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2015/16 ANNUAL PROGRESS REPORT ON PROJECT REBIRTH FOR REVIVAL OF NATIONAL FRESH PRODUCE MARKETS

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Page 1: 2015/16 ANNUAL PROGRESS REPORT ON PROJECT REBIRTH …webapps.daff.gov.za/AmisAdmin/upload/2015-16 Progress Report... · 2015/16 ANNUAL PROGRESS REPORT ON PROJECT REBIRTH FOR REVIVAL

2015/16 ANNUAL PROGRESS REPORT ON PROJECT REBIRTH FOR REVIVAL OF NATIONAL FRESH PRODUCE

MARKETS

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2015/16 ANNUAL PROGRESS REPORT ON PROJECT REBIRTH FOR REVIVAL OF NATIONAL FRESH PRODUCE MARKETS Page 1

TABLE OF CONTENTS

1. INTRODUCTION AND BACKGROUND ................................................................................... 3

2. PROJECT REBIRTH ................................................................................................................... 4

3. INTERVENTIONS BY THE STEERING COMMITTEE DURING THE 2015/16 ................. 5

3.1 Meetings of the Steering Committee ................................................................................. 5

3.2 The Codes of Best Practice ................................................................................................ 5

3.3 Standard Operating Procedures and Scorecard as management tools ...................... 6

3.3.1 Springs Fresh Produce Market .................................................................................. 6

3.3.2 Pietermaritzburg Fresh Produce Market ................................................................... 8

3.3.3 Tshwane Fresh Produce Market .............................................................................. 12

3.4 Interaction with Municipalities ........................................................................................... 13

3.5 Establishment of a Mentorship program ......................................................................... 15

3.6 Interaction with DCOGTA.................................................................................................. 16

3.7 Ethical trading in the NFPMs ............................................................................................ 18

3.9 Promotion of National Fresh Produce Markets .............................................................. 19

4. CHALLENGES ............................................................................................................................ 20

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ACRONYMS

APAC: Agricultural Produce Agents Council

APS: Agricultural Product Standards

BEE: Black Economic Empowerment

CFO: Chief Financial Officer

CoBP: Codes of Best Practice

DAFF: Department of Agriculture, Forestry and Fisheries

DCOGTA: Department of Cooperative Governance and Traditional Affairs

DGs: Directors General

FSA: Fruit South Africa

HACCP: Hazard Analysis Critical Control Point

IDP: Integrated Development Plan

IMASA: Institute of Market Agents of South Africa

MIG: Municipal Infrastructure Grant

MIS: Management Information System

NAMC: National Agricultural Marketing Council

NFPMs: National Fresh Produce Markets

PMA: Produce Marketing Association

PPECB: Perishable Products Export Control Board

PSA: Potatoes South Africa

SAUFM: South African Union of Food Markets

SLA: Service Level Agreement

SOPs: Standard Operating Procedures

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1. INTRODUCTION AND BACKGROUND

Historically, the marketing of fresh agricultural produce (fresh fruits and vegetables)

in South Africa has been mainly undertaken through National Fresh Produce Markets

(NFPMs). Most of these markets were established more than three decades ago and

have since undergone little or no substantive operational and transformational

changes in line with the macroeconomic and industry reforms currently taking place

in South Africa since 1994. These resulted in substantial declines in throughput and

participants in these markets over the past two decades.

NFPMs are strategic, public marketing infrastructure that play a critical role in both

national and household food security. In addition, these markets serve as:

• Suppliers of fresh produce to fresh produce

marketers/hawkers/vendors/traders who sustain their families from them thus

enhancing local economic development;

• Outlets where large buyers, mainly the large retail chain stores (such as Pick

‘n Pay, Shoprite-Checkers, Spar, Fruit & Veg City, Fruit Stop etc.) procure

fruits and vegetables;

• Trading facilities for fresh produce industry stakeholders (smallholder and

commercial farmers, market agents, traders, etc.);

• Providers of employment opportunities (at the markets and market agencies);

• Low-cost marketing channel for large scale/commercial and smallholder

producers (producers pay 12.5% fee to sell their produce through this

channel); and

• Price forming mechanism in that, prices established at the NFPMs are used

as national reference prices, mainly for fruits and vegetables.

