Challenges facing the agricultural sector

23 Jul
Presenter’s name
Challenges Facing the
Agricultural Sector

Agenda
Welcome
Carl Opperman – CEO Agri Wes-Cape:
Challenges and Realities in Agriculture Sector Today
Wage Determination SD 13
Background
Scope of Application
Wages and Deductions
Other terms and conditions
Who is an employee in terms of SD13?
2

Agenda
ESTA Developments
New Earnings Threshold
Wildcat Strikes – The Law
Wildcat Strikes and Recovering Damages
Intellectual Property
Competition Law and the Agricultural Section
Questions and Answers
3

Challenges and Realities in
Agriculture Sector Today
4

Which other industry embraces
life 24h / 365 days on going?
Who supplies Food & Fibre?
What economy foundation is not
build on Agriculture?
5

Basic Facts about SA
Agriculture
• Only 12% of South Africa’s landmass is considered
arable and only 3% "truly fertile".
• Only 1.5% of the land is under irrigation, producing
30% of the country’s crops.
• Contribution to GDP dropped from 21% in 1910 to
between 3‐5% over the last decade.
• Declining contribution frequently misinterpreted as
agriculture’s declining role in the country’s economy.
6

Agriculture
• The physical performance of South African
agriculture is heavily influenced by the climate.
• 20% of farmers generate 80% of agricultural output
value.
• 60% of South Africans are urbanised and depend
on the agri‐food chain and specifically the food
processing, distribution and retailing system.
7

Agriculture
• Transport and distribution a major cost and also
contributor to carbon foot print.
• Agriculture has been a net earner of foreign
exchange – exporting more in rand terms than
importing.
• Agriculture has been challenged to produce more
food in the next 50 years than it did in the past 500
years.
8

Land capacity of South Africa
9

Number of farming Units
Source: Stats SA
10

South African Farming
Structure
Source: Stats SA
11

Agriculture’s output and GDP
contribution
1911 ‐ 2005
12

Contribution of agriculture to
the GDP in SA,
1990 to 2012
13

The cost squeeze for SA
farmers
2008 to 2012 (2005 = base year = 1)
14

Farm Income & Expenditure
15

Earner of Foreign Exchange
16

Export / Import Value (F.O.B)
17

Agriculture’s linkages with the
rest of the economy
• Backward linkages
− Purchases of goods such as fertilizers,
chemicals and implements
• Forward linkages
− Supply of raw materials to industry and the
food supply chain in general
• Approximately 70 % of agricultural output is used
as intermediary products in other sectors
18

Global agriculture in the
21st century faces multiple
challenges
• Resource depletion
− It has to produce more food and fibre to feed
a growing population with a smaller rural
labour force
• More feedstocks for a potentially huge bio‐
energy market
• Contribute to overall development in the many
agriculture‐dependent developing countries
19

Global agriculture in the
21st century faces multiple
challenges
• Adopt more efficient and sustainable production
methods
• Adapt to climate change
• Price volatility
• Diet changes
• Increased competition via globalisation,
demographic transition and urbanization
20

PSE Definition
The producer support estimate (PSE) is an
indicator of the annual monetary value of
gross transfers from consumers and
taxpayers to support agricultural producers,
measured at farm gate level, arising from
policy measures, regardless of their nature,
objectives or impacts on farm production or
income.
21

PSE
Producer Support Estimates, 2011
22

Affordability of food a global challenge
What proportion of people’s household
expenditures goes to food?
23

Top most constraining
factors
• Trust in the political system
• Competence of personnel in the public sector
• Public sector's ability for sufficient service
delivery
• Electricity supply
• Cost of Crime
• Efficiency of national infrastructure
• Cost of transport
Source: ABC
24

Top most constraining
factors
• Administrative regulation in SA
• Availability of professional labour
• Cost of using infrastructure
• SA's labour policy
• Cost of financing
• Labour administration costs
• Availability of skilled labour
• Current exchange rate
Source: ABC
25

Challenges in the local
agricultural sector
• Policy coherence in relation to agriculture
• Administered prices
• Agricultural research
• Labour in agriculture
• Trade dispensation
• Land reform
26

Challenges in the local
agricultural sector
• Protection of natural resources (impact of mining
on agriculture)
• African development
• Infrastructure (the lack of)
• Integrated Growth and Development Plan for
agriculture
• Disaster management
27

