3.5 Other Pressures for Reform
In addition to the major political and economic drivers of the reforms other issues were raised as being important by market participants. The additional drivers related to information, market concentration, the diversity of grower interests, and legislative appropriateness. With regard to information it was noted that the boards emerged in the 1930s when South African growers lacked information about European markets. In that context the boards provided extra information to growers. However, in the 1990s it appears that the boards have provided relatively less information to growers due to the lack of transparency between the information they provided growers and the information readily available from other sources.
With regard to market concentration it was noted that the existence of single marketing channels led to concentration in secondary markets such as printing and transport services provided to boards. The existence of boards may well have reduced competition in the provision of these services. Further, the lack of arms length transactions between boards and companies they owned raises serious questions about the possibility of corruption. With regard to grower diversity it was noted that in addition to the different interests of emerging (black) farmers and established commercial farmers the interests of all established farmers are not homogeneous. These differences have led to the establishment of independent growers and independent grower organisations who pressed the case for reform.
With regard to legislative appropriateness the case for reform was consistent with the extension of the reforms already adopted during the 1990s. Further there were numerous powers available in the legislation which were not being used and it was considered inappropriate that they remain.
Finally, it was considered that where single channels were successful it was because of the people involved, (and not the legislation) and hence there was no need for the legislation
3.6 The Process of Deregulation
The basis for the recent intervention in the fruit industry has been the 1968 Marketing Act which established the rights of statutory intervention in the industry by the Boards. In the early 1990's investigation of the 1968 Act began and in 1992 the Kassier Report was tabled in Parliament. This Report was critical of the 1968 Act and the schemes it provided for. Following this Report, an Agricultural Marketing Policy Evaluation Committee (AMPEC) was established. This Committee sought views on the 1968 Act and the Kassier Report. The existing control boards had a considerable input to the resulting AMPEC Report and therefore the conclusions drawn were much less critical than those in the Kassier Report. The findings of the AMPEC formed the basis for the original 1995 Marketing of Agricultural Products Bill. This Bill proposed a system very similar to that contained in the 1968 Act.
When the Bill reached Parliament, it was challenged by an African National Congress (ANC) document which proposed a completely different approach to marketing of agricultural and horticultural products based on a new deregulated regime rather than some modification of the existing system. The ANC considered that past extensive intervention in agricultural pricing and marketing and the accompanying statutory controls and the allocation of subsidies had favoured powerful interest groups such as larger commercial farmers, agricultural processors and the agricultural bureaucracy. The ANC believed the needs of low income consumers and small farmers were neglected and employment in the agricultural sector had declined unacceptably. "The high level of protection to producers, uniform pricing and the lack of competition in marketing has had a significant economic cost" (D Hanekom, Minister of Agriculture and Land Affairs, September 1996).
The White Paper on Agriculture, 1995, established the underlying premises on which a reform of the agricultural sector would take place. This included agricultural marketing arrangements. An extract from that Paper is presented below which sets the philosophical background:
"Local and international experience has led to the recognition and protection of individual rights as the cornerstone of a just and stable society. Rights of the individual relate to issues such as equality, freedom of economic activity and the right to associate freely. It also implies an orderly society which is so governed that private initiative is promoted by Government policies and preferably not restricted by regulatory measures or competition from Government enterprises.....
Consistent with these stipulations of the Constitution, the Government accepts that freedom of choice and freedom of association should form the cornerstone of its agricultural marketing policy, while also accepting that this basic right may be curbed where deemed reasonable and justifiable in the public interest........
3.4 In order to enhance the welfare of the nation as a whole, Government intervention in agricultural marketing should:
(a) be limited to the correction of market imperfections and socially unacceptable effects:
(b) never be used to rectify socially unacceptable conditions when non-market mechanisms are appropriate; and
(c) allow for export marketing arrangements which enhance the welfare of the nation as a whole."
White Paper on Agriculture
Department of Agriculture, 1995
The philosophy as expressed in the White Paper has been adopted in the formulation of the Marketing of Agricultural Products Act, 1996.
Throughout the whole process of the consideration of the statutory powers of the Boards operating in the South African system, the over-riding consideration has been the concept that such powers should be granted and exercised on behalf of society as a whole, rather than on behalf of any particular sector. In other words, statutory powers are considered to be extensions of the role of government which undertakes such a role on behalf of society and therefore such powers should not be used to protect any particular sector. Protection of a sector through the granting of statutory powers implies benefits being accrued by one sector at the expense of other sectors of society. This became particularly evident in the agricultural sector where a "two agricultures" system developed with a commercial sector and a subsistence farming sector. The statutory powers granted to the Boards was seen as contributing to this division of agriculture; removal of such powers was seen as a way of improving the equity of the agricultural system by making commercial activities available to all agricultural participants.
