annual progress report on the marketing …webapps.daff.gov.za/amisadmin/upload/annual... · 2.3...

ANNUAL PROGRESS REPORT ON THE MARKETING INFRASTRUCTURE

PROGRAMME– 2015/16

DIRECTORATE: MARKETING

ANNUAL PROGRESS REPORT ON MARKETING INFRASTRUCTURE PROGRAMME – 2015/16 of 25

CONTENTS

ACRONYMS ........................................................................................................................................................... 3

1. INTRODUCTION AND BACKGROUND ........................................................................................................ 4

1.1 Definition of agricultural marketing infrastructure ........................................................................... 4

1.1 Problem statement ..................................................................................................................... 5

1.2 Interventions by the Department of Agriculture, Forestry and Fisheries (DAFF) ................................ 5

2. STATUS OF THE MARKETING INFRASTRUCTURE INVESTMENTS – 2015/16 ....................................... 6

2.1 Criteria for funding ...................................................................................................................... 6

2.2 Funding administration and implementation .................................................................................. 6

2.3 2015/16 marketing infrastructure investments’ progress report ....................................................... 7

3. SUCCESSFUL BUSINESS CASES ............................................................................................................ 10

3.1 Cortina Farm – Western Cape Province ..................................................................................... 10

3.2 Solly’s Boerdery – Limpopo Province ......................................................................................... 11

4. MONITORING AND EVALUATION MECHANISMS.................................................................................... 13

5. PROGRESS ON PENDING APPLICATIONS .............................................................................................. 13

6. PLANS FOR THE 2016/17 FINANCIAL YEAR ........................................................................................... 14

APPENDIX: CONSTRUCTION WORK AT CORTINA FARMS AND SOLLY’S BOERDERY....................... 15


ACRONYMS

ABSA : Allied Banks of South Africa

AgriBEE : Agricultural Broad-Based Economic Empowerment

CA : Controlled Atmosphere

CC : Close Corporation

DAFF : Department of Agriculture, Forestry and Fisheries

D: CED : Directorate: Cooperatives and Enterprise Development

EC: DRDAR : Eastern Cape: Department of Rural Development and Agrarian Reform

GDARD : Gauteng Department of Agriculture and Rural Development

Land Bank : Land and Agricultural Development Bank of South Africa

MoA : Memorandum of Agreement

(Pty) Ltd : Proprietary Limited

PDAs : Provincial Departments of Agriculture


1. INTRODUCTION AND BACKGROUND

1.1 Definition of agricultural marketing infrastructure

The Integrated Marketing Strategy for Agriculture, Forestry and Fisheries Products in the Republic of

South Africa defined marketing infrastructure for agriculture, forestry and fisheries as:

Agricultural marketing infrastructure: any facility or tool that can be used by producers and

traders to facilitate trade, transform raw agricultural products into value-added products through

processing and packaging, storing agricultural products to smooth out supply and fulfil demand,

transporting agricultural products to satisfy demand, collecting, collating, synthesising and

disseminating market related information. Among other things, marketing infrastructure comprises

of the following: storage units, including cold storage and regular ambient storage, ripening

chambers and ice plants, grading facilities for specific qualities of produce , facilities for washing

(cleaning) of fruit and vegetables, communication facilities (telephones, faxes, internet access,

etc.), abattoirs and other processing facilities, livestock auctioneering facilities, wool shearing,

cleaning and grading sheds, loading pens or ramps, marketing information accumulation and

dissemination facilities such as computers and any other relevant facility required by farmers and

traders for marketing purposes.

Marketing infrastructure for fisheries and forestry products: any tool or facility that can be used

by producers and traders to facilitate the marketing and trading of raw fisheries and forestry

products and products derived from them from the points of production and/or processing up until

they are finally utilised by final consumers or industrial users. Such infrastructure may, in the case

of fisheries products, include storage, packaging, processing and distribution equipment and

facilities. In the forestry subsector, critical marketing infrastructure includes value adding and

processing equipment and facilities such as pole treatment plants, furniture manufacturing plants,

extraction and bottling equipment for honey, processing plants for processing activities and fibre

production and the subsequent distribution of the final products to the relevant markets at the right

time, in required quantities and at the right price.1

Source: An integrated marketing strategy for agriculture, forestry and fisheries products in the Republic of South Africa

(2012).