Policy challenges
• Spatial challenges continues to marginalise the
poor
• The ailing public health system confronts a
massive disease burden
• The performance of the public service is uneven
• Corruption undermines state legitimacy and
service delivery
• South Africa remains a divided society
28

23 Jul
By Jacques van Wyk
New Wage
Determination SD 13

A Sectoral Determination supplements and amends the
provisions of the Basic Conditions of Employment Act 75
of 1997 (“BCEA”) in a particular sector.
If a determination is silent the BCEA shall have
application (section 1(5) of Determination 13).
31
SD 13 Background

Applies to all farm workers in all farming activities
within South Africa.
A farm worker is an employee who is employed mainly
or wholly in connection with farming activities.
Farming activities includes primary and secondary
agriculture, mixed farming, horticulture, aqua farming
and the farming of animal products or field crops
excluding the forestry sector.
Includes domestic workers and security guards (if not
employed in the private security sector).
32
SD 13 Scope of Application

Not defined.
Look at what the courts say and the definitions provided
by AgriSETA and StatsSA and the DoL approach.
Look at the nature of the enterprise in which the
employees and their employer are associated for a
common purpose.
33
SD 13 What is “Secondary Agriculture”?

It must be work conducted in furtherance of the primary
purpose of the employer which must be the production
of agricultural products.
What about processing and production? (question of
fact: if they are controlled by the same undertaking and
are connected with the farm land then they will likely
fall within the definition of secondary agriculture).
34
SD 13 What is “Secondary Agriculture”? (continued)

Factors that may play a role in determining whether an
activity constitutes secondary agriculture:
The dimension of the activities of the secondary side of the
undertaking.
Whether the operation need necessarily be part and parcel
of the farming operation.
The commercialisation of the enterprise.
The location of the processing facility in an industrial area.
Examples: Abattoir on farm vs abattoir in industrial area
serving other suppliers.
35
SD 13 What is “Secondary Agriculture” (continued)

The magnitude of the operations and the number of
employees employed in the secondary industry.
Whether employees execute other farming tasks.
Whether production is industrialised.
Where the employees live: in an industrial area or on the
farm.
Whether the processing activity is dependent upon urban
infrastructure.
36
SD 13 What is “Secondary Agriculture”? (continued)

Distinction between “wage” and “remuneration”:
“remuneration” is “payment in money or in kind, or both
in money and in kind”.
“wage” is “amount of money”.
Minimum wage is amount of R105 per day, irrespective
of additional payment in kind such as housing, food,
electricity, transport.
37
SD 13 Wage Increases and Exemption Applications

New minimum wage (for a 9 hour day) as of 1 March
2013 until 28 February 2014 [67% increase!].
Will be further increased from 1 March 2014 until 28
February 2015 to [previous year’s minimum wage +
minimum wage+ CPI + 1.5%].
Again from 1 March 2015 until 28 February 2016 to
[previous year’s minimum wage + minimum wage+ CPI
+ 1.5%].
38

What are the consequences of non-compliance:
Fine (schedule 2 of the BCEA); and
Term of imprisonment? (section 93 of BCEA).
39

Employer may make the following deductions from an
employee’s wage:
Housing;
Food; and
Selected “others”.
Provided certain prescribed criteria are met.
40
SD 13 Deductions

A 10% deduction for housing if it:
is provided as part of employment;
has a durable and waterproof roof;
has glass windows that can be opened;
is at least 30 square meters in size;
41
SD 13 Deductions (continued) - housing

electricity is available inside the house (in so far as such
infrastructure is on the farm);
safe water is available inside the house or within 100
meters from the house;
flush toilet or pit latrine is inside or near the house; and
no other deductions are made for housing (e.g. for
electricity or water).
42

Where more than two workers in collective housing
(e.g. “hostels”):
Maximum deduction in total in respect of all resident
workers = 25% in total of minimum wage (R105); and
Equal part to be deducted from each of the residents’
wages.
No deduction for housing from wages of a worker under
18 years of age.
43

A 10% deduction for food if it is:
provided free of other charges;
provided on an ongoing and regular basis as part of the
employee's conditions of employment;
The deduction may not exceed the actual cost to the
employer for providing the food; and
No other deductions for food may be made of the worker's
remuneration.
44
SD 13 Deductions (continued) - food

Third parties (e.g. bank, union, medical aid) on written
instructions from worker;
in terms of a law or court order (e.g. tax or child
maintenance); and
no more than 10% of the wage for the repayment of an
advance or loan made to the worker.
45
SD 13 Deductions (continued) – “other”

Currently no provision for deduction for electricity.
Department of Labour (“DOL”): Contentious issue.
The DOL have requested a legal opinion and will issue
guidelines for employers.
46
SD 13 Deductions (continued) – electricity?

