Agriculture Sector Code is a step in the right direction, says law firm

The Amended AgriBEE Sector Code 2017, acknowledges the diversity and particularity of sub-sectors within the agricultural sector in South Africa, which is positive, but the wide scope also poses challenges, says Agbiz. File photo

The Amended AgriBEE Sector Code 2017, acknowledges the diversity and particularity of sub-sectors within the agricultural sector in South Africa, which is positive, but the wide scope also poses challenges, says Agbiz. File photo

Published Feb 9, 2023


Cliffe Dekker Hofmeyr (CDH) yesterday said the Agriculture Sector Codes was still fairly new, but was a step in the right direction.

CDH held a webinar yesterday, which focused on the B-BBEE regulatory environment applicable in South Africa in the agriculture and fishing sectors.

With the advent of the Agriculture Sector Codes in December 2017, it made it easier to ensure and measure Broad-Based Black Economic Empowerment (B-BBEE) compliance.

In CDH’s view it was likely to stay in place to allow the potential benefits and opportunities to crystallise over time.

However, in the fishing industry, it said there was no B-BBEE sector code, and the generic code applied, but to a more limited extent.

“There is accordingly, no sector specific B-BBEE regime applicable to the fishing industry which continues to apply its own policies and assessment processes which do take B-BBEE into account, but there are no fishing sector specific or relevant criteria in the generic B-BBEE Codes,” the firm said.

It said the fishing sector might have to look at developing a B-BBEE sector code in the future, but at this stage it did not appear as if this was on the cards.

But the changing nature of the Agriculture Sector Codes remained a challenge, Theo Boshoff, the CEO at Agricultural Business Chamber (Agbiz) said yesterday.

Agbiz said promoting inclusive growth in the agro-food value chain was one of their core objectives.

“B-BBEE remains directed at big businesses. In this regard, businesses in the value chains have made significant investments into B-BBEE. Investments that are made towards gaining greater recognition can be undermined when codes change. Long-term stability is required,” he said.

Agbiz said the fundamental objective of the Act was to advance economic transformation and enhance the economic participation of black people in the South African economy.

For this objective to be realised, the Code must be implemented, but there were geographic and financial challenges hampering its effective implementation.

“Supplier development can be a powerful tool to aid black businesses throughout the value chain, but the rural nature of agriculture typically results in limited options as far as suppliers are concerned. For farmers, they need to source inputs from companies within the region to avoid exorbitant transport costs. There may therefore be areas where black suppliers are available but likewise, remote areas where the options are limited.

“Agro-processors and food companies have invested substantially into developing black farmers and bringing them into their value chains. There are great examples within multiple value chains and some of the leading supplier development programmes empowering black farmers are being implemented by Agbiz members,” Agbiz said.

But it said access to funding and the slow pace of land reform in South Africa continued to be a challenge to reaching industry goals and sourcing more produce from black farmers, however there were praiseworthy programmes that had made real progress.

Boshoff said likewise, many agribusinesses and co-operatives who supplied inputs to farmers, had comprehensive farmer development programmes.

These companies provided technical support, training, skills development and finance to black farmers.

“Likewise, many commercial farmers provide mentorship and lend equipment to neighbouring black farmers. While this is very positive, the codes unfortunately provide little recognition for these companies as enterprise development (building black businesses who are not your suppliers) carries little weight in the codes. Here there is a clear mis-match between genuine efforts to build black businesses and the recognition provided by the codes,” he said.

Boshoff said the Amended AgriBEE Sector Code 2017, acknowledged the diversity and particularity of sub-sectors within the agricultural sector in South Africa, which it said was positive, but the wide scope also posed challenges.

This as the same code sought to cover input suppliers, agro-processors, traders and farmers. These companies operated in vastly different areas with very different issues.

“A number of tweaks can certainly be made. For instance, voting rights as a measure of ownership may work for companies but not for co-operatives, which work on the basis of one-member, one vote. Using turn-over as a measurement of an entity’s size is also a challenge for agricultural commodity traders who move product through their books. They typically have a high turnover based on buying and selling stock, but with very low profit margins, thereby giving the impression that they are larger companies than they really are,” he said.

Boshoff said elements such as preferential procurement was a challenge for farming as the options for procurement were very limited in deep rural areas. This was also the case with many farming enterprises that do not have multiple tiers of management.

“An alternative, a simplified scorecard for primary agriculture should be considered. Overall, implementation and funding remains problematic. Verification is a costly process that adds to the cost of doing business. If the codes can be simplified and mechanisms be put in place to assist implementation (for instance, soft-finance for BBBEE deals), the uptake would likely be greater,” he said.