1.1 Problem statement

Commercial trading of agriculture, forestry and fisheries’ products and bi-products has over the years

undergone various rapid developments. From the supply side, producers are facing stringent market

requirements from the markets and consumers to produce, package and supply good quality products

that meet the minimum food quality and safety requirements. To respond to these modern demands,

established commercial producers made massive investments in their marketing infrastructure

(packaging, branding, storage and transport facilities), research and development and other modern

farming technologies.

As a result of the above mentioned developments, smallholder producers as well as the previously

disadvantaged individuals generally find it difficult to supply the markets with produce that meet these

modern demands. The Department of Agriculture, Forestry and Fisheries (DAFF) has over the years

identified access to agricultural marketing support services such as agricultural marketing infrastructure

and agro-logistics, agricultural marketing information, agricultural marketing skills, agricultural marketing

institutions and agricultural marketing finance as key constraints limiting smallholder producers to enter

the mainstream agricultural marketing and trading environment.2

1.2 Interventions by the Department of Agriculture, Forestry and Fisheries (DAFF)

To address the above mentioned challenges faced by smallholder producers, the Department of

Agriculture, Forestry and Fisheries (DAFF) undertook the following initiatives:

Developed an Integrated Marketing Strategy for Agriculture, Forestry and Fisheries Products

(2012). The strategy identifies certain impediments constraining smallholder producers from

accessing mainstream agricultural markets such as agricultural marketing infrastructure.

The Directorate: Marketing initiated a process of developing the National Guidelines (Norms and

Standards) for Public Investment in the Establishment of Agricultural Marketing Infrastructure.

These National Guidelines are primarily aimed at facilitating and directing the establishment of

agricultural marketing infrastructure, thereby ensuring that the impact of this market access barrier

are softened or minimised.

Introduced a funding programme for Small and Medium Enterprises (SMEs) falling within the

agriculture, forestry and fisheries sectors named the AgriBEE Fund. The fund is targeting previously

marginalized SMEs who are willing to acquire equity/shareholding in existing commercially viable

2 Source: Agricultural Marketing Policy for the Republic of South Africa


and sustainable agri-businesses. The fund also focuses on enterprise development by funding of

SMEs willing to venture into agro-processing and value adding activities.

2. STATUS OF THE MARKETING INFRASTRUCTURE INVESTMENTS – 2015/16

2.1 Criteria for funding

For any business proposal to be considered, the following basic criterion must be met:

The applicant must be black and the entity applying be 100% black owned;

The business must be registered as a legal entity;

A detailed business plan with clear investment requirements must be submitted;

The business must have clear indications for sustainability; and

To enhance commitment and optimal utilization of the fund by the applicants, a minimum own

contribution of 10% is required for investments up to the value of R5 million. For investments above

R5 million, a minimum of 20% own contribution is required from the applicants.

2.2 Funding administration and implementation

To ensure efficiency in the administration and the implementation of the Fund, the Department of

Agriculture Forestry and Fisheries (DAFF) appointed the Land and Agricultural Development Bank

(Land Bank) of South Africa to be the Fund Manager. As a key specialist financial institution for the

sector, the Land Bank is tasked to ensure that the AgriBEE funds are disbursed according to the

approved specifications and guidelines provided for in the Memorandum of Agreement (MoA) for the

Fund. Amongst other responsibilities, the Land Bank is also tasked to conduct feasibility and viability

studies and due diligence on businesses recommended for funding before any financial commitments

can be made.

At a technical level, DAFF works closely with the Provincial Departments of Agriculture (PDAs),

Commodity Associations and other relevant industry stakeholders to identify potential SMEs to benefit

from the fund. Coordination of the selection process is undertaken through the Marketing Forum chaired

by the Director: Marketing. During its sittings, the Forum reviews applications from various stakeholders

and provides inputs and preliminary recommendations for funding of potential business cases.

Recommended business cases are therefore referred to the Directorate: Cooperatives and Enterprise


Development (D: CED) for preliminary assessment before they can be submitted to the Land Bank for

further processing.

2.3 2015/16 marketing infrastructure investments’ progress report

For the period ending in March 2016, the Department of Agriculture, Forestry and Fisheries (DAFF)

through the Marketing Forum managed to receive, examine and recommend ten (10) business cases

for marketing infrastructure funding with the total required funds amounting to R 63 707 000. This figure

excludes equity and agro-processing funding applications. Of the recommended ten (10) business

cases, two (2) cases with the total value of R 13 626 000 have been finalized and massive construction

work has been undertaken on site and are in the last phase of finalization. The remaining eight (8)

business cases are currently undergoing internal assessment processes within DAFF and the Land

Bank. Table 1 below highlights an overview of marketing infrastructure business cases handled during

2015/16.

