The Commission is a creature of statute in terms of the Competition Act 89 of 1998 (“the Act”), therefore, the Act empowers the Commission to investigate and evaluate restrictive business practices, abuse of dominant positions, mergers, and undertake market enquiries.
The FPMI focused on five (5) fruit types viz: apples, citrus, bananas, pears, and table grapes. Additionally, on six (6) vegetables such as potatoes, onions, carrots, cabbage, tomatoes, and spinach.
Access to markets is the lifeblood of agribusinesses and the National Fresh Produce Markets (“NFPM”) link farmers to a variety of buyers. Market agents located within the ecosystem serve as aggregators and intermediaries of fresh produce at the NFPM, hence market agents represent farmers through selling fresh produce.
The FPMI provisional report amplified investigations and recommendations by the National Agricultural Marketing Council (“NAMC”) in terms of the Section-7 of the Marketing of Agricultural Products Act, Act 47 of 1996 (“MAP Act”). NAMC published a report in 2006 on NFPM following comprehensive and rigorous investigations. Similar recommendations to the FPMI provisional report were issued with respect to governance, operations and regulatory framework. Whilst the FPMI and the MAP Act section-7 committee reports focused on the fresh produce value chain. Findings may be generalised across the agro-food value chains.
The AAMP provide the platform to implement remedial actions as per the FPMI provisional report. The AAMP was signed on the 12th of May 2022. The theory of social compact that grounds the AAMP posits social compacts as an agreement amongst and by the social actors. AAMP is implemented through respective value chain round tables (“VCRT’s”) and production schemes that are industry specific and focused. Both implementation models provide solid basis to follow through on remedial actions articulated in the FPMI report.
The FPMI provisional report lists twenty-nine (29) remedial actions. These recommendations may be broadly categorised as follows: (i) Barriers to entry related to factors of production; (ii) production related constraints; (iii) binding marketing and logistical challenges; and (iv) burdensome and unresponsive regulatory framework related to the marketing of fresh produce. Unsurprisingly, interventions expressed in the AAMP are aligned to remedial actions in the FPMI provisional report, such as access to land, finance, water and infrastructure.
Economic theory postulates factors of production as land, capital, and labour. These factors are unproductive without availability and access to water. Both the AAMP and the FPMI provisional report identified access to land as a barrier to entry. As per interventions of the AAMP, a total of 246000 hectares was acquired through Proactive Land Acquisition Strategy (“PLAS”) during the previous Medium Term Expenditure Framework (“MTEF”) period. The MTEF is State expenditure framework linked to circle of administration.
Also, 30 000 hectares was acquired and directly transferred to farm dwellers and labour tenants to guarantee security of tenure. Additionally, the transfer of title deeds to qualifying farmers is underway. Title deeds serve as collateral to unlock finance for production purposes.
The FPMI provisional report and AAMP articulates access to finance as a significant barrier to entry for farmers.
Based on the interventions in the AAMP, the one-size-fits-all approach to funding was culled. At least within State funding instruments. At the larger scale, the Department of Agriculture has partnered with the Industrial Development Corporation (“IDC”) and Land Bank to commercialise development farmers through blended finance scheme.
The State is also in strategic partnership with various commercial banks to unlock private sector funding. To-date, more than R3.1 billion was invested through blended finance benefiting 183 commercial farmers and a total of R1.2 billion being State grants to de-risk respective applications.
At smallholder level, farmers that do not qualify to access loans are financed through the Comprehensive Agricultural Support Programme (“CASP”). Over R6 billion was disbursed to qualifying farmers over the previous MTEF period. At the subsistence level, farmers were catered through Presidential Employment Stimulus Initiative (“PESI”). Over 250 000 vouchers were issued to rural households as incentives to bring back fallow land into production. Farmers used vouchers to access production inputs such as seeds, fertilizers and agro chemicals.
The PESI system allowed farmers to take control of: (i) what to buy; (ii) when to buy; and (iii) where to buy, hence farming activities are aligned to market requirements and technical aspects. The Micro Agricultural Financial Institutions of South Africa (“MAFISA”) is another instrument targeting subsistence farmers. The agro-energy fund is available to all categories of farmers capped at R1.5 million on a sliding scale.
The FPMI provisional report expresses positive relationship between market access and agribusiness skills. Over the previous MTEF period, about R1 million was spent on 9k rural youth, capacitated on business and technical skills via the National Rural Youth Services Corp. AgriSETA has also partnered with the private sector to expand the cohort of skilled and productive workforce. Employment statistics is a success measure for the AAMP.
The FPMI provisional report and the AAMP depicts the delays and frustrations by farmers in the applications to solicit water use authorisations. The Department of Water and Sanitation (“DWS”) is the responsible and competent authority for access to water use for economic development.
As part of implementation of the AAMP interventions, the DWS has taken steps to improve efficiencies in the licences system. Accordingly, it takes 90-days latest to finalise an application. Subject to submission of all relevant and required documents by applicants.
High cost of production is amongst the production related challenges reflected in the FPMI provisional report and the AAMP. The simultaneous and adverse impact of (i) climate change; (ii) geopolitical conflict; (iii) intermittent energy supply; and (iv) outbreak of epidemics has escalated the cost of fertilizers, agrochemicals and potent seeds. In mitigation, the AAMP recognises the need to improve the efficiency and effectiveness in the localization of the production capacity and distribution of fertilisers and agrochemicals. The geopolitical conflict provides business opportunity for Foskor to expand local manufacturing capacity of mono-ammonia phosphates and urea.
Binding marketing and logistical constrains are listed by both the FPMI provisional report and the AAMP as the Achilles heel towards access to markets. Truth to meaning, Operation Vulindlela in the Presidency has resulted in significant positive shifts to improve efficiencies at various ports geared to improve export competitiveness. Further, a pipeline of infrastructure projects valued at more than R2 trillion is being unlocked. These include investments in road, rail, energy, telecommunication, water and sanitation. These are critical to lower the transaction cost faced by farmers and agribusinesses.
Burdensome legislative requirements are cited as limiting access to markets. The FPMI provisional report and the NAMC MAP Act section-7 committee observed disparities in respective municipal bylaws governing NFPM. Farmers consequently find it difficult to switch in-between various NFPM. Ultimately, access to market is curtailed. At a municipal level, the ownership and control of NFPM as per the Municipal Systems Act, Act 32 of 2000 is at the heart of low infrastructure investment. At a sectoral level, the AAMP pinpoints the urgent need to review Act 36. The review process was initiated and underway. Albeit amendments to legislation are tedious and lengthy.
In conclusion, whilst the AAMP is not the panacea to all challenges confronting the sector. The assertions by the Minister of the Department of Agriculture on the 16th of July 2024 during the budget vote 29 speech to accelerate the implementation of AAMP is critical. AAMP is fundamental to ensure globally competitive sector, inclusive growth, increased investment, and generation of sustainable jobs. The AAMP provides the platform to follow through on the remedial actions contained in the FPMI provisional report. Implementation of AAMP is work in progress.
Author: Mahlogedi LV Thindisa; Ph.D.
Agropreneur and Agricultural Economist. Expressing personal views.
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