As early as 1997, there were concerns regarding the National Fresh Produce

Markets mainly arising from the significant deterioration in infrastructure and service

standards, together with collapse in management which seriously affected the

rendering of efficient and commercially competitive services to farmers, market

agents and buyers, and thereby also on the ability of the domestic fresh produce

marketing system to transform and provide market access to smallholder producers.

These concerns triggered the then Minister of Agriculture and Land Affairs (Minister

Thoko Didiza) through the National Agricultural Marketing Council (NAMC) to launch

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investigations termed Section 7 Committee Investigations (in terms of section 7 of the

Marketing of Agricultural Products Act, 1996).

The Section 7 Committee identified five key themes which then constituted the main

framework for its investigations; these were on ownership and management of

NFPMs, legal framework within which they operate, the commission system,

transformation, market access as well as infrastructure. The Section 7 Committee

produced and published three successive reports with similar sets of

recommendations, which were later consolidated by the Ministerial Interim

Committee (MIC) on Fresh Produce Markets appointed by Minister Lulu Xingwana in

2009, as an effort to pave the way towards implementation.

2. PROJECT REBIRTH

In 2013, the continuing deterioration in service standards in the NFPMs triggered key

stakeholders in the fresh produce industry, mainly fresh produce market agents

through IMASA (Institute of Market Agents of South Africa) and producers through

PSA (Potatoes South Africa) to eventually approach the Department of Agriculture,

Forestry and Fisheries (DAFF) for immediate intervention and partnership to address

the persistent challenges faced by the markets. This led to the evolution of a new

initiative termed “Project Rebirth” aimed at improving the operations, service

standards and transforming the fresh produce markets of the republic.

Consequently, a National Steering Committee on Project Rebirth for NFPMs was

established. The National Steering Committee is chaired by Mr. HM Mamabolo, the

Director of Marketing in the DAFF and is composed of representation from the

following industry stakeholders: Institute of Market Agents of South Africa (IMASA,

representing fresh produce market agents); Agricultural Produce Agents Council

(APAC, regulatory body for market agents); Potatoes South Africa (PSA,

representing potato producers); Fruit South Africa (FSA, representing fruit

producers); South African Union of Food Markets (SAUFM, representing fresh

produce market managers); Department of Cooperative Governance and Traditional

Affairs (DCOGTA) and the National Agricultural Marketing Council (NAMC).

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The Terms of Reference for the National Steering Committee are as follows:

To facilitate a process to solicit inputs from key stakeholders (producers, market

agents and market managers) to develop the Codes of Best Practice (CoBP) for

NFPMs, that will pertain to the three stakeholders;

In order to achieve this the National Steering Committee was tasked and

expected to:

Interrogate submissions from the three key stakeholders and separate the

strategic aspects from the operational issues;

Consider whether transformation in NFPMs can be addressed by the

committee or it should be addressed separately;

Assist with infrastructure audit and investments in NFPMs; and

Establish any linkages to the legislative and regulatory framework.

Once the CoBP are finalised, the Steering Committee must identify key impediments

towards implementation and propose ways to solve them.

3. INTERVENTIONS BY THE STEERING COMMITTEE DURING THE 2015/16

FINANCIAL YEAR

3.1 Meetings of the Steering Committee

During the 2015/16 financial year the National Steering Committee held four sittings

in its effort to address the Terms of Reference. The meetings were held outside the

departmental premises at the offices of Potatoes SA on the 19th June 2015, the

NAMC on the 1st September 2015 and the Tshwane FPM Council Chamber on the

1st December 2015 respectively. The last sitting was held on the 08 March 2016 at

the Johannesburg Market.

3.2 The Codes of Best Practice

Through the National Steering Committee, the CoBP for NFPMs (Annexure 2) have

been developed and adopted by the fresh produce industry stakeholders. The CoBP

are aimed at assisting fresh produce markets to improve their service standards and

operations and are centred around ten pillars, which are on compliance to the

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regulatory environment; communication and stakeholder engagement; consignment

control and inspections; food safety, hygiene & cleanliness; safety & security;

information management; risk & financial management; transformation; infrastructure

and human capital development.

