Presentation of the Annual Report for the 2015/16 finacial year.

Acting Chairperson: Mr. Andre Young CEO: Mr. Tshililo R Ramabulana

CFO: Mrs. Sarah Muvhulawa

Acronyms ARC - Agricultural Research Council DAFF - Department of Agriculture, Forestry and Fisheries DPFO - Developing Poultry Farmers Organisation DRDLR - Department of Rural Development and Land Reform FAO - Food and Agricultural Organisation FPEF - Fresh produce Exporters Forum GDP - Gross Domestic product GFADA - Grain Farmers Development Association IDC - Industrial Development Corporation MERC - Market and Economic Research Centre MMM - Making Market matter MPO - Milk Producers Organisation NERPO - National Emerging Red Meat producers Organisation PPECB - Perishable Products Export Control Board RPO - Red Meat Producers Organization SAGIS - South African Grain Information Services SAMIC - South African Meat Information Company SAMAC - South African Macadamia Growers Association SAPPO - South African Pork Producers Organization SAWIT - South African Wine Industry Trust SAWIS - South African Wine Information Services S&DEC - Supply and Demand Estimates Committee SIP - Strategic Integrated Projects WIDA - Wine Industry Development Association WOSA - Wines of South Africa WFP - World Food Programme

2

Objectives and Mandate

Divisions •Market and Economic Research Centre •Agricultural Trusts •Agribusiness Development •Statutory Measures •Corporate Services

Mandate and Objective

•Advisory body that advices the Minister of DAFF and DAG on all matters relating to marketing of agricultural products.

• Increase market access for all participants.

•Promotion of efficiency of marketing of agricultural products.

•Optimise export earnings from agricultural products.

•Enhance the viability of the agricultural sector.

NAMC Council Members Mr. Andre Young- Deputy Chairperson & Acting Chairperson Ms Mina Gill- Council Member Mrs JM v/d Merwe- Council Member Dr. John Purchase- Council Member Mr. Andries Cronje- Council Member Dr Litha Magingxa- Council Member Mr. Augustinus Hendricks- Council Member Ms Thami Zimu – Council Member

3

Vision & Mission

Vision

Strategic positioning of agriculture in a dynamic global market.

Mission To provide agricultural marketing advisory services to key

stakeholders in support of a vibrant agricultural marketing

system in South Africa.

4

Facilitate the efficient operation of the deregulated agricultural markets

• The promotion of competition along the marketing chains;

• The provision of timely, transparent and reliable agricultural information;

• A legally secure framework within which agricultural trade can take place; and

• Encourage private sector to invest in the maintenance of physical marketing infrastructure.

5

Apex policies identify agriculture as a sector with high growth and job creation potential

NDP

(National Development

Plan)

NGP

(New Growth

Path)

MTSF

(Medium-Term Strategic

Framework) 2014-2019

145,000 new jobs in agro-processing by 2020

300 000 new smallholders

1 million new jobs in rural economy by 2030

Reduction of rural unemployment from 49% to less than 40% by 2030

▪ Improved land administration and spatial planning

▪ Land Reform ▪ 1 million additional

sector jobs ▪ 1 million hectares under

production ▪ Food Security ▪ Land under irrigation

Policy Alignment

6

High Impact Indicators

GROWTH TARGET: Annual increase of 0.5% (Current contribution to GDP: 2.5%)

Challenges Current Status (Jun.15’)

2019 Target

Agro-Processing sales incr. by 1,3%, now at R101.8 bill (Q1, 2015)

Sales of Agro-Processing to incr. annually by 2% (total of 10% by 2019)

Gross value add for Agriculture; Forestry & Fisheries increased by 5.6% (2013-14); shrunk by -16.6% in Q1, 2015

An annual incr. in gross value add for Agric.; Forestry & Fisheries of 2% , until 2019

Total jobs in Agriculture increased by 183 000, between 2014 and 2015 (total of 891 000) \

