DRAFT
SUBMISSION TO THE MINISTER FOR PRIOR CONSIDERATION BY THE PARLIAMENTARY
COMMITTEES
|
TO: |
NATIONAL
AGRICULTURAL MARKETING COUNCIL
|
FROM: |
HORTICULTURAL SECTION |
ENQ |
MATHILDA VD WALT |
REF: |
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DATE: |
OCTOBER 2001 |
1.
The above matter, as well as the Annexures mentioned
below, refers.
Annexure
A: The final report of the working group investigating into the proposed continuation
of statutory measure in the wine industry
Annexure
1: The Wine Industry Forum’s (WIF) letters dated 10, 11 and 12 July 2001 and
attachments, refer.
EXECUTIVE
SUMMARY
The Minister took
cognisance that the statutory measures requested by the WIF are consistent
with the objectives of the Marketing of Agricultural Products Act (as set out
in section 2 of the Act) and formally referred the request to the National
Agricultural Marketing Council for investigation on 2 August 2001 to report
back to the Minister within 60 days i.e. 2 October 2001. The Minister was requested to extend the date on which the
NAMC was to report back, from 2 October to 2 December, this submission is still
at the Ministers office.
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The working group found that the WIF’s application
for statutory measures is consistent with the National Agricultural Marketing
Council’s (NAMC) policy in respect of statutory measures. The working group therefore advise recommends
that the NAMC, advise the Minister to
approve the introduction and promulgation of the following statutory measures
as requested by the WIF: ·
Section 18 of the Marketing of Agricultural Products Act: Records and
Returns. ·
Section 19 of the Marketing of Agricultural Products Act:
Registration. ·
Section 15 of the Marketing of Agricultural Products Act: Statutory
levies on the related products specified in the application:
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2.
PURPOSE OF SUBMISSION
2.1 The working
group found that the WIF’s application for statutory measures is
consistent with the National Agricultural Marketing Council’s policy in respect
of statutory measures. The working group therefore recommends that the NAMC
advise the Minister to approve the introduction and promulgation of the
following statutory measures as requested by the WIF:
·
Section 18 of the Marketing of Agricultural Products Act: Records and
Returns.
·
Section 19 of the Marketing of Agricultural Products Act: Registration.
·
Section 15 of the Marketing of Agricultural Products Act: Statutory
levies on the related products specified in the application:
1. |
Grapes intended for the production of wine |
|
|
·
Research and Development levy: |
R 8,40 per ton |
|
·
Information levy: |
R 6,30 per ton |
|
Total |
R14,70 |
|
|
|
2. |
Grape juice concentrate intended for use in wine. |
|
|
·
Research and Development levy at 17,4 degrees
Balling: |
1,20 cents/litre |
|
·
Information levy at 17,4 degrees Balling: |
0,90 cents/litre |
|
Total |
2,10 cents/litre |
|
|
|
3. |
Bulk
drinking wine; or Packaged
drinking wine |
|
|
Research
and Development levy |
1,20 cents/litre |
|
Information
levy: |
0,90 cents/litre |
|
Wine
Export Generic promotion levy |
7,00 cents/litre |
|
Total |
9,10 cents/litre |
|
|
|
5. |
Distilling wine; or Wine spirit |
|
|
Research and Development levy: |
1,00 cents/litre |
2.3
Furthermore, that it be recommended that the NAMC advice the Minister to sign
the attached notices in this regard.
3.
BACKGROUND
3.1
On 16 July 2001, the WIF applied for the following statutory measures:
·
Section 15 of the Marketing of Agricultural Products Act: Continuation
of an information levy, a research and development levy and a levy for the
generic promotion of export wine;
·
Section 18 of the Marketing of Agricultural Products
Act: Records and Returns.
·
Section 19 of the Marketing of Agricultural Products
Act: Registration.
3.2
The application relates to the following products:
·
Grapes intended for the production of drinking wine
or distilling wine.
·
Grape juice concentrate intended for the use in
drinking wine or other alcoholic products.
·
Drinking wine.
·
Distilling wine.
·
Wine spirit.