Table 1: Summary of business cases submitted to DAFF for marketing infrastructure funding

NO. BUSINESS

NAME

PROVINCE INVESTMENT

VALUE

INVESTMENT

REQUIREMENTS

STATUS

1 Starking Fruit

Packers CC

t/a Cortina

Farms

Western

Cape

R 5, 430 000 Expansion of fruits

(apples and pears)

packaging facilities;

Construction of 3

Controlled Atmosphere

(CA) rooms; and

Procurement of 1 000

fruit bins for the CA

rooms.

Funding approved and

construction is currently in

the final stage of being

completed.

2 Kaapschon

Boerdery 35

(Pty) Ltd

Western

Cape

R 5 000 000 Renovation and

equipping of existing

packaging facility,

Construction and

equipping of 2

Controlled Atmosphere

(CA) rooms; and

Procurement of 1 000

Application was assessed

by DAFF and is currently

with the Land Bank for

due diligence.


NO. BUSINESS

NAME

PROVINCE INVESTMENT

VALUE

INVESTMENT

REQUIREMENTS

STATUS

fruit bins for the CA

rooms.

3 D&M Fresh

Products CC

Western

Cape

R 5 000 000 Revamping, expansion

and equipping of the

current packaging

facility; and

Procurement of plastic

fruit bins.

Application was assessed

by DAFF and is currently

with the Land Bank for

due diligence.

4 La Ric Mal

CC

Western

Cape

R3, 660 000 Purchasing of bottling

and branding machine;

and

Purchasing of wine

storing tanks.

Business proposal is

currently undergoing

internal assessments

within DAFF and will be

submitted to Land Bank

as soon as all documents

are received and

assessed.

5 Siyavuselela

Agricultural

Cooperative

Eastern

Cape

R6, 900 000 Construction and

equipping of a tomato

packhouse; and

Procurement of a

refrigerated truck.

20% contribution was

provided by the EC:

DRDAR on behalf of the

cooperative.

Production tunnels

damaged by hailstorm.

Land Bank can only

commence with the

disbursement of funds

once production issues

are resolved (tunnels

repaired) and risk

mitigation strategies are in

place.

6 Ripplemead

Citrus Farm

Eastern

Cape

R 18,500 000 Construction and

equipping of citrus

packhouse facility and;

Procurement of a

The Province submitted a

revised proposal with

project cost escalations

from R 18, 5 M to R39, 4


NO. BUSINESS

NAME

PROVINCE INVESTMENT

VALUE

INVESTMENT

REQUIREMENTS

STATUS

refrigerated truck. M.

The province was

requested to forward

revised construction

quotations to justify the

cost escalations.

20% contribution to be

provided by the EC:

DRDAR behalf of the

cooperative.

7 Mystic Blue

Trading 164

(Pty) Ltd

KwaZulu

Natal

R 3, 260 000 Purchasing of 3 delivery

trucks to deliver

produce from

packhouse to harbour

and juice factory.







are received and

assessed.

8 Moradu

Farming

Enterprise

Limpopo R 5, 785 000 Construction and

equipping of a

packhouse facility with

cold storage;

Purchase of a

temperature controlled

transport.







are received and

assessed.

9 Solly’s

Boerdery

(Pty) Ltd

Limpopo R8, 196 000 Construction of

packhouse with potato

washing, grading,

sorting and packaging

equipment; and

Purchasing of

refrigeration and

aeration systems.

Funding approved and

construction is currently in

the final stage of being

completed.


NO. BUSINESS

NAME

PROVINCE INVESTMENT

VALUE

INVESTMENT

REQUIREMENTS

STATUS

10 Korema

Primary

Cooperative

Gauteng R 1, 976 000 Expansion and

equipping of existing

packhouse facility with

cold storage;

Purchase of a

temperature controlled

transport.

The funding is approved

by DAFF and Land Bank.

Funds to be disbursed

after GDARD has

completed the

construction of the

packhouse to be

equipped.

Total investment required R63, 707 000

As highlighted in Table 1 above, 8 (eight) business cases are currently being assessed by DAFF and

the Land Bank. (2) Two business cases have received funding and construction is currently in the last

phase of completion. For the coming financial year, DAFF, the Land Bank and other relevant

stakeholders will continue with the processing of other business cases.

3. SUCCESSFUL BUSINESS CASES

3.1 Cortina Farm – Western Cape Province

Covering a total area of 54 hactares, Cortina Farm is situated in the Vyeboom area, between Grabouw

and Villiersdorp. The property is described as Portion 26 of the farm Fortuin Nr.83, falling within the

Overberg Region of the Western Cape Province.The farm is 100% black owed by the W&R Myburgh

Trust.