3.3 Standard Operating Procedures and Scorecard as management tools

The Steering Committee evaluated the Standard Operating Procedures (SOPs) of

the top three fresh produce markets (Cape Town, Tshwane and Johannesburg) and

developed generic SOPs that can be adopted (with some adaption) to assist fresh

produce markets with implementation. The SOPs are on consignment control

procedure, ripening and cold room management, risk and financial management as

well as cleaning procedures.

In addition, to facilitate implementation of the CoBP, a Scorecard was developed to

assess the level of compliance at all markets. The scorecard is comprised of 45

indicators reformulated as a questionnaire to assist market managers, market

agents, producers and other service providers to undertake a self-assessment

exercise and identify gaps that require short-term, medium-term and long-term

attention. During this financial year the scorecard has been applied (through the

leadership of DAFF) in four markets, namely the Cape Town Fresh Produce Market,

Springs Fresh Produce Market, Tshwane Fresh Produce Market and

Pietermaritzburg Fresh Produce Market. Preliminary results were shared with the

above mentioned markets and indicate the level of compliance to the ten pillars of the

codes with recommendations for improvement in the various areas. The results of the

scorecard are summarised in sections 3.3.1 to 3.3.3 below.

3.3.1 Springs Fresh Produce Market

Figures 1 below shows the current levels of compliance to the CoBP at the Springs

Fresh Produce Market.

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Source: Springs Fresh Produce Market and own calculation

It can be observed that the Springs FPM complies fully with respect to Safety and

Security, Information Management, Infrastructure and Risk and Financial

Management with compliance levels of 100%. This is attributed to the following

facts:

• The municipality has injected an amount of R 24 million over the past two

years which has been used for market infrastructure upgrades and

maintenance and the level of security was also improved, with new CCTV

security system erected across the market and monitored at all times. There

is already an approved master plan to expand the market which is expected

to commence during the year 2016;

• The market has its own account separate from the municipal account, and the

market management is the only one with login credentials and powers to

transfer funds to agents on a daily basis; and

• The market utilises a Freshmark system which is updated, maintained

properly and accessed by relevant individuals only.

Areas that require attention are compliance to the regulatory environment,

stakeholder management, transformation and human capital development that have

compliance levels below 50%. The main reasons for lower compliance levels to the

above pillars are as follows:

• The market does not have enough human resource capacity to carry out

regular stock inspection to ensure compliance to the Agricultural Product

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Figure 1 :Springs FPM Compliance level per CoBP pillar

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Standards Act (APS Act) but the market is addressing the weakness as they

acquired the services of PPPECB to build capacity of its staff in the area of

quality control inspections. The market is also finalising an organisational

structure with new additional inspectors expected to fill the gap on human

capacity;

• The market does not have a skills development plan for its personnel;

• There are no existing and signed performance agreements or workplans

between the market manager and market employees;

• The market manager has not signed a performance agreement with the

municipality;

• The stakeholder engagements are taking place but they need to be

strengthened, formalised, be inclusive of all stakeholders and have Terms of

Reference; and

• The level of transformation was found to be low, but the Springs Market has

plans to make available more market floor space to cater for two BEE market

agents and to identify black sales persons.

Consignment control and Food Safety, Hygiene and Cleanliness are above

satisfactory with scores just above the 50% compliance level. The market is on par

with regular cleaning routines and the level of cleanliness is notable across the

market floor and outside the premises. The market does implement proper

consignment control procedures but the main reason that led to lower compliance is

that market management has not formally documented procedures which clearly lays

out the processes.

3.3.2 Pietermaritzburg Fresh Produce Market

Figures 2 below shows the current levels of compliance to the CoBP at the

Pietermaritzburg Fresh Produce Market.

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Source: Pietermaritzburg Fresh Produce Market and own calculations

It can be observed from Figure 2 that the Pietermaritzburg Fresh Produce Market

complies fully with respect to Safety and Security, Infrastructure, Information

Management and Risk and Financial Management with a compliance level of

100%. This is attributed to the following facts:

Safety and Security: The level of security has been strengthened, with new

CCTV security system installed across the market and cameras monitored by

personnel at all the times. The local municipality has also provided the market

with full time security to ensure that there is no crime taking place and this is

supported by the fact that there has not been any case of crime incidents in

the market.