3.3
The amounts of the proposed levies on the related products are as
follows:
1. |
Grapes intended for the production of wine |
|
|
·
Research and Development levy: |
R 8,40 per ton |
|
·
Information levy: |
R 6,30 per ton |
|
Total |
R14,70 |
|
|
|
2. |
Grape juice concentrate intended for use in wine. |
|
|
·
Research and Development levy at 17,4 degrees
Balling: |
1,20 cents/litre |
|
·
Information levy at 17,4 degrees Balling: |
0,90 cents/litre |
|
Total |
2,10 cents/litre |
|
|
|
3. |
Bulk
drinking wine; or Packaged
drinking wine |
|
|
Research
and Development levy |
1,20 cents/litre |
|
Information
levy: |
0,90 cents/litre |
|
Wine
Export Generic promotion levy |
7,00 cents/litre |
|
Total |
9,10 cents/litre |
|
|
|
5. |
Distilling wine; or Wine spirit |
|
|
Research and Development levy: |
1,00 cents/litre |
3.3
The Minister took cognisance that the statutory
measures requested by WIF are consistent with the objectives of the Marketing
of Agricultural Products Act (as set out in section 2 of the Act) and on 1 June
2001, formally referred the request to the NAMC for investigation.
3.4
A Notice published in the Government Gazette
on 17 August 2001, indicated that the directly affected groups had to submit
their comments regarding the implementation of the proposed statutory measures
not later than 2 September 2001.
3.5
The National Agricultural Marketing Council decided
to appoint a working group within the Council, which is supported by the
relevant staff, to investigate the request and advise the Council thereon. The working group consists of the following
members:
·
Mr. Inus Bezuidenhout
·
Dr Cyprian Buthelezi
·
Ms Mathilda vd Walt
·
Mr. Chris Gladwin
3.6
After publication of the proposed
statutory measures in the Government Gazette, the National Agricultural
Marketing Council received only one comment in support of continuation of the
proposed statutory measures in the wine industry (see Annexure
6).
4
DELIBERATION
4.1
Only one comment in support of the continuation of the proposed
statutory measure was received from directly affected groups by the end of the
due date, i.e. 2 September 2001.
4.2
The working group found that the WIF’s application for statutory
measures is consistent with the National Agricultural Marketing Council’s
policy in respect of statutory measures.
4.3
The working group is convinced that registration is necessary to
assist SAWIS in ensuring that the levy imposed can be collected. By combining
compulsory registration with the keeping of information and the rendering of
returns on an individual basis, information for the whole of the industry can
be co-ordinated to ensure the orderly collection of levies and the provision of
industry statistics, which are crucial.
4.4
The total extent of the levies is well below the prescribed maximum of
5% of the guideline price (as defined in the Amendment Act) at the first point
of sale, as stipulated in section 15 of the Marketing of Agricultural Products
Act.
4.5
The proposed levies are respectively 20% (R&D), 10% (information)
and 16.6% (generic promotion) less than the amount prescribed at present.
4.6
The purpose of the levies is for the funding and provision of Research
and development, Information and the Generic promotion on export wine. The
levies will specifically make provision for the following:
o
The Information levy requested is to ensure the collection and
dissemination of information.
o
The objective of a research and development levy is amongst other
things, to commission relevant and thoroughly planned research, technology
development and technology transfer in the promotion of the industry’s technological
capabilities and in the attainment of the other objectives.
o
The objective of a levy on the export of wine aims at increasing the
profit margin for the industry for each focus market.
4.7
The working group is satisfied with the fact that the proposed
statutory levy is to raise funds to be used to fund research programs and to
improve the profitability of all producers by accessing new markets as well as
providing information.
4.8
In the case of a levy collected only on exports, as in the case of the levy
for generic promotion of export wine, wine producers of export wine bear
the full economic cost, while South African consumers enjoy an implicit
subsidy
4.9
However, in terms of the proposed information levy and research and
development levy on wine and grapes, wine producers bear the full
economic cost of a levy on wine, while in the case of a levy on grapes,
both the grape producers and the consumer of the grapes for the
production of wine (i.e. the wine producer) bear the full economic burden
of the levy.
4.10
The working group was satisfied by the projects identified and work
done by SAWIS, WINETECH and SAWSEA/WOSA regarding transformation issues.
4.11
The working group felt that although the budgets do not indicate the
percentage allocated towards transformation, they are satisfied that the organisations have realised the
importance of transformation issues and are planning to increase their
activities in this regard in future.
