Article
Growth Of The Industry
Published: 22/06/2021
The South African grain industry has a rich history of progressive development with the times. Its focus has always been to remain competitive and efficient in the environment within which it operates.
In 1907 there was already a clear need to establish an official mouthpiece for the grain farmer and especially the maize farmer in the Free State and Transvaal.
In that year the Transvaal had to "import" 380,000 bags of maize from Natal and the Free State. From 1909, however, enough maize was grown in the Transvaal to provide for its own needs and even to export. Several agricultural cooperatives were established in the Transvaal in 1909, but the marketing of maize was still in disarray. To cope with this situation, the Government and the Land Bank of the Transvaal founded an organization called "Central Agency of Cooperative Society" which was taken over by the Transvaal cooperatives shortly thereafter. The Free State decided to affiliate only much later, in 1927.
An interesting piece of history comes from the year 1920. Cooperatives paid advances of between 6.12 and 6.18 per pocket based on an expected market price 25 / - and 30 / -. Eventually the maize was sold overseas at 11 / - and the farmer had a choice of whether to pay back a portion of his advance or whether the co-op had to bear the loss and be in danger of going down. Fortunately, the Government intervened and a special law was passed that authorized the Land Bank to give cooperatives a 5-??year opportunity to repay their debt. Export losses therefore come a long way with the maize farmer.
The Central Agency eventually went under in 1934 because overseas contracts were entered into at prices that were unacceptable for the cooperatives and they decide not to deliver maize to the agency. However, there was still a need for a brokerage to market the cooperatives' products. The demise of the agency led directly to the founding of Grain Union.
With the establishment of Union Grain Cooperative Company Limited on 29 May 1935, the two founders, the Central Western Cooperative Agricultural Association and Eastern Transvaal Agricultural Cooperative Society, very ambitiously predicted that there would ultimately be only one agricultural cooperative that will serve all the Free State and Transvaal maize producers.
In the statement submitted by the two founding cooperatives to the Registrar of Cooperatives, it is stated, inter alia, that:
"If the outlined scheme is found to be successful, these two associations intend to, in later years, attempt the implementation of further mergers of the scheme, with the ultimate goal of having just one big Co-operative Agricultural Company, which will serve the whole Free State and Transvaal."
Although this goal was never reached, Union Grain acted as spokesman for the grain producer for many years.
Shortly after its establishment, other cooperatives joined Union Grain, and 50 years later it comprised of twenty members.
Union Grain did good business for the cooperatives and its functions extended to imports of leather and also the right to handle and trade Sasko's grain.
With the advent of the Marketing Act in 1938, its main function, namely the marketing of maize, became redundant and it had to focus on other uncontrolled products. This alone was not sufficient to keep the organization afloat and in 1945 it had already decided to take £ 30,000 from its reserves and to divide it amongst the members on a pro-rata basis.
By about 1956 Union Grain was entirely out of business and acted only as a mouthpiece for the cooperatives. It also assisted various industry committees of the SAAU with calculations not only in terms of maize, but also sorghum, beans, etc. As early as 1945, it had already adopted the task of determining the maize price as well as compensation to the cooperatives. The former function was later, with the establishment of a industry committee for maize, passed on to this committee and it began to focus on research in the interest of the cooperatives’ main function, namely storage and handling of products. Herein it was very successful and continued to deliver an outstanding service to its cooperatives. An important feature of Grain Union was to coordinate its member cooperatives into unified action in matters of common interest.
For many years Grain Union worked in very close cooperation with the National Sales and Marketing Council and the individual marketing boards of which the Maize Board was the most important. By its honorable conduct it managed to build very good relations with all these institutions. Through its well-reasoned and substantiated submissions, it also managed to obtain a more just and equitable dispensation for cooperatives.
But the contribution that Union Grain made to farming was not limited to a fair deal for his member cooperatives. During disastrous drought years, the Grain Union was at the forefront fighting for the grain farmers who struggled to survive.
The crisis in which the summer crop industry found itself due mainly to droughts and the financial implications it posed for producers and cooperatives, was already brought to the attention of the SAAU in October 1982 by Union Grain. It was pointed out that despite the assistance measures, including relief of interest on carry-over debts and production credit, grain producers would not be in a position to fulfill their normal financial obligations.
At the request of Union Grain, the SAAU decided inter alia that an in depth study should be done on the financial position of the cooperative members and the effect thereof on the cooperatives ability to provide credit needs to be done. Union Grain undertook this study.
From the study, the shocking decline of agriculture's financial position clearly emerged. Everyone who thought that the food producers of South Africa were just complaining, realised for the first time how precarious the financial position of agriculture was in reality.
The influential role that Union Grain played in maize industry was emphasized by the fact that, until the arrival of Nampo, the central region nominated half of the Maize Board members.
Amongst the important role players were Eastern Transvaal Cooperative, Sentraalwes, Northwest. Mr A S Beyers was director and chairman of Union Grain from 1964 to 1984.He arrived amidst a battle between small and large cooperatives regarding equal pay of Union Grain's expenses. Fortunately they soon reached agreement.
