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THE
GRAIN AND OILSEED INDUSTRY
OF SOUTH AFRICA – A JOURNEY THROUGH TIME
ႄႆ
In order to alleviate the shortage of maize supplies after the droughts of the
preceding years, it was decided – with approval from the Minister of Agri-
culture, Mr Greyling Wentzel – that a premium would be paid for early maize
delivery in the 1984/1985 season. However, the premium was limited to the first
300 000 tons delivered.
Land conversion scheme
At a special Congress of NAMPO held on 27 August 1987 in Potchefstroom, Min-
ister Wentzel announced measures to make gradual structural adjustments to the
utilisation of land in the summer sowing areas possible. This applied not only to
land on which maize was planted, but also to other summer cereal crops. The most
important component here was a special land conversion scheme that was intro-
duced to convert marginal land into planted pasture.
The land conversion scheme was an exclusive NAMPO initiative, led by Mr Cerneels
Claassen, who is discussed in more detail in Chapter 4. This was a project that
would be phased in over about five years and was aimed at limiting maize produc-
tion in particular to approximately the levels of domestic demand by converting
about one million hectares of arable land into pasture. It went hand in hand with
assistance from the government to limit losses with maize exports during the con-
version period.
Expansion of controlled areas
In 1988 the controlled areas in terms of the single-channel system for maize were
expanded to place all magisterial districts, where more than 5 000 tons of maize/
year were produced, under control. The problem was partly caused by the fact that
the South African producer price for maize was higher than the international price,
which was very low at that stage because of an oversupply of maize on interna-
tional markets. The Maize Board was of the opinion that an ‘artificial’ international
market situation had been created by the fact that foreign governments subsidised
their maize producers heavily, and that this market situation would lead to produc-
ers in the non-controlled areas benefiting at the expense of those in the controlled
areas.
Brand Committee (1988)
At that stage the maize industry was in a transition phase and the Maize Board had
pointed out that the adjustments that were being considered could only succeed if
all the maize producers were involved.
In addition to various other marketing alternatives that were considered, the Com-
mittee of Enquiry into Alternative Marketing Arrangements (the so-called Brand
Committee) was, for example, investigating the possibility of establishing a grain
exchange. The gap between the producer price and the consumer price of maize
was problematic and one of the components contributing to this price gap was in
fact the high marketing expenses of the Maize Board. This included the cost of stor-
age, handling and fumigation, as well as the Maize Board’s administrative expenses
and interest expense. Any alternative would have to try and address this problem
too, and accomplish a structural reduction in these costs.
The Brand Committee, whose report was handed to Minister Wentzel (Agriculture)
on 14 November 1988, ultimately recommended that a single-channel marketing
system for maize be retained, because, in the opinion of the committee, it would
best meet the criteria that had been set for a maize marketing system in South
Africa. The committee also recommended that the management and running of
such a marketing system in time had to adapt to changing circumstances. In this
regard it was recommended that a more market-oriented single-channel system
for maize be implemented over time (by allowing producers to sell maize directly
to buyers under certain conditions), in order to develop a pricing mechanism in
due course.
The committee pointed out that a free-market system did have certain advantages
and expressed the opinion that the best solution probably lay in a combination of
regulated pricing and a free-market system, with a proper distribution of functions.