4.12
The South African wine industry can only prosper over the long term if
it is an effective global player. This means offering the international market
only the best quality in wines, brandies and other grape based products
(according to market requirements and niches) at the lowest cost, and by means
of superior marketing and logistics systems.
4.13
The working group also took into consideration that the Council
previously recommended wheat, cotton, sorghum, wine, deciduous (stone fruit,
grapes and pome fruit), citrus and dried fruit levies based on the conviction
that research and information qualify as public goods. According existing
policy, the Council also considers specific market access issues on merit.
5. PERSONNEL
IMPLICATIONS
None
6. FINANCIAL
IMPLICATIONS
6.1.
There will be some financial
implications for the fiscus in terms of evaluating the statutory measures every
two years. The extent of these
implications is impossible to quantify in advance.
7.
LEGAL IMPLICATIONS
7.1.
If the Minister approves the
implementation of the proposed continuation of the statutory levies, the
Notices containing particulars of the statutory measures will be published in
the Government Gazette.
8.
COMMUNICATION IMPLICATIONS
8.1.
The directly affected groups in
the wine industry will be informed of the Minister's decision.
9. RECOMMENDATION
9.1
The working group found that the WIF’s
application for statutory measures is consistent with the National Agricultural
Marketing Council’s policy in respect of statutory measures.
9.2
The working group therefore recommends that
the National Agricultural Marketing Council recommends that the Minister
approve the introduction and promulgation of the following statutory measures
as requested by the WIF:
·
Section 18 of the Marketing of Agricultural Products Act: Records and
Returns.
·
Section 19 of the Marketing of Agricultural Products Act: Registration.
·
Section 15 of the Marketing of Agricultural Products Act: Statutory
levies on the related products specified in the application:
1. |
Grapes intended for the production of wine |
|
|
·
Research and Development levy: |
R 8,40 per ton |
|
·
Information levy: |
R 6,30 per ton |
|
Total |
R14,70 |
|
|
|
2. |
Grape juice concentrate intended for use in wine. |
|
|
·
Research and Development levy at 17,4 degrees
Balling: |
1,20 cents/litre |
|
·
Information levy at 17,4 degrees Balling: |
0,90 cents/litre |
|
Total |
2,10 cents/litre |
|
|
|
3. |
Bulk
drinking wine; or Packaged
drinking wine |
|
|
Research
and Development levy |
1,20 cents/litre |
|
Information
levy: |
0,90 cents/litre |
|
Wine
Export Generic promotion levy |
7,00 cents/litre |
|
Total |
9,10 cents/litre |
|
|
|
4. |
Distilling wine; or Wine spirit |
|
|
Research and Development levy: |
1,00 cents/litre |
9.3
The working group also recommends that the NAMC advise the Minister to
approve that the SAWIS, WINETECH and SAWSEA submit its annual audited financial
statements reflecting actual income and expenditure figures yearly to the NAMC
and the Auditor-General. The percentage allocated towards transformation should
be indicated in the expenditure figures.
9.4
The working group also recommends that the NAMC advise the Minister to
approve that the financial statements should be accompanied by a report stating
how the objectives of the levy have been met.
9.5
The working group recommends that the NAMC continue its observer status
on the on SAWIS to ensure compliance with the original intent of the
application. Furthermore, the working group recommends that the NAMC advise the
Minister to approve that the NAMC should have observer status on SAWSEA and
WINETECH to ensure compliance with the original intent of the application.
9.6
It is furthermore recommended that:
·
Any surplus income from the levy
(actual amount collected above the amount budgeted for) should be transferred
to a separate fund.
·
The surplus fund should not form
part of the assets of the organisation administrating the levy and would be
utilised with the discretion of the Minister after the lapsing of the levy.
·
Levies must be accounted for, in a
manner and to the extent acceptable to the Auditor-General, separately from any
other funds or assets under the control of the levy administrator.
9.7
Furthermore the working group recommends that the NAMC advice the
Minister that electronic data regarding the implemented statutory measures
(records and returns etc.) on the whole industry be supplied to the NAMC on
quarterly basis. A time series of industry data should also be provided at
introduction of the levy.
HORTICULTURE: SECTION
October 2001