DRAFT SUBMISSION TO THE MINISTER FOR PRIOR CONSIDERATION BY THE PARLIAMENTARY COMMITTEES

 

 

TO:

NATIONAL AGRICULTURAL MARKETING COUNCIL

FROM:

HORTICULTURAL SECTION

ENQ

MATHILDA VD WALT

REF:

 

DATE:

OCTOBER 2001

 

THE IMPLEMENTATION OF THE CONTINUATION OF STATUTORY MEASURES IN THE WINE INDUSTRY

 

1.                   The above matter, as well as the Annexures mentioned below, refers.

 

Annexure A: The final report of the working group investigating into the proposed continuation of statutory measure in the wine industry

 

Annexure 1: The Wine Industry Forumís (WIF) letters dated 10, 11 and 12 July 2001 and attachments, refer.

 

EXECUTIVE SUMMARY

 

The Minister took cognisance that the statutory measures requested by the WIF are consistent with the objectives of the Marketing of Agricultural Products Act (as set out in section 2 of the Act) and formally referred the request to the National Agricultural Marketing Council for investigation on 2 August 2001 to report back to the Minister within 60 days i.e. 2 October 2001. The Minister was requested to extend the date on which the NAMC was to report back, from 2 October to 2 December, this submission is still at the Ministers office.

 

The working group found that the WIFís application for statutory measures is consistent with the National Agricultural Marketing Councilís (NAMC) policy in respect of statutory measures.The working group therefore advise recommends that the NAMC, advisethe Minister to approve the introduction and promulgation of the following statutory measures as requested by the WIF:

 

         Section 18 of the Marketing of Agricultural Products Act: Records and Returns.

         Section 19 of the Marketing of Agricultural Products Act: Registration.

         Section 15 of the Marketing of Agricultural Products Act: Statutory levies on the related products specified in the application:

 

1.

Grapes intended for the production of wine

 

         Research and Development levy:

R 8,40 per ton

 

         Information levy:

R 6,30 per ton

 

Total

R14,70

 

 

 

 

2.

Grape juice concentrate intended for use in wine.

 

         Research and Development levy at 17,4 degrees Balling:

1,20 cents/litre

 

         Information levy at 17,4 degrees Balling:

0,90 cents/litre

 

Total

2,10 cents/litre

 

 

 

3.

Bulk drinking wine; or

Packaged drinking wine

 

 

Research and Development levy

1,20 cents/litre

 

Information levy:

0,90 cents/litre

 

Wine Export Generic promotion levy

7,00 cents/litre

 

Total

9,10 cents/litre

 

 

 

5.

Distilling wine; or

Wine spirit

 

 

Research and Development levy:

1,00 cents/litre

 

 

 

2.                   PURPOSE OF SUBMISSION

 

To advise the NAMC regarding on the application for the continuation of statutory measures and to recommend the following:

 

2.1††††††† The working group found that the WIFís application for statutory measures is consistent with the National Agricultural Marketing Councilís policy in respect of statutory measures.The working group therefore recommends that the NAMC advise the Minister to approve the introduction and promulgation of the following statutory measures as requested by the WIF:

 

         Section 18 of the Marketing of Agricultural Products Act: Records and Returns.

         Section 19 of the Marketing of Agricultural Products Act: Registration.

         Section 15 of the Marketing of Agricultural Products Act: Statutory levies on the related products specified in the application:

1.

Grapes intended for the production of wine

 

         Research and Development levy:

R 8,40 per ton

 

         Information levy:

R 6,30 per ton

 

Total

R14,70

 

 

 

2.

Grape juice concentrate intended for use in wine.

 

         Research and Development levy at 17,4 degrees Balling:

1,20 cents/litre

 

         Information levy at 17,4 degrees Balling:

0,90 cents/litre

 

Total

2,10 cents/litre

 

 

 

3.

Bulk drinking wine; or

Packaged drinking wine

 

 

Research and Development levy

1,20 cents/litre

 

Information levy:

0,90 cents/litre

 

Wine Export Generic promotion levy

7,00 cents/litre

 

Total

9,10 cents/litre

 

 

 

5.

Distilling wine; or

Wine spirit

 

 

Research and Development levy:

1,00 cents/litre

 

2.3               Furthermore, that it be recommended that the NAMC advice the Minister to sign the attached notices in this regard.

