Renewal of the

statutory leviesApril 2019

Agenda

1. Setting the scene - Reflection2. Utilization of levy funding (Pome & Stone)3. Income over past 2 years (General levy & Trade

Development)4. Industry capacity5. Cost benefit analysis6. Trade development funding focus7. Rules of engagement (Government lobbying, Market

Access, Funding)8. Strategic Framework next 4 years9. Levy proposal10.Discussion11.Way Forward

Summary of issues raised – Mid-term strategic session

• New cultivars (Breeding/Evaluation/Strategy) – Provar; LNR; Cultivar acquisition

• Organisational structure – Role / functions/restructuring boards• Transformation of value chain• Research focus on mechanisation/netting• Labour issues/housing – Phakisa/Off-farm• Phytosanitary risks• Market Access/Gain Retain Optimize• Mitigation/Actions required for adaptation to Climate change• Water• Measure results• Communication/promote image

Plant Improvement i. New cultivar strategy by Plant material advisory

committee ( Pome & Stone)

ii.Independent cultivar evaluation by Provar.

iii.Implementation of Pro-Hort evaluation sites in various

representative sites (7 for stone+ 5 for pome).

iv.New approach and capacity via continued local

breeding at ARC (plums, early nectarines, apricots and

flat peaches , blush pears, climate adapted apples).

v.International procurement via SAPO.

vi.Culdevco commercialisation of ARC varieties.

vii.The rootstock programmes via SAPO

viii.Empower growers,make informed decisions relating

to cultivar/rootstock choices – PROVAR evaluation

Plant material Management Advisory committee(PMAC)

Pome Stone

Culdevco

ARC Breeding (in accordance to

PMAC strategy) SAPO Other IP managers OTHER IP

Cultivar management Plums Acquisition and IP management of

Varieties according to PMAC guidelines

Acquisition and IP management of

Varieties according to PMAC guidelines

Acquisition and IP management of Varieties according to own strategy

and guidelines

Early Nectarines

Apricots

Blush PearsClimate adapted

Appels

Provar independent

cultivar evaluation

PRO-HORT: Phase 3 evaluation in

decentralise sites

PRO-HORTEvaluation in

decentralised sites

PRO-HORT : Evaluation in

decentralised sites

Provar request independent cultivar

evaluation

Culdevco commercialisation Commercialisation

Commercialisation by IP manager

Clubvarieties

Club varieties with private marketing

rulesOpen varieties to all growers with IP licencing and Royalties.

PRODUCERS

Service Structures

CEO - Dr Konanani Liphadzi

Trade/International relations –

Dr Mono MashabaGovernment relations, Market access,

policy & legislation, logistics &

infrastructure, SIZA - Ethical trade (Environment, FS & GAP to

follow), Social Compact/FIVCRT, AgBisFruit Desk

Industry Functions

Production (Supply side) Research & Development

Technology Transfer

Technical Services

Plant Improvement

Certification

Market (Demand side) Info & Stats

Logistics & Infrastructure

Trade & Market Access

Trade Development & Consumer Awareness

Market & Consumer Research

Standards & Protocols

Other “cross cutting”

Transformation (Land Reform/Economic Development/BEE/Training & Skills development, etc) Communication, Image, Representation

Admin & Financial services

Commercial/User Pay Industry Services

Fruitfly Africa / Culdevco / Fruit Journal / PlantSA / Agri-Hub/SAPO

0

10

20

30

40

50

2007 2015 2018

TOTA

L H

OR

TGR

O E

MP

LOYE

ES

HORTGRO Employment Equity Sept 2018

AM AF CM CF WM WF TOTAL

Industry Capacity

2007 2015 (Sept)

2018 (Sept)(Sept)

Total HORTGRO Employment 39 40 44

Number of employees paid via levies 18 19 20

Research (incl. Market access) 17 15 12

Industry structures, Transformation, other services 4 6 12

37 869 986

67 770 07875 567 598

R-

R20 000 000

R40 000 000

R60 000 000

R80 000 000

2007 2015 2018

Levies

Budget / Use of funds

Statutory Levies HORTGRO POME & STONE = R60 million

Administration, 7%

Information & Stats, 3%Industry

Representation , 4%

Research & Plant Improvement, 56%

Techincal Trade & Market Access, 9%

Transformation & Training, 21%

Research & Development

Staying competitive

Staying in business

OVERALL OBJECTIVE

RESEARCH

Addressing present & future challenges by:

• Providing a constant stream of well-trained

people.

• Developing technology.

