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COMPARISON OF STATUTORY MEASURES APPLICABLE IN

SOUTH AFRICA AND AUSTRALIA

SCHALK BURGER: SENIOR MANAGER26 MARCH 2010

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PRESENTATION OUTLINE

• Background

• What is regarded as statutory measures?

• The application for statutory levies

• Evaluation of statutory levies

• Defaulters and legal action

• Review of statutory levies

• Conclusion

LEGISLATION

South Africa AustraliaOne Act , namely the Marketing of Agricultural Products Act, 1996

Number of Acts• Imposing legislation – 7 Acts• Collecting legislation – 2 Acts• Disbursement legislation – 15 Acts

Once approved by the Minister, the statutory measures be promulgated through different Government Notices

Sub-ordinate legislation that set out further details

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STATUTORY MEASURES

South Africa AustraliaWe have five (5) statutory measures, namely –• Statutory levies• Registrations• Records & returns

• Marketing pools• Control of exports

Has only one statutory measure, namely statutory levies, although Records & returns is included in statutory levies

They don’t have compulsory registration (very much a law abiding nation)

What is a statutory measure?Compulsory, approved and promulgated

The same!!!

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ROLES OF NAMC / LRS

South Africa AustraliaNational Agricultural Marketing Council (NAMC), a statutory body not part of the DAFF. The NAMC only facilitate the process, investigate an application and make a recommendation.Once approved, the relevant industry organisation collect and administer the statutory levies.NAMC be funded by tax money.One office, 3 people.NAMC has other duties.

Levy Revenue Services (LRS), a government body and part of the DAFF. LRS also investigate and make a recommendation.

Once approved. LRS will collect and distribute the levy funds

LRS be funded by statutory leviesSix offices, 47 peopleLRS focus only on levies

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SIZE OF AGRIC SECTORS

South Africa AustraliaAgriculture is 3% of GDP Also 3% of GDP

Agric land – 101 mill hectareAgric production –• Field crops - 33%• Horticulture - 23%• Animal production - 44%

Gross value of agric production• R120 billion

Net exporter???

460 mill hectareAgric production –• Field crops – 18%• Horticulture – 26%• Animal production – 56%

Gross value of agric production• Aus$44 billion (R308 billion)

50% of agric production be exported

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WHY STATUTORY LEVIES?

South Africa AustraliaTo finance generic functions such as research, information, promotions and transformation

Transformation?

Must promote the objectives of the MAP Act.

MOTIVATION TO APPLY!!!!►►►►►

To finance functions such as research, promotion, residue testing and plant / animal health programmes.

Levies only be introduced to address market failure and then the benefits of the levy must be more than the cost of the levy.

Australian Government pay LRS a matching grant for each Aus$ collected for research.

66% of agric products levied 99% of agric products levied7

THE APPLICATION PROCESS

South Africa AustraliaAn industry body identifies the need for a statutory levy to finance generic functions. Before an industry could apply, they need to lobby the support from directly affected groups.

Process could take app 8 months

An industry body identifies the need for a statutory levy in order to respond to a market failure which require collective industry funding.

Process – 5 to 6 months

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LEVY PRINCIPALS AND GUIDELINES

South Africa AustraliaIn SA we have the guideline that not more than 10% of levy income be used for admin purposes, 20% for transformation and 70% for functions such as research , information and promotion.

Then the levy must not be more that 5% of the guideline price at first point of sale.

Levies be approved for a maximum of 4 years.

The Australian DAFF introduced 12 levy principles that must be met before an industry could apply for a levy. These principles relate to support, objections, the business plan and the type of market failure.

There is no limit!!

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LEVEL OF SUPPORT

South Africa AustraliaA guideline that two-thirds (67%) of producers and production have to support an application for statutory levies.

NAMC has a register of directly affected groups for each commodity. They are consulted during the investigation process.

The NAMC wants to avoid possible court cases regarding statutory levies

Majority support, more than 50%, of producers and production is needed.

An industry must have a voting register of all potential levy payers to consult and to lobby their support.

The LRS has a minimum of court cases. Australians are used to regulations.

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REFERENDUMS

South Africa AustraliaA referendum not being held with every application. It will only be held if there is uncertainty about the level of support for an application.

In 1998, after a referendum in the wool industry, the NAMC decided not to recommend an application for statutory levies, to the Minister for approval.

A referendum being held when there is not sufficient industry structures for a comprehensive consulting process.

An independent returning officer is required to ensure the integrity of the ballot.

Levies will not be submitted to their Minister if there is not sufficient support.

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DEFAULTERS / LEGAL ACTION

South Africa AustraliaInterest is payable on outstanding levies. The current rate is 15% per annum.

In 2007/08 the levy collection rate was 99%.

Due to the fact that the Minister approved the statutory levies, she will also be involved in possible court cases and we must avoid it as far as possible.

A penalty of 2% per month compounding is payable to LRS on unpaid amounts.

During the same period, the levies outstanding, was only 0.12% of levies payable.

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EXTEND OF LEVIES

South Africa AustraliaIn 2008, a number of 14 different levies were promulgated.

An amount of R222 million was collected.

Administration cost – 7%

Main functions: Research, information, promotion and transformation

Over the same period, 60 different levies were promulgated.

An amount of Aus$621 million was collected (20x more).

Administration cost – 1%

Main functions: Research and promotion.

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ALLOCATION OF LEVIES

South Africa AustraliaAdmin – 7%Research – 32%Information – 17%Transformation – 23%Export promotion – 12%Local promotion – 5%Other – 4%

Admin – 1%Research – 31%Information – 0%Transformation – 0%Export promotion – 60%Local promotion – 8%Other – 0%

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OTHER ISSUES

South Africa AustraliaValue Added Tax (VAT) payable on levies.

Period of validity: 4 years

Levies an a percentage of the value of the agric products levied – 0.5%

Goods and Services Tax (GST) not applicable on levies.

Indefinite

Approximately 1.4%

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SUMMARY

• Australian DAFF (LRS) is collecting statutory levies

• LRS being funded by statutory levies

• Driving force of applications for statutory levies in Australia

• Admin costs: 7% compare to 1%

• Best system????

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THANK YOU