Feasibility Study for Leaf Services (Pty) Ltd as Assignee ...
154
Feasibility Study for Leaf Services (Pty) Ltd as Assignee Appointed under the Agricultural Product Standards Act (Act 119 of 1990). Prepared by: 31 January 2021
Transcript of Feasibility Study for Leaf Services (Pty) Ltd as Assignee ...
Feasibility Study
for
Leaf Services (Pty) Ltd
as
Assignee Appointed
under the
Agricultural Product Standards Act (Act 119 of 1990).
Prepared by:
31 January 2021
Contents
List of graphs and figures ........................................................................................................... 5
List of definitions ........................................................................................................................ 7
A. EXECUTIVE SUMMARY .................................................................................................... 8
B. INTRODUCTION TO THE FEASIBILITY STUDY ...............................................................13
1. Project objectives ...............................................................................................................14
2. Legal framework ................................................................................................................14
2.1 The Agricultural Product Standards Act, NO.119 OF 1990 (APSA), ............................14
2.2 Promotion of Administrative Justice Act – Act 3 of 2000 (PAJA). ................................15
3. Project plan ........................................................................................................................17
3.1. Phase One-Initial stakeholder engagements ...............................................................17
3.2. Phase Two-Investigation into the South African grain industry ....................................17
3.3. Phase Three-Develop an oversight model ..................................................................17
3.4. Phase Four-Bankable business plan ...........................................................................18
4. Structure of this report........................................................................................................18
C. BACKGROUND TO GRAIN TESTING AND GRADING .................................................19
1. Introduction ....................................................................................................................19
2. Factors that affect grain testing and grading: ..................................................................19
3. Requirements to test and grade grain. ............................................................................19
4. Challenges experienced with grain testing and its influence on grading..........................21
5. Critical control points for calibration of grading equipment ..............................................25
6. Challenges experienced with grain graders and its influence on grading. .......................26
7. Conclusion .....................................................................................................................27
D. PHASE ONE ..................................................................................................................28
1. Introduction to Phase One .................................................................................................28
2. Consultation process followed. ...........................................................................................28
2.1. Leaf Steering committee May 14, 2020 .......................................................................28
2.2. Subsequent meetings .................................................................................................30
2.3. List of meetings held ...................................................................................................31
2.4. Summary of meetings .................................................................................................31
2.5. The conclusion to Phase One .....................................................................................35
E. PHASE TWO .....................................................................................................................36
1. Introduction to Phase Two .................................................................................................36
2. Description of the grain and oilseed production areas in South Africa ................................36
3. Quantity of commodities produced per province in South Africa. ........................................39
4. Production and consumption dynamics for maize, wheat, sunflowers, and soya beans. ....41
5. An estimation of the volume of commodities per service point. ..........................................48
6. Analysis of storage providers, including estimated grain receipts: ......................................50
7. The service point for grading of commodities. ....................................................................52
8. Identification of the grain processors in South Africa ..........................................................53
9. The conclusion to Phase Two ............................................................................................56
F. PHASE THREE-Develop an oversight model .....................................................................57
1. Introduction to Phase Three ...............................................................................................57
2. Supply chain analysis ........................................................................................................57
2.1. Introduction .................................................................................................................57
2.2. Maize value chain analysis .........................................................................................57
2.3. Wheat value chain analysis .........................................................................................60
2.4. Soya bean value chain analysis ..................................................................................62
2.5. Sunflower value chain .................................................................................................65
2.6. Barley value chain analysis .........................................................................................67
2.7. Canola value chain analysis ........................................................................................69
3. International benchmarking study. .....................................................................................72
3.1. Introduction and background .......................................................................................72
3.2. Comparison with international standards ....................................................................72
3.3. The general implications .............................................................................................82
3.4. Conclusions ................................................................................................................83
4. Legal review .......................................................................................................................84
4.1 Agricultural Products Standards Act (119 OF 1999) (“APSA”) .....................................84
4.2 Regulations Issued in Terms of APSA ........................................................................84
4.3 Other Legislation .........................................................................................................84
5. The operational remit of Leaf Services ...............................................................................85
5.1. Building blocks developed by Leaf Services................................................................85
5.2. Building blocks for raw grains .....................................................................................85
5.3. Retention samples, calibration and quality control through ring tests ..........................91
5.4. Building blocks for grain products ...............................................................................97
5.5. The conclusion on the model for oversight ................................................................ 105
5.6. Assumptions to the business model .......................................................................... 107
G. FINANCIAL ANALYSIS ................................................................................................ 111
H. FINANCIAL FEASIBILITY OF THE PROJECT ............................................................. 112
A. CONCLUSIONS ............................................................................................................... 113
Reference ............................................................................................................................... 114
ANNEXURE A SUMMARY REGULATIONS APSA ................................................................. 117
ANNEXURE B SUMMARY OF GRADING PROCESSES ....................................................... 132
ANNEXURE C GRADING TABLES APSA REGULATIONS .................................................... 140
5
List of graphs and figures
Figure 1: Leaf Services Building Blocks Overview ............................................................... 11 Figure 2: South Africa's maize value chain .......................................................................... 58 Figure 3: South Africa's wheat value chain .......................................................................... 61 Figure 4: South Africa's soya bean value chain ................................................................... 64 Figure 5: South Africa's sunflower seed value chain ........................................................... 66 Figure 6: South Africa's barley value chain.......................................................................... 68 Figure 7: South Africa's canola value chain ......................................................................... 70 Figure 8 Retention sample control building blocks .............................................................. 94 Figure 9 Calibration assurance building blocks ................................................................... 95 Figure 10 Pre-Season Ring Test assurance building blocks................................................ 96 Figure 11: Inspection frequencies ..................................................................................... 104 Figure 12 Building block overview for raw grain ................................................................ 105
Graph 1 Annual production of major grains in SA .................................................................. 8 Graph 2: Historical Production of Major Crops in SA ........................................................... 37 Graph 3 Total area planted, production and yield to maize. ................................................ 37 Graph 4: Summer crop utilisation ........................................................................................ 39 Graph 5: Summer grains 10-year average production ('000 Mt) .......................................... 39 Graph 6: Oils seeds 10-year average production ('000Mt) .................................................. 40 Graph 7: Wheat 10-year average production ('000 Mt) ........................................................ 40 Graph 8 Other winter grains 10-year average production ('000Mt) ...................................... 41 Graph 9 Silo capacity and utilisation per province in South Africa ....................................... 49 Graph 10 Total silo capacity per silo owner ......................................................................... 49 Graph 11: Summary of capacities and receipts of the small silos ........................................ 50 Graph 12 Silo capacities and grain receipts at SAFEX registered silos in SA ...................... 51 Graph 13 Analysis of the main cost allocations for the business. ...................................... 111 Graph 14: Cost allocation per industry .............................................................................. 111
Map 1: The major maize production regions in South Africa................................................ 38 Map 2 The location of storage providers in South Africa ..................................................... 48 Map 3 The location of mills and animal feed producers in South Africa ............................... 53 Map 4: The number of bakeries per region in South Africa. ................................................. 55
Table 1 Number of FBO service points ................................................................................. 9 Table 2: The proposed fee structure ................................................................................... 12 Table 3: Producer deliveries, Consumption, Imports, for maize. .......................................... 42 Table 4: Maize products manufactured in South Africa - October 2019 to September 2020 43 Table 5: Producer deliveries, Consumption, Imports, of Wheat ........................................... 44 Table 6: Wheat products manufactured in South Africa ....................................................... 45 Table 7: Quantity of Pan Baked bread in South Africa. ........................................................ 45 Table 8: Producer deliveries, Consumption, Imports and Exports of Sunflowers ................. 46 Table 9: Producer deliveries, Consumption, Imports and Exports of Soya Beans ............... 47 Table 10 Analysis of smaller silo operators ......................................................................... 50 Table 11: Silo classification in small, medium and large ...................................................... 51 Table 12 Summary of grain intake points in South Africa .................................................... 52 Table 13: Large millers in South Africa ................................................................................ 53 Table 14: Food processors per province based on their registered head offices. ................ 54
6
Table 15: Comparison of international grain grading and standardisation systems. ............ 83 Table 16 Building blocks over raw commodities grading ..................................................... 87 Table 17 Building blocks over the grading of wheat and maize products ............................. 99 Table 18 Summer grain volume assumptions ................................................................... 107 Table 19 Winter grain volume assumptions ....................................................................... 107 Table 20: Proposed fee structure. ..................................................................................... 108 Table 21 Sampling for analysis assumptions .................................................................... 108 Table 22 Leaf Services personnel assumptions ................................................................ 109 Table 23 Office space assumptions .................................................................................. 109 Table 24 Leaf Services CAPEX assumptions .................................................................... 110 Table 28: The financial results normalised per year .......................................................... 112
7
List of definitions
In this report,
Commodities refer to grains, and oilseed assigned to Leaf Services in the Government Notice
No. 345 published June 17, 2016.
