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15 Jun 2023

Once-off transformation levy on agricultural products; the AAMP; AGOA & Draft regulations on water use licensing

by Dr Pieter Taljaard

As a voluntary producer’s organisation, Grain SA supports a free and fair market economy that will enhance and support economic growth and development. Our core focus is to support the sustainable profitability of local grain- and oilseed production and hence its processing. Grain SA therefore fully support a national policy and legislation framework that will enhance and support economic growth, food security and affordable food production. For many years, Grain SA and its members supported honest and meaningful economic transformation, evident in its active development and transformation programme that have been managed and supported for over 13 years. Grain SA proudly support good governance and the fact that this programme, together with all other Grain SA activities received 100% unqualified audits for many years, shows its dedication to uncompromised governance. 
History has proven that social engineering is highly unsuccessful globally and during the last 28 years, South Africa has been no exception. Sensible transformation can only succeed where passionate individuals are carefully selected as beneficiaries, for the right reasons. From the latest statistics since 1995, more than R53 billion was awarded to 2,3 million beneficiaries of which just under 50% (R25.6 billion) was spent on land cost (accruing 3,86 million ha of land) and the remaining R22.5 billion was settled in financial compensation and another R5.3 billion in grants. Therefore, the draft regulations on water use licensing and amendments will have a severe negative impact on the security value of irrigation land and hence also negatively influence land market values which in turn will be detrimental to local food production in general and specifically place further burdens on food inflation. More specifically irrigated grain and oilseeds provides a “safety net” ensuring that in drier years we produce enough and in wetter years we produce an exportable surplus, which not only earns foreign exchange, but also ensure that like in the current situation, South Africa are the cheapest source of maize for example. Any significant interference in the free market value of any of the production factors, being it land, or water will have a significant impact on local production levels.  
To re-emphasise, Grain SA and its members are fully committed to Agricultural and Agro-processing transformation that make economic sense and that will benefit the poor. Given the global situation, local food security remains of utmost importance, with the affordability factor being our countries’ greatest challenge during the past few years. To remain food secure, globally competitive value chains are needed, which requires a stable and confident local investment environment. In addition, farming eminently is a family business, which is in principle extremely arduous to enforce or implement BEE. 
Throughout the design stages of the AAMP, Grain SA committedly worked with industry stakeholders on the key drivers and development actions required to build a more inclusive and competitive Agricultural Sector, which amongst others, include better market access to all primary producers. Many innovative demand-driven or pull transformation factors and innovations exist that will truly and honestly benefit the poorest of the poor. Those being the passionate and dedicated individuals that do have a greater change on success in primary agricultural production. Therefore, our transformation initiative (which is proven to be highly successful) is focussed on commercialising such individuals into businesspeople and women that can proudly stand on their own feet in the economy and continue to grow their hard-earned businesses. Such success requires one thing – good corporate governance throughout the entire process. Coupled with true and honest intentions, the right support in terms of mentorship remains imperative. 
In line with this, the request from SAGRA for a “once-off transformation levy on all Agricultural products for a period of five years” emerged for the first time, during the last discussion rounds of the AAMP in the Grain and Oilseed Cluster. As recent as May during NAMPO 2023, Grain SA and SAGRA once again engaged in discussion regarding this request amongst other.  
Grain SA is firstly of the opinion that this is not in line with the purpose of commodity levies and therefore directly in contrast with the goals and purpose of the MAP Act 47 of 1996 (Marketing of Ag Products Act). This act specifically paved the way for the Free Market Regime (deregulation of Agricultural markets) in the South African market since its promulgation. Secondly, it is commonly known that the effectiveness and performance of transformation projects, specifically in the Agricultural Industry have not been remarkably successful, except for a few isolated cases. In this regard, Grain SA is of the opinion that until such time that all projects and funds are effectively managed, accounted for and bearing success, such an additional Fund will be open to further misuse and therefore inefficient and fail in terms of its main objective. Thirdly during this discussion, the proposal was also tabled to amend the MAP Act. Grain SA strongly oppose such a suggestion since the objectives of the MAP Act (as summarised below) will be breached, namely 

  • To increase market access for all market participants, 

  • To promote the efficiency of the marketing of agricultural products, 
  • To optimise export earnings from agricultural products, and 
  • To enhance the viability of the agricultural sector. 

Finally, the broader agricultural value chain, and specifically the grain- and oilseed sector are concerned about the way that our government - in general - is handling the situation around the AGOA agreement. It is with great concern that the agricultural fraternity took notice that the local US authorities are advising against hosting the AGOA Forum later this here on local soil. 
In conclusion, Grain SA support the sustainable and profitable transformation and development of new entrants by creating “pull factors” for transformation. All these and more, are clearly set out in the inclusive AAMP objectives and strategies. Furthermore, of great concern and bitter disappointment to the agricultural fraternity, is that the Blended Finance Scheme (BFS), as an innovative and inclusive finance mechanism, has not commercially effectively been launched. Likewise, the court case where judges unanimously ruled that water rights can be transferred but to date still does not transpire in practice, again show the ineffectiveness of the department. Lastly, since the AAMP has been opened and later stalled from implementation, is a significant setback for the country as a whole and clearly indicate that government and political priorities are geared towards the 2024 elections – rather than the development and prosperity of South African citizens.