Infrastructure: The provincial department of Co-operative Governance and

Traditional Affairs has injected an amount of R15 million which has been used

for market infrastructure upgrades and maintenance, these have allowed the

market manager to revive the depilating infrastructure. The local municipality

also invested in the market through the provision of operational budget which

is used for infrastructure maintenance and is reviewed quarterly.

Information Management: The market utilises Freshmark system which is

updated, maintained properly and accessed by relevant individuals only.

Additionally, the system is being audited by municipal auditors to review if it’s

being implemented and utilised efficiently, and whether certain individuals

don’t access certain parts of systems illegally.

63% 71%

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Figure 2 : Pietermaritzburg FPM Compliance rate per CoBP pillar

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Risk and Financial Management: The market has its own separate account

and is being accessed by the municipality’s CFO who has login credentials to

the system and transfers funds to agents on a daily basis. Market agents have

also asserted that there has not been any delays with regards to transfer of

funds to their accounts from the municipality. There is an existing contract

with a commercial bank and the market funds are also insured against

unforeseen circumstances.

Food Safety, Hygiene and Cleanliness, Consignment Control, Transformation,

Stakeholder Engagement and Compliance to the Regulatory Environment are

satisfactory with compliance levels above 50%. This is attributed to the fact that there

are still weakness that both market management and market agents must address to

ensure full compliance and these are highlighted as follows:

Food Safety, Hygiene and Cleanliness: Currently the market utilises the

Hazard Analysis Critical Control Point (HACCP) rules which serve as

guidelines for food safety. The market is implementing a cleaning routine

which is being monitored at all times and it can be observed throughout the

market floor, ablution facilities, market platforms that hygiene and cleanliness

is maintained. In terms of food safety, the agents are also playing a major role

as they do not accept any produce that does not comply with food safety

regulations.

Transformation: There is only one BEE agent in place but currently the

municipality wants to allocate more space to black agents and they have

made available an additional R 560 000 for pallet banks and R 170 000 for

internal fencing to support new black agents. Promotion of the market to black

farmers is taking place continuously but one of the concerns is that some of

old existing agents are reluctant to help new black owned agencies as they

perceive them as competition.

Stakeholder engagement: A buyers’ forum has just been established where

a platform is given to buyers to raise and discuss issues related to the market

and a forum between market management and market agents is taking place

each month. There is an existing lease agreement between the market and

tenants as well as service level agreements between the market with the

security company, banks, Freshmark and cleaning providers. There are no

SLAs between the market and market agents but the process is being

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finalised as the SLA is with municipal legal services for review. Daily sales

reports are emailed to producers and some of the producers closer to the

market undertake market visits occasionally. There is an existing Performance

Agreement between the market manager and municipality but the market

manager must ensure that it formulates work plans with its labour force based

in the market.

Regulatory Environment: The market by-laws have been reviewed in the

year 2014 and swiftly implemented (i.e. market agencies are required to pay a

certain shortfall amount within 24 hours if stock shortages are experienced in

his/her agency). Quality Inspections are also taking place and carried out by

Prokon and DAFF. DAFF does product quality inspections twice a week but

they don’t share the results with the market, which is an area that the market

management needs to rectify as it will serve as guidance on areas that need

major attention and improvements in terms of product quality. DAFF is also

part of market management and market agents forum to guide agents about

inspection and minutes are available. With regard to compliance to the APS

Act, large scale farmers grade and mark according to the Act but smaller

emerging farmers do not comply and the market agents are advised to further

provide guidelines on the APS Act to these farmers when undertaking visits

and ensure that they comply. Some of the market agents do not accept the

produce if they are not properly graded and marked.

Consignment Control: Condemnation of Stock that is unfit for human

consumption is undertaken in collaboration with the municipality’s division of

environmental health. The market does have an SOP for consignment control

in place and the market manager is currently enforcing its implementation.

