By Dr Langelihle Simela-Langelihle.Simela@absa.co.za
Absa bank het al die afgelope 100 jaar in landbou belê en sien uit na die volgende 100 jaar saam met ons boere. Bekende name in die landboubedryf gaan verskillende vooruitsigte soos die ekonomie, die weer, gewasse, groente, vee ens vir 2017 bespreek. Hou ons webblad dop om almal te lees.
Current agriculture development policy environment
The South African government views agriculture as one of the sectors with great potential to drive economic growth and job creation. Agriculture is integral to achieving the 2030 strategic goals of 5,7% average real GDP growth, eliminating poverty and reducing inequality from 0,70 to 0,60, as measured by the income Gini coefficient. Consequently, revitalising agriculture and agro-processing value chains (RAAVC) features at the top of the list of the President’s nine-point plan for accelerated economic growth. Part of the challenge in realising the intended growth in agriculture has been the coexistence of multiple, well-intended, but uncoordinated programmes, that have had a minimal impact in advancing the sector. This was evident in the recent reviews of a number of producer support programmes by the Department of Planning, Monitoring and Evaluation (DPME). Recognising this, the government embarked on a plan, called Operation Phakisa, for agriculture, land reform and rural development. The primary objective is to formulate interventions for transforming South African agriculture to be more inclusive, particularly focusing on the grain, horticulture and livestock integrated value chains, as well as the cross-cutting issues of labour, farmer support, land reform and rural development. At the time of publication, the intensely consultative process of Operation Phakisa was under way. It is expected to yield a consensual plan for agriculture, through which government and the private sector can, in tandem, drive transformation and inclusive growth.
B-BBEE at a glance
One of the policies that South Africa already has and that potentially can embed transformation and inclusive growth in business is broad-based Black economic empowerment (B-BBEE). The policy is intended to advance the economic transformation and participation of Black people in the South African economy. It is based on a scorecard against five elements of empowerment , with much emphasis on the development of (enterprise and supplier development) and procurement from small and medium enterprises, skills development and ownership. Collectively, the three priority elements make up between 90 and 104 points of the scorecards that could be used by agricultural entities (i.e. agriculture, forestry and fisheries) and take fully compliant companies to at least B-BBEE Level Three contributors. The three priority elements have subminimal levels to which companies should comply to avoid being downgraded one B-BBEE level down. The B-BBEE policy caters for three tiers of business entities; namely large enterprises with an annual turnover of more than R50 million, qualifying small enterprises (QSEs) with an annual turnover of more than R10 million but less than R50 million, and exempt micro-enterprises (EMEs) with an annual turnover of less than R10 million. All EMEs automatically qualify as B-BBEE contributors at Level Four if they are less than 51% Black owned, Level Two if they are at least 51% Black owned and Level One if they are 100% Black owned. They are expected to provide only an affidavit stating their turnover and credentials as proof of their B-BBEE status. Large entities and QSEs need to provide a B-BBEE certificate and the requisite documents to prove their B-BBEE status. However, an affidavit suffices for QSEs that are at least 51% Black owned. Thus, proving B-BBEE status has been made less onerous for small and medium enterprises, particularly the Blackowned ones. The points earned by a business entity on the scorecard determine its level of B-BBEE contribution; and hence the level of procurement recognition that an entity receives. As illustrated, a company with a higher B-BBEE status enhances its customers’ scorecard for every rand spent on procurement; whereas it would cost customers more to obtain points by procuring from suppliers with a weak scorecard (below B-BBEE Level Four). Not complying with enterprise and supplier development at all has the greatest impact; the highest possible B-BBEE contribution would be Level Six, including the discounting principle. Similarly, not complying to equity ownership and skills development would result in possible B-BBEE Levels Four and Three, respectively. Besides the priority elements, the B-BBEE policy fosters a workforce that is aligned to economically active population demographics (i.e. ratios of African, Coloured, Indian and White in the age group 15 to 64-years-old), the empowerment of women and the use of accredited training programmes. It also enforces procurement from “empowering suppliers” which, broadly defined, are “good corporate citizens” that meet prescribed minimum standards for local procurement, job creation for Black people, local beneficiation of products, skills development and employment of South Africans.
The premise of the B-BBEE scorecard is therefore to incentivise business entities to procure from other entities that would enhance their scorecard and so create a network of B-BBEE-compliant entities. Government is the catalyst for the development of this network by setting mandatory B-BBEE qualification criteria for the issuance of licences (e.g. water, import and export); awarding concessions and grants; buyers of state or public assets; and implementing preferential procurement policy.
There is no recent information on the extent of compliance with the B-BBEE policy other than a benchmarking exercise that was conducted back in 2007, which indicated compliance levels of less than 13% to any of the seven empowerment elements in the 2007 codes. The B-BBEE Advisory Council is tasked with reviewing progress in achieving B-BBEE. It is anticipated that with the new regulations that were promulgated in June 2016, information will be compiled and shared with the public in due course. The implications of B-BBEE policy for business entities are that they should work with their advisers to develop their plans for complying with B-BBEE policy. In their planning they would not only consider the minimum targets set out in their relevant sector codes but also their clients’ short to longer-term targets. They therefore need to decide on who they intend to supply in future, determine the B-BBEE compliance requirements of their clients and work towards achieving those targets. Invariably this influences who the company in turn chooses to have in its supply chain, as this impacts on its BBBEE credentials.
A critical consideration for any business would be government’s requirements for the issuance of licences, concessions and authorisations. The success of achieving B-BBEE largely hinges on clear information and guidance to businesses on how to implement BBBEE; businesses’ willingness to comply with the policy; the effectiveness of incentivising those who comply and penalising those who do not; and, enabling policy and support measures for the growth and development of agriculture, as is anticipated from Operation Phakisa. As Absa AgriBusiness, we are wholly aware of the implications of the new B-BBEE policy for the bank and its clients and are committed to providing accessible financial and business support services that will assist our clients to comply with the policy, with a view to enabling transformation and inclusive growth in the sector. We value ours and our clients’ standing as credible role players in South Africa’s agricultural sector and continue to support the building of a progressive society.
Source: ABSA agricultural outlook 2017