Thousands of Exemption applications were made.
Few granted.
The key factor: a real and pressing financial need for
the exemption (for example, the failure to obtain an
exemption would necessitate significant retrenchments
or result in the failure of the enterprise).
How? By way of an application to the DOL.
47
SD 13 Exemption Applications

Exemption application: the procedure:
Determine whether there are trade unions representing
affected employees;
If yes, then approach them in order to obtain their
consent to the application for exemption;
If the trade union consents a copy of the consent must
be attached to the application (the consent should be
contained on the union’s letterhead);
48
SD 13 Exemption Applications (continued)

If no consent, the trade union must nonetheless be
served with a copy of the application and informed they
can made representations to the DOL.
If there are no trade unions the employer must try to
obtain the employee’s consent. In addition an affidavit
must be completed which states that “none of the
employees affected by the application are unionised”;
If the employees do not consent proof must nonetheless
be attached to the affidavit indicating they have been
informed of the process;
49

Thereafter, submit a copy of the application (BCEA Form
6) to the DOL. The form must be accompanied by the
following documentation:
Copies of the Employer’s financial statements (income
statement, cash flow statement, balance sheet);
Motivational letter indicating why exemption is sought;
Project plan indicating projections of meeting the
prescribed conditions;
50

List of employees with their salaries reflected;
Farm Workers form;
Trade union consent (if applicable);
Alternatively employees consent and affidavit setting out
steps taken to notify employees (if applicable).
51

There are a number of additional ‘unusual’ terms and
conditions contained within SD13:
Extension of ordinary working hours of employees;
Overtime;
Remuneration for work on Sundays;
Termination of employment;
Accommodation, livestock and crops on termination;
52
SD 13 Other Terms and Conditions

With effect from 1 July 2013:
Increase from R183 008 to 193 805;
Threshold calculated in accordance with employee’s
earnings (what is included and excluded?);
“Earnings” is regular annual remuneration before
deductions (income tax, medical, pension etc.).
Does not include subsistence and transport allowances.
54
New Earnings Threshold

Implications of threshold?
More employees entitled to the protections of the BCEA.
Ordinary hours of work, overtime, compressed working
week, averaging hours of work, meal intervals, daily
and weekly rest periods, pay for work on Sundays, night
work and work on public holiday.
Administrative and financial consequences.
55
New Earnings Threshold (continued)

The purpose of the Extension of Security of Tenure Act
62 of 1997 (“ESTA”) is to:
Provide long-term security of occupancy, residency or
possession of land.
Provide for and put in place the conditions that must be
met and circumstances that allow for persons to be
evicted from land.
It applies to occupiers of land other than land
designated as a township.
57
ESTA Overview and Recent Cases

Give two months’ written notice of intention to apply for
eviction order to:
Occupier;
Local municipality;
Department of Land Affairs.
Obtain court order for eviction
Will only be granted if ‘just and equitable’ to evict taking into
account a range of factors.
Once court order obtained, give notice to occupier that
he/she is to be evicted
58
ESTA Eviction Process

What constitutes ‘just and equitable’ circumstances?
The following factors:
the period of time the person has occupied the land;
whether valid grounds exist for ending the right to occupy;
the land owner’s conduct;
potential hardship to be suffered by person evicted; and
availability of alternative accommodation.
Pivotal to show ‘meaningful engagement’ by land owner.
59
ESTA Just and Equitable

May institute proceedings in the Magistrates Court or
the Land Claims Court.
Each court has advantages and disadvantages.
Land Claims Court:
Is more inclined to issue injunctions.
Is more explicit in its disapproval should the department
so ordered fail to comply with its injunctions.
Judges concern themselves solely with land claim issues
and eviction applications.
Is a High Court and accordingly there is no automatic right
to appeal.
60
ESTA - Magistrate’s Court or Land Claims Court?