One of the that needs further enhancement is the recording of delivery notes

which are recorded by agents alone not the market personnel, but the market

is currently rectifying the issue as they are in a process of building a suitable

structure at the loading zone to render this service. The cashiers are the ones

currently conducting stock counts/audits and the market was advised to

transfer that responsibility to the inspection officer and his team.

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3.3.3 Tshwane Fresh Produce Market

Figure 3 below shows the current levels of compliance to the CoBP at the Tshwane

Fresh Produce Market.

Source: Springs Fresh Produce Market and own calculations

It is notable that the market fully complies with five pillars which are Safety and

security, Food safety, hygiene and cleanliness, Infrastructure, Information

management, and Human capital development with compliance levels of 100%.

This is based on the following rationale:

The market has official documents in place which lays out its protocols, SOPs and

their implementation thereof. The market has a CCTV security system in place

which is monitored for 24 hours and visible armed security, and during the past

year there has not been records of crime incidences. The market has invested

heavily in the upgrading of facilities such as new pallet banks, storage facilities,

upgraded market agents building, upgraded client service centre, waste disposal

centre and new perimeter walls;

The market has cleaning protocols which are being implemented especially by

most market agents who also took it upon themselves to clean their market floors;

and

The market has its own account separate from the municipal account.

The remaining pillars are satisfactory with compliance levels above 50%. Currently

the market is improving compliance to transformation as they have acquired three

89% 85%

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67% 67%

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Figure 3: Tshwane FPM Compliance rate per CoBP pillar

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new BEE market agencies. The market is also in a process of converting into a

municipal entity. The market also intends to introduce an auction system for

discarded produce, which is selling of produce deemed unfit for human consumption

to be used for other purposes. The market has recently entered into an agreement

with Botswana for export of fresh fruit and vegetables to that country while they will

introduce sales of meat on the market floor on a commission basis.

3.4 Interaction with Municipalities

As part of addressing infrastructure backlogs as well as improving service standards

and operations of NFPMs, the National Steering Committee on Project Rebirth for

NFPMs engaged directly with various municipal authorities that own fresh produce

markets. Engagements were held with the Nelson Mandela Bay Metropolitan

Municipality (Port Elizabeth Fresh Produce Market), Sedibeng District Municipality

(Vereeniging Fresh Produce Market), Sol Plaatje Local Municipality (Sol Plaatje

Fresh Produce Market), Matjhabeng Local Municipality (Matjhabeng Fresh Produce

Market), Pietermaritzburg Local Municipality (Pietermaritzburg Fresh Produce

Market) and the City of Johannesburg Metropolitan Municipality (Johannesburg

Fresh Produce Market). Engagements with the above mentioned municipalities were

aimed at lobbying for the following:

• To negotiate with municipal authorities to ring-fence a portion of the market

fee generated from sales in the National Fresh Produce Markets (NFPMs)

(5% market fee) for use as capital and operational expenditure for

infrastructure upgrades and maintenance in the markets;

• To negotiate with municipalities owning National Fresh Produce Markets

(NFPMs) to prioritize them as projects for funding through the Management

Information System (MIS) of the Municipal Infrastructure Grant (MIG) as an

immediate intervention to upgrade infrastructure in these markets;

• Kick-start a process with municipalities to provide the NFPMs with some

degree of operational and financial independence within the framework of

municipal legislation; and

• To negotiate with municipal authorities to provide full support to its NFPMs

staff and ensure that there is permanency and continuity at market

management level.

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A direct interaction between municipalities and the Department of Agriculture,

Forestry and Fisheries (DAFF) has yielded some positive results at several markets.