The elimination of segregation in the South African system is a key corner-stone of current South African policies. This policy perspective tends to over-shadow other considerations such as the possible potential for international benefit from centralised marketing systems and the possible exercise of international market power. The granting of special privileges to any particular sector is seen as being contrary to New South African philosophy. Where there may be potential for benefit from co-operation between industry participants, it is considered that voluntary co-operation would ensure the gathering of such benefits. If the potential benefits are not sufficient to attract voluntary co-operation, then the granting of statutory powers to force co-operation is not appropriate. It should be noted that voluntary co-operation behaviours in the agricultural sector in order to gain benefits that may be available will not be countered by competition promoting legislation. With respect to the "problem" of free ridership in international markets with voluntary co-operation as a basis for co-ordinated marketing, the Committee was of the opinion that free ridership should be seen as not a negative aspect but that such activity could be viewed as entrepreneurial which would encourage greater performance from the co-operative marketing establishment.
3.7 The Reforms Made
The South African reforms included five key components.
They are:
- Legislation was passed with specific goals stated in the legislation,
- A National Agricultural Marketing Council was established to oversee the process and the future of deregulated marketing,
- Boards were given one year to phase out,
- Criteria and processes for decision were defined,
- Interested parties were defined.
3.7.1 The Legislation
The Marketing of Agricultural Products Act, 1996 was signed by the President on 27 September, 1996. [ An amendment to the Act was passed in November 1997] The objectives of the act are:
" |
(a) | the increasing of market access for all participants; |
| (b) | the promotion of the efficiency of the marketing of agricultural products; | |
| (c) | the optimisation of export earnings from agricultural products; and | |
| (d) | the enhancement of the viability of the agricultural sector". S.2(2). |
The Act does allow for intervention in agricultural markets but
"A statutory measure may only be introduced in terms of this Act if the Minister is satisfied that such measure will directly and substantially advance one or more of the objectives mentioned in subsection (2), without being substantially detrimental to one or more of such objectives". S.2.(1). [ Section 2(1) of the Act effectively rules out single desk selling because this would violate section 2(1)(a) "increasing market access for all market participants ".]
The Act also seeks to maintain food security and fair labour practice by section 2(3) "No statutory measure or prohibition in terms of section 22 which is likely to be substantially detrimental to food security, the number of employment opportunities within the economy or to fair labour practice may be instituted in terms of this Act."
3.7.2 The National Agricultural Marketing Council
The National Agricultural Marketing Council (NAMC) has an important role under the 1996 legislation. The functions of the council are specified in Section 9 of the Act.
| 9.(1) |
Subject to the provisions of section 2, the Council - | ||
| (a) | shall, when requested by the Minister, or of its own accord, investigate, in terms of section 11(2), the establishment continuation, amendment or revocation of statutory measures affecting the marketing of agricultural products, evaluating the desirability, necessity or efficiency and if necessary, proposing alternatives to the establishment, continuation, amendment or repeal of a statutory measure and report and advise the minister accordingly; | ||
| (b) | shall prepare and submit to the Minster for consideration statutory measures and changes to statutory measures which the Minister directs it to prepare; | ||
| (c) | shall, whenever requested by the minister and at least once annually, report on the activities of the Council; | ||
| (d) | may direct any institution or body of persons designated for the purpose of the implementation or administration of a statutory measure in terms of section 14, to furnish the Council with such information pertaining to a statutory measure as the Council, the Minister or the parliamentary committee may require | ||
| (e) | may undertake investigations and advise the minister regarding - | ||
| (i) | agricultural marketing policy and the application thereof; | ||
| (ii) | the coordination of agricultural marketing policy in relation to national economic, social and development policies and international trends and developments; and | ||
| (iii) | the possibilities of promoting the objectives mentioned in section 2(2); | ||
| (f) | shall monitor the application of statutory measures and report thereon to the Minister and shall evaluate and review such measures at least every two years; | ||
| (g) | shall prepare a budget of its expenses, in consultation with the Director General, on an annual basis for approval by the Minister. | ||
(2) |
Copies of all reports which are submitted to the minister in terms of subsection (1) shall simultaneously be despatched to the parliamentary committees for their information. | ||
Section 9 of the Act makes clear the importance of the Council in terms of its gathering of information, advising the Minister and relevant parliamentary committee and the implementation and enforcement of the legislation. Apart from the Minister’s and their own initiatives they also have to handle all requests for establishment, continuation, amendment or repeal of statutory measures.
3.7.3 The Phase Out of the Boards
The list of Boards which were in place and the date they were disbanded is as follows:
- Maize Board 30 April 1997
- Canning Fruit Board 30 September 1997
- Citrus Board 31 December 1997
- Cotton Board 31 December 1997
- Deciduous Fruit Board 31 October 1997
- Dried Fruit Board 31 December 1997
- Lucerne Seed Board 31 December 1997
- Meat Board 31 December 1997
- Milk Board 31 December 1997
- Mohair Board 31 December 1997
- Oilseeds Board 31 December 1997
- Sorghum Board 31 December 1997
- Wheat Board 31 December 1997
- Wool Board 31 August 1997
WTO Report, G/STR/N13/ZAF, 6 August 1997
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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