Magistrates Court:
More inclined to grant postponements until such time as
the relevant department acts as ordered, if at all.
This may lead to months or even years of delay.
Eviction order is sent to the Land Claims Court on
automatic review.
Upon conclusion of review proceedings if the eviction order
is granted the respondents have an automatic right of
appeal. This delays the proceedings even further.
61
ESTA Magistrate’s Court or Land Claims Court? (continued)

23 Jul
Wildcat Strikes
– The Law

The strikes in Marikana and De Doorns have focused attention on
wildcat strikes in South Africa.
De Doorns strikes:
Workers demanded a wage increase from R69 to R150/day
before striking unlawfully.
The conduct of the strikers and persons amongst them led to
approximately R100 000 000* in damages to export table-
grape farms.
The Food and Allied Workers Union (FAWU) now threatens
further strike action. FAWU members number approximately
2500 out of roughly 8000 permanent employees.
*http://www.bdlive.co.za/national/labour/2013/05/07/fawu-threatens-further-de-doorns-farm-strikes
63
Wildcat Strikes – An overview of recent strikes

For a strike to be lawful, it must comply with chapter 4
of the LRA.
The issue in dispute must be referred to a bargaining
council or CCMA for conciliation;
A certificate stating the dispute is unresolved must be
issued or a period of 30 days must elapse from the date
of referral; and
Notice of strike action must be given at least 48 hours
before the strike.
If procedure is not followed, the strike is regarded as
unlawful.
64
Wildcat Strikes – What does the law require?

Obtain an interdict from the Labour Court to bring the
unlawful strike to a halt. Must prove:
A right has been infringed;
Irreparable harm will occur if the interdict is not granted;
Granting the interdict is more convenient than not; and
The applicant has no other satisfactory remedy.
65
Wildcat Strikes – What are the Employer’s remedies?

The employer may also claim compensation or
damages.
The employer may dismiss the employees but this
should be regarded as a mechanism of last resort.
66
Wildcat Strikes – What are the Employer’s remedies?

23 Jul
By Nasheetah Smith
Wildcat Strikes –
Recovering Damages

Rights in terms of Protected strikes:
If the strike is protected, then the LRA grants immunity to
striking employees and trade unions against the following:
Breach of contract claims;
Delictual and civil claims; and
Dismissals (other than for operational reasons)
Immunity does not protect strikers who commit unlawful
conduct during the strike.
68
Wildcat Strikes – Damages Recovery

Section 67(6) of the LRA provides that:
“Civil legal proceedings may not be instituted against any
person for participating in a protected strike or a protected
lock-out; or any conduct in contemplation or in furtherance
of a protected strike or a protected lock-out.”
The immunity granted under S67 is not absolute. Section
67(8) expressly excludes “…any act in contemplation or in
furtherance of a strike or lock- out, if that act is an
offence”
69

Criminal conduct would therefore not be condoned.
Any damages suffered as a result of the unlawful conduct of
the strikers will expose them, the organisers, protestors
and/or trade union to delictual liability.
70

In recent cases, conduct such as intimidation, assault
and damage to property was found not be afforded
immunity under Section 67(2) and (6).
(Minister of Correctional Services and Another v Ngubo and others
(2000); Fourways Mall v SA Commercial Catering and Allied
Workers Union(1999))
Damages claims arising out of unlawful conduct which
constitutes an offence would have to be instituted in the
High Court.
71
Wildcat Strikes – Damages Recovery (continued)

What about Unprotected Strikes:
The immunity granted in Section 67 is not granted at all
in regard to unprotected strikes.
Section 68(1)(b) allows Employers to sue for losses
suffered as a result of any conduct in contemplation or in
furtherance of an unprotected strike.
The remedy may be enforced against the strikers or their
trade unions.
72

What must Employers prove in such a case:
the strike was unprotected;
the employer suffered a loss as a result of unprotected
strike (for example, loss arising from the blockading of the
entrance of the employer’s premises, the refusal to work,
the loss of productivity occasioned thereby etcetera) ;
where relief is sought against a trade union it must be
demonstrated that the trade union participated in the
unprotected strike or committed acts in contemplation or in
furtherance thereof.
73