Some municipalities are currently investing in the infrastructure of their markets and

there are also signs of improvements on the hygiene and management of these

markets. The following positive outcomes emerged since the department began

engaging with various municipalities and their market authorities:

• The Ekurhuleni Metropolitan Municipality invested substantially in the

upgrading of the Springs Fresh Produce Market. The municipality has

contributed R 25 million over a two year period which was primarily utilised to

upgrade the market infrastructure and there is already an approved R160

million budget from the municipality for expansion of market infrastructure

during 2016/17;

• The Provincial Department of Cooperative Governance and Traditional Affairs

in KwaZulu-Natal contributed R15 million towards the infrastructure upgrades

of the Pietermaritzburg Fresh Produce Market which have been concluded in

September of the current financial year;

• The City of Tshwane Metropolitan Municipality invested substantially in the

upgrading of the Tshwane Fresh Produce Market having spent a total of R37

million over the past three years in infrastructure upgrades. In January 2016,

the market received a letter of approval from the National Treasury that an

amount of R390 million will be allocated to the Tshwane FPM for market

expansion and currently a feasibility study is being conducted on expanding

the market;

• During the 2015/16 financial year, the Gauteng Department of Agriculture and

Rural Development assisted the Vereeniging Fresh Produce Market through

an investment of R5.8 million which was utilised to revamp cold rooms,

ripening rooms, access gate, roof and to install new surveillance cameras. An

additional R4 million is allocated by the Sedibeng District Municipality to

revamp the butchery and to build a processing plant and R20 million is

allocated for the 2017/18 financial year for market expansion. Negotiations

are underway with the Development Bank of South Africa (DBSA) for a loan

of R40 million to use for market infrastructure refurbishment and expansion;

and

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• DAFF in collaboration with the DCOGTA will be gazetting the CoBP so that

they serve as national norms and standards for all the fresh produce markets

in the country.

In addition to the above, the Steering Committee on Project Rebirth for National

Fresh Produce Markets under leadership of the Department of Agriculture, Forestry

and Fisheries (DAFF) engaged the City of Joburg to discuss governance, operations

and infrastructure backlogs at the Joburg Market. Furthermore, the engagement was

also aimed at discussing the key role that the Joburg Market should be playing in

assisting smaller fresh produce markets regarding mentorship program in

implementing efficient Standard Operating Procedures (SOP) as well as

implementing some key provisions of the Codes of Best Practice (CoBP) for NFPMs.

With regard to ownership and management issues in the Tshwane, Springs and

Pietermaritzburg FPMs efforts are underway to convert these markets into municipal

entities and the process is at an advanced stage. There are also recent

developments at the Cape Town FPM with regard to ownership and management, as

the municipality has entered into a new lease agreement with a consortium of

producers organisation, market agents and BEE market agencies to improve

operational efficiencies of the market.

3.5 Establishment of a Mentorship program

A mentorship program championed through the Tshwane Fresh Produce Market

(FPM) (as a mentor) was established to assist ailing markets to swiftly implement the

Standard Operating Procedures (SOP) and CoBPs. The mentorship program focuses

on building the capacity of market management and its market staff on six key areas

of Consignment (Stock) Control, Risk and Financial Management, Information

Management, Stakeholder Management, Hygiene, Cold Rooms and Ripening Rooms

management as well as compliance to the Regulatory Environment.

During the current financial year a team from Tshwane FPM assisted the Vereeniging

FPM, Pietermaritzburg FPM and Port Elizabeth FPM in normalising current situation

with development and application of the SOPs, By-Laws and Service Level

Agreements (SLAs).

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The introduction of the mentorship program at the Pietermaritzburg FPM and

Vereeniging FPM has yielded substantial notable changes. The revenue of the

market at the Vereeniging FPM increased by 25% within a month after the

introduction of the mentorship program just by tightening consignment control as well

as risk and financial management process signalling that improper business conduct

were taking place in the market. The above mentioned changes immediately

triggered the Gauteng Department of Agriculture to assist the market with

infrastructure upgrades, and farmers also indicated their willingness to sell their

produce through the Vereeniging market due to positive developments taking place.

At the Pietermaritzburg FPM, with the introduction of the mentorship program the

volume of produce sold through the Pietermaritzburg FPM during the year 2015

increased substantially as compared to the previous year at the same period. A total

volume of 88 785 tons of fresh produce worth R 319 million were sold through the

Pietermaritzburg FPM from January to December 2015 while 85 449 tons worth

R264 million were sold during the same period of 2014. This represents a reasonable

average growth of 0.96% in volume in the year 2015 as compared to 2014. The

increase in volume saw the market overtaking Springs FPM as the fourth top market

from the month of June 2015. The level of hygiene and cleanliness at the market has

also improved tremendously.

