ATC170322: Report of the Portfolio Committee on Agriculture, Forestry and Fisheries on the Oversight Visit to Onderstepoort Biological Products (OBP) and Agricultural Research Council (ARC) on 02 December 2016, Dated 22 March 2017

Agriculture, Land Reform and Rural Development

Report of the Portfolio Committee on Agriculture, Forestry and Fisheries on the Oversight Visit to Onderstepoort Biological Products (OBP) and Agricultural Research Council (ARC) on 02 December 2016, Dated 22 March 2017

The Portfolio Committee on Agriculture, Forestry and Fisheries, having undertaken an oversight visit to Onderstepoort Biological Products and Agricultural Research Council on 02 December 2016 reports as follows:

1.         INTRODUCTION

As per Parliament’s constitutional mandate, the Portfolio Committee on Agriculture, Forestry and Fisheries undertook an oversight visit to Pretoria, Gauteng Province on 02 December 2016, to oversee two of the Department of Agriculture, Forestry and Fisheries’ Entities namely: Onderstepoort Biological Products (OBP) and Agricultural Research Council (ARC).

1. Delegation

The delegation of the Portfolio Committee composed of Ms MR Semenya, ANC (Chairperson and leader of the delegation); Mr PDN Maloyi, ANC; Mr CC Mathale, ANC; Mr N Capa, ANC; Mr WB Maphanga; Mrs A Steyn, DA;  Ms Z Jongbloed, DA; Mr M Paulsen, EFF and Mr S Mncwabe, NFP. The Committee was supported by Ms A Kakaza, Committee Secretary; Ms N Mgxashe, Content Advisor and Ms S Govender, Communication Officer.

1.2   In attendance

The following were in attendance: National Department of Agriculture, Forestry and Fisheries: Mr RM Ramasodi, Deputy Director-General (DDG): Agricultural Production, Health & Food Safety; Dr BM Modisane, Chief Director: Animal Production and Health and Ms N Mafani, Parliamentary Coordinator: Office of the Director-General (DG). Onderstepoort Biological Products (OBP): Dr M Mashaba, Dr M Mogajane and Ms K Mdlulwa, OBP Board Members; Dr S Cornelius, Chief Executive Officer (CEO), Dr B Nthangeni, Chief Scientific Officer; Dr J Modumo, Business Development Officer; Mr L Serfontein, GMP Project Manager; Mr M Gololo, Chief Financial  Officer and Mr S Ntombela, Production Executive. Agricultural Research Council (ARC): Dr S Moephuli, CEO, Dr A Magadlela, Research Institute Manager: Animal Sciences (ARC-Animal Production Institute (API)); Dr M Mulumba, Research Institute Manager (ARC- Onderstepoort Veterinary Institute (OVI)); Dr J Rees, Head: Biotechnology Platform (ARC-OVI) and Dr F Muchadei, Research Institute Manager (ARC-OVI).

1.      

 

1. TERMS OF REFERENCE

2.1 Background

During the 2015/16 Annual Report briefings by the Department of Agriculture, Forestry and Fisheries (DAFF) and its Entities, the South African Veterinary Council (SAVC) raised a concern about non-availability of important animal vaccines from the OBP during times of disease outbreaks. The Committee therefore, took a resolution to visit the OBP to investigate if there are any challenges with manufacturing or production of vaccines as reported by SAVC. In addition, the Committee also planned to visit the ARC-Onderstepoort Veterinary Institute (OVI), which is adjacent to the OBP, to determine the state of vaccine research and progress on the development of the foot-and-mouth disease (FMD) Facility.

2.2 Objectives of the Oversight Visit

The purpose of the oversight visit was to:

• Investigate the concerns that were raised by the South African Veterinary Council (SAVC) on timeous availability of vaccines some of which are only manufactured by OBP, which has a negative impact on animal health particularly during disease outbreaks.
• Oversee progress on the establishment of a new state-of-the-art foot-and-mouth disease (FMD) vaccine manufacturing facility at the ARC-OVI.

1.       COMMITTEE OVERSIGHT FINDINGS

3.1 Onderstepoort Biological Products (OBP)

At arrival the delegation was welcomed by the Acting Chairperson of the Board, Dr M Mashaba. The Chief Executive Officer (CEO), Dr ST Cornelius, gave a brief overview of the company and its operations. The presentation focused on the production, sales and marketing as well as upgrades and Good Manufacturing Practice (GMP) standards project.

The CEO reported that all the animal vaccines for diseases of economic importance have been available on time at the OBP for the past few months. However, the company had experienced some challenges on the distribution of such vaccines as most of the vaccines are exported to other countries. The OBP has now improved its local vaccine distribution system as it has moved from a single channel to a multi-channel approach. The company has ended the contract with the single distributor, which was Bayer, in March 2016 and is currently doing its own distribution via cooperatives (coops), wholesalers, veterinarians, feedlots and small businesses. Dr Cornelius said the multi-channel approach model is far more profitable for OBP, easy to manage and will also benefit small businesses who were previously excluded.

The CEO also mentioned that some of the challenges or delays encountered by OBP  on the distribution of vaccines after it ended the contract with Bayer were that the OBP did not have a database of coops to whom vaccines are sold and had to develop and implement a distribution network within a short period of time; it did not have a system or experienced personnel when it started with distribution in April 2016; the credit application process and supplier contract negotiations took time to complete and most were completed in June 2016; and Government is using the Treasury Regulation 10 (TR10) tender system to buy vaccines.   The TR10 tender system disadvantages OBP as it competes with companies that do not produce but sell tariff-free imports pharmaceuticals and therefore, are in better positions than OBP to put in better prices.