• Creating knowledge

WHAT IS OUR RESEARCH

STRATEGY?

• Driven by the future needs of the:

Orchard

Pack house

Exporter

Customer

• Informed by future risks & opportunities

Science Funding allocation 18/19

11%

4%

30%

10%

12%

16%

5%

11%

1%

Other research

ARC Breed ARC Proj

Experico

Comms

Research Posts

Proj Man

International Conference

Stell Univ

Pome R 23,8mill Stone R 11,1millTOTAL R34,9mill

Spend per programme 17/18

8%

23%

25%

39%

5%

Pome fruit

Breeding

Crop Protection

Market Access

Post-harvest

Crop Production

32%

7%

13%

38%

10%

Stone fruit

Market Access

Post-harvest

Crop Production

Breeding

Crop Protection

R&D spend as % of turnoverR&D spend as a % of Turnover (2017/2108)

Fruit Type Industry BodyIndustry R&D spend (R mil)

Turnover* (FOB+local+processing)

(R mill)

R&D as a % of

Turnover

Leveraged R&D funds**

(R mill)

Total R&D Spend (R mill)

Total R&D as % of

Turnover

Fruit South Africa (FSA) industries:

Pome Fruit Hortgro Pome 20,78 8 370 0,25% 19,97 40,75 0,49%

Stone Fruit Hortgro Stone 10,36 2 700 0,38% 9,95 20,31 0,75%

Table Grapes SATI 6,34 8 057 0,08% 8,79 15,13 0,19%

Citrus CGA / CRI 52,58 18 788 0,28% 14,96 67,53 0,36%

Avos Sub Trops 3,70 1 850 0,20% 0,50 4,20 0,23%

FSA Total 93,76 39 765 0,24% 54,17 147,92 0,37%

Optimum range for research: 1,2 – 3,0 % of Turnover

Begins & ends with the grower

Crisis research requests

E.g. Internal browning on Fuji / Pit burn in Stone Fruit

– Initiate workgroup of experts to evaluate problem

– Identify best course of action to address problem

– If immediate preliminary research required

• Initiate project proposal and ad hoc funding

– If further research required

• Put in project proposal into next research cycle

Need Technical experts to respond to immediate needs –crisis – short-termResearch takes time – long-term strategy

Crop Production Research Themes

Focus Area

Objectives

Soil fertility

Effective

irrigation

Growing

season

climate

Rootstocks Reprod.

biology

Farming Eff.

& Tech.

Dormancy

Communication Vehicles

GROWER

Pamphlets

Research ShowcaseIPM

Orchard of the future

Website

YouTube Channel

Funded Post Graduates - 2018

DEGREEBLACK

MALE

BLACK

FEMALE

WHITE

MALE

WHITE

FEMALETOTAL

Hons 3 3 2 8

MSc 7 5 4 9 25

PhD 6 5 3 7 21

Postdoc 1 4 5

TOTAL 14 13 10 22 59

% 24% 22% 17% 37%

46% 54%

“Doubling the industry by

2050”

NAMC Transformation Guidelines

• Guidelines drafted in line with AGRIBEE sector codes – Dec 2017

• 5 Pillars – Ownership, Enterprise & Supplier Development, Skills Development, Socio-economic development

• 20% Transformation funding spent according to AGRIBEE balance scorecard.

• 20% of statutory funds remain the same.

Transformation Pillars (R14.8 m) = 24% total

• Submit annual Transformation Plans – 3 months before financial year end• Utilization of budget submitted to Transformation Review Committee – discussed &

decision (aligned with 4-year budget cycle)• All Transformation activities to be reported against budget annually • NAMC conduct M & E on selected projects from time to time

Transformation Pillars New GuidelinesActual Spend

(R million) Actual %

1. Enterprise Development 60% 13.6 92%

2. Skills Development 18% 0.61 4%

3. Management Control

17%

0 0%

4. Ownership 0 0%

5. Socio-Economic Development 5% 0.52 4%

TOTAL 100% 14.73 100%

Transformation (20% = R13.6m):Economic Development Initiatives

• Tree Planting Project (2009 – 2016)

• Administration & Implementation of CASP (Comprehensive Agricultural Support Programme) funding (2011 – cont.)