3.6 Interaction with DCOGTA

There have been continuous engagements between the DCOGTA (as owners of the

markets) and the DAFF to discuss ways in which the two departments can

collaborate in improving service standards and operations of the NFPMs. On the 11th

May 2015 a meeting between Mr. Vusi Madonsela (Director General: COGTA) and

Prof Edith Vries (former Director General: DAFF) took place and the key issues for

discussions were five-fold:

Participation of the Department of Cooperative Governance in the Steering

Committee on Project Rebirth; a matter that has been raised as a major concern

by fresh produce industry stakeholders and which has the potential to be an

impediment in the implementation of some provisions of the CoBP;

The options and possibilities of gazetting the CoBP as official national norms and

standards for fresh produce markets by DCOGTA. DAFF does not have the

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mandate to execute this since it only regulates the trading aspects of markets

and not the physical infrastructure (overall operations of the markets);

Ring-fencing and reinvestment of a portion of the 5% (commission charged for

utilising the market infrastructure) municipal revenue generated by fresh produce

markets, into the operational expenditure for fresh produce markets;

The use of the Municipal Infrastructure Grant (MIG) for infrastructure upgrades

and expansion in the fresh produce markets. Currently, smaller municipalities in

particular do not prioritize fresh produce markets in their proposals and

submissions to the MIG; and

Improvement in the operational efficiencies of fresh produce markets, in terms of

converting some fresh produce markets into municipal entities to provide them

with some degree of operational independence. The possibilities of considering

multi-jurisdictional entities is also an option.

The discussions between the two Directors-General generated the following

resolutions:

DG Madonsela committed himself to establish which component of the MIG is

designed to support fresh produce markets in terms of infrastructure support and

will revert back to DG Vries. Should there be no provisions for fresh produce

markets he committed to take up the matter with National Treasury to open that

window in the MIG;

DG Madonsela further committed himself to steer a process of collaborating with

municipalities to consider the best management/ownership model for fresh

produce markets;

He further impressed that the initiative on the fresh produce markets is an ideal

candidate for Outcome 13 and the two DGs resolved to table the initiative at the

Social Protection Cluster;

The initiative and its successes and challenges need to be tabled to the Forum

that DCOGTA has with municipal managers. DG COGTA will provide the

meeting schedules and contacts to DAFF;

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The two DGs agreed on the need to engage the Department of Health as a key

partner in respect of monitoring adherence to health and food safety regulations

in the markets;

The presentation to be adapted for use by DG Madonsela, to include among

other things the following: the financial implications of implementing the Codes of

Best Practice, positive success stories emanating from Project Rebirth and data

(in monetary values) of the 5% municipal revenue generated by the markets; and

DAFF to draft a letter to DG COGTA, appreciating the meeting, requesting

nomination of an official from DCOGTA to participate in the Steering Committee

on Project Rebirth.

Subsequent to this an official from DCOGTA was nominated by DG:COGTA to

participate in the Steering Committee who has since participated in the previous

three sittings. The DCOGTA representative agreed in principle that the DAFF will be

invited to participate in the municipal Integrated Development Plan (IDP) planning

processes at local level and has already communicated to the affected municipalities

to prioritize NFPMs in their plans for 2016/17. This will allow the DAFF to work

directly with the affected municipalities in ensuring that the investments required by

the NFPMs in various municipalities are reflected in the IDPs.

3.7 Ethical trading in the NFPMs

In recent years, there have been concerns in respect of the conduct of some fresh

produce market agents who operate on the NFPMs and who trade in fresh produce,

which may be considered anticompetitive behaviour. The concerns relate specifically

to the following:

Produce reservation - this refers to a practice wherein fresh produce (of

particular grades, quality, etc) marketed by certain intermediaries/agents is

reserved for specific buyers (mostly large buyers). This leaves especially small-

scale buyers (hawkers) with fewer options in terms of the produce that is offered

for sale across the markets;

Late Sales - this refers to a practice wherein certain volumes are sold in the

markets during certain late hours of trading at the markets with an express

intention to manipulate prices to move in certain and desired directions. This has