Food Business Operator (FBO) is any point where commodities are stored or processed.
Grain Industry refers to all grains including (barley, maize, oats, sorghum and wheat) and
oilseed (canola groundnuts, soya beans and sunflower) industries. The grain industry is one
of the largest South African agriculture industries producing between 25% and 33% of the total
gross agricultural value.
Repeatability - Repeat the test using the same sample in the same laboratory by the same person within a short period of time.
Reproducibility - Comparing results between laboratories. The same sample is tested in different laboratories by different operators using different equipment.
Silos or traditional silos refer to permanent silo complexes. In South Africa, these silos are
mostly concrete structures, but new silos can be made either from steel or concrete. Most of
the traditional silos are owned by large agricultural business such as Senwes, Afgri, VKB and
NWK.
Alternative storage facilities refer to any grain storage facility that is not a traditional silo.
These facilities include grain bunkers, silo bag depots, grain dams or silos that farmers build
on their farms. Traders of grain can manage alternative storage facilities, e.g. Silostrat, Cargill
or Louis Dreyfus but farmers or any large agribusinesses have also invested in alternative
storage facilities.
Metric Tonne (Mt) unit of mass equal to 1,000 kilograms. Other grain measures that are called
tone can include a short ton (US) or a long ton (UK).
The Southern African Grain Laboratories (SAGL) The Southern African Grain Laboratory
is an accredited laboratory, established in 1997 as a reference laboratory on request of the
South African Grain Industry.
Test weight, also known as hectolitre mass (HLM), is a measure of grain volume per unit. It
is usually expressed as kilograms per hectolitre and is a good indication of grain-soundness.
Millers usually use test weight as an indication of expected flour yield.
South African Cereal and Oilseed Trading Association (SACOTA) is an association of
trading members operating within South Africa and the SADC region.
Animal Feed Manufacturers Association of South Africa (AFMA) is the official industry
representative body of the South African feed industry in the livestock feed sector and larger
agricultural environment.
Johannesburg Stock Exchange (JSE) is the largest stock exchange in Africa and is located
in Sandton, Johannesburg.
Department of Agriculture, Forestry and Fisheries (DAFF) appointed assignees in 2016.
DAFF changed to the Department of Agriculture, Land reform and Rural Development
(DALRRD)
Crop Estimates Committee (CEC) of the Department of Agriculture, Forestry & Fisheries.
8
A. EXECUTIVE SUMMARY
The Minister of Agriculture Forestry and Fisheries appointed Leaf Services (Propriety) Limited
(Leaf Services) in 2016 as assignee under the Agricultural Product Standards Act, 1990
(APSA). The appointment was formalised in the Government Notice No. 345 published June
17, 2016. 1990 (APSA).
The APSA requires the assignee to perform a quality control function of grading grains, oilseed and grain products produced in or imported into South Africa. The APSA aims to control the sale and export of certain agricultural products; control the sale of certain imported agricultural products; and control other related products by defining minimum quality standard for different classes of commodities. The methodology proposed by the assignee and the fees charged is subject to the stipulation of the Promotion of Administrative Justice Act – Act 3 of 2000 (PAJA).
Leaf Services is exploring the possibility of establishing a viable commercial entity to oversee
the grading of grains and related products as defined in the regulations to the APSA.
The Leaf Services' business model and services include standardisation, training, inspections,
quality assurance and information collection for relevant research and analysis. Leaf Services
must report regularly and comprehensively to the Minister of Agriculture on its activities and
any non-compliance to the APSA that it might discover.
The project team consulted widely with industry role players and gained insight into these role
players' business operations. This included meetings with producer organisations, grain
storage industry, milling and baking industry, regulatory bodies and food processors.
Graph 1 Annual production of major grains in SA
The South African grain market is dominated by maize and has steadily increased over the
years due to its use as a staple (white maize) and animal feed (yellow maize). Approximately
30% of the maize products are used for animal feed. Wheat, the second most important grain
crop produced in South Africa, is mainly used for human consumption (mainly bread).
Services points at FBOs can either be a site of one of the storage providers, or a processor
such as a maize or wheat mill that produce meal and flour for human consumption, oilseed
crushers or animal feed producer.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Met
ric
ton
ne
PRODUCTION OF MAIZE IN THE RSA PRODUCTION OF SOYABEANS IN THE RSA
PRODUCTION OF SUNFLOWERSEED IN RSA PRODUCTION OF WHEAT IN THE RSA
9
Table 1 Number of FBO service points
FBOs Total number of FBOs
FBOs that procure from farmers
Storage providers 311
Maize mills 136 21
Wheat mills 32 24
Oilseed crushers 23 23
Animal feed producers 37 10
Total 539 78
Most silos in South Africa have two individuals that can grade and two individuals who take
samples at intake and out loading. Very few if any silos have individuals that exclusively
perform grading functions. Most managers at silos can and perform the grading of
commodities received at or dispatched from silos. More than 20% of grains produced in South
Africa are not stored in traditional silos but are shipped directly to the processor or stored in
alternative storage facilities. Most silos are operated around the year. While most of the grain
at silos are received during the harvesting-seasons, the storage and dispatch functions at silos
are usually not seasonal, and silos need their management teams on-site around the year.
The processing environment is highly concentrated and is dominated by sizeable integrated
role players; the large food producers are vertically integrated, mill both maize and wheat and
use most wheat flour to bake bread in their bakeries. The large producers dominate the maize
and wheat markets with 75% market share for maize products and more than 90% for wheat
products. South Africa sustains more than 100 smaller maize millers and 24 wheat millers.
Many of these producers have developed well-known brands. Most supermarket brands have
invested in in-store bakeries. The number of instore bakeries is estimated to be 2200.
Supply chain analysis was performed for all major commodities cultivated in South Africa,
including Maize, Wheat, Soya beans, Sunflower, Barley and Canola. The value chain analysis
documented the players, regulators, commodity volumes, value-adding opportunities,
inspection, and grading points. It also identified areas that require further improvements. The
study included identifying the inspection points that would adequately address the risks and
fulfil the regulations.
Grading regulations are set to ensure reliable and accepted crop quality descriptions.
Standardised quality descriptions support value creation, thus promoting prosperity in the
agricultural sector by contributing to the successful marketing of grain and related agricultural
products. Furthermore, it provides the guidelines for such regulations to impose impartial
handling practices. Different countries grade their grain differently. Seven countries were
selected to evaluate their grain trading approaches. They are Argentina, Australia, Egypt,
Russia, Ukraine and The United States of America (US).