Job increase of 500 000 (100 000 p.a.) by 2019 and 1 million by 2030

1. Unprotected sector

2. Market Concentration

3. Rising input costs (insufficient producer support)

4. Competing land use

5. Climate change

6. Infrastructure

1. Market Access & Trade Development

• Trade Development Strategy

• Agri-Parks

2. Fast Tracking Land Reform

• 50:50 policy framework piloted

3. Producer Support

• Financial support (DAFF & DRDLR)

• Capacity building

4. Production

• 9 value chains

Key Interventions

No. of smallholders 171,670 (2013)

No. of smallholders 471,670 (2019) (additional 300,000)

7

Access to Food • The percentage of South African households with

inadequate or severely inadequate access to food decreased from 23,9% in 2010 to 22,5% in 2014.

• During this time, the percentage of individuals that were at risk decreased from 28,6% to 26%.

• Between 2002 and 2014, the percentage of households that experienced hunger decreased from 29,3% to 13,1% while the percentage of individuals who experienced hunger decreased from 23,8% to 11,4%.

• Since 2011, the percentage of individuals who experienced hunger increased very slightly by +0,3% to 13,4%.

8

NAMC Performance 2014/15 Division Planned Target Achieved Percentage

MERC 21 21 100%

Statutory Measures 9 7 78%

Agri-Business Development

4 4 100%

Agricultural Trusts 7 7 100%

Office of CEO 4 4 100%

Finance and Administration

7 7 100%

Human Resources Management

11 11 100%

Total 63 61 97%

9

Statutory Measures

Expenditure paid by statutory levies

• Research, e.g. Grain Laboratory Services (29%),

• Transformation, e.g. GFADA (22%),

• Export promotion, e.g. WOSA (17%),

• Information, e.g. SAGIS, SAWIS (12%), and local promotions (8%).

Background

•18 industries collecting statutory levies

•In 2014/15 financial year – R409 mill collected

•20 industries administering statutory measures relating to registrations, records & returns

10

INDUSTRY Administrating body Statutory Measures

Levy Registration Records &

Returns

Citrus (export only) Citrus Growers Association

Cotton Cotton SA

Dairy Milk SA

Deciduous fruit (pome & stone) HORTGRO Services

Dried fruit Dried Fruit Technical Services

Fynbos (proteas) HORTGRO Services

Grains (Maize, Oilseeds,

Sorghum, and Winter Cereals)

The South African Grains and Information

Services (SAGIS)

Lucerne Lucerne Seed Organisation

Macadamias Southern African Macadamia Growers’

Association (SAMAC)

Mangoes Subtrop

Milk Milk Producers’ Organisation

Mohair Mohair SA

Olives SA Olive

Pecan nuts SA Pecan Producers’ Association

Summary of statutory measures

applicable in South Africa 2014/2015

11

INDUSTRY Administrating body Statutory Measures

Levy Registration Records &

Returns

Pork SA Pork Producers’

Organisation

Potatoes Potatoes SA

Poultry and eggs Southern African Poultry

Association

Red meat Red Meat Levy Admin

Sorghum Sorghum Trust

Table Grapes exported SA Table Grape Industry

Wine SAWIS, WIDA, Winetech and

WOSA

Winter Cereals Winter Cereal Trust

Wool Cape Wools SA

Summary of statutory measures applicable

in South Africa 2014/2015 cont’

