economic purposes only and there are no political disagreements preventing the committee from moving on it.

Mr Van NieKerk wanted clarity regarding the levees on grapes. How will levees between white grapes, wine grapes, raison, etc. be determined? Mr Smith said that only table grapes would be affected by the legislation: wine grapes and dried fruit are dealt with separately.

Mr D M Kgware asked the presenter to submit any further statistical documentation to the select committee.

Dr. E A Conroy noted the poor state of the deciduous industry, in that many farms are now being abandoned. Are there any studies available on this?

Chairperson Reverend P Moatshe observed that the members approve of the amendment and signed the document. Mr Smith assured members that he would forward the NAMC report to the select committee once it has been finalized. Chairperson P Moatshe suggested that future presenters not come to the committee with "piecemeal" amendments (i.e. separate amendments for dried fruit, processed fruit, etc.). Mr Smith stated that the nature of the present Act dictates that any changes or amendments must be instigated only at the request of the industry - he suggested the committee may look to changing the regulations within the Act itself.

At this point Chairperson P Moatshe thanked the NAMC for their presentation and all members for participating. The meeting was then adjourned.

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Appendix 1

Referendum Results