The grading systems are mostly applied to improve commodity performance in the market.
The central pillar of that application remains uniformity, particularly within the country. The
governance structures of the grading system vary between countries as well. There are
extreme sides, from the government taking over the system to an industry-led and designed
system. The former system is applied by countries such as Egypt and former Soviet Union
members. In the other extreme: Australia's whole system is entirely operated and funded by
the industry. The US has a hybrid system managed and facilitated by the government, but
industry plays a significant role and funds the system through levies. While there is no perfect
system, each system depends on the pursued outcomes.
10
The insights gained from the first two phases of this study and three studies of Phase three enabled Leaf Services to formulate a framework that will ensure proper oversight over the grading of commodities in South Africa. Leaf Services considered various models to become an effective custodian of grain and grain products' grading and analysis. The models considered included the taking over of all grading functions in South Africa to a pure auditing model.
Throughout the fact-finding and model development period it became clear that the industry
developed natural and informal processes that are, with some exceptions, working relatively
well, but are not providing for the application of the Minister's statutory responsibility of
oversight.
Against this background, the Leaf Services modelling team changed its approach from
developing a specific model to a building block model that forms a holistic oversight
model. These building blocks were discussed and debated with various industry role-players
and reformulated after industry input. Eventually, through the development of a collection of
possible building blocks, the team believes that, if utilised in a synchronised way, Leaf
Services will effectively conduct its custodian role and ensure that the Minister's regulatory
responsibility is fulfilled.
The building block modelling approach puts Leaf Services in a position to tap into all existing
processes and current infrastructure leveraging an effective system that the grain industry
developed over the past 30 years. Leaf Services does not want to be reinventing the wheel.
The building blocks are modular, allowing for phased implementation in line with Leaf's
capacity and allowing for the opportunity of testing and experimenting to ensure the successful
final performance of the plan and model.
The functions assigned to Leaf Services in terms of the APSA are restrictive and limited to a
quality control function over grains, oilseeds (including grading and sampling) and grain
products as defined in the APSA regulations. Leaf Services as an assignee will, therefore, not
attract any of the operational risks that providers of storage facilities or the processors of
commodities take in their regular operations. Leaf Services does not aim to be involved in silos
and storage facilities' everyday operations. It only seeks to improve the grading processes,
grading quality and grading legitimacy of grains and grain products in SA.
Due to the difference in the handling and storage of raw grain compared to the processed products, it was necessary to develop separate building blocks for raw grain and grain products.
The Leaf System's overriding principle is that Leaf Services will be the custodian of the grading function of grains and oilseeds in South Africa. To this end, Leaf Services will:
1. develop minimum standards for graders,
2. create minimum standards for grading instruments,
3. maintain a database of authorised graders,
4. enforce sanctions for non-compliance,
5. develop standard operating procedures for the various activities described in the building blocks below,
6. perform inspections services.
The building blocks provide a robust framework for the oversight function assigned to Leaf
Services. The flow diagram below summarises the process of oversight and service as an
inspection protocol for Leaf Services.
11
Figure 1: Leaf Services Building Blocks Overview
The testing protocols for grain products follow a risk-based approach. The risk of non-
compliance will be determined by assessing the internal food quality control environment
and prior year testing results. The number of samples taken is based on the Standard
Operating Procedure for FBOs' risk profiling in the grain industry that DAFF issued in 2017.
12
The building blocks form the basis of the model for oversight that Leaf Services is
implementing.
The volume assumptions for commodities are the model's main income and cost driver. The
invoicing model assumes that Leaf Services will invoice a fee per Mt of raw grain handled
whether the FBO is a storage provider or a processor. The fee recovered is fixed and therefore,
capped per Mt irrespective of the grain flow.
Table 2: The proposed fee structure
Commodity or product Units Fee per unit
Raw grains including imported grains Mt R4 per Mt
Maize meal and other products kg 0,6 c per kg
Wheat flour excluding bread kg 0,6 c per kg
Wheat bread products Loaf of bread 4 c per loaf
Samples will be analysed based on the current SAGL costs, and the central grading facility's
costs include rental, personnel cost, and the depreciation cost on grading machinery. Capital
expenses are estimated to be R21m.
The personnel will consist of the following:
• Number of roaming inspectors 30
• Number of residential inspectors 380
• Number of lab employees 10
• Administration employees 22
• Training officers 6
• Number of senior managers 5
The expected annual Income, Operating expense and Net income for Leaf Services' business model are estimated to be:
Income R 197,0 mil Sampling Cost R 57,1 mil HR and Admin Expenses R 104,2 mil Depreciation R4,4 mil Net Income R 15,1 mil
The projected normalised profit and loss statement and cash flow statement for Leaf Services
project net profit of R15 million per year and net cash flow of R18,5 million per year for the
next 10 years.
Hallmark will support the business by arranging financing for the fixed and working capital
requirements for Leaf Services.
The financial analysis above indicates that the business model for Leaf Services is feasible.
13
B. INTRODUCTION TO THE FEASIBILITY STUDY
The Minister of Agriculture Forestry and Fisheries appointed Leaf Services (Propriety) Limited
(Leaf Services) in 2016 as assignee under the Agricultural Product Standards Act, 1990
(APSA). The APSA requires the assignee to perform a quality control function of grading
grains, oilseed and grain products produced in or imported into South Africa. Leaf Services is
exploring the possibility of establishing a viable commercial entity to oversee the grading of
grains and related products as defined in the regulations to the APSA.
Leaf Services' appointment was formalised in the Government Notice No. 345 published June
17, 2016.
As an assignee of The Department of Agriculture, Land reform and Rural Development
(DALLR), Leaf Services is responsible for the enforcement of Sections 3(1) (a) and (b), 3(1A),
4(A)(1)(a), 7 and 8 of the APSA.
The APSA lists actions that the assignee is expected to perform to ensure quality control over
the industry's grading and analysis actions. The activities listed include inspection, grading
and sampling for quality control over the grading of the following products:
1. Canola
2. Dry Beans
3. Groundnuts
4. Maize
5. Malting barley
6. Rice
7. Sorghum
8. Soya beans
9. Sunflower seeds
10. Maize products
11. Wheat (bread wheat, durum bread, soft wheat)
12. Wheat products
13. Other grains and grain products for which regulations may be promulgated.
Leaf Services is a private South African incorporated company. As a private company, with
shareholders that provide the entity's funding, Leaf Services has a profit motive and is a profit-
driven, government-mandated service provider. The primary source of income for Leaf
Services will be the service fee charged to the grain and oilseed industries. The fee will be
based on a cost-plus basis.
Leaf Services provides its services to the grains and oilseeds value chain from producers to
retailers but as its mandate of operation originates from South African regulations and laws,
Leaf Services' will provide an oversight function within South Africa's borders.
The Leaf Services' value contribution and field of expertise are focused on all elements of
quality control and analysis of grain and oilseed within South Africa's borders. The directors
have extensive experience in the certification of agricultural products in South Africa and the
United Kingdom.
Leaf Services' value contribution includes quality assurance, standardisation, enhancing the
trading environment, and protecting minorities, smaller role players and consumers.
The Leaf Services' business model and services include standardisation, training, inspections,
quality assurance and information collection for relevant research and analysis. Leaf Services
14
must report regularly and comprehensively to the Minister of Agriculture on its activities and
any non-compliance to the APSA that it might discover.