12

Product Levy income R Levy collection rate %

Citrus (exported) 39 452 963 100,00

Cotton lint 2 414 809 100,00

Dairy products 32 019 779 106,10

Deciduous fruit 76 661 008 96,00

Dried fruit 4 646 362 96,00

Fynbos 308 634 94,00

Lucerne 1 328 644 75,00

Mangoes 709 436 65,00

Olives 1 101 401 40,49

Pecans 1 036 000 97,00

Pork 18 071 010 103,3

Potatoes 33 754 684 98,75

Poultry and eggs 20 985 104 94,81

Red meat 27 431 309 98,80

Sorghum 1 501 813 70,05

Table grapes 19 381 060 99,53

Wine 72 246 149 100,00

Winter cereal 53 020 498 97,36

TOTAL 409 070 663

Levies collected per commodity – 2014 survey

13

Industry Statutory measures Reason

Pork Levies Continuation

Pork Records & returns Continuation

Pork Registrations Continuation

Sorghum Levies Continuation

Winter cereals Levies Continuation

Red meat Levies Continuation

Red meat Records & returns Continuation

Red Meat Registrations Continuation

Macadamias Levies New

Macadamias Records & returns New

Macadamias Registrations New

Lucerne Levies Continuation

Grain products Records & returns New

Grain products Registrations New

Deciduous fruit Records & returns New

Deciduous fruit Registrations New

Statutory Measures promulgated during

the 2014/2015 Financial Year

14

Commodity Institutions

Citrus (exported) Citrus Growers Association, Citrus Academy, Citrus Growers’ Development Chamber and

Citrus Research International

Dairy products Dairy Standards Agency, Milk SA and MPO

Deciduous fruit Hortgro, Fresh Produce Exporters’ Forum (FPEF), Deciduous Fruit Dev Chamber

Pork SAPPO and Baynesfield Training Academy

Potatoes Potatoes SA, Potato Industry Development Trust

Poultry and eggs Developing Poultry Farmers’ Organisation (DPFO)

Red meat NERPO, RPO and SAMIC

Table grapes SATI and Table Grape Academy

Wine SAWIS, Winetech and WOSA

Winter cereal ARC, GFADA and SAGIS

Examples of Institutions funded by

statutory levies

15

Functions Amount spent

R

Percentage of

total levy

expenditure

Administration 23 382 174 5,55

Transformation 97 857 656 23,21

Research 129 488 083 30,72

Local promotions 41 781 397 9,91

Export Promotions 61 125 753 14,50

Information 42 289 121 10,03

Quality control 18 024 659 4,28

Plant improvement 4 732 794 1,12

Production development 2 885 571 0,68

TOTAL 421 567 208 100.00

Functions financed through Statutory Levies

16

Agricultural Trusts Trusts funded projects (Examples)

• National Lucerne Trust : Taung project, supporting 20 farmers with 500 hectares, 25 ha each

• Mohair Trusts: farmers receiving at least 1000 ewes each

• Wool Trust: R1.85 million allocated for the supply of shearing equipment to 76 communal sheds in the EC. 33 856 quality rams distributed

Background

•11 agricultural industry trusts.

•25 ministerial trustees. (excl. SAWIT)

•Total assets- approximately R2 billion

17

Markets & Economic Research Centre MERC Aims

•gauge the efficiency of the market for every agricultural commodity (Agro-food Chains ); •undertake market and trade research to inform interventions aimed at enhancing the viability of agro-food industry (Trade Focus Area); and •intensify research efforts on options to link smallholder farmers to agro-food value chains (Smallholder Market Access Focus Area)

MERC Research Products

•Food Price Monitors, Food Cost Reviews, Input Cost Monitors, Trade Probes, Fruit Flow reports, and lately the South African Grain & Oilseeds Supply & Demand Estimates report.

18

Market & Economic Research Outputs Portfolio Deliverables

1. Price analysis Quarterly FPM report

Annual Food Cost Review

Annual Input costs report

Grain & Oilseeds Supply and Demand Estimates Reports

2. Markets Sectoral market studies - fruit exports into Africa

Trade Probe

Fruit flow

3. Competitiveness Value chain studies (Wheat, poultry and mangoes)

VAT for selected agric inputs

4. Supply chains Supply chain studies (wheat, fruit- Africa)

Transport deferential on wheat

Transport costs analysis

5. Policy Transformation monitoring report

Levy evaluations

Marketing schemes

19

Grain and oilseeds Supply & Demand Estimates Committee

• Provides supply and demand projections for grains and oilseeds on a monthly basis

• Critical in light of the importance of food security, volatile grain prices and insufficient information about future stock levels of staples

• The functioning of the S&DEC committee is perceived to be very successful. The principles of the initiative are unique in its kind in the world; through the participants’ information being offered on a voluntary base

• The initiative is supported and welcomed by many stakeholders, nationally and internationally.

