Speech by Dr Rob Davies, Deputy Minister of Trade and Industry, on the occasion of the launching of the Fruit Canning Initiative

Chairperson
MEC for Environmental Affairs, Planning and Economic Development, Minister Tasneem Essop
MEC for Agriculture, Minister Cobus Dowry
Mayor of the Breede River Winelands, Cllr John Ngonyama
Chairperson of the South African Fruit and Vegetables Canners Association (SAFVCA), Mr Rudi Richards
Ms Jill Palm, General Manager of SAFVCA
Representatives of Trade Unions of the Community
The Department of Trade and Industry, other departments
Ladies and gentlemen

It is a very great honour to have been invited to deliver the keynote address at today's launching of the Fruit Canning Initiative. This is a very special occasion for me personally. Since 1994, I have been deployed as a constituency Member of Parliament to the Breede River Winelands area. Through my work here, I have become acutely aware of the critical importance of the deciduous fruit canning industry, for the livelihoods and material well-being of many, many people in the communities of this area. I have also become painfully aware of some of the difficulties which this industry has experienced over the years and of the impact which these difficulties can have on the lives of working people and communities in this area.

The closure of the fruit canning line in Paarl a few years ago was a traumatic event for that community, which this area certainly cannot afford to pass through and yet, many of us are convinced that fruit canning is an industry where South Africa has significant comparative and competitive advantages and where there is scope therefore to offer a pillar of stability and growing prosperity to communities in the rural areas of the Western Cape and elsewhere in our country.

South Africa produces the best canned yellow peaches in the world. Our pears and apricots are second to none. Yet our industry has been declining in terms of world market share, while those of other countries have been expanding. The main reasons for this lie in factors external to our own canning industry. The world trading system, as it continues to function up to the present, allows governments in the rich industrialised countries to deploy large subsidies to support inherently less competitive fruit canners, whilst at the same time erecting high tariff walls to the entry of products from more competitive producers like ourselves.

We battled hard in the negotiations for the Trade, Development and Co-operation Agreement with the European Union to avoid having canned fruit totally excluded from any tariff benefit arising from the trade component of that agreement. What we managed to secure was a tariff quota covering only part of our total sales to the European Union (EU), which enters at half the prevailing high Most Favoured Nation (MFN) tariff. While trading conditions in traditional established markets have remained harsh, all of us gathered here today are convinced that there is a way forward for the canning industry in this country and that if we can chart our way over a few rocky courses, a bright future awaits us in the longer term.

The direct origin of the initiative we are launching today dates back to the beginning of 2004, when it became evident in the face of an appreciating currency and a declining world price for canned deciduous fruit, that the industry may be going through another rocky period. In the face of such indications, we approached the then Minister of Trade and Industry, Comrade Alec Erwin, who visited the area and agreed to fund a study by the National Productivity Institute to identify areas of work that needed attending to in order to place the industry on a more secure footing. A feature of the National Productivity Institute study was that it identified a number of areas where it made sense for the different firms active in the industry to come together and act collectively to address common problems and challenges.

When I was appointed to my present portfolio two years ago, tomorrow in fact, I called a number of broad stakeholder meetings to workshop the proposals in the study of the National Productivity Institute. The basic methodology which we followed is one which we are proposing as an integral component of our National Industrial Policy, namely: "self discovery". Another feature of the process which we began on the 15th August 2005 was the involvement in the exercise of self discovery of all key stakeholders, industry, supplier industries, labour, community and government, national, provincial and local. The broad stakeholder meetings agreed that all the recommendations in the National Productivity Institute's study had merit and that there was a need to turn these into an Action Plan.

At the same time and responding also to the conditions imposed by the competition authorities for the merger of the then Ashton Canning and Tiger Brands companies, the group agreed that issues of transformation, job sustainability and social responsibility were also critical elements that needed to form an integral part of the Action Plan. The broad group agreed to form a task team, consisting of representatives of all constituencies to work on the Action Plan. That Action Plan which we are now calling the Fruit Canning Initiative is what we are launching here today. The Fruit Canning Initiative has been approved by the principles of all the representatives to the task teams. It embraces four main themes:

* marketing
* market access
* issues of input costs, regulatory environment, competitiveness and industry cooperation
* transformation, job sustainability and social responsibility.

I am very pleased that the Department of Trade and Industry has been able to approve a grant of R8,4 million through our Sector Wide Enterprise Employment and Equity Programme (SWEEP). The total funding requirement agreed by the Task Team amounted to R16,8 million. One of the conditions of the SWEEP programme is that funding is allocated on a 50/50 basis with half the total funding of approved projects coming from our department and the rest from the applicant, in this case the Fruit Canners' Association, acting on behalf of the Task Team.

When the industry told us that they would have difficulty in raising their full contribution of R8,4 million, the department agreed to attach a monetary value to the time and resources spent by business in the work of the leadership group. I am glad that we were able to find a flexible accommodation of each other's needs that enabled the funds to be released. We look forward to the spirit which has underpinned the production of the Action Plan and which continues in the phase of its implementation. Although conditions in the global market remain harsh, there are some prospects of a measure of respite that may benefit this industry. Intense efforts are currently underway to try to conclude the World Trade Organisation (WTO) Doha Round before the end of this year.

Although the proposals emerging from the chair of the negotiating group on agriculture suggest the possibility of any agreement if indeed there is one, being at a lower level of ambition than demanded of the G20 group, there is a chance that new disciplines on domestic support, the removal of export subsidies by 2013 and tariff cuts may provide some benefit to this industry, at least if tariff cuts are not thwarted by unfair rules on sensitive products. Likewise in our current negotiations with the European Union, which are now taking place within the framework of the Southern African Development Community (SADC) Economic Partnership Agreement Negotiating Configuration, although the EU have indicated that it will maintain barriers against so-called "sensitive products" from South Africa, it may be possible on the bilateral front, to secure some concessions. The industry and the Task Team on market access in particular, needs to monitor carefully the possibilities as well as difficulties that may arise in these processes.

In the meantime, it is to be hoped that the work of the Task Team on marketing as well as on market access will succeed in identifying the many opportunities which many of us suspect are available in non-traditional markets, which are opening up all over the world for South African products. Work on benchmarking and competitiveness, we trust, will identify issues in the industry's own internal operations that need to be improved. As a representative of government and also in my capacity as a constituency MP of this area, I look forward to seeing rapid progress in the development of a Broad-Based Black Economic Empowerment (BBBEE) plan as well as a job security and social responsibility programme. The old days, when people of colour in this area worked in the industry only as operatives and mostly as seasonal workers have long gone. Many more opportunities need to be created for all the people of this area to benefit from this industry at all levels and in ways beyond merely drawing wages. We look forward to this industry becoming more than just a source of employment and income that the people of this area cannot do without and becoming also an active driver of broader based growth and development throughout the Breede River Winelands area.

I would like in conclusion to thank all those who have participated in these processes and particularly the members of the Task Team for the hard work which they have done in producing and negotiating this industry Initiative. May I indicate our willingness as a department to work further with you on any issues which may arise in the future and in the meantime to wish all stakeholders every success in taking this important programme forward.

I thank you.

Issued by: Department of Trade and Industry
21 June 2007