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Chairperson
Mr D P Ford
Cell
082 898 7194
E-mail
dave@safeedlot.co.za
Tel
(012) 665 1469
Fax
(012) 665 1296
P O Box 7588
Secretariat
Ms M de Lange
Centurion
Cell
079 162 6465
0046
E-mail
manager@rmif.co.za
1 March 2013
Mr Nkonyiso Mkhize
nmkhize@parliament.gov.za
Portfolio Committee on Agriculture, Forestry and Fisheries
Private Bag 15
Cape Town
Dear Sir,
INDUSTRY COMMENT ON THE PRINCIPLES OF THE PROPOSED DRAFT FERTILIZER AND FEEDS
BILL 2012
We refer to our previous unanswered comments dated 15 September 2009, 30 November 2009
and 29 April 2010 in relation to the proposed Fertilizer and Feeds Bill 2012 (“the Bill”).
We welcome this opportunity again to provide further combined comment on behalf of the Red
Meat Industry Forum, whose members include the National Emergent Red Meat Producers
Organisation, the SA Feedlot Association, the Red Meat Producers Organisation, and the SA Pork
Producers Organisation together with the Milk Producers Organisation:
1. As we pointed out in our previous comments, the Bill in its current form requires the
registration not only of commercially manufactured feeds and commercial feed mills,
but also all other mixing facilities. Accordingly, as it currently stands, the Bill will require
even those farmers who “self-mix” (i.e. mix feed solely for their own livestock), to
register as a mixing facility. Our current experience suggests that this will be a very time
consuming and potentially costly if not impossible process. Farmers and producers who
self-mix their own feed will have to wait extended periods of time before they are able
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)
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to obtain registration and legally mix food on their own premises to feed their own
livestock.
2. The original objective of the proposed bill was to replace the registration of
commercially manufactured feeds with the registration of commercial feed
milling/mixing facilities. The proposed Bill includes both, as well as including all other
mixing facilities under the guise of food safety when no case of a negative effect on
either human or animal health has ever been reported. The proposed Bill thus exceeds
the original objectives, and it is questionable if and why it should do so as the
motivation is unclear.
3. The Bill has moved from regulating commercial feeds to effectively regulating animals
for commercial production. This is a far cry from the original ambit and will have a major
impact on the commercial viability of farmers (especially emergent and small scale
farmers) and through that on food security – issues of national concern and extreme
sensitivity. We submit that this will have extremely negative consequences on the food
value chain and ultimately, the South African economy as a whole:
3.1 The proposed bill was initially compiled in collaboration with the commercial feed
industry to simplify the lengthy feed registration process, with little or no input from
the self-mixing industries.
3.2 Self-mixers will, until they are able to procure registration, be forced to purchase
mixed feed from the commercial feed industry. This is a concentrated sector of the
economy which is dominated by a number of large competitors mainly AFMA
members.
3.3 At present, the market power of these commercial feed suppliers is counterbalanced to some extent by the economic ability of farmers and producers of red
meat and dairy products to self-mix their own feed (for example, if commercial feed
producers raise their prices substantially, or if their quality or service levels drop). In
the event that the Bill comes into effect in its current form, this countervailing
power will be eliminated because farmers and producers will have no legal choice
but to purchase their feed from the large suppliers if their facilities are not
registered.
3.4 The licensing of facilities as stated in the proposed Bill could number in excess of
30 000 commercial facilities and 40 000 emergent facilities, which could be virtually
an impossible task to monitor.
3.5 The registering of a facility cannot guarantee the actual safety of feed offered to the
livestock which will depend totally on the actual feed management at the
production site.
3.6 The DAFF does not have the capacity to institute this additional work load as is
demonstrated by the absence of:
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)
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The enforcement of the ban on the use of ruminant by-products as well as
the double standards that are applied.
The inability to do adequate surveillance at abattoirs for BSE.
The enforcement of the ban on the selling and feeding of swill to swine.
The registration of abattoirs in Limpopo who were until recently operating
illegally without registration.
The speedy registration of animal feeds which lead to this application by
AFMA.
The majority of the registration, removal procedures, reporting,
consultation, issuing, auditing and return of certificates, registering of feeds
requirements are unattainable.
The proposed Fertilizer and Feeds Bill is based on similar bills in some European and
other 1st world countries with sophisticated control and monitoring structures which
are deficient in South Africa.
3.7 In the event that the proposed bill is passed in parliament, the commercial feed
industry will stand to benefit to the detriment of the self-mixing industries, with a
substantial impact on the input costs of farmers and producers. In particular, the
following effects are likely:
3.7.1
The possibility exists that some presently adequate self-mixing facilities
could be forced to introduce major capital expenditure improvements to
meet certain set unsubstantiated standards. No reference is made as to
what the requirements will be for the licensing of different classes of
facilities, or as to who will be responsible for the actual licensing functions.
This function will have to exclude any party associated to the formal feed
mixing industry. Similarly the setting of required standards for self-mixing
facilities and the resulted licensing for the self-mixing of feed for i.e. 5, 50,
500, 5000 and 50 000 animals will be an impossible task as the
specifications would have to be totally different for each of the species and
type of production systems and required facility and audited as such.
3.7.2
The tax payer funds the activities and services of the DAFF and there should
therefore not be a tonnage fee but maybe a registration free, renewed
annually for commercial mills and ingredient suppliers.
3.7.3
Farmers and producers will be forced to increase their selling prices due to
ever increasing production costs, which in turn will have severe knock-on
effect throughout the South African food value chain, fuelling already
spiralling food prices and thereby jeopardising the government objective of
food security.
