MECHANISATION SUPPORT POLICY FRAMEWORK PRESENTATION TO THE PORTFOLIO COMMITTEE ON AGRICULTURE, FORESTRY AND FISHERIES DIRECTOR GENERAL EDITH V. VRIES 21 OCTOBER 2014

Presentation Outline Background Problem Statement Objectives of the Policy Guiding Principles of the Policy Legislative Mandate Proposed Policy Framework (Options) Monitoring and Evaluation Conclusion

Background The Freedom Charter (1955) states, “The state shall help the peasants with implements, seed, tractors and dams to save the soil and assist the tillers” The conscious decision to make tractors and implements available to people with access to land is recognised The provisioning of tractors and implements created unintentional problems in the way it was implemented The proposed policy addresses the problems and provide solutions for the large number of people that require support The use of local SMME’s address a critical developmental issue Mechanisation support is a critical pillar of Fetsa Tlala Integrated Food Production Initiative .

Problem Statement Challenges experienced in provinces: Unavailability of mechanisation support to producers when required Majority of producers can’t afford mechanisation – due to economies of scale and high operation and maintenance costs There are few or no financial institutions to facilitate credit requirements of mechanisation Provinces have indicated at the workshop held at (12/08/2014) that about 50% of the tractors available is functional and that the tractors available addresses about 5% of the demand

Problem Statement cont…. Local supply chains are poorly scattered that limit availability of services and parts There is a lack of technical skills and other human capacity. There are inadequate mechanisation training facilities The size of the South African market limit the number of role players that can successfully penetrate it There is an uncoordinated approach to mechanisation support Government operated mechanisation support does not work due to inherent supply systemic constraints (timeliness and appropriateness)

Present Policies implemented by Provinces EC FS GP KZN LP MP NC NW WC Support individuals x Support Cooperatives Use SMME’s Credit facility but not implemented Implement support by province Use Implementing agency X (LM)

Problem statement - Mechanisation costs Average mechanisation cost per hectare serviced (excluding other inputs such as seed and fertilizer) Includes fuel, operation and maintenance but excludes the initial purchasing cost State run mechanisation fleet R 6 800/ha (average yields 1,5 tons/ha) Operational inefficiencies, travelling distances, variable soil types Private farmers 2700/ha (average yields 4 tons/ha)

Government equipment

Government equipment

Government equipment

Objectives of the Policy To ensure the provision of an affordable mechanisation service to producers with access to viable natural resources To unlock the potential of underutilized agricultural resources and increase food production and reduce poverty and under-development To enable full access to and utilization of available equipment To support the provision of holistic support aimed at producer growth and development To promote local economic beneficiation

Guiding Principles of the Policy Co-operative governance Participatory approach Sustainable natural resource management Equity Competitiveness Sustainability and self-sufficiency Capacity building

Legislative Mandate Constitution of the Republic of South Africa (Act 108 of 1996) Public Finance Management Act 1 of 1999 National Environmental Management Act 107 of 1998 Marketing of Agricultural Products Act 47 of 1996 Conservation of Agricultural Resources Act 43 of 1983 Plant Improvement (Act 53 of 1976) National Veld and Forest Fire Act (Act 101 of 1998) Agricultural Pest Act, 1983 (Act 36 of 1983) Perishable Products Exports Act (Act 9 of 1983) Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act (Act 36 of 1947) Plant Breeder’s Right Act (Act 15 of 1976) National Environmental Management: Biodiversity Act (Act 10 of 2004) Occupation Health & Safety Act (Act 85 of 1999) Skills Development Act

Proposed Policy Framework (options) Budget for mechanisation cannot be separated from that of other inputs required for production An optimised mechanisation plan is required for each enterprise Government must avoid ownership and operation of tractors and equipment. Therefore the policy advocates for the disposal of such equipment Government should create an enabling environment through support that provides stimulus for agricultural production. Promotion of cooperatives where feasible is encourage to optimise use of land and equipment

Proposed Policy Framework (options)… Three OPTIONS are proposed. Option A – Transfer of government owned tractors and equipment to cooperatives Option B – Utilisation of local SMME Contractors/ Service providers Option C – Establishment of a Credit Facility Implementation not prescriptive

Transfer of Government Equipment Identify appropriate equipment in government pool for transfer Valuate the equipment and linking it to the financial lending institution. Redistribute to producers at 80% grant and 20% repayment.* Identify cooperatives with institutional, management and financial skills Develop mechanisation solution with cooperative Portion of solution not available from pool should be obtained by cooperative through credit facility

Utilisation of local SMME/Service Providers Provide mechanisation services on a cost recovery basis. This facility already exist in some if not all provinces. Provide services cooperatives or individual producers Opportunity for entrepreneurs and employment and promotion of local empowerment. Standard rates should be developed (approved by provincial Treasury) Rates across provinces where possible should be standardized

Establishment of a credit facility Affordable loans through a credit revolving fund created through Land Bank. Support to cooperatives, individual producers and Land Reform beneficiaries (RECAP) Grant of 50% and 66% of purchase price for conventional conservation agriculture equipment respectively. Maximum amount of grant R 2,5 million Repayment over 5 years at preferential interest rates

Guidelines for Mechanisation support It is the prerogative of each province to set standards and criterion for the mechanisation support program. These should include consideration of the following: To ensure that value on investment is derived through selection of cost effective, viable and sustainable mechanisation strategies To channel comprehensive support to producers in addressing the gaps in the broad spectrum of needs for these producers To strengthen institutional arrangements (partnerships, restructuring, funding, establish new entity/ties) for the effective delivery of services

General Conditions of Support To guide the support that should be provided to producer Indigent producers/farmers, Smallholder producers/farmers and Commercial producers/farmers All beneficiaries assisted may not dispose of equipment within 5 years Contravening above – blacklisted for 5 years Threatened/ imminent repossessions must be reported Unannounced visits to monitor and evaluate equipment Record keeping by all service providers and beneficiaries

Monitoring and Evaluation Provinces will be expected to report progress on a quarterly and annual basis on the following performance indicators: The area (ha) serviced per household The area (ha) serviced per agriculture cooperative The area (ha) serviced per district The area (ha) serviced per province The average cost (R/ha) of providing the services per district Furthermore data should be collected on the following: Project/ beneficiary information (i.e. name, contact details, ID numbers, etc) A GIS database with the position and size of each beneficiary/ project land mapped. Support provided to each individual/cooperative

Implementation cost 2015/16 R’ mil 2016/17 2017/18 2018/19 2019/20 Transfer of existing equipment 35 30 Use SMME’s to cultivate 100 000 ha 450 472 496 521 547 50% grant to support mechanisation acquirement on 100 000 ha of additional land yearly 1 800 1 890 1 984 2 084 2 188 Total 2 285 2 392 2 480 2 605 2 735

Conclusion/ Wayforward ACTIVITY DATE Consultation with provinces 12 August 2014 (took place –awaiting feedback) Portfolio Committee 4 September 2014 (presentation was not made but was available at the meeting) Consultation with other departments/entities (DRDLR, NT, dti, Land Bank) Proposed for 12 September 2014 Final consultation with all stakeholders 20 September 2014 ASRDC/STC 30 September 2014 EXCO 7 October 2014 MINTEC 11 September 2014 MINMEC 26 September 2014 Cluster To be determined IMC CABINET