In Mangaung Local Municipality v SA Municipal Workers
Union (2003) the court held:
“…where a trade union has a collective bargaining relationship with an
employer, and its members embark on unprotected strike action and
the trade union becomes aware of such unprotected strike and is
requested to intervene but fails to do so without just cause, such trade
union is liable in terms of S68(1)(b) of the Act to compensate the
employer who suffers losses due to such an unprotected strike.”
74

What can be recovered?
limited under Section 68(1)(b) to “…just and
equitable compensation…”;
Therefore unlikely that an Employer will be able to
recover all its damages under the LRA.
75

What is just and equitable?
the courts have held that the compensation granted must be
fair and is aimed at compensating the aggrieved party and not
to penalise the wrongdoer (Algoa Bus Company v SATAWU
[2010]).
the courts have a wide discretion to award a lesser amount
than the full extent of the damages claimed and 68(1)(b)
requires them to take a number of factors into account when
doing so.
76

Factors to be taken into account will include whether-
attempts were made to comply with the provisions of the
LRA and the extent of those attempts;
the strike or conduct was premeditated;
the strike or conduct was in response to unjustified conduct
by another party to the dispute;
there was compliance with an interdict granted by the
Labour Court;
77

the interests of orderly collective bargaining;
the duration of the strike or lock-out; and
the financial position of the employer, trade union or
employees respectively.
78

68 (1) provides exclusive jurisdiction to the Labour Court
to grant orders for payment of losses incurred as a result
of the unprotected strike or conduct in furtherance
thereof however excludes the following:
Non-striking employees and third party delictual claims;
Civil claims arising out of criminal offences
79

Delictual claims arising out of unlawful
behaviour/conduct during protected and
unprotected strikes
All delictual claims arising out of criminal offences
committed during protected strikes will be dealt with by the
High Court;
The law is unclear whether delictual claims arising out of
criminal offences committed during unprotected strikes
should be dealt exclusively by the Labour Court or whether
such claims can also be dealt with by the High Court given
that same are common law offences;
80

In Coin Security Group (Pty) Ltd v SA National Union
for Security Officers & Other Workers & Others the
Court held that:
the Labour Court has exclusive jurisdiction to consider
conduct such as intimidating, assaulting, vandalising and
threatening and verbally abusing co-workers for purposes
of interdictory relief in terms of S68(1)(a) when defining
“conduct in furtherance of the strike”
The court however did not confirm whether the Labour
Court would also have exclusive jurisdiction to deal with
delictual claims arising out of the criminal conduct.
81

What damages can be claimed?
Patrimonial losses - actual damages and not potential
damages;
Damages that are easily quantifiable and can be proven by
evidentiary proof
82

List of necessary information for instituting claims:
Date of incident(s);
Details of parties involved (individuals; union members;
union);
Evidence proving involvement of parties (photo, video,
sound recordings etcetera);
Estimation of damages suffered and proof thereof;
CAS numbers (in the event of criminal charges being laid);
List of witnesses and witness statements;
Any and all relevant correspondence between parties.
83

Would arise in the instance where employees or their
trade unions failed to adhere to a court order.
When? If an interdict has been granted preventing
employees from engaging in unlawful strike action and /
or committing acts of misconduct during such strikes and
the fail to comply with that order.
The law has recently been clarified on whether a trade
union can also be held in contempt for failing to restrain
the actions of its members.
84
Wildcat Strikes – Contempt of Court proceedings

In2Food (Pty) Ltd v FAWU and others J350/13 (decided
on 1 March 2013)
Relevant facts
Interim order granted restraining FAWU and its members
from embarking upon an unlawful strike;
FAWU and its members failed to adhere to order, causing
substantial loss and damage to the employer;
Contempt of court order then obtained. It called upon
FAWU and its members to show cause why they should not
be held in contempt in a final order;
FAWU found to have been in contempt and received a R500
000 fine.
85
(continued)

Important points to be aware of:
The damages occasioned to the employer was in excess of
R16 000 000. The contempt fine is therefore not aimed at
recouping damages.
Furthermore, the fine is payable to the court and not the
employer;
86
(continued)