Leaf Services contracted the agricultural consulting firm, Afrilogic in association with
Enterprises UP to perform a feasibility study to develop and investigate commercial viability
business models for Leaf Services. Enterprises UP is the commercial consulting entity of the
University of Pretoria. Leaf Services commissioned the study to engage with relevant industry
role players, confirm the designed business model's financial feasibility, and seek finance to
implement the project.
1. Project objectives
The project has the following objectives:
▪ To develop an efficient oversight body by gaining sufficient information about the grain
and oilseed value chains, the grading regulatory environment and international grading
and certification practices.
▪ To consult with the relevant stakeholders in the grain and oilseed value chains to obtain
industry-relevant information to test the developed model's feasibility.
▪ To allow stakeholders the opportunity to comment and give input to the proposed
oversight model for the grading and analysis of commodities.
▪ To quantify the proposed business model of Leaf Services though a financial model.
▪ To develop a feasibility study, with industry buy-in, for an inspection solution for
regulated raw grains and grain products.
Outcomes of the project should address the following:
▪ Design a system of oversight that will discharge the Minister of Agriculture's
responsibility to ensure that the grading of grain and grain products are performed as
required by the South African grading and sampling regulations.
▪ Quantify the financial implications of the designed system.
▪ Inform relevant stakeholders of the effect that a grading oversight system might have
on them.
▪ Raise commercial funding for the new inspection business.
2. Legal framework
2.1 The Agricultural Product Standards Act, NO.119 OF 1990 (APSA),
APSA aims to control the sale and export of certain agricultural products, control the sale of certain imported agricultural products; and control other related products by defining minimum quality standard for different classes of commodities.
Article 3 of the APSA requires the Minister of Agriculture to control the sale of products and the Minister to this end may prohibit the sale of a prescribed product:
(a) if those products are not graded according to the grading regulations sold,
(b) if the products do not meet the prescribed standards regarding the quality thereof, or
(c) if the products are not packed, marked, and labelled according to the requirements of the Act.
15
Therefore, the Minister of Agriculture has the responsibility to enforce the APSA.
Article 3(a) stipules that the Minister can appoint assignees to support the Minister in applying the APSA. Leaf Services was appointed in 2016 as assignee to oversee the grading and certification of grains including oilseeds and grain products. The appointment was made as per Notice. 345 of 2016 published in Government Notice No. 40075 of June 17, 2016.
Article 3(A1) stipulates that:
Fees may be charged in respect of the powers exercised and duties performed by the assignee to ensure compliance with section 3 and the assignee must determine the fee to be charged for the services rendered.
2.2 Promotion of Administrative Justice Act – Act 3 of 2000 (PAJA).
The methodology proposed by the assignee and the fees charged are subject to the stipulation of the PAJA.
Any statutory change in South Africa is subject to PAJA. The PAJA process requires that
statutory changes be lawful, reasonable, and procedurally fair as per Section 33 of the
Constitution.
Section 33 provides the guidelines for a fair administrative process and the rights of review of
the process. PAJA governs the exercise of administrative action in general. All decision-
makers entrusted with the authority to make administrative decisions by any statute must do
so consistently with PAJA.
The PAJA includes the following requirements:
▪ Administrative action which materially and adversely affects the rights or legitimate
expectations of any person must be procedurally fair [Section 3(1)].
▪ A fair administrative procedure depends on the circumstances of each case [Section
3(2)(a)].
▪ Procedurally fair administrative action requires that the following should be provided to
an affected person [Section 3(2)(b)]:
o adequate notice of the nature and purpose of the proposed administrative
action,
o a reasonable opportunity to make representations,
o a clear statement of the administrative action,
o adequate notice of any right of review or internal appeal, where applicable, and
o adequate notice of the right to request reasons in terms of section 5.
▪ The administrator (in this case represented by the assignee) may depart from the
procedures in Section 3(2)(b) on reasonable ground, which include the need to
promote an efficient administration and good governance.
▪ The administrator also has the discretion to allow an affected person the opportunity
to obtain assistance, to present and dispute information and arguments and to appear
in person [Section 3(3)].
During 2020 Leaf Services had several interactions with industry role players in the grain and
oilseed value chains. These interactions aimed to inform stakeholders that might be affected
through any future actions of Leaf Services about the purpose of the discussions/consultation
16
and the process that Leaf Services has embarked on. Once Leaf Services can quantify the
effect that their actions might have on industry role players, Leaf Services will formally
communicate these actions, including the expected impact of such activities. Affected parties
will then be given reasonable time, as prescribed in the PAJA, to react to Leaf Services'
proposal. Leaf Services will evaluate all submissions and commentary received from the
Industry.
To ensure that the process followed by Leaf Services to discharge its responsibility is in
compliance with the APSA, the management team has:
▪ Appointed the consulting firm Afrilogic to among other things identity and facilitate any
engagement with industry role players and,
▪ Embarked on a round of extensive consultations with relevant industry role players to
introduce Leaf Services' process to follow to develop a system that will ensure effective
oversight over the grading and analysis of grains and oilseeds in the value chains.
After finalising the business model, including the resulting tariffs, Leaf Services will publish
these tariffs in the Government Gazette. The publication will describe the impact that the
oversight function could have on stakeholders in the grain and oilseed value chains.
Affected parties will have 30 days after the publication of this notice to make comments,
proposals, or raise objections to the oversight regime that Leaf Services plans to implement.
17
3. Project plan
The agreed project plan formed the basis of the study that consisted of four phases over 24
weeks, as described below:
3.1. Phase One-Initial stakeholder engagements
Conduct sector meetings to introduce the concept of an independent party that will oversee
or take over the current grading and certification process and present the scope of the
independent study that Leaf Services has commissioned. The aim of Phase One was to
consult broadly with stakeholders in the grain industry to inform them of the administrative
action and receive their inputs to develop the most efficient and cost-effective oversight
solution for commodity grading.
3.2. Phase Two-Investigation into the South African grain industry
Leaf Services required the collection and analysis of information about the grain industry
in South Africa. The information regarding volumes of products, the flow of products
through the grain value chain and collection points of commodities and the cost estimates
of grading forms the bases of the feasibility study's assumptions. Volumes of grains
received and grading costs are regarded as industry sensitive information. The study,
therefore, used publicly available information to calculate many of the volumes and costs
at FBOs.
3.3. Phase Three-Develop an oversight model
Phase Three of the study's focus was to gain a thorough understanding of the grain value
chains, international grading practices, and to summarise the APSA and Regulations. The
insights gained with the information gathered and analysed in Phase Two of the study was
used to develop the business model for Leaf Services. The final section in Phase Thee
tests the business model's feasibility with a financial model. Leaf Services continued to
engage with stakeholders to test the proposed oversight model's concepts and get inputs
from the grain industry.
The sections of Phase Three are summarised below:
▪ The value chain analysis for the major commodities and products listed in Government Gazette Notice 345 of 2016.
▪ The international benchmarks and gap analysis.
▪ Performing a legal review of the laws and regulation that Leaf Services should consider.
▪ Developing a business model.
▪ Consultations with stakeholders.
▪ Modelling the financial feasibility of the proposed business model.
The figure below illustrates the actions completed in Phase Three.
18
3.4. Phase Four-Bankable business plan
The final Phase was to draft a bankable business plan.
4. Structure of this report
This next section in the report with the heading "Background to grain testing and grading"
provides background to the commodity grading environment for raw grains. The section
was not in the original scope of the proposal. However, understanding the process of and
factors that affect grain testing and grading are critical to understanding the concepts of
grain grading as these concepts underline the study and form the basis of the oversight
solution that the study proposes.
The remainder of the report will follow the framework as set out above. The bankable
business plan will be a separate document.
