Agricultural Sector Transformation Overview to Portfolio Committee - DAFF & AgriBEE - Nov 2013

1. 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

2. CONTENTS Purpose Background - Major Milestones What are the implications of the Section 9(1) AgriBEE Sector Code How will AgriBEE Sector Code be enforced? (The Guiding Principles) What are the applicable Enforcement Measures for the AgriBEE Sector Code? How Permits are used to enforce the implementation of the AgriBEE Sector Code Important Principles applied during the allocation of Market Access Quotas How compliance to Code will be measured: Source of Information Homepage of the AgriBEE IT Portal Status of Transformation in Agricultural Sector 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 DAFF’s contributions to the implementation of the AgriBEE Sector Code Conclusions

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

4. 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

5. What are the implications of the Section 9(1) AgriBEE Sector Code • The Code has the same legal status as the Generic Codes of Good Practice (GoGP). • The Code is now fully implementable effective from that 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.

6. How will AgriBEE Sector Code be enforced? The Guiding Principles The Constitution of the Republic South Africa1996 Section 217 (1); (2); and (3) of the Constitution of South Africa states that: 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. Subsection (1) does not prevent the organs of the state or institutions referred to in that subsection from implementing a procurement policy providing for: Categories of preference in the allocation of contracts; and The protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. National legislation must prescribe a framework within which the policy referred to subsection (2) may be implemented.

7. The Guiding Principles (Cont….) • The BBBEE Act 53 of 2003:Section 10 of the Act provide for All Organs of 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.

8. What are the applicable Enforcement Measures for the AgriBEE Sector Code? • 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

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

10. Important Principles applied during the allocation of Market Access Quotas • Black Economic Empowerment is the primary requirement for the allocation of marketing permits – i.e. First round. • After the points have been allocated in accordance with the point system in section 2 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 in terms of section 3.2 above. • If after the first and the second round there is still a surplus (i.e. surplus of surplus), the Third round would be to take the surplus of surplus and divide it by the number of all non-compliant companies.

11. How compliance to Code will be measured: Source of Information • 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/

12. Homepage of the AgriBEE IT Portal

13. Status of Transformation in Agricultural Sector • Currently, there is no actual information on the status of transformation in Agricultural Sector. • This is because reliable source, DTI BEE IT Portal, is no longer functional. • However, DAFF has commissioned a study through 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

14. Total Population of Commercial Agricultural Stakeholders and the Sampling approach

15. Estimated status of transformation & BEE compliance in agricultural sector

16. Perceptions & viewpoints of agricultural enterprises on BEE & Transformation I am not considering a BEE strategy for my business 209 (13%) 157 (10%) I first want to “test waters” and “see where things are heading” before committing myself to a BEE strategy 775 (47%) 491(30%) I am considering the implementation of a BEE strategy as soon as possible I have already developed a detailed BEE strategy and have to implement it in my core business

17. Obstacles & challenges to the implementation of AgriBEE Sector Code Number of responses

18. Elements of Empowerment: Undertakings by Stakeholders

19. DAFF’s Contributions • 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 were 50 smallholder women tomato farmers are undergoing through the mentoring programme. • This incubation pilot project is the collaboration of DAFF, LDA and SEDA (Timbali Incubator).

20. Conclusions • The AgriBEE Sector Code is the law and has the same status as GoGP. • The AgriBEE Sector Code has the “teeth” which are aligned to the Constitution and the BBBEE Act 53 of 2003. • AgriBEE IT Portal is fuctional 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.