Important points to be aware of:
However, these proceedings still serve a valuable function:
Acts as a deterrent;
Seeks to add an additional financial burden on trade
unions;
Imposes a duty upon unions to take positive steps
87
(continued)

“The time has come in our labour relations history that
trade unions should be held accountable for the actions of
their members. For too long trade unions have glibly
washed their hands of the violent actions of their members”
“Alarmingly, on the evidence before me, the union and its
officials have not taken sufficient steps to dissuade and
prevent their members from continuing their violent and
unlawful actions”
88
(continued)

23 Jul
By Janine Hollesen

Product of the intellect
Commercial value
Sold
Licensed
Objective : Identify the IP for protection / licensing
90
What is Intellectual Property and the
Relevance in the Agricultural Sector?

Patents
Trade Marks
Copyright
Trade Secrets and Know-how
Plant Breeder’s rights
91

Territorial
Limited duration
Any invention registered if it involves an inventive
step capable of being used or applied in trade or
industry or agriculture
Absolute novelty requirement : invention must be
new in South Africa or elsewhere
92
Patents

SHELTER FOR FRUIT TREES FRUIT PRESERVATION BAG
93
Examples

Shape / appearance of articles
Manufactured in an industrial process
Territorial
Limited duration
New = design does not from part of the
State of the Art
94
Designs

ELONGATED FRUIT BOX FRUIT PICKING
APPARATUS
95
Examples

Registered = certainty with regard to
protection
Territorial
Distinguishing function
Search
Process
Duration
96
Trade Marks

45 classes
Class 29 – preserved, dried and cooked fruits and
vegetables; eggs; milk; processed olives; olive oil
Class 30 – staple foods including flour and preparations
made from flour
Class 31 –fresh fruit and vegetables
Class 32 – non-alcoholic beverages
Class 33 – alcoholic beverages including wine
Class 35 – marketing, retail and wholesale services; export
services; forest management
Class 39 – transport, packaging and warehousing services;
Class 42 – scientific and research services;
Class 44 – agricultural services; afforestation services
97
Trade marks

Copyright Act
Types of works protected
Literary works
Artistic works
Sound recordings
Musical works
Cinematograph films
Computer programmes
50 years
99
Copyright

Trade secret = information not generally available /
competitive advantage
Examples : chemical formula, manufacturing process, a
machine design, business method
Know-how = body of information, the compilation of
which has competitive value
Examples = customer lists, supplier lists, parts
specifications, quality assurance and testing procedures
Cannot convert general knowledge by labelling
100
Trade secrets and Know-how

Registered Right
DUS requirements
Territorial
Limited duration –
Trees and vines – 25 years
Other varieties – 20 years
101

Patents
Trade Marks
Copyright
Trade Secrets and Know-how
102

Identify the IP right
Registered
Obtain advice and secure protection as soon a possible
103
Intellectual Property Protection

NB = identify the IP that is being licensed
Is the right valid and enforceable in South Africa and in
other territories to which the licence extends?
Searches
Obtain advice regarding terms of licensing agreement
Exclusive / Non-exclusive / Duration / Royalties /
Termination
IN CONCLUSION :
Ensure that the subject matter of IP is capable of being
licensed or whether you will be paying for non-existent
rights.
104
Licensing

Presenter’s name
Competition Law and
the Agricultural Sector
By Irma Gouws

Commission’s focus on Agricultural Businesses
The Competition Commission has identified food and
agro-processing as a priority investigation area (2009)
“The far reaching liberalisation has not yielded the desired
policy outcomes, in that the agricultural value chain
appears to be still largely characterised by anti-
competitive outcomes, including high concentration, high
barriers to entry, concentration of ownership, vertical
integration as well as anti-competitive behaviour in the
pricing of food. These have serious consequences for the
welfare of the poorest households.”
There have been investigations in grain, diary, poultry,
fertilizer, milling and baking industries

Section 4 – Restrictive horizontal practices
Section 4 of the Competition Act 89 of 1998 (“the Act”)
prohibits agreements or concerted practices between
organisations in a “horizontal relationship”.
“Horizontal relationship” refers to organisations which
are competitors or potential competitors.
“Agreements” as defined in the Act include:
“contract, arrangement or understanding, whether or not
legally enforceable”;
107