The farm was purchased in 2001 by means of a mortgage loan which was acquired from ABSA. The

Myburgh family has however settled the mortgage in 2009 and has not received any assistance with the

settlement of the mortgage. Mr. Richard Myburgh has more than 40 years experience in the marketing

and distribution of deciduous fruits for the domestic and export market. The farm employs approximately

75 employees (15 permanent and 60 on seasonal basis).

The farm produces apples and pears on 32 hectares. 32 % of the produce is sold domestically, 60% is

exported while the remaining 8% is supplied to local juice manufacturers. Locally, the fruit is sold at

Johannesburg, Pretoria, Pietermaritzburg, Bloemfontein and Klerksdorp Fresh Produce Markets through


the family owned Starking Fruit Packers CC while Melsetter Group (Groupways) is used as a channel

for export markets.

Cortina Farm applied for funding to expand fruit packaging facilities through the construction of three

Controlled Atmosphere (CA) cold rooms3, purchasing of 1 000 wooden bins for packing of fruits,

revamping the roof ceiling of the existing packhouse and painting of the pack house floor. The total

amount for this investment was R5 431 970.00. As stipulated in the AgriBEE operational manual, W&R

Myburgh Trust had to contribute 20% of the investment (R1 086 394.00) whereas the R4 345 576.00

was paid by DAFF through the AgriBEE fund. There has been progress in the implementation of the

project. The savings that were made on the Controlled Atmosphere (CA) cold rooms were used to

procure extra 1000 plastic bins and the revamping of the existing packhouse (See pictorial material

from page 15). The funding was allocated as shown in Table 2 below:

Table 2: Breakdown of Cortina Farm funding

Item Cost

Wooden bins for packing x 1000 R672 600.00

Controlled Atmosphere (CA) cold rooms x 3 R4 218 000.00

Ceiling for existing pack house R461 370.00

Paint for packhouse floor R80 000.00

20% contribution from W&R Trust R1 086 394.00

Total amount from AgriBEE Fund R4 345 576.00

Total investment R5 431 970.00

Investments made in Cortina Farm are already yielding positive outcomes. Through the construction of

the Controlled Atmosphere (CA) cold rooms, the farm can now supply the market with apples

throughout the year at good prices during off-season while the competitors are out of stock. Cash flow in

the farm also remains consistent as a result of consistent supply of the apples to the market. Some of

the casual employees can also be retained in the farm due to consistent supply of produce.

3.2 Solly’s Boerdery – Limpopo Province

Owned by Mr. Solly Ratjomane, the farm is located at Sewabarwana (formerly known as Bochum) in

the Blouberg Municipality of the Capricorn District in Limpopo Province. The farm covers a total area of

3 Controlled Atmosphere (CA) cold rooms – storage method in which temperature, humidity, oxygen, carbon dioxide and nitrogen concentrations are regulated to pro-long the freshness of fruits and vegetables without the use of chemicals. With CA cold rooms, produce can be stored 2-4 times longer than usual.


1430ha and the producer grows mainly potatoes (Mondial potato variety) on 144 ha and rotates with

tomatoes (12ha), dry beans (80ha), pumpkin (+/- 50ha) and maize (52ha).

The producer also leases an additional 446ha of land (Devonia) which is near Ga-Moleele village where

additional potatoes are produced on the 80ha plot. In total, 184ha of land is used for potato production

while the remaining 40ha is used for seed production. On this farm there is also a livestock segment

which comprises of 242 Bonsmara and 78 Simbra cattle. Currently, the farmer contributes immensely to

job creation where 48 people are permanently employed and seasonally an additional 150 people are

employed on the farms.

To enhance potato production and packaging on the farm, Mr. Ratjomane submitted an application for

marketing infrastructure funding to DAFF. In the application, he indicated his desire to have a well-

equipped packhouse to the value of R 8 196 183.90 where potatoes will be washed, sorted and

packaged before being sent to various markets. Prior to applying for the fund, the producer was using

two dilapidated packhouses/sheds for sorting and packaging of his produce.