 

3.                   BACKGROUND

 

3.1               On 16 July 2001, the WIF applied for the following statutory measures:

         Section 15 of the Marketing of Agricultural Products Act: Continuation of an information levy, a research and development levy and a levy for the generic promotion of export wine;

         Section 18 of the Marketing of Agricultural Products Act: Records and Returns.

         Section 19 of the Marketing of Agricultural Products Act: Registration.

 

3.2               The application relates to the following products:

         Grapes intended for the production of drinking wine or distilling wine.

         Grape juice concentrate intended for the use in drinking wine or other alcoholic products.

         Drinking wine.

         Distilling wine.

         Wine spirit.

 

3.3               The amounts of the proposed levies on the related products are as follows:

 

1.

Grapes intended for the production of wine

 

         Research and Development levy:

R 8,40 per ton

 

         Information levy:

R 6,30 per ton

 

Total

R14,70

 

 

 

2.

Grape juice concentrate intended for use in wine.

 

         Research and Development levy at 17,4 degrees Balling:

1,20 cents/litre

 

         Information levy at 17,4 degrees Balling:

0,90 cents/litre

 

Total

2,10 cents/litre

 

 

 

3.

Bulk drinking wine; or

Packaged drinking wine

 

 

Research and Development levy

1,20 cents/litre

 

Information levy:

0,90 cents/litre

 

Wine Export Generic promotion levy

7,00 cents/litre

 

Total

9,10 cents/litre

 

 

 

5.

Distilling wine; or

Wine spirit

 

 

Research and Development levy:

1,00 cents/litre

 

3.3               The Minister took cognisance that the statutory measures requested by WIF are consistent with the objectives of the Marketing of Agricultural Products Act (as set out in section 2 of the Act) and on 1 June 2001, formally referred the request to the NAMC for investigation.

 

3.4               A Notice published in the Government Gazette on 17 August 2001, indicated that the directly affected groups had to submit their comments regarding the implementation of the proposed statutory measures not later than 2 September 2001.

 

3.5               The National Agricultural Marketing Council decided to appoint a working group within the Council, which is supported by the relevant staff, to investigate the request and advise the Council thereon.The working group consists of the following members:

         Mr. Inus Bezuidenhout

         Dr Cyprian Buthelezi

         Ms Mathilda vd Walt

         Mr. Chris Gladwin

 

3.6               After publication of the proposed statutory measures in the Government Gazette, the National Agricultural Marketing Council received only one comment in support of continuation of the proposed statutory measures in the wine industry (see Annexure 6).

 

4         DELIBERATION

 

4.1               Only one comment in support of the continuation of the proposed statutory measure was received from directly affected groups by the end of the due date, i.e. 2 September 2001.

 

4.2               The working group found that the WIFís application for statutory measures is consistent with the National Agricultural Marketing Councilís policy in respect of statutory measures.

 

4.3               The working group is convinced that registration is necessary to assist SAWIS in ensuring that the levy imposed can be collected. By combining compulsory registration with the keeping of information and the rendering of returns on an individual basis, information for the whole of the industry can be co-ordinated to ensure the orderly collection of levies and the provision of industry statistics, which are crucial.

 

4.4               The total extent of the levies is well below the prescribed maximum of 5% of the guideline price (as defined in the Amendment Act) at the first point of sale, as stipulated in section 15 of the Marketing of Agricultural Products Act.

 

4.5               The proposed levies are respectively 20% (R&D), 10% (information) and 16.6% (generic promotion) less than the amount prescribed at present.

 

4.6               The purpose of the levies is for the funding and provision of Research and development, Information and the Generic promotion on export wine. The levies will specifically make provision for the following:

o        The Information levy requested is to ensure the collection and dissemination of information.

o        The objective of a research and development levy is amongst other things, to commission relevant and thoroughly planned research, technology development and technology transfer in the promotion of the industryís technological capabilities and in the attainment of the other objectives.

o        The objective of a levy on the export of wine aims at increasing the profit margin for the industry for each focus market.

 

4.7               The working group is satisfied with the fact that the proposed statutory levy is to raise funds to be used to fund research programs and to improve the profitability of all producers by accessing new markets as well as providing information.

 

4.8               In the case of a levy collected only on exports, as in the case of the levy for generic promotion of export wine, wine producers of export wine bear the full economic cost, while South African consumers enjoy an implicit subsidy

 

4.9               However, in terms of the proposed information levy and research and development levy on wine and grapes, wine producers bear the full economic cost of a levy on wine, while in the case of a levy on grapes, both the grape producers and the consumer of the grapes for the production of wine (i.e. the wine producer) bear the full economic burden of the levy.