20

SIP 11

Source: StatsSA, 2013

Background

• National Infrastructure Plan - will be operationalised through legislation (Infrastructure Development Act)

• Current focus is on mobilisation of funding for many of the anchor projects (currently only R3 billion funding has been secured)

NAMC’s Role

•Assisting project owners (DAFF, provinces, local government) to strengthen the project business cases to raise funding

•Coordinating reporting on existing and proposed new high-impact/anchor agro-logistics & rural infrastructure projects

– Quarterly reporting on a total of over 800 infrastructure projects nationally (R26 bn)

– Draft Business Plan consisting of 28 proposed or recently initiated high-impact/anchor projects (R18 bn)

•Assist to bring stakeholders to work together to enable implementation of these projects

21

SIP 11

Reporting Entities Total Projects

Captured Project Value

R'm

Expenditure To-March 2013

R'm

Expenditure To-March 2014

R'm

Expenditure To-March 2015 R'm

Expenditure To Date R'm

Actual Spent in Q1 of

2015/2016 R'm

Total Jobs Planned

Jobs Created To Date

Jobs Created: Q1: 2015 -

Jobs

Agricultural & Rural Transport Systems

22 801 126 220 315 315 0 1 528 867 128

Electricity Projects 3 2 2 Completed 0

Fencing 208 405 87 179 248 249 1 6 447 3 163 238

Marketing & Storage Facilities 75 4 249 76 230 300 317 5 7 663 1 590 500

Other Primary Agricultural Infrastructure

217 6 925 193 465 727 818 162 40 986 11 816 1 732

Processing Facilities 93 4 885 344 789 1 156 1 235 76 12325 6362 1678

R&D, College, Schools & Houses Projects

55 2 228 38 236 471 552 81 1 989 1 518 221

Recapitalisation & Development

30 48 7 33 48 50 2 792 632 75

Rural & Agro Tourism 1 6 - - 1 2 0 17 - 0

Sanitation Projects 23 2 071 19 39 53 53 45 150 504 422 58

Social Relief Projects 3 6 6 6 6 6 0 32 27 0

Soil Rehabilitation Projects 38 329 5 16 19 19 - 1 257 603 34

Water & Irrigation Projects 156 7 630 273 563 754 773 19 72 641 11 289 392

Grand Total 924 29 585 1 172 2 775 4 099 4 387 390 296 181 38 289 5 056

Agri-logistics and rural infrastructure – SPEND & JOBS By Infrastructure Type – All reporting entities

Note: The total estimated costs are over periods that have not been disclosed and are not annual budgets.

22

Agribusiness Development

Introduction

• ADD designs and facilitates the implementation of Agribusiness models that link small scale growers with markets through collaborations/partnerships with various organisations (public and private) in order to achieve the following:

– increased market access,

– encourage new market development,

– build capacity for the developing producers.

• Organisations and institutions that we strengthen our partnership with:

– Provincial Governments; DAFF, DRDLR, Land Bank; PPECB; IDC and other agencies.

– Industries

– Donors

ADD Programmes • Development Schemes - driven to

address food security and domestic market access.

• Business Linkages - develop and manage programmes that link growers with international markets.

• Capacity Building - facilitate training programmes in marketing, financial and strategic management to assist small holder producers in building successful and thriving businesses.

• Market Information - facilitate the dissemination of market information to farmers.

23

Development Schemes • Continue with the design and implementation

of the development schemes. The objective of the schemes is to integrate the developing agribusinesses into the commercial mainstream,

• Designs are demand driven and guided by the following:

- developmental impact

- feasibility

• Schemes under implementation

- Dry beans development scheme- Limpopo

- Vineyard development scheme – Northern Cape

- Mohair development scheme – Eastern Cape

- Red Meat Development scheme- Eastern Cape, Kwazulu Natal and Northern Cape

- Dairy development scheme- Free State

24

Transformation

• Promote the participation of Previously Disadvantaged Individuals (PDI’s) in the agricultural sector

• Other important focus areas: – Making smallholder farmers aware of the Marketing of Agricultural

Products Act (1996) and new structures formed after deregulation

– Encouraging smallholder farmers to participate in industry structures

– Work with industry structures to develop and implement development

• One of the NAMC guidelines for levy applications is that 20% of funds generated by levies should be used for transformation by the industry in question.