19
C. BACKGROUND TO GRAIN TESTING AND GRADING
1. Introduction
Grain's properties must be tested so that the seller and/or the buyer knows what grade/quality
they have to trade. Farmers produce crops with a particular market in mind, and the crop
variety and farm practices are chosen to supply the required grade. The farmer must know if
his crops meet the market requirements.
The buyer must be sure that the delivered grain meets the specifications and is suitable for
his application. The storage operator, trader or merchant often provides the link between the
seller and the buyer and is therefore responsible for testing the grain.
The only way to determine the grade and thus, the value of grain, is to have samples tested.
Proper testing of representative samples is therefore key. With accurate knowledge of grain's
properties based on sound testing, the grain can be delivered with confidence to meet the
purchaser's specification.
2. Factors that affect grain testing and grading:
The following factors influence grain testing and grading:
▪ Sample homogeneity – bulk grain, whether in stores, silos, or lorries, is unlikely to be uniform unless precisely blended. Whether the sample originates across a field, from a consignment being delivered or within a storage facility, and is taken from a bag or bulk, it should be representative of the whole.
▪ Representative - To achieve a representative sample, the sample entering the grading facility must be a mix of grain from sub-samples taken from the bulk and cover most of the variability within the bulk.
▪ Preparation - Incorrect or inadequate preparation may make it impossible for staff, however competent they are using the best equipment, to achieve accurate grading results. Sampling and sample preparation should be considered an integral part of analytical methods to test and grade grain. Staff involved with sampling, should have specific training in sampling and know how to obtain representative samples.
▪ Sampling Plan - The sampling plan should accommodate the effects of natural variability and detect if a portion of the grain of the wrong type is in the load. Inaccurate sampling can happen by error, such as a trailer load of grain being tipped in the wrong part of a store or, less likely, deliberate inclusion of the wrong grain.
▪ Handling - However good the representative sampling, this can be undone if the grain's subsequent treatment is not appropriate. Various standards for representative sampling exist. Standards recommend how many and at what locations points or intervals the sub-samples need to be taken.
▪ Results - For trading and end-use, analytical results must represent the average bulk. Inadequate sampling and subsequent unrepresentative analytical results can have significant financial implications (claims, rejections, out of specification or inferior end products).
3. Requirements to test and grade grain.
3.1. Trained personnel
The first essential is the person who does the testing and grading. The grader must be competent to undertake testing to ensure correct results.
20
Graders undergo training to know how to perform each test and grade the relevant commodities. The employer will keep a record of the training received by the graders.
It is also essential to continuously upskill the grader's capabilities through continued professional development.
3.2. Suitable working environment
All standards and codes of practice specify working conditions. Suboptimal working conditions can negatively affect the results. The following are important conditions to consider:
▪ Temperature: If the sample temperature is outside the measuring range of the instrument or the sample has a wide temperature range, the correctness of the results will be affected.
▪ Vibration: Various aspects, from processing equipment (conveying, grinding etc.) to traffic will affect balances – grading equipment must be mounted on a vibration-free table or platform.
▪ Dust: Dust levels are often high in grain laboratories and testing rooms. It is not easy for a silo to be free from dust, but sensitive instruments and balances can be affected by dust build-up.
▪ Light: Light intensity and colours are important – too low or high light makes reading digital displays difficult, and the visual inspecting of samples unreliable. Ideally use natural light for inspecting samples.
▪ Electricity: Fluctuations affect equipment negatively. Fluctuations in electricity supply require investment in stabilising power sources essential.
3.3. Equipment Maintenance
Equipment must be checked daily before operations for the day commence. Things do change and go wrong, so the grader's security is to check that the equipment is working correctly. For example, balances must be clean and level and checked with Check Weights to ensure they are weighing within set tolerances. These daily checks must be logged on control charts.
The grading office systems will have a schedule for equipment maintenance – possibly within an annual or six-monthly service to ensure the equipment is working correctly and giving the correct results. Some equipment uses calibrations to do measurements, and they must be checked or updated annually. All these checks and maintenance records must be up to date and available for inspection.
In addition, all grain testing equipment is calibrated before each harvest season by the service provider who has supplied the instrument. The calibration is based on the widest possible range of expected values for that specific commodity.
If all these items are performed, then grain testing can commence, and it shows that the equipment is fit for purpose.
3.4. Quality control
When equipment has been set up and checked, there still needs to be certainty that the whole test is working, and that grading is conducted correctly. This can only be achieved by using quality control systems.
Each test requires its own control system – and it is essential to implement the control protocol before a testing session for grading purposes is started. There are two essential elements of a quality control system: repeatability and reproducibility:
21
The repeatability test shows that the individual grader can get the same results (within defined limits) on the same samples within the same laboratory environment. Repeatability is marked by precision.
Reproducibility tests how well the individual grader agrees with others to judge the individual's performance against others doing the same tests.
The only way to measure the individual's performance against others is to take part in proficiency testing – in fact, it should be required by all role players in the grain industry value chain. The proficiency scheme will set standards that should be achieved by all graders and their testing equipment. When these standards are achieved, the correlation between laboratories and grain testing and grading facilities will improve.
3.5. Reporting system
The grading office should have a procedure for recording and reporting results. Such a system is needed to ensure that the customer's results are clear, understandable, and easily related to the sample (identified by codes, descriptions etc.). They are also an accurate record of the test and provide the necessary traceability.
Records and corresponding samples should be kept for an agreed time – this is usually specified in contracts. If records and reports are done electronically, the grading office will be able to prove to an auditor that the systems work, cannot be corrupted and regular backups are made.
4. Challenges experienced with grain testing and its influence on grading.
1.1 Equipment
There is a variety of grain testing equipment and many different suppliers. Each instrument manufacturer recommends a suitable work environment. Many instrument checks are carried out either before every use or on a regular basis to ensure that the instrument is in good condition and maintains performance. Since each instrument is different, the grader at each testing site should consult the manufacturer's handbook and ensure that adequate checks are in place. Instruments should be maintained by cleaning and servicing regularly. Suppliers also recommend running built-in diagnostics and check the consistency of results by using check samples.
Throughout the season, instrument manufacturers and other role players collect hundreds of samples from various production regions with a wide range of quality parameters – from very high to very low values. These samples are used to strengthen the calibration for the various quality parameters.
The instrument manufacturers collaborate with SAGL to prepare large grain samples of known and homogenous quality parameters, e.g. moisture, protein etc. in order to provide calibration samples for their seasonal visits to testing sites. These tests for homogeneity are done with primary methods (laboratory tests).
The calibration does not drift – it is a set of numbers that only change when the user alters the equipment.
1.2 Calibration
Calibration is an equation that is entered into secondary measuring equipment used for rapid measurement of grain properties. Instrument manufacturers usually develop calibrations. Alternatively, they have been developed by specialist laboratories and adopted by manufacturers.
Calibrations must be robust and require many samples (often hundreds) to be measured by both the primary reference method and the secondary instrument. Calibrations are subject to specific international standards which allow for a minimum difference of the
22
secondary method from the primary method. Statistical routines are used to produce calibrations.
Calibration performance should be verified on a range of samples. Calibrations are national calibrations and are therefore the best possible line through the band of results obtained from different regions.
• Primary methods
The primary reference methods are either chemically or physically based and are recognised by the industry that uses them. In some cases, they are international standards (ISO or ICC) which industry representatives on international Standards Committees have developed and agreed on. Primary reference methods are conducted in dedicated grain laboratories such as the SAGL.
• Secondary methods
Most primary reference methods are too time-consuming for routine grain testing when consignments are delivered for storage or to buyers. The reference tests are then used to produce calibrations for secondary (rapid) methods and also the established values for ring tests/proficiency schemes. Secondary (rapid) methods are the instrument methods used in routine grain testing. They do not measure the parameter directly, but their measurements are related to reference values.