 

4.10            The working group was satisfied by the projects identified and work done by SAWIS, WINETECH and SAWSEA/WOSA regarding transformation issues.

 

4.11            The working group felt that although the budgets do not indicate the percentage allocated towards transformation, they are satisfied that the organisations have realised the importance of transformation issues and are planning to increase their activities in this regard in future.

 

4.12            The South African wine industry can only prosper over the long term if it is an effective global player. This means offering the international market only the best quality in wines, brandies and other grape based products (according to market requirements and niches) at the lowest cost, and by means of superior marketing and logistics systems.

 

4.13            The working group also took into consideration that the Council previously recommended wheat, cotton, sorghum, wine, deciduous (stone fruit, grapes and pome fruit), citrus and dried fruit levies based on the conviction that research and information qualify as public goods. According existing policy, the Council also considers specific market access issues on merit.

 

5.†††††††† PERSONNEL IMPLICATIONS

 

None

 

6.†††††††† FINANCIAL IMPLICATIONS

 

6.1.             There will be some financial implications for the fiscus in terms of evaluating the statutory measures every two years.The extent of these implications is impossible to quantify in advance.

 

7.                   LEGAL IMPLICATIONS

 

7.1.             If the Minister approves the implementation of the proposed continuation of the statutory levies, the Notices containing particulars of the statutory measures will be published in the Government Gazette.

 

8.                   COMMUNICATION IMPLICATIONS

 

8.1.             The directly affected groups in the wine industry will be informed of the Minister's decision.

 

9.†††††††† RECOMMENDATION

 

9.1               The working group found that the WIFís application for statutory measures is consistent with the National Agricultural Marketing Councilís policy in respect of statutory measures.

 

9.2               The working group therefore recommends that the National Agricultural Marketing Council recommends that the Minister approve the introduction and promulgation of the following statutory measures as requested by the WIF:

 

         Section 18 of the Marketing of Agricultural Products Act: Records and Returns.

         Section 19 of the Marketing of Agricultural Products Act: Registration.

         Section 15 of the Marketing of Agricultural Products Act: Statutory levies on the related products specified in the application:

 

1.

Grapes intended for the production of wine

 

         Research and Development levy:

R 8,40 per ton

 

         Information levy:

R 6,30 per ton

 

Total

R14,70

 

 

 

2.

Grape juice concentrate intended for use in wine.

 

         Research and Development levy at 17,4 degrees Balling:

1,20 cents/litre

 

         Information levy at 17,4 degrees Balling:

0,90 cents/litre

 

Total

2,10 cents/litre

 

 

 

3.

Bulk drinking wine; or

Packaged drinking wine

 

 

Research and Development levy

1,20 cents/litre

 

Information levy:

0,90 cents/litre

 

Wine Export Generic promotion levy

7,00 cents/litre

 

Total

9,10 cents/litre

 

 

 

4.

Distilling wine; or

Wine spirit

 

 

Research and Development levy:

1,00 cents/litre

 

9.3               The working group also recommends that the NAMC advise the Minister to approve that the SAWIS, WINETECH and SAWSEA submit its annual audited financial statements reflecting actual income and expenditure figures yearly to the NAMC and the Auditor-General. The percentage allocated towards transformation should be indicated in the expenditure figures.

 

9.4               The working group also recommends that the NAMC advise the Minister to approve that the financial statements should be accompanied by a report stating how the objectives of the levy have been met.

 

9.5               The working group recommends that the NAMC continue its observer status on the on SAWIS to ensure compliance with the original intent of the application. Furthermore, the working group recommends that the NAMC advise the Minister to approve that the NAMC should have observer status on SAWSEA and WINETECH to ensure compliance with the original intent of the application.

 

9.6               It is furthermore recommended that:

 

         Any surplus income from the levy (actual amount collected above the amount budgeted for) should be transferred to a separate fund.

         The surplus fund should not form part of the assets of the organisation administrating the levy and would be utilised with the discretion of the Minister after the lapsing of the levy.

         Levies must be accounted for, in a manner and to the extent acceptable to the Auditor-General, separately from any other funds or assets under the control of the levy administrator.

 

9.7               Furthermore the working group recommends that the NAMC advice the Minister that electronic data regarding the implemented statutory measures (records and returns etc.) on the whole industry be supplied to the NAMC on quarterly basis. A time series of industry data should also be provided at introduction of the levy.

 

HORTICULTURE: SECTION

October 2001