Towards a New Marketing Dispensation for SA

1. Towards a New Marketing Dispensation for SA Mohammad Karaan University of Stellenbosch

2. Outline • No one learns from history… • MRC Findings • Recommendations • New Deal for Agriculture • Incentives for developing sector

3. No one learns from history…… • 1800’s: liberal tradition • 1900’s: depression, war, technology, farm politics, concentration, coops, family farms => INTERVENTION • Commission of Inquiry 1934 (Frankel, 1934) - Yes, free market - no coops - no new institutions - no price controls - no one channel marketing • Dominant class will restrict less favored blacks (Davis, 1931) • Yet, 1937 Act brought the opposite • Followed the British and politics

4. MRC Brief Review the impact of deregulation ito: • agricultural marketing systems and institutions. • pricing structures of major commodities. • increased production and expanded markets. • market access qualifiers • import and exports. • public and private networks and institutions • trade and tariff policies. • national and household food security. Determine • Role of the state in a deregulated environment. • Role of the Marketing of Agricultural Products Act No. 47 of 1996 re: • employment creation • food security • BEE • Competitiveness • export and investment promotion • value addition. • Institutional framework for management of the agricultural marketing

5. Key questions • Provide a brief summary of the deregulation process. • Describe the emerged organizational arrangements. • Describe the experience of the industry in the post-deregulation era with respect to: • Trends in total output; • Trends in exports & imports; • Trends in the use of resources (land, capital & labour); • Changes in the structure of the sector in terms of farm size, shifts in location of production, etc.; • Social aspects such as schools, education, health, housing; etc • Environmental impacts; • Research & technology development; • Competitiveness (global & domestic); • Regulatory environment and the impact on business; • Competitive behaviour; • Prices and margins. • What could have been done differently? • Progress and impact on land reform and BEE. • Provide an overview of industry performance in relation to objectives of MAP 1997 • Describe the most important factors in the global trade arena that impacted on your industry. How did your industry contend with it? • What can government do to improve marketing in your industry?

6. Hearings

7. The Committee • Dr. Mohammad Karaan • Ms Jean Davidson • Dr. Tobias Doyer • Prof. Charles Machethe • Dr. Patrick Sokhela • Mr. Bigman Maloa • Prof. Herman van Schalkwyk • Prof. Nick Vink Acknowledge assistance of Mr Billy Morokolo personnel at the NDA

8. Findings categorisation • The impact of policy shifts on agriculture • Industry views on the process of deregulation • Impact of deregulation on empowerment • The role of the state • Synopsis

9. The impact of policy shifts on agriculture • Difficult to separate deregulation & liberalisation • Least support in world standards • Gainers= large efficient firms • Losers=400000workers + casualisation • 2000 farmers + 40 000 workers p.a. • Growth in exports • Destabilising effect of the Rand • Greatest effect on grains • Expanded agribusiness • Limited impact on meat • Increase in farm size • Privatisation of Information • Capacity in DoA • Depletion of public research

10. Industry views on the process of deregulation • Neglected Information function • Neglected Research & ARC • Loss of capacity with Boards • Pace of reform • Lack of attention to BEE & transformation

11. Impact of deregulation on empowerment • Strong negative impact • Constrained opportunities in farming • More market risk new firms • Commitment to BEE, lack frameworks/plans

12. The role of the state • Infrastructure • Food Control & inspections • Monitor uncompetitive practice • Support emerging firms • Govt coordination • Functions of prov & nat dept’s • State-industry coordination • Attend to govt capacity • Trade administration & negotiations • Market access • Promotion and export incentives • GI & IP • Collaboration in market intelligence

13. Synopsis Deregulation had an overall positive impact on the agricultural sector. The main areas where little progress was achieved are in the advancement of black agribusiness enterprises, research, information, and in changing the composition and direction of trade. Hence, it is generally recommended that specific support measures be introduced for black firms, and incentives be developed for closer cooperation with the private sector in information, promotion, research, consumer protection, and transformation. Support measures for black firms do not need to be in the form of market interventions, but they can include direct support as defined in the ‘green box’ and special and differential treatment clauses of the Agreement on Agriculture. Therefore, the Committee does not necessarily call for state intervention in markets, but rather for closer collaboration with markets through incentives in addressing the contemporary challenges.

14. Recommendations • The need for a Marketing Act • Deficiencies in the Marketing Act • Clarify role of NAMC • Retain trusts & levies • Monitor and align trust funds • Markets & Econ Research program • Export promotion program • Coordination: ITAC, Dti, CC…. • Agric trade admin capacity • Simplified tariff regime • Direction and composition of trade • Trade attaches & Market intelligence • Southern Hemisphere collaboration • Industry incentives • Cost sharing

15. Recommendations cont… • SADC leadership • Transformation guides per industry • Legislative reviews • Strategic grain reserves • Attend to infrastructure • Address gender • Marketing assistance schemes • Consumer protection • Enhance value chain

16. MAP deficiencies • the powers of the NAMC • transformation targets • the definition of statutory measures • maintaining a public information system • export promotion • trade and tariff measures • domestic markets • developing regional trade • market intelligence • market and economic research • respective powers of the NAMC and the DoA • roles of industry trusts • roles and responsibilities of private sector • consumer protection • the application of levies

17. A New World • Rising demand and commodity prices • Chain integration • Mass acculturation and customisation • Value co-creation • Food liability • Uneven playing fields • Knowledge economies • Demise of the nation state

18. A New Deal The key prerequisites: • Land question • Unity • Growth

19. A Growth Path • Advance capital investment in growth industries • Infrastructure investments • Change the direction and composition of trade • Proactively seeking bilateral trade • Market intelligence • South-South Collaboration • Trade tactics • Human capital • Institutional integration • Improve food liability

20. Design criteria: • Government does least • Concessionary markets • Delayed gratification • Incubation & experiential learn • Incentives to markets • Entry and exit criteria • Sunset arrangements • Risk mitigation mechanisms • Social capital • Talent • Goodwill vs Law • Debt trap! • Non racial socciety

21. Contracting examples: • Agricultural cooperatives / Agribusinesses contracting with black farmers • Sugar mills contracting with small farmers • Grain traders and coops contracting with black farmers • Feedlots, abattoirs or traders contracting black livestock owners • Exporting firms/agents procuring from black producers • Processing companies procuring from black suppliers • Cotton mills and ginneries out-contracting to black farmers • Wine cellars issue delivery rights to black farmers • Market agents contract selling produce of black farmers • Supermarkets procuring from black farmers • Centre-satellite outgrower schemes in primary agriculture

22. Possible Schemes • Transaction cost offset scheme • Revolving fund attrition scheme • Contract and equity acquisition scheme • Price support scheme • Market access quota scheme • Infrastructure development fund • Training and capacity building • Export promotion programme

23. Africa’s MomentPete Ondeng God said,: ‘Go and build a better world” And I said, “How? The world is such a big place, And so complicated now, And I’m so young and helpless, There’s so little I can do”. And God in all His wisdom said, “Just build a better you”.

24. Thank You END