AgriBEE Transformation Charter Presentation to the Public Hearings on AgriBEE DATE: 17 September 2010 VENUE: Parliament – Cape Town

Presentation Outline Introduction Scope of Application for the AgriBEE Charter AgriBEE Elements AgriBEE Beneficiary Base Scorecards Variations: AgriBEE versus BBBEE AgriBEE Scorecard: All Elements - Weights, Indicators &Targets Enterprises Classification versus Compliance to the Scorecard Enterprises’ Indicate AgriBEE Status and Procurement Recognition Levels SANAS Accredited Rating and Verification Agencies for Scorecard Calculation

Presentation Outline (cont…) Composition of the AgriBEE Charter Council Progress made by the AgriBEE Charter Council Progress report on the Study for EMEs and QSEs Thresholds Challenges experienced by the AgriBEE Charter Council Implementation of the AgriBEE Equity Fund BBBEE compliance in the Agricultural Sector Concluding Remarks Way Forward

Introduction The AgriBEE Sector Charter is a statement of intent wherein stakeholders expressed their commitment towards the goals for broad-based transformation of the agricultural sector. It is the product of extended consultations and deliberations amongst sector and related stakeholders over a number of years, initiated by the launch of the AgriBEE Framework in July 2004. AgriBEE Charter was developed as guided by the Phase 1 & 2 BBBEE Codes of Good Practice, taking into effect: BBBEE Act No. 53 of 2003 South African Strategic Plan for Agriculture of 2001 Unique aspects specific to sector i.e. Land AgriBEE Charter was gazetted on 20 March 2008. AgriBEE Charter was then launched on 4 April 2008. AgriBEE Charter Council was inaugurated on 5 Dec 2008.

Scope of Application for the AgriBEE Charter The scope of the AgriBEE Transformation Charter shall include any Enterprises which derives the majority of its turnover from: The primary production of agricultural products; The provision of inputs and services to enterprises engaged in the production of agricultural products; The beneficiation of agricultural products whether of a primary or semi-beneficiated form; and The storage, distribution, and/or trading and allied activities related to non-beneficiated agricultural products.

AgriBEE Elements Ownership Management Employment Equity Skills Transforming the Commercial sub-sectors Ownership Direct participation in Economic Activities (Shareholders & Management Team) Management Employment Equity Addressing challenges of the commercial & developing sectors Development of Human Capital (Current & prospective employees) Skills Development Preferential Procurement Addressing challenges of developing sector Development & Investment in Affirmable Enterprises (Suppliers & communities) Enterprise Development Poverty alleviation 6

AgriBEE Beneficiary Base Equitable Economic Opportunities Emerging black middle class & investors Ownership & Management The Opportunity Barrier Preferential Procurement Enterprise Development Black entrepreneurs The Business Barrier Skills Development Black workers, professionals, graduates, school-leavers The Skills Barrier Employment Equity RD, PA & CSI Black unemployed & rural poor The Poverty Barrier

Scorecards Variations: AgriBEE versus BBBEE No Empowerment Indicator AgriBEE Indicative Scorecard Variance BBBEE Generic Scorecard 1 Ownership (Land and Equity) 20 points 2 Management Control 10 points 3 Employment Equity - 5 15 points 4 Skills Development + 5 5 Preferential Procurement 6 Enterprise Development 7 Rural Development, Poverty Alleviation and CSI 05 points

AgriBEE Scorecard Weight 100% Ownership 20% 10% Management Control Your company 10% Employment Equity 20% Skills Development Preferential Procurement 20% Your supply chain Enterprise Development 10% The environment Socio-Economic Development 10% 100%

Ownership (20 points)

Management Control (10 points)

Employment Equity (10 points)

Skills Development (20 points)

Preferential Procurement (20 points)

Enterprise Development (10 points)

Rural Development, Poverty Alleviation and Corporate Social Investment (10 points)

Enterprises Classification vs. Compliance to the AgriBEE Scorecard Exempted Micro Enterprises (EMEs) have an annual turnover of less than R5 million. They are FULLY EXEMPTED from complying with the Codes, and are considered fully empowered. They automatically have a Level 4 Contribution Level or status, and are considered at Level 3 if they are also black-owned. Qualifying Small Enterprises (QSEs) have an annual turnover of more than R 5 million, but less than R 35 million. They can CHOOSE any four out of the seven elements of the scorecard, and each element is weighted equally at 25%. Large enterprises have an annual turnover of more than R 35 million, and they have to comply with ALL seven components of the Scorecard.

Enterprises’ Indicate AgriBEE Status and Procurement Recognition Levels

AgriBEE Contribution Levels % Points on Scorecard Procurement Recognition (R1.00 spent =) Level 1 greater than 100 points R1.35 Level 2 from 85 to 99 points R1.25 Level 3 from 75 to 84 points R1.10 Level 4 from 65 to 74 points R1.00 Level 5 from 55 to 64 points 80 c Level 6 from 45 to 54 points 60 c Level 7 from 40 to 44 points 50 c Level 8 from 30 to 44 points 10 c Non Compliant from 0 to 39 points 0 c

SANAS accredited Rating/Verification Agencies for Scorecard calculation

Composition of the AgriBEE Charter Council Government, Agribusinesses, Agricultural Processors, Farmers Organisations, Labour Unions Civil Society Organisations, and Farmers Unions.