In response to Mr. Ratjomane’s application, DAFF through the Land Bank approved that the producer

receive the required amount. The producer indicated his commitment by contributing 20% of the

required amount. Table 3 below indicates how the funding was allocated:

Table 3: Breakdown of Solly’s Boerdery funding

Item Cost

Construction of a packhouse R2 123 825.00

Purchase and installation of packing lines machinery R6 072 358.20

20% contribution from Solly’s Boerdery R1 639 236.80

Total amount from AgriBEE Fund R6 556 947.20

Total investment R8 196 184.00

During the recent visit by the Department of Agriculture, Forestry and Fisheries (DAFF) to Solly’s

Boerdery, Mr. Ratjomane (the owner) indicated that with the completion of the new potato packaging

facility he will speedily pack potatoes for a number of clients such as Spar, Market agencies and others

that are distributed to the Fresh Produce Markets. The producer also indicated that he is willing to assist

neighbouring potato producers with packaging of their produce should such a need arise. This means

that there will be increased farm income and more jobs will be created for local people.


4. MONITORING AND EVALUATION MECHANISMS

To monitor and evaluate the funding process and to ensure accountability, the following mechanisms

are used:

The Directorate: Cooperatives and Enterprise Development and Directorate: Marketing, Land Bank

and Provincial Departments involved, make several visits to both farms (Cortina and Solly’s

Bordery) to ensure that the funds indicated in Tables 2 and 3 above are being utilized according to

the approved application for funding and the recommendations from all parties. Both projects are

currently in the last phase of completion and it is envisaged that they will be completed before June

2016;

Project engineers hold regular progress meetings with stakeholders to provide feedback and

progress regarding the construction;

The Land Bank receives approved construction progress reports from the service providers through

Provincial Departments and DAFF before processing any payments; and

DAFF has developed an Impact Assessment Tool to measure the impact of the marketing

infrastructure programme on funded farms. The Tool will consider variables such as: access to new

markets, changes in farm incomes and jobs creation and shall be applied over the next 3 to 5 years

to assess the impact

5. PROGRESS ON PENDING APPLICATIONS

5.1 DAFF is currently working with the Land Bank and Provincial Departments of Agriculture (PDAs) to

finalize the remaining business cases. The following key issues hinder progress in processing the

remaining proposals:

Delays in submittal of outstanding required documentation by the applicants;

Delays in sourcing of construction quotations from potential service providers to justify the funding

requirements;

Inflation of construction costs by some of the service providers; and

Inability of the applicants to raise and pay the required own contribution.

5.2 To address the above mentioned challenges the following initiatives are made:

DAFF is working closely with Provincial Departments and the Land Bank in improving the turn-

around times;


Regular updates are provided through letters to affected stakeholders; and

Some Provincial Departments made commitments to assist the producers in acquiring of the

required own contribution.

6. PLANS FOR THE 2016/17 FINANCIAL YEAR

DAFF will continue to take the lead in processing of the remaining business cases.

DAFF is currently working with the Western Cape and Limpopo Provincial Departments to arrange for

the official launches of Cortina Farms and Solly’s Boedery where the Minister will also be invited to lead

these official launches.

More applications are expected from the other provinces. Free State and North West Provinces are

amongst other provinces indicating their desire to submit proposals during 2016/17 financial year. The

Western Cape Province is also working on additional business cases. These proposals will be reviewed

in the next Marketing Forum sitting to be held in April 2016.

APPENDIX: CONSTRUCTION WORK AT CORTINA FARMS AND SOLLY’S BOERDERY

CONSTRUCTION WORK AT CORTINA FARMS – WESTERN CAPE

Picture 1: Construction of Controlled Atmosphere (CA) rooms – Cortina Farms

Picture 2: Painting work done inside the CA rooms – Cortina Farms



Picture 3: Equipped CA room – work in progress

Picture 4: Construction of CA rooms completed



Picture 5: Revamping of the packhouse ceiling

Picture 6: Revamping of the packhouse ceiling completed



Picture 7: Painted packhouse floor

Picture 8: Fruit storage bins inside the CA room – 1000 bins were procured


CONSTRUCTION WORK AT SOLLY’S BOERDERY – LIMPOPO

Picture 9: Previous potato packaging facility

Picture 10: Previous potato packaging line



Picture 11: Previous potato packaging line

Picture 12: Construction of the new facility commencing – site preparation



Picture 13: Construction of the new facility commencing – site preparation

Picture 14: Interior of the new packaging facility – work in progress



Picture 15: Potato packaging line being installed in the new facility

Picture 16: Newly installed potato packaging line



Picture 17: Newly installed potato packaging line

Picture 18: Mr. Solly Ratjomane making basic demonstration the for new packaging

line



Picture 19: Exterior view of the new facility

Picture 20: Exterior view of the new facility


…………………………………………………………

Name: H.M Mamabolo

Designation: Director: Marketing

Date:

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