The Acting Chairperson of the Board, Dr Mashaba, assured the delegation of the Board’s capability to carry out its legislated mandate and also mentioned that some of the issues that have been raised by stakeholders including SAVC, are from a year and half ago when the current Board first came in. He further mentioned that the Board has invited SAVC to meet with them to discuss their concerns but they have not responded to the invitation.

The delegation was taken for site inspection to the cold room storage, packaging section and also visited the section were animals are kept for vaccine testing.

3.2 Agricultural Research Council – Onderstepoort Veterinary Institute (ARC-OVI)

On arrival, the delegation was welcomed by the Chief Executive Officer (CEO), Dr S Moephuli. The delegation was taken for site inspections firstly; to the bust of Dr Jotello Soga, the first South African to qualify as a veterinarian;  and then to the facilities, namely, the Incinerator; the Biotechnology Platform where it was shown the Post Graduate Student Laboratory for Bioinformatics and the Genomics Laboratory; the Residue Laboratory and the FMD Facility. After the site inspection, Dr A Magadlela, the Group Executive for Animal Sciences, gave a brief overview of the Animal Health, Production and Improvement Programme. The presentation highlighted key challenges such as encroachment of transboundary animal diseases, maintaining of disease-free status that will ensure continued access to international markets, underfunding of the institution, etc.  

Dr M Mulumba, the Research Institute Manager for OVI, presented progress report on the establishment of the foot-and-mouth disease (FMD) Facility. Dr Mulumba reported that in ensuring that the ARC produces a vaccine of international quality that complies with the current requirement of Good Manufacturing Practice (GMP) standards, the decision was taken to build a new facility instead of renovating the current facility that does not meet GMP standards. He reported that the main challenge in the establishment of the facility was insufficient funding and delays in the appropriation of funds for the construction of the modern FMD vaccine factory. The final diagram of the new building was developed and the inception report was submitted for approval. The detailed cost estimates based on the concept layout revealed that the initial budget allocated to the construction of the new facility is insufficient and additional funds are required to complete the project as outlined in the FMD business plan. He reported that an additional R326 million will be required to establish a full-scale FMD production facility.

The CEO further reported that the ARC has been making submissions, through DAFF, to the National Treasury for additional funding for the FMD Facility for the past 3 years but with no positive response. He further reported that the ARC also requires approval from National Treasury to seek financial assistance from other institutions such as the Industrial Development Corporation (IDC).

4.         COMMITTEE OBSERVATIONS AND CONCLUSIONS

The Portfolio Committee, having interacted with the OBP and ARC including site inspections to the different sections of the two entities of DAFF, made the following observations and conclusions:

4.1        The Committee delegation was generally satisfied and impressed with the progress that has been made by the OBP on the production and distribution of animal vaccines as this has been a great concern to the Committee. The delegation also commended the OBP for putting systems in place to manage vaccine supply including the training of its personnel to manage the marketing and distribution of vaccines and the maintenance of vaccine producing machinery.

4.2   The OBP, as a National Key Point and the only animal vaccine manufacturer in the country that is also operating on very old buildings was not getting funding from Government to ensure that it effectively carries out its mandate and is able to sustain itself. The delegation was also concerned that some provincial departments and local governments do not fully support OBP and still source their vaccines from private companies.  

4.3   The slow progress on the development of the new foot-and-mouth (FMD) vaccine manufacturing facility at the ARC due to funding constraints.  

4.4      Commended the ARC for its future research plans on the development of a 5-in-1 vaccine (a world first) that will prevent goat pox, sheep pox, African swine fever, Rift Valley fever and lumpy skin disease.   

4.5   Lack of a maintenance plan for the new Incinerator at the ARC-OVI and the shortage of analytical chemists (a critical skill) in the country were a concern to the delegation. 

4.6   No clear alignment of activities between the OBP and the ARC-OVI as the latter also produces vaccines.

4.7     Lack of a communication and branding strategy at the OBP while the ARC’s communication strategy needs some strengthening. 

5.         RECOMMENDATIONS

The Committee recommends to the National Assembly (NA) that the Minister of Agriculture, Forestry and Fisheries should:

1. Ensure that a strong business case and funding requests are submitted to National Treasury for the OBP, which is a National Key Point, to get the necessary funding to fully upgrade and modernise its facilities; and a specific grant to enable OBP to assist smallholder farmers. Report to the Committee by April 2017.
2.  DAFF and the ARC should submit to the Committee the copy of the submission for additional funding to the National Treasury for the FMD facility by April 2017.
3. The ARC should submit to the Committee a maintenance plan including responsible personnel for the new incinerator by April 2017.
4. Ensure that a meeting is arranged in the next term between DAFF, National Treasury and Parliamentary Committees on Finance and Agriculture, Forestry and Fisheries to discuss National Treasury Regulations (e.g. TR10) that constrain the ability of provinces to procure vaccines from OBP. With the TR10 tender system, the OBP gets disadvantaged in terms of pricing as it has to compete with companies that do not manufacture vaccines but sell imported tariff-free pharmaceuticals. 

 

 

 

Report to be considered.