25

Training and Capacity Building Programs

Making Markets Matter - MMM

• Agribusiness training and mentorship

program aimed at emerging agribusiness

entrepreneurs

• Driven by the need for Human Capital

development in agriculture to meet the goals

of South Africa and to redress past imbalances

• Develop entrepreneurs in agribusiness -

necessary business skills - successfully and

sustainably competition locally and

internationally .

AGRIBIZ for Women

• The management training for women in agribusiness branded AGRIBIZ.

• Designed for women entrepreneurs engaged in on- and off-farm production and services and in the entire value chain of natural products, food and agricultural products.

The MMM and AGRIBIZ training programmes take place every year in

May in Cape Town. MMM - 150 farmers trained since 2008

( ± 15 per year) AGRIBIZ - 287 famers trained since

2008 ( ± 35 per year) Collaboration with the Colleges and NGOs: •Mzinti and Madzivhandila Agricultural Colleges

26

Contract Farming Section 7: Fruits & Vegetables Introduction: Contract farming is one of the

potential tools for effectively linking farmers to lucrative markets.

Why section 7 and the report?

The motivation for the section 7 investigation revolved around contractual farming arrangements issues. For example unfair contractual practices and contracts amendments which led to the satisfaction of one party.

Major findings

• Inconsistence contracting enforcement mechanisms by the agribusiness sector;

• Lack of knowledge and understanding of contractual arrangements amongst many smallholder growers;

• Different contracting mechanisms by agribusiness sector and increase in use of private standards;

• Vegetable sector is not fully organized at grower level (with exception of the few);

• Lack of disputes settlement forums from organized agriculture;

• Side selling of contracted commodities by the growers;

• Unequal powers relations between the contracting parties;

• Lack of state and agricultural industry support on contract farming (e.g Public legislative framework on contracting arrangement is not in existence).

Actions/Implementation

Contract farming manual on fruits and vegetables sector developed.

Training

Training has taken place with farmers and extension officers in the Eastern Cape and Western Cape province.

Way forward

Rollout training to other provinces with DAFF taking the lead.

27

“the NAMC worked with the WFP on the Lesotho Initiative

(Humanitarian assistance to the Mountain Kingdom of

Lesotho by the South African Government). The NAMC has

developed a Training Manual of Marketing, Trade and Pricing

of maize and dry beans.”

28

Human Resources Management

29

NAMC Organogram

30

Human Resources Administration

• (43) permanent employees and 18 employees contracted –

61 employees.

• The gender distribution is as follows:

(03) Female African at management

(13) Female African

(9) Female White

(34) Male African

(2) Male white

• (03) employees tendered their resignation

• (03) employees were dismissed due to misconduct.

31

PART TWO FINANCIALS

32

Financial Overview

Income (Grant received) R36 million

Interest generated R1,9 million

Project income received R40,8 million

Expenditure R77,6 million

Creditors payment period 3.4 days against a target of 30 days

Debtors collection period 22.2 days against a target of 30 days

Fruitless & wasteful expenditure R0,00

Irregular expenditure R0,00

Unauthorized expenditure R0,00

External Audit Report Unqualified

33

Statement of Financial Performance for the year ended 31 March 2015

2013/14 2014/15 % Change

R’000 R’000

Revenue 60,765 78 741 30%

Non- exchange revenue 59,893 76 801 28%

Exchange revenue 872 1 940 122%

Expenses 59,813 77 476 30%

Administrative Expenses 3,687 4 527 23%

Personnel Expenditure 25,392 28 586 13%

Operating Expenditure 29 492 43 112 46%

Depreciation & Amortisation 707 1 226 73%

Finance cost 35 25 -29%

Profit/(Loss) on disposal of asset (57) (78) 37%

Loss on disposal of inventory 0 (12) 100%

Surplus / (Deficit) for year 1,396 1,175

34

Expenditure Categories: 31 March 2015

2013/14 2014/15 % Change Reasons for variances

Expenditure Categories:

R’000 R’000

Personnel 25,392 28,586 13% An increase of 13% in personnel expenditure is as a result of increase in the amount paid toward performance bonuses and the annual salary adjustments of 6%.