Union Grain also worked very closely with the National Marketing Council and control boards. By its honorable conduct it managed to build very good relations with all these institutions. Through his well-reasoned and substantiated submissions, it also managed to obtain a more just and equitable dispensation for cooperatives.
During the eighties the silo building projects slowed down and commercial silo owners focused more on effectiveness and efficiency. In alignment with this process, the analysis and implementation of grain industry systems as well as payment for grain services on a through-put basis also became a focus area of Union Grain. This phase led up to the deregulation process that followed the democratization of the political system in South Africa.
The Union Grain was essentially a strong and solid grouping, despite geographic and commodity differences between the northern (mainly summer grain) and southern (mainly winter wheat) members. Members realised that aspects such as quality, open access to grain-related services and internationalisation were becoming more important. Union Grain's role in this regard had always been significant, credible and in the interest of the entire grain industry.
At the beginning of the nineties, it became clear that the political system would change. The controlled system that the grain role players had organised, had to be liberalised and intense discussion were conducted by various stakeholders such as the grain producers, Nampo and other producer organizations, governing bodies, government departments, financial institutions, millers, feed manufacturers and other industries. In the quest, debate and even arguments to achieve a fair and workable system, Union Grain and its members played a significant role. Union Grain's understanding of the grain industry system of that time and the expectations of stakeholders for a freer future was, time and time again, crucial in the design thereof.
Union Grain and its members realised that deregulation, the dissolution of the councils and changes to marketing legislation required a whole new philosophy and made itself and its members aware in advance to act and negotiate uniformly and collectively as a stakeholder. Socialist political undertones and talk of nationalisation compelled Union Grain to drive the transfer of ownership of silos, free association and free-market principles, and together with other stakeholders propagate it as a prerequisite for a new order. This was probably one of the biggest successes of Union Grain and its members. It also established the pursuit of transparency, orderliness, fairness, self-regulation and group interests, which were important values ??for a new order.
The changed political order, amended legislation, lack of input and insight from the government, and the focus of stakeholders in the grain industry chain to engineer selfish expectations, forced Union Grain to redefine its own role, behaviour and positioning in the grain industry. Where the focus up to that time had been specifically on member interest and grain handling and storage aspects, members pro-actively participated in forums and working groups to make contributions. Self-interest made way for the design and establishment of a grain industry system that was workable, effective and accepted by most players. Industry role players realised that associations, official representative bodies and ongoing involvement were materially important for role players in finding consensus. Due to the scope and impact that Union Grain's members had across the country in terms of infrastructure, volume of business done, experience, knowledge, intellect and integrity, it rapidly became an indispensable, recognised and respected group in the new order.
Union Grain's organizational form as a central co-operative was reconsidered during this phase of liberalisation in the country by the Lubbe Committee and it was decided to create a more modern, market-oriented and open business. The establishment of Grain Silo Industry (Pty) Limited (GSI) in 1997 was the culmination of many inputs, much thought and evaluation in the grain industry. GSI was recognised as a visible, proactive, responsive and reliable grouping which made a significant impact and contribution to the national grain industry chain.
GSI's focus has changed to establish a fair, workable, effective grain industry that complies with stakeholders' expectations, helps to solve the lack of government inputs and maintains the free market in order for its members to freely operate their grain businesses. As an association with an interest in its members and the grain management environment in South Africa, GSI individually, and in collaboration with other role players, played a very important role.
It is clear that GSI had a significant role when the industry's recognition of the association and its people are taken into account. GSI's profile was undeniably one of scope, experience and knowledge, cooperation and integrity - aspects that are highly respected in the grain industry value chain.
In 2014 the twelve largest commercial grain handling and storage companies in South Africa decided to establish a new fully-fledged and dedicated desk, named Agbiz Grain, under the Agribusiness Chamber of South Africa, also known as Agbiz. The rationale was to promote visibility on a higher level and to create a critical mass. It will also enhance the vision of expanding the client base of commercial silo owners, increasing membership, reducing member costs and growth opportunities. The partnership has mutual benefits.
The industry has established itself as a progressive food producer with increased yields, adequate storage facilities and the ability to export surplus grain successfully to both Africa and other countries around the world. The grain and oilseed industry has transformed to include the establishment of new grain farmers amongst its activities and, together with the Grain Value Chain Network, established the Grain Farmer Development Association. The industry has sharpened its focus on grain farmer development and the storage and handling of grains and oilseeds produced by small-scale farmers in the established grain producing areas. New production areas with high potential are constantly evaluated for opportunities to establish alternative storage structures for the developing farmers in those regions.
Attention is paid to the following:
- Sustaining free-market principles
- Food security and sustainable production
- Food safety
- Food quality
- Legislation and regulatory aspects
- Standardisation and compliance
- Representation on industry bodies
- Training and development
- Information
Source:
Mr A S Beyers (Chairman Union Grain 1965 - 1984)
Dr A Lubbe (Chairman Grain Silo Industry: 2002-2007; Managing Director: 2010-2013)
Ms M Purnell (General Manager Agbiz Grain 2013 - 2020)
Mr WL Lemmer (General Manager Agbiz Grain 2020 - )