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an effect of distorting the normal and efficient marketing of fresh produce in

South Africa;

Credit sales by agents - this refers to instances where agents buy produce from

themselves on credit and at unusually low prices with the aim of selling the same

produce at higher prices to other buyers. Credit sales are not allowed in terms of

the rules unless they are done with the express concern of the principals of the

produce concerned;

Price discrimination based on identity of the buyers – in this instance, the

market agents treats buyers differently depending on quantities or volumes

bought by the different buyers. This raises the issue of unequal access to fresh

produce by different buyers in the markets purely on account that a buyer is

large or small;

Cancellations - wherein stock/consignment is booked on the official trading

system and is not sold and is later on cancelled from the system. The stock can

either be sold through late sales or through other channels outside of the official

trading platform of the markets; and

Stock shortages - wherein a fresh produce market agent/sales person is unable

to reconcile his/her consignments between the stock received and sold. These

shortages might exist due to stock being sold as late sales or being sold outside

of the formal trading platform.

Subsequently the DAFF’s request for an investigation into the ethical trading

(business) conduct of fresh produce market agents was accepted and approved by

the executive of the Competition Commission. The objective of this investigation is to

enhance fair competition, improve fair access to produce by buyers and enhance

development of statutory rules and regulations for market agents. The Competition

Commission has agreed to conduct the investigation which is expected to unfold in

2016/17.

3.9 Promotion of National Fresh Produce Markets

The panel of Project Rebirth partners participated in the PMA Fresh Connections

Conference and Expo on the 12-13 August 2015 in Cape Town at a breakaway

session where it presented the main role the industry plays in the NFPMs and on the

implementation of the CoBP. Furthermore, two publications termed “Fresh Produce

Market Monitor” which communicates recent developments and work of Project

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Rebirth were developed and published on websites of various fresh produce industry

stakeholders, departmental and municipal websites.

The Steering Committee has also participated in the 75th Annual General Meeting

(AGM) of the IMASA on the 17-18 September 2015 to communicate positive

developments emanating from Project Rebirth and to lobby for support of market

agents particularly with regard to ethical trading and transformation in the Fresh

Produce Markets. During the AGM, DAFF was awarded the Shiny Red Apple Award,

which is an award presented to a fresh produce industry role-player in recognition of

their leadership and innovation in customer relations and communications within the

fresh produce sector.

4. CHALLENGES

Over the past year the National Steering Committee encountered several challenges

with regard to implementation of the CoBPs in a few markets and are as follows:

As an effort to ensure that fresh produce sold through the NFPMs is safe for human

consumption, the Steering Committee in collaboration with the DAFF, Directorate:

Food Safety and Quality Assurance introduced a food testing program in the

NFPMs. The initiative began at the Tshwane FPM and ran for a period of two

months in March and April 2015. Unfortunately the process of food testing was

halted due to the introduction of tariffs by DAFF Laboratory services at a cost of

R541.00 per sample. The costs associated with sample testing were not warmly

welcomed by market management, market agents and producers because it would

be a burden to the market and farmers in terms of costs and administration;

The introduction of product quality inspection/control service in the markets could

not be implemented because of lack of human resource capacity at DAFF but the

department is currently engaged in a process of appointing assignees to conduct

product quality inspections throughout the NFPMs across the Republic of South

Africa;

Lack of continuity and stability at market management level was also a major

challenge as it hampered efficient implementation of SOPs and CoBP, and in most

cases where management exist, they lack the capacity to efficiently run the market;

Most municipalities are unable or unwilling to reinvest a portion of 5% market

revenue generated from sales into markets to use for market infrastructure

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refurbishments, leading to potential for collapse of markets. This is because many

smaller municipalities are cash-strapped;

An effective and well organised SAUFM is a challenge, as its passivity in the work

of Project Rebirth makes it difficult to implement most provisions of the pillars within

the Codes of Best Practice; and

The ability of market agents and sales persons to uphold ethical trading practices

and maintain integrity of the commission system.

________________________________

H.M. Mamabolo Chairperson: Steering Committee on Project Rebirth for National Fresh Produce Markets Tel: 012 319 8455 Fax: 012 319 8131 Email: [email protected]