Progress made by the AgriBEE Charter Council Council drafted a detailed workplan and already met 6 times to discuss and agree on the workplan activities. Council agreed to migrate the section 12 into 9 Sector Codes for Agricultural Sector Council established 3 Working Groups as follows: Working Group 1: responsible for the alignment of the Sect.12 Charter with the final DTI Codes, check the 7 elements of the Generic Scorecard and their points’ allocation with the indicative AgriBEE Scorecards. Working Group 2: responsible for drawing up a Budget for the Activities of the Council. Working Group 3: responsible for the investigation and development of a cost-effective monitoring & reporting system on AgriBEE implementation.

Progress (cont…) Council agreed to commission a study to review thresholds for Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs). Council made a commitment to complete a Draft Sector Code by next Council Meeting and agreed to gazette it parallel to the study. Council completed the alignment of AgriBEE Scorecard and the Development of AgriBEE IT Portal is in progress. Council investigated options for structure and funding after Section 9 follows: STRUCTURE: Council Executing Authority remaining under wing of Government (currently Secretariat to Council) or Independently Established Office with appointed CEO and staff. FUNDING: 50-50 or 60-40 (Government-Private Sector). Not yet finalized the decision on the structure and funding.

Progress report on the Study for EME and QSE Thresholds Following the Departmental Supply Chain processes, a tender was advertised two times to appoint a suitable service provider, however all Bidders did not meet the requirements. BID Evaluation Committee evaluated various options to undertake the study given unsuccessful tender option and recommended a proposal to engage the NAMC to undertake the study for Council’s consideration. Council supported the proposal to appoint NAMC to do such study and tasked the Secretariat to facilitate the appointment modalities. NAMC appointment is still in progress.

Challenges experienced by AgriBEE Charter Council Reporting on sector’s transformation is a difficult task under current Section 12 Charter status Unable to give statistics on Scorecard Targets & Indicators other than the basis information in the DTI’s BEE Portal Statistics/ information on AgriBEE not available and not coordinated

Implementation of the AgriBEE Equity Fund Fund Objective: To provide funding for equity deals that promote the entry and participation of black people in the entire agricultural value chain. DAFF entered into an MOA with Land Bank, as the Fund Manager. About R195 million was transferred to the Bank: 2006/07 – 2009/10. About R85 million was spend between 2006/07 and 2007/08 to finance 13 equity projects and 6 AgriBEE opportunity studies & database . About R110 million has been frozen due to the allegations of mismanagement of the fund by the Land Bank. In order to unfreeze the fund, DAFF and Land Bank have developed a new MOA on the AgriBEE Equity Fund and also revised the AgriBEE Fund Operational Manual, which are on route for signature by both parties. Once the MoA is signed, the AgriBEE Fund will be operational and the applications will be considered by the Land Bank in line with the revised operational manual

Agricultural Sector BBBEE Compliance: Registered Entities and Ownership Status According to the DTI IT Portal as at 30 June 2010, there are 612 entities registered in the Agricultural Sector as follows: 299 are Exempted Micro Enterprises (EME’s) 231 are Qualifying Small Enterprises (QSE’s) 82 are Large Enterprises (Generics) 278 were not yet rated. Ownership status of the Registered Agricultural Entities: Average black ownership is 23% Average black women ownership is 10%

Number of Agricultural Entities Agricultural Sector BBBEE Compliance: Status of the Registered Agricultural Entities Contribution Levels Number of Agricultural Entities % Points on Scorecard Level 1 31 greater than 100 points Level 2 20 from 85 to 99 points Level 3 74 from 75 to 84 points Level 4 161 from 65 to 74 points Level 5 12 from 55 to 64 points Level 6 16 from 45 to 54 points Level 7 6 from 40 to 44 points Level 8 from 30 to 44 points Non Compliant 8 from 0 to 39 points

Concluding Remarks “We must be the change we wish to see in the world. I was born in India, but made in South Africa”: Mahatma Gandhi “Socio-economic transformation is difficult but not impossible”: Nelson Mandela Given these remarks, AgriBEE Charter (Section 12) is currently on the transformation roadmap to AgriBEE Sector Codes (Section 9) This transformation roadmap has lot of turbulences and therefore require more than 100% commitment from all the stakeholders in the Agricultural Sector: Working together we can do more.

Way Forward Council will facilitate the gazette of AGRIBEE Sector Codes from December 2010. Council will facilitate the signing off of the Section 9 Code by the key agricultural stakeholders before the end of March 2010. Council will facilitate reporting by all agricultural stakeholders who falls under scope of the AgriBEE Charter.

History confirms that people don’t believe the MESSAGE until they believe the MESSENGER. I THANK YOU