• Quality parameters tested on instruments using calibrations, but not necessarily included in the grading parameters are:
o Maize - Protein, Moisture, Milling Index, Oil, Starch
o Sunflower – Oil, Moisture
o Sorghum – Moisture
o Soya Beans - Protein, Moisture, Oil
o Wheat – HLM, Protein, Moisture, Falling number
1.3 Verification
It is necessary to verify the correctness of instruments daily through check/quality control samples. Check samples, with pre-determined values, are analysed to check and verify instrument performance before proceeding with the analysis of a batch of samples. Check samples should be chosen to cover as much of the expected result range as possible.
Such quality control samples with established analytical values are commonly used for cereal testing methods. In order to monitor the equipment continuously, these results should be used to produce a control chart. Each instrument has a control sheet on which the daily readings are recorded. In a grain storage business or a processing plant, this would entail a daily update of the control chart as grain is continuously received and/or dispatched.
Check samples should be prepared in dedicated grain laboratories such as the SAGL. SAGL prepares large grain samples of known and homogenous quality parameters, e.g., moisture, protein etc. These large samples are divided into individual samples (one per instrument) that must be used for the instrument's daily verification.
In the rest of the world, there are countries with a superior system, where a Network links NIR instruments to a reference laboratory that does this on-line.
1.4 Sieves
Most grain quality standards state that the screens in sieves used to assess foreign matter content should consist of perforated metal plate conforming to specifications laid down by national or international standards organisations. Such specifications cover the
23
composition and thickness of the metal plate, the shape and dimensions of the perforations, and the plate's perforations' arrangement. In South Africa, the sieves are described in each grain and oilseed commodity's grading regulations.
Commodity Sieve structure
Maize A 6,35 mm round-hole sieve with:
▪ a flat metal sheet bottom of 1,0 mm thickness perforated with round holes of 6,35 mm (± 0,05 mm in diameter that is arranged with the centres of the holes at the points of
▪ the intersection of an equilateral triangular grid with a pitch of 8 mm; ▪ of which the upper surface of the bottom is smooth; ▪ the frame of which is at least 40 mm high; ▪ with the inner width of at least 200 mm and the inner length of at
least 300 mm, or, in the case of a circular sieve, the inner diameter of at least 278 mm;
▪ with a minimum area of 600cm2 and a maximum of 750cm2; and ▪ that fits onto a tray with a solid bottom and must be at least 20mm
above the bottom of the tray.
Sunflower A slotted sieve with:
▪ flat bottom of metal sheet of 1,0 mm thickness with apertures 12.7 mm long and 1.8 mm wide with rounded ends (±0.03 mm). The spacing between the slots in the same row must be 2.43 mm wide, and the spacing between the rows of slots must be 2.0 mm wide. The slots must be alternately oriented with a slot always opposite the solid inter-segment of the next row of slots (b) of which the upper surface of the sieve is smooth;
▪ with a round frame of suitable material with an inner diameter of at least 300 mm and at least 50 mm high; and
▪ that fits onto a tray with a solid bottom and must be at least 20 mm above the tray's bottom.
Sorghum A slotted sieve with:
▪ a flat metal sheet bottom of 1,0 mm thickness perforated with rectangular slots of 12,7 mm in length and 1.8 mm in width with rounded ends. The spacing between the slits in the same row must be 2,43 mm wide, and the spacing between the rows of slots must be 2,0 mm wide. The slots must be alternately orientated, with a slot directly opposite the solid inter-segment of the adjacent row of slots;
▪ of which the upper surface is smooth; ▪ with a circular frame of suitable material with an inner diameter of at
least 300 mm and maximum 310 mm and at least 50 mm high. ▪ That fits onto a tray with a solid bottom and must be at least 20 mm
above the tray's bottom.
24
Commodity Sieve structure
Soya Beans Two sieves are used:
1) A 1,8 mm slotted screen sieve with:
▪ a flat bottom of metal sheet of 1,0 mm thickness with apertures 12,7 mm long and 1,8 mm wide with rounded ends. The spacing between the slots in the same row must be 2,43 mm wide and the spacing between the rows of slots must be 2,0 mm wide. The slots must be alternately oriented with a slot always opposite the solid inter-segment of the next row of slots;
▪ of which the upper surface of the sieve is smooth; ▪ with a round frame of suitable material with an inner diameter of
between 300 mm and 310 mm maximum and at least 50 mm high; and
▪ that fits onto a tray with a solid bottom and must be at least 20 mm above the tray's bottom.
2) A 4,75 mm round-hole screen sieve with:
▪ a flat metal sheet of 1,0 mm thickness perforated with round holes of 4,75 mm in diameter that are arranged with the centres of holes at the points of intersection of an equilateral triangular grid with a pitch of 8 mm;
▪ of which the upper surface of the sieve is smooth; ▪ the frame of which is at least 40 mm high; ▪ with the inner width of at least 200 mm and the inner length of at least
300 mm. or, in the case of a circular sieve, the inner diameter of at least 278 mm; and
▪ that fits into a tray with a solid bottom; and not less than 20 mm above the tray's bottom.
Wheat A slotted sieve with:
▪ a flat bottom of metal sheet of 1.0 mm thickness with apertures 12.7mm long and 1.8 mm wide with rounded ends. The spacing between the slots in the same row must be 2.43 mm wide, and the spacing between the rows of slots must be 2.0 mm wide. The slots must be alternately orientated with a slot always opposite the solid inter-segment of the next row of slots;
▪ of which the upper surface of the sieve is smooth; ▪ with a round frame of suitable material with an inner diameter of
between 300 mm and 310 mm maximum and at least 50 mm high; and ▪ that fits onto a tray with a solid bottom and must be at least 20 mm
above the tray's bottom.
The efficiency of a sieve is dependent upon two factors:
• the dimensions of the apertures in the screen, and
• the proportional volume of material which will not pass through the gaps.
As a rule, the percentage sieving area of a screen with small perforations is less than that of a screen with larger holes. Its capacity for sieving efficiently is correspondingly reduced. Also, for a perforated metal screen of fixed specifications, the sieving efficiency falls off
25
markedly if the volume of material which will not pass through the apertures exceeds a certain quantity.
5. Critical control points for calibration of grading equipment
The following are three critical control points for the calibration of grading equipment:
1.1 Sample homogeneity
The sample homogeneity and preparation of the sample are critical control points. If these two factors are not adequately controlled, the whole exercise is worthless. These factors are largely irretrievable; their importance cannot be emphasized enough.
1.2 Equipment
Calibration samples are normally purchased from each new instrument's supplier but must be checked using locally produced commodities (a validation set). Alternatively, a local calibration can be developed by analysing hundreds of samples over a wide range using primary methods and building a unique calibration for that particular country's instrument.
Operators of stand-alone instruments with existing calibrations should check the calibrations. Ideally, samples covering the range of measurement are required. They should be tested by the primary reference method and the secondary instrument containing the calibration. Then the two sets of results are compared statistically. Use an expert to make adjustments. It must be done by the instrument manufacturer or supplier in some cases.
Laboratory instruments (FOSS, GAC and Omega Analyzer) are serviced and cleaned twice per annum before the summer crop (May-August) and before the winter crop (November-January). Complete the summer crop service before the last day of March each year and complete the winter crop services before the last day of September each year. Six weeks before the seasonal deadline, testing facilities should provide sufficient control samples over a wide spectrum to the service providers to confirm the accuracy of the grain analysis calibration loaded on the instruments.
1.3 Pre-Season Ring Tests
A proficiency scheme is based on ring tests and forms an important part of a quality control system. Cereal testing laboratories commonly use these schemes to check the laboratory method's performance (these may differ from the reference method) at regular intervals. Several laboratories and the results analyse a homogeneous sample compared with an established value.