“Concerted Practices” as defined in the Act mean:
“co-operative, or co-ordinated conduct between
organisations, achieved through direct or indirect contact,
that replaces their independent action, but which does not
amount to an agreement”.
108

Section 4(1)(a) prohibits agreements or concerted
practices amongst competitors if –
the agreement substantially prevents or lessens
competition in a market (i.e. the conduct has an anti-
competitive effect); and
if there are no technological, efficiency or other pro-
competitive gains to outweigh the anti-competitive effect.
109

These agreements require an assessment of their anti-
competitive effect and a balancing between the anti-
competitive effect and the efficiency or other pro-
competitive benefits.
This is referred to as a “rule of reason” analysis.
110

Section 4(1)(b) prohibits agreements or concerted
practices amongst competitors which involve –
(i) directly or indirectly fixing a purchase or
selling price or other trading condition;
(ii) dividing markets by allocating customers,
suppliers, territories or specific types of
goods or services; or
(iii) collusive tendering (i.e. bid-rigging)
This conduct is prohibited whether or not it gives rise to
an anti-competitive effect
111

Exchange of information between competitors
Section 4(1)(a)
the artificial removal of uncertainty can in itself
remove rivalry.
Section 4(1)(b)
facilitating factor for collusion & monitoring of
compliance with collusive arrangements.
112

Western Cape Citrus Producers Forum.
Banana Cartel: Del Monte and Dole engaged in “general
market gossip”.
UK Diary “Hub and Spoke” cartel.
UK Agricultural Tractor Registration Exchange.
113
Examples

How does information exchange take place?
Joint Ventures;
Benchmarking Studies;
License Agreements;
Supply Agreements;
Industry bodies/Trade Associations:
Facilitate information exchange.
Useful! They gather and disseminate information
such as investments, employment figures, product
standards.
114

Sharing of information between competitors
There is increasing recognition that information
exchange could result in large efficiency benefits:
improve investment decisions and organisational learning
of firms, which could potentially result in better quality,
more variety and better future ability to respond to
demand changes;
more efficient production planning;
improved distribution and marketing strategies;
better product positioning (in the case of differentiated
products), all of which could improve consumers welfare.

Sharing of information between competitors
The problem for Competition Law is to distinguish those
exchanges of information which have a neutral or
beneficial effect upon efficiency from those which
seriously threaten the competitive process by facilitating
collusive behaviour.

Anti-competitive effects…
Two crucial questions:
What is the nature of the information exchanged?
What is the structure of the market?
117

Nature of Information Exchanged
Pricing information
Capacities, costs, demand, prices, sales
Keep an eye on compliance with agreement!
Customer information
Could result in shifts in pricing policies and erode vigour
of competition between firms
118

Nature of Information Exchanged
Specificity
Individual v Market/Industry as a whole;
Aggregated information;
Historic, current and future;
Confidential v Public.
119

Structure of the market
The level of concentration & structure of supply and
demand must be considered.
One must consider:
the number of competitors;
the symmetry and stability of market shares;
barriers to entry;
the existence of any structural links between
competitors;
the homogeneity of products;
market transparency.
120

Drawing the line – not to share…
Price, costs, investments, business strategy, rebates,
discounts;
Sales and production targets;
Bidding and tender procedures;
Customer information;
Confidential information and information that create
competitive advantage;
Current information;
Individual company data;
Implied direction or recommendations.
121

The neutral area…
Exchange with non-competitors.
“Process” type information that will result in industry
efficiency.
Public domain.
Historic information.
Aggregated data – BUT avoid if disaggregation is
simple.
122

Your company and employees need to know the do’s and
don’ts of competition law…
Compliance with the Competition Act is not negotiable – ignorance
of the law is not a mitigating factor!
There is always a good commercial reason for anti-competitive
behaviour and agreements

Presenter’s name
THANK YOU
Jacques van Wyk
Nasheetah Smith
Janine Hollesen
Irma Gouws
Thandi Lamprecht
Nothing in this presentation should be construed as formal
legal advice from any lawyer or this firm. Readers are
advised to consult professional legal advisors for guidance
on legislation which may affect their businesses.
© 2013 Werksmans Incorporated trading as Werksmans
Attorneys. All rights reserved.

Challenges facing the agricultural sector

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