Operating 5,475 5,808 6%

35

Expenditure Categories: 31 March 2015: Cont’

Rental: Office space 1,433 2 270 58% Increase of 58% is as result of the in operational costs.

Research, workshops & investigations

22,585 35,034 55% An increase of 55% in professional services is as a result of an increase in expenditure for sponsored projects.

Other administrative 4,486 5,868 31% An increase of 31% is as a result of increase in expenditure for travel and accommodation related to the sponsorship projects.

Total 59,370 77,566 31%

Baseline Allocation 33,819 36,005 6%

Donor funds 26,074 40,796 56%

Expenditure Categories: 31 March 2015 Continues...

36

Expenditure Categories:

Personnel - 37%

Operating - 7%

Rental: Office Space -3%

Research, workshops &investigations - 45%

Other administrative -8%

Expenditure Categories: 31

March 2015

37

Statement of financial position as at 31 March 2015

2013/14: R’000

2014/15: R’000

% Change Reasons for variances

Reserves 2,133 3,308 55%

Non-current assets

2,604 6,542 151% Increase on assets bought relating the National Red Meat Development Project.

Receivables 1,365 5,054 270% Increase in number of invoices raised for sponsorship projects

Cash & Inventories

20,535 36,577 78% Sponsorship funding received and not fully utilised as at year-end.

Liabilities 22,371 44,865 101% Increase in liabilities as a result of un-utilised revenue for sponsorship projects.

38

Statement of financial position as at 31 March 2015: Continues…

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2013-14

2014-15

39

Cash Flow Statements as at 31 March 2015

Categories

2013/14 2014/15

% Change

R'000 R'000 Cash flow from operating activities

Cash receipts 78 396 96 755 23%

Grants and Transfers 33 819 36 005

Other receipts 44 577 60 750

Cash paid to suppliers and employees

(58 546)

(59 074)

32%

Employee costs

(25 089) (28 495) Suppliers (33 457) (48 751)

Cash generated from operations

19 850 19 509

Interest received 872 1 940 Net cash flows from operating activities

20 722 21 449 4%

40

Cash Flow Statement as at 31 March 2015 continues...

Categories

R’000

2013/14 R’000

2014/15

% Change

Cash flow from investing activities

Proceeds on disposal of non-current assets 13 73

Acquisition of property plant and equipment (1 632) (5 089)

Acquisition of intangible assets - -

Net cash flows from investing activities (1,619) (5,016) 210%

Cash flows from financing activities

Finance lease payments (296) (288) Finance costs (35) (25)

Movement in finance lease liability 83 81 Net cash flows from financing activities (248) (394) 59%

Net increase/(decrease) in cash and cash equivalents

(18 855) 16 039

Cash and cash equivalents at the beginning of the year

15 1 627

20 482

Cash and cash equivalents at end of year 15 20 482 36 521 78%

41

Major Audit Findings

Material audit findings as a result of audit were as follows: • Performance targets should be specific in clearly identifying the nature

and required level of performance. A total of 33% of the targets were not specific and measurable.

• Performance indicators should be well defined by having clear definitions so that data can be collected consistently and is easy to understand and use. It must further be possible to validate the processes and systems that produced the indicator should be verifiable. A total of 22% of the indicators were not verifiable.

• This was due to a lack of proper systems and processes for performance planning and management to provide for the development of performance indicators and targets included in the annual performance plan and technical indicator descriptions.

• Material misstatements of revenue and deferred revenue that were identified by the auditors were subsequently corrected by management.

42

Steps taken to address material audit findings

• Management has developed a technical indicator guideline in response to the targets that were not specific and indicators not clearly defined.

• Management has systems in place for classification of revenue and deferred revenue in the annual financial statements. Reconciliations of deferred revenue are done on a monthly basis.

43

Thank you

44