Participation in pre-season grading ring tests (the proficiency scheme), before the harvest of summer and winter grains, is essential for an agribusiness to determine the efficiency of training programmes every year and test maintenance and renewal of skills before the next harvest is delivered. Ring tests determine the practical implementation of knowledge by the individual grader in his environment. It serves to verify that the company is ready to receive all crops in the new season.
Ring tests are designed to make inter-laboratory or inter-facility comparisons to monitor equipment, personnel and test methods. All role players who receive and dispatch grain should participate to get an independent assessment of quality control measures. The primary aim is to have a quality assurance tool for benchmarking against other laboratories, and good quality results will lead to increased productivity and competitiveness.
Benefits of ring tests for the grain industry are:
i) Regular independent checks on the quality of analytical measurements and grading;
26
ii) Compare performance with an independent laboratory;
iii) Demonstrate competence to customers (dispute resolution);
iv) Monitoring of trends over time;
v) Evaluation of methods and instrumentation;
vi) Staff training and customer education; and
vii) Participants can meet customer requirements and optimise quality control systems.
Ring tests are a valuable tool to maintain quality standards in the grain industry. The value is determined by:
i) Regular participation; ii) Following the instructions; iii) Evaluation of results; and iv) Corrective actions implemented based on the results.
This process will check the reproducibility of graders.
6. Challenges experienced with grain graders and its influence on grading.
Two major challenges are experienced with grain graders that influence the grading:
6.1 Identification of the defects
The objectivity of the individual undertaking the grain grading affects visual defects interpretation. Decisions should be based on hard facts and evidence, but the personal judgment of one person differs from that of another when the appearance of blemishes in the various grain commodities must be categorised.
Different defects will predominate in different seasons. Staff thus need to consider growing and harvest conditions and their effect on grain when examining it. Defective grain could mean grain and pieces of grain
a. that are shrivelled, immature, frost-damaged, heat damaged, water damaged, mouldy or chalky;
b. that are discoloured by external factors such as water and sun;
c. that have sprouted, including kernels of which the shoot (plumule) in the germ is visibly discoloured;
d. that have cavities in the germ or endosperm caused by insects or rodents;
e. that are visibly soiled (smeared) or contaminated by smut, fire, soil, smoke or coal-dust and chemical residues.
They must also be able to identify insect pests and poisonous weed seeds in grain that may, in terms of the Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act No. 54 of 1972), represent plant species that are a hazard to human or animal health when consumed.
Comprehensive training is essential before staff can be judged to be competent, and their objectivity eliminates decisions based on personal bias or incorrect identification.
6.2 Calculating the percentage (%) of the defect as per the grading regulations
Grain grades must be determined according to the standards for grades of each commodity according to the Agricultural Product Standards Act, 1990 (Act No. 119 of 1990) as defined by The Minister of Agriculture.
27
Quality standards differ for each commodity and can include factors like frost-damage, heat-damage and the presence of other grain and noxious seeds.
Calculations are required to determine the class and grade of the grain-based on a specific working sample size (in gram), a sub-sample of the screened sample. Also, there may be other aspects affecting the determination of the mass - For example, with maize samples, the factors affecting the calculation differ between white and yellow maize.
Apart from the determination of undesirable odours and harmful substances and glass, metal, coal, dung, stone, poisonous seed and insect content, some determinations require calculations to determine the percentage of defects, screenings and foreign matter.
Maximum percentage permissible deviations have to be calculated based on the identification of defects and other factors like, e.g. in the case of maize - Other colour kernels, Foreign matter and Pinked kernels, or for wheat - Damaged wheat, Field fungi infected wheat, or for sunflower - Sclerotia.
Comprehensive training is essential before staff can be judged to be competent.
7. Conclusion
This section highlights the complexities of grain grading and the importance of graders to be well trained and have access to high quality and well-maintained equipment. Leaf Services' mandate is to support the grading industry through the development of an efficient oversight mechanism that will assure the market that grain is graded correctly. The oversight system must address all the complexities highlighted in this section.
28
D. PHASE ONE
1. Introduction to Phase One
During Phase One Leaf Services consulted broadly with stakeholders in the grain and oilseed
value chains. During the consultations, Leaf Services gained insight into the different role
players' operational reality. Leaf Services also informed stakeholders to the system of
oversight that they are developing and sensitise stakeholders about the administration
process that might impact their current business operations. During the consultation process
inputs were received from:
1. Primary producers; through engagements with producer organisations such as
Grain SA and SAGRA.
2. The grain storage industry though interactions with Agbiz Grain and SACOTA
3. The milling industry which comprises of the feed mill industry and the milling
operations that produce food for human consumption through engagements with
AFMA and the Chamber of Milling.
4. The baking industry through engagements with the National Chamber of Bakers
5. Regulatory bodies such as the JSE
6. Food processors such as Tiger Brands
The report on Phase One of this study summarises the engagements that Leaf Services'
meetings had with different role players. The section will conclude that Leaf Services has
consulted widely with industry role players and gained insight into these role players' business
operations. Leaf Services had to change their initial approach to understand the grain and
oilseed value chains through the consultation process. Leaf Services is grateful for the
engagements with stakeholders as this allowed Leaf Services to co-invent a system of
oversight with the grain industry. Phase 2 presents an analysis of the industry's information.
2. Consultation process followed.
A summary of the consultations is presented, including the feedback received from the parties
consulted.
The aim of the initial outreach meetings with entities in the grain and oilseed value chains was
to confirm Leaf Services' appointment as assignee and advise them to the development of an
oversight system for grading and analysis. The willingness of role players to commit to the
process was gauged during these meetings.
The initial bi-lateral meetings were held with Mr Leon du Plessis, the South African Maize Trust
administrator, and Mrs Mariana Purnell, the then General Manager of Agbiz Grain. During
these meetings, Leaf Services decided to form a steering committee and invite role players in
the grain and oilseeds value chain to a forum held on May 14, 2020.
2.1. Leaf Steering committee May 14, 2020
The meeting was facilitated by Leon du Plessis, the South African Maize Trust administrator.
The virtual meetings were conducted using the Zoom platform. During the meeting, the Leaf
Services team introduced Leaf Services' vision. It explained the change in shareholding when
the UK company Hallmark acquired a majority shareholding in Leaf Services during the latter
part of 2019.
29
After the formal presentation, the chair opened the floor for questions. The discussion that
followed is summarised below.
Rod Blondin, Chairperson of the Maize Forum Steering Committee – asked whether Hallmark
has ambitions to get involved with other assignees than Leaf Services.
Dirk Strydom from Grain SA – Asked for more clarity on the planned business model of Leaf
Services. Is it to take over graders or only to ensure quality control?
Response from Leaf Services: Danie Botes – Leaf Services is not sure and needs to complete
a study to plan the most efficient operational model for Leaf Services. Chris Opperman - Leaf
Services does not want to duplicate functions but intends to formalise the grading of grain,
Corne Louw from Grain SA asked for more clarity on the feasibility study's expected timeline.
Response from Leaf Services; Chris Opperman 2 -3 months, but Dr Sierk Ybema warns that
the study will take longer
Mariana Purnell from Agbiz Grain pointed out that all graders are involved in many functions
at the silos. The employees who perform grading functions have many different job
descriptions, such as silo managers, grain handlers, etc.
Heiko Kӧster from AFMA asked about Leaf Service's aim and its main shareholder, Hallmark.
Is this a government instruction or an opportunity to get involved in grading commodities?
