3.8 Management Responses to the Legislative Reform
The implementation of the Agricultural Marketing Act 1996 under the guidance of the National Agricultural Marketing Council (NAMC) required the transformation of many agricultural organisations and the reformation of the marketing chain. Key decisions made related to:
- Development of business plans showing what the future structure would be in each sector and what would happen to the existing assets.
- etermining if there would be any continuing marketing agencies.
- Establishment or reconstitution of producer organisations
- Determining whether or not producer organisations would seek to operate completely voluntarily or whether they would seek statutory support.
In many cases board assets were handed over to new established trusts where the trust deeds limit where the funds can be spent. The NAMC has required that these funds be spent in line with the wishes of all interested parties. As can be expected the determination of ownership and establishment of business plans was a very contentious issues with strong talk between the NAMC and interested parties.
In some cases there has been no continuing centralised marketing agencies (as in the case of grains) but in other cases they have remained as in the case of Unifruco for deciduous fruits. Where continuing agencies have remained they have lost monopoly export rights.
Producer organisations have generally reformed as Section 21 [ Section 21 of the tax code] Companies. These organisations have new tightly written constitutions with focussed goals relating to promotion and research or some other set of producer goals.
The newly formed trusts have been able to establish themselves and seek funding from voluntary subscriptions, compulsory levies and trusts. Where they have sought levy monies or trust monies they have had to obtain the approval of the NAMC. Given that approval is given for a period of 2 years at a time some producer organisations have determined that is better to wear the losses of some free riders rather than pay the transaction costs of obtaining and maintaining the approval of the NAMC.
One of the down stream affects of the changes has been that many cooperatives have been transformed into corporates. It appears that historically many of these cooperatives had guaranteed income streams from their relationships with boards and the demise of these relationships requires that these organisations develop a sharper commercial focus.
3.9 Commercial Response to the New Environment
The legislative and administrative reforms in South Africa have had a substantial effect on commercial behaviour. Board staff, the NAMC and new exporters have all reported substantial innovation as a result of the reforms. The key driver has been the greater freedom to engage in commerce in general and in exporting in particular. This has encouraged the incumbents to takeinitiative to persuade existing suppliers to remain with them. It has also encouraged entrepreneurs to see if they can do better. The net result is that growers have generally been offered more favourable payments terms than in the past. Further, there has been a lot of concern about costs, particularly transport and storage costs. It appears that the reforms are bringing downwards pressure on these costs. Generally speaking there seems to be substantial experimentation going on concerning production, packaging, processing and marketing. Clearly not every idea is a winner but currently there appears to be a lot of creative energy at work within South African agriculture.
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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