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)
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3.7.4
Farmers (especially emerging producers and small scale producers) who
cannot recover increased feed costs and the extremely low margins may be
forced to exit the market in due course, leading to fewer competitors and
jobs on this level of the market.
3.7.5
New entrants, and particularly emergent black famers, will be deterred from
entering the market. Such new entrants might otherwise be able to self-mix
feed relatively cheaply until they reach a large enough size and scale to
purchase commercial feeds economically.
4. The proposed Bill is thus likely to increase concentration at the farming level of the
market and enhance the market power of already powerful commercial feed producers.
As Simon Roberts, the Chief Economist of the Competition Commission (“the
Commission”) notes:
“Market power and concentration in food production is obviously of great importance as
it affects the pricing of food to consumers and impacts on the producers at different
levels of the various value chains, including farmers"1
5. The Commission has repeatedly highlighted concerns about the lack of competitiveness
in various levels of the food value chain2, which it describes as consisting of “historical
oligopolies and virtual monopolies”.3 Primary producers bear the full brunt of anticompetitive behaviour because they are squeezed from two sides: monopolistic prices
on the input side, coupled with concentration upstream in support and processing
sectors where prices for products are being pushed down.
6. The Commission emphasises that new players are battling to enter food production due
to the dominance of established brands. In particular, the dominant firms use their
powerful position to impose standards which exclude vigorous competition, and which
are beneficial to their own interests and profitability. The current lobbing effort by the
Animal Feed Manufacturers Association (“AFMA”) in relation to this Bill is a good
example of this anticompetitive practice: in the event that AFMA is successful in
convincing Parliament to pass this proposed Bill, large numbers of purchasers will be left
1
Chabane, Rakhudu & Roberts (2008) Market Power and Competition Concerns in Food: A Review of Conduct and
Outcomes following DeregulationChabane, Rakhudu & Roberts (2008) Market power and competition Concerns in
Food: A Review of Conduct and Outcomes following Deregulation
2 For example, the Competition Commission is currently investigating the poultry, edible vegetable fats and oils and
supermarket sectors. Complaints involving the dairy industry, as well as the activities of SAFEX are being prosecuted.
The Competition Tribunal is due to hear a case regarding anti-competitive practices in the fertilizer and milling
industries, and the Competition Appeal Court is yet to hear an appeal relating to price-fixing in the bread industry
3 Presentation by the Competition Commission to the Portfolio Committee on Economic Development 2009-11-12
4 For a list of the members of AFMA, see http://www.afma.co.za/Membership.htm
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)
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with no option but to purchase their feed from commercial feed producers, some of
whom are AFMA members.4
7. The Commission has repeatedly called on government to introduce measures designed
to increase competition in the food value chain and benefit consumers. However,
passing this Bill in its present form will substantially hinder competition in the food
value chain. This is contrary to Parliament’s objectives when it passed the Competition
Act.
8. It will also impact negatively on government’s commitment to increase participation by
previously disadvantaged individuals in agriculture, to promote equitable access to
markets by emerging black producers and advance land reform.
9. It is furthermore procedurally unfair to require parties whose rights will be affected by
draft legislation to comment until such time as the material regulations spelling out the
detail of the proposed legislation are known. The Constitution provides specifically for
participatory democracy which has been interpreted by the Constitutional Court to
mean that citizens must be provided with a “meaningful” opportunity to be heard in
relation to the making of laws. In order for an opportunity to comment to be
“meaningful” parties should have access to all relevant information? It would also be a
violation of the constitutional right to fair administrative action to promulgate the Act
without giving producers that self mix an opportunity to respond. It was undertaken by
the Registrar that consultation would have taken place to discuss regulations separately
with self-mixing and commercial industries, but did not materialize.
RECOMMENDATIONS
10. These concerns highlight the need for the Department to hold more extensive
consultations on the Bill with all stakeholders as undertaken. In particular, the
Department should consult with the competition authorities on the potentially anticompetitive effects of this proposed Bill before it proceeds any further.
11. The self-mixing industries support the registering of facilities, that process, mix, value
add or distribute feed ingredients (domestically produced or imported), premixes or any
feed additives or further compound feeds commercially for use by a third party.
Accordingly we can support the Bill if it only relates to commercial mixing, i.e. if a selfmixer sells to a third party, then the facility should be registered.
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)
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12. The majority of self-mixers use commercial ingredients, premixes or supplements with
their home produced grain or roughage components. Accordingly, 90% of the risk of
food safety will be addressed if (11.) above was the objective of the proposed Bill.
Hence there is no need to register self-mixing facilities that do not sell to third parties,
but only mix for own use.
13. The notices of the proposed Bill should include the keeping of records of the products
distributed or mixed under (11.) above which should also specify purchaser information
for traceability objectives.
14. The self-mixing industries will continue to pursue the application of Good Management
Practice Standards for this sector.
We trust that these combined comments from the self-mixing industries as under (1.) will be
seriously contemplated.
We thank you in anticipation.
Yours sincerely,
Chairman
Red Meat Industry Forum
Mr DP Ford (Chairman), Mr TG Davidson (Vice-Chairman), Mr AM Mahanjana, Mr DPE van Zyl, Mr JC van der Ryst, Ms
JCJ van Rooy, Ms E van Reenen, Ms A Herbst, Mr D Osborne, MR A Cocks, Mr G Southey, Mr GS Kok, Mr A Vos, Mr DB
Matthis (Scribe)