• DFDC Commercialisation Programme (2016 – 2020)

• Hortfin (2018 – 2021) – R600m – value chain

• DFDC Initiatives and projects (EC/Mpumalanga/FS, etc)

• More than 80% of Transformation funding spent on Economic Development Initiatives

Gearing (cost benefit)

Statutory Levies Income = R60 millTotal Gearing = R140 mill

Gearing Ratio R1:R2.30

Trade & Markets, Market Access

(MD Levy: R21m)

Trade & Markets, Market Access

• General Market Activities (Trade Protection & Market Access)– Special Markets Management – USA, Mexico, Taiwan, China– Phytclean – Orchard registration, FCM & CM Risk Management Systems– Trade Protection

• Trade & Markets (“JMF”)– Trade issues - India, Nigeria, etc– Product Standards– Packhouse Action Group– Trade shows (Berlin, Hong Kong)– Info purchase – PPECB, AgriHub, Price– International memberships – WAPA– FPA, FEMA– Logistics, etc

• Market Access (Technical)– Pest & Diseases – FCM, CM, GCB– MRL’s– PRA’s & PIP’s– Research Projects– Research/Technical Capacity– Increased Capacity– DAFF Support– Protocols

Trade & Markets, Market Access

• Trade Development & Consumer Awareness/Education (MD)– Away from below the line

– Trade focused

– Public Relations

– See next slides

• Technical Services (Science)– Quality, maturity management

– Standards & Regulations

– Special Ad Hoc projects (dry matter)

All intertwined, linked in some way.

All have market access aspects within.

Some Market Access Sequencing

• China

– Pears

– Avos

– Stone fruit – Plums

• Thailand

– Apples & Pears

Market Access

• Retention & Access will NOT get easier

• Is a priority & will remain one

• Requirements will only get more stringent

– Tariff and Non-tariff barriers

Trade & Market Access Adv CommRevised

Nicholas DiceyCalla Du Toit

Anton Kruger

Willem Viljoen Fanie Grundlingh / Marius van der Westhuizen

Gysbert du Toit /Linde/Willem CoetzeeHein Keulder

Roelf PienaarStephan Beukes

Philip du PlessisIan Snetler / Kallos

Thomas MoutonFrancois MalanRenier GrobbelaarAnton RabeJacques du PreezDanelle Du Toit

Trade & Market Access Adv CommRevised

André Smit Daniel Theron Wayne Mudge/ Xavier Murray/ Erik van Zyl Annelie Haumann Anton Kruger Grant SmutsGysbert du Toit/Julia BouwsemaHubert LeclercqStephan StraussGerhard Robbertze Louis Meyer/ Jan HoonCharl Stander Marius Brewis Marlett Botha Elaine LaubscherAnton RabeJacques du PreezKarin van RensburgPetru du Plessis

Beginning to Current

(International)Was

Item: Pome & Stone Pome Stone

Campaigns

*UK

*Germany

*Middle East - New

*France - New

*Africa - New

Trade shows 0% 4% 3%

Personnel & Overheads 0% 8% 8%

2019

74% 78%

0% 14% 11%

Market Access

*Technical

*Delegations

*FruitSA

*Trade

100%

Campaigns only (Pome & Stone)

Only 6% for Pome

FAR EAST & ASIA 3,88 mil

UK 10,27 mil EU & RUSSIA 9,07 mil

AFRICA 2,22 mil

MIDDLE EAST 1 mil

IOI 796’

USA & CANADA

433’ 70%

Pome Market Split 2006 (27.7m eqv. cartons)

FAR EAST & ASIA

12,11 mil

UK 6,6 milEU & RUSSIA

11,37mil

AFRICA 9,44 mil

MIDDLE EAST

5,32 mil

IOI 1,11 mil

USA & CANADA

646’

Pome Market Split 2017 (46.6m eqv. cartons)

39%

Pome 8 –Year Market

Distribution

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

16 000 000

EU ANDRUSSIA

FE & Asia Africa UK Middle East IOI USA &Canada

2010 2011 2012 2013 2014 2015 2016 2017

FAR EAST & ASIA

10,79 mil

UK 7,1 milEU & RUSSIA

11,31 mil

AFRICA 8,72 mil

MIDDLE EAST

4,61 mil

IOI 1,1mil

USA & CANADA

583’

Pome Market Split 2018 (44.2 eqv. cartons)

42%

Pome 8 –Year Market

Distribution

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

16 000 000

EU ANDRUSSIA

FE & Asia Africa UK Middle East IOI USA &Canada

2011 2012 2013 2014 2015 2016 2017 2018

FAR EAST & ASIA

POSSIBLE FUTURE GROWTH POME

SOUTHAFRICA

AFRICA

UK 13 218 ton

EU & RUSSIA 18 862 ton

USA & CANADA

Stone Market Split 2005/2006 (8m cartons)

88%

AFRICA 270 ton

IOI 541 ton

FAR EAST & ASIA 592 ton

MIDDLE EAST

3 026 ton

FAR EAST & ASIA

2 376 ton

UK 22 299 ton

EU & RUSSIA 30 565 ton

AFRICA 592 ton

MIDDLE EAST

12 564 ton

IOI994 ton

USA & CANADA283 ton

Stone Market Split 2017/2018 (16.5m cartons)

76%

POSSIBLE FUTURE GROWTH STONE

MIDDLE EAST

SOUTHAFRICA

FAR EAST & ASIA

Evolution, Re-allocation

Change in nature

Strategic Framework 2019 –

2023 (Programmes)

1. Independent Evaluation (Cultivars & Rootstocks) - R2.925m

2. Scientific research & Development & associated Tech Transfer R33.938m

3. Technical Market Access, Protocols & Product Standards R12.847m

4. Plant Material Acquisition & Rootstock Development (New) R1.653m

5. Trade, Market Intelligence & Trade Awareness R14.752

6. Economic Development & Land Reform R14.785m

7. Plant Improvement & Certification R74,000

8. Industry Information & statistics R2.143m

9. Skills & Human Resource Development incl. socio-economic See 6 & 2

10. Communication & Industry Representation R2.789m

11. Good governance, Administration & Financial management R4.895m

Levy Proposal c/Kg = 6%

Statutory Measure / Statutêre Maatreël - C/kg

Current/

Tans 2019/20202020/20212021/20222022/2023

Trade & Markets (only exports) / Handel & Mark (slegs uitvoer) 2.80 2.80 2.85 2.90 3.00

Fresh/Vars - Traditional / Gewone 4.75 5.00 5.30 5.60 6.00

Processing / Verwerk (Apples/Appels) - Rand/ton 8.75 9.20 9.70 10.40 11.00

Dried / Gedroogte vrugte - Traditional / Gewone 18.00 21.00 21.00 25.00 25.00

Dried / Gedroogte vrugte - Trade & Markets / Handel & Mark 0.00 6.00 6.00 8.00 8.00

Stone Fruit / Steenvrugte (Tradisioneel)

Traditional Statutory Measure / Tradisioneel Statutêre Maatreël - C/kg

Current/T

ans 2019/20202020/20212021/20222022/2023

Apricots / Appelkose 19.00 20.00 21.00 22.50 24.00

Peaches & Nectarines / Perskes & Nektariens 12.00 12.60 13.40 14.00 15.00

Plums & Prunes (Fresh) / Pruime & Pruimedante (Vars) 15.75 16.50 17.50 18.60 20.00

Dried / Gedroogte vrugte - Traditional / Gewone 18.00 21.00 21.00 25.00 25.00

Export (Trade & Markets) Uitvoer (Handel & Mark) Statutory Measure /

Statutêre Maatreël - C/kg

Current/T

ans 2019/20202020/20212021/20222022/2023

Apricots / Appelkose 10.00 10.50 11.00 11.80 12.60

Peaches & Nectarines / Perskes & Nektariens 20.00 21.00 22.20 23.70 25.00

Plums & Prunes (Fresh) / Pruime & Pruimedante (Vars) 9.50 10.00 10.60 11.30 12.00

Dried / Gedroogte vrugte - Trade & Markets / Handel & Mark 0.00 6.00 6.00 8.00 8.00

Local (Trade) Statutory Measure / Plaaslike (Handel) Statutêre Maatreël -

C/kg

Current/T

ans 2019/20202020/20212021/20222022/2023

Peaches & Nectarines / Perskes & Nektariens 4.00 4.20 4.50 4.70 5.00

Plums & Prunes (Fresh) / Pruime & Pruimedante (Vars) 1.90 2.00 2.10 2.20 2.40

Dried / Gedroogte vrugte - Trade & Markets / Handel & Mark 0.00 6.00 6.00 8.00 8.00

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

TOTALPRODUCTION

LOCAL MARKET EXPORTS

TON

S

Deciduous Fruit

2014/2015 2015/2016 2016/2017** 2017/2018 Pre-Lim

Summary - Proposed budget allocation 2019/23

• Maintain core strategic functions i.e. R&D; Transformation; Information; Communication; Trade & Market Access

• Funding utilized according to existing framework

• Shift from Market Development to Trade Development & Market Access

• Transformation is needed for Government liaison & buy-in

Thank you