Response from Leaf Services: Chris Opperman – At a meeting with the Department of
Agriculture, officials of the Department expressed the expectation of a central grading and
inspection function. During the bilateral meeting with Industry, the message to Leaf Services
was that the grain industry agrees with the need to improve the standardisation of the grading
and analysis process for grain in South Africa. Chris Opperman emphasised that Leaf Services
aims to develop a co-operation solution with Industry.
Heiko Kӧster from AFMA was not satisfied with the comments made. He made it clear that
AFMA did not consent to the idea of a centralised grading function.
Heiko then raised concerns about Leaf Services' performance to date. He did agree that AFMA
will co-operate with the current process.
Leon du Plessis – Asked who is regarded as the Industry, and asked Leaf Services to name
the bilateral consultations they had before this meeting.
Response from Leaf Services: Chris Opperman– Hallmark empowered Leaf Services to fulfil
their mandate. Leaf Services has met with Leon du Plessis (administrator of the South African
Maize Trust) and Mariana Purnell (General Manager of Agbiz Grain). Leaf Services has
planned to meet with Heiko Kӧster, but due to COVID, it was not possible. Leaf Services wants
to develop a value proposition that will bring neutrality to the grading of grain and oilseeds.
Rod Blondin emphasises the importance of a feasibility study but expressed his amazement
that Hallmark had not done a feasibility study before they invested in Leaf Services. He noted
that Leaf Services has therefore already developed a business model and is by implication
not serious about creating a solution with Industry.
Response from Leaf Services: Diederick Opperman, as the driver of the investment of
Hallmark, makes the point that the main driver for the acquisition is his desire to give back to
South Africa. However, he thinks that Leaf Services can be profitable if they take over grain
30
and oilseeds' grading function in South Africa because they will be more efficient than
government organisations.
Arrie Wessels from Pioneer Foods pointed out that the boards were responsible for grading
grains during the era of control boards. Therefore, it is rational that the Government feel that
it should play a role to ensure consistent quality. However, the Government's focus should be
to ensure that consumers buy and consume safe food.
He then explains the grading process and that it will not be possible for an external party to
take over the graders. Grading is a significant function, but it does not consume most of the
grader's time in the day.
Leon du Plessis made the point that the Government misunderstands the grading requirement
of the APSA and confuses this with the health aspects of the consumers.
Response from Leaf Services: The feasibility study will focus on the process of inspections by
Leaf Services, and the cost to perform these services.
The reaction from industry role players to the study are listed below:
• Heiko Kӧster: AFMA only agrees to the feasibility study as far as the assignee is
concerned. Any value-add solutions must be discussed and decided within bi-lateral
discussions.
• Wade Rosewall (Chamber of Milling): agrees to the feasibility study.
• De Wet Boshof (SACOTA) agrees to the feasibility study.
• Dirk Strydom (Grain SA) believes that a feasibility study should provide the answers to
questions raised by the meeting.
The meeting adopted the following resolution:
Leaf would proceed with a feasibility study to compare three options for ensuring a compliance
regime, those being:
1) A model whereby the grain value chain's grading and certification functions are
outsourced to Leaf Services.
2) An inspectorate model where Leaf Services acts as an oversight body over the
current grain and oilseed grading and certification process.
3) A combination of the above two options, namely a grading function in some parts of
the value chain, and an inspection protocol in others.
2.2. Subsequent meetings
Afrilogic was appointed in July 2020 to perform the feasibility study that Leaf Services has
committed to during the meetings with the Leaf Steering committee. Leaf Services and
Afrilogic then embarked on the second round of bilateral meetings. These meetings aimed to
introduce Afrilogic to industry role players and allow role-players to further engage with Leaf
Services' management and with Afrilogic.
The table below list the meetings held and summarises the minutes of the sessions, where
available. Meetings were properly structured with clear presentations and hosted on Zoom
due to Covid-19 lockdown restrictions, and follow-up letters were sent to attendees post-
meeting.
31
2.3. List of meetings held
Organisation Date Representation
AGBIZ Grain August 5 2020 Commercial silo owners
JSE Commodities Derivatives Market
(SAFEX)
July 30 2020 Formal price forming
platform
AFMA July 30 2020 Animal feed industry
SACOTA July 30 2020 Grain traders and alternative
storage providers and port
elevators
Grain SA (Affiliated to AgriSA) July 30 2020 Commercial grain producers
Chamber of Milling August 12 2020 Milling industry for human
consumption
Chamber of Baking August 19 2020 Baking industry
Oilseed producer's organisation July 30 2020 Oilseed crushing industry
SAGRA (Affiliated to AFASA) August 26 2020 Emerging grain producers
Allem Brothers September 11
2020
Prominent private
commercial silo owner,
miller and retailer
Through the consultation process listed above, Leaf Services has engaged with the following
stakeholders in the value chain:
1. The primary producers of grain through engagements with Grain SA and SAGRA
2. Commercial and alternative grain storage providers were consulted through meetings
with Agbiz Grain, SACOTA
3. The processors of grains were consulted through meetings with AFMA, the oilseed
producers' organisation, the Chamber of Bakers and the Chamber of Millers.
4. Consultations with role players in the grain trading environment were done through
meetings with the JSE and SACOTA.
2.4. Summary of meetings
The main concerns raised during the sessions are listed below.
2.4.1 AFMA and SACOTA
Summary of the meeting
The members of SACOTA and AFMA acknowledged the importance of their participation in
the process especially during the second Phase of the study where they will have an
opportunity to give input to any proposed change in the grading and certification process of
grains and oilseeds and the defined products of grains and oilseeds.
32
The next meeting, which will be a consultation in terms of the PAJA and the consultation
framework that Leaf Services has developed, will be with the trade committees of SACOTA
and AFMA. The management teams of SACOTA and AFMA confirmed that they would keep
their members informed of this meeting's content.
The representatives of AFMA and SACOTA made the following comments:
1. SACOTA and AFMA received no formal communication to inform these organisations
that Afrilogic and E-UP have been appointed. Dr Kӧster found the lack of
communication by Leaf Services unprofessional.
2. Mr Kok wanted to know whether the expected amendments to the APSA would impact
the study's scope.
2.4.2 AGBIZ GRAIN
The meeting decided that Leaf Services would proceed with a feasibility study in conjunction
with Afrilogic and the University of Pretoria Enterprises Unit ("E-UP") and Agbiz Grain to
investigate a compliance model for Leaf Services as duly appointed assignee as per the
APSA.
The feasibility study will determine the most feasible three options and then investigate the
most desirable option in full. These options are:
1. A model whereby the grain value chain's grading and inspection functions outsourced to
Leaf Services and Leaf establishes a central grading sampling and inspection agency for
the grain industry throughout the value chain.
2. A model whereby the Industry retains its current graders and Leaf appoints its own graders
and inspectors to oversee and inspect the current grading and sampling process.
3. A hybrid model whereby Leaf Services fulfils an outsourced grading, sampling and
inspection function in some areas in the value chain, and an inspection and oversight
function in other areas of the value chain.
Any agreed model has to ensure a cost-effective solution with no unnecessary duplication of
cost and function and has to comply with the Act and Regulations' intent.
Afrilogic and the University of Pretoria Enterprises Unit will conduct the study and work with
Agbiz Grain to develop the model.
Afrilogic and the University of Pretoria Enterprises will channel any communication through
the Agbiz Exco committee with the Agbiz Steering Committee. The Agbiz Steering Committee
will keep all Agbiz members informed of the study's progress. It will co-ordinate the protocols
to be agreed upon in the collection of information and data for the study, and general co-
operation in devising a new model.
Future discussion in order to finalise the study can be conducted with the steering committee
of Agbiz Grain.
2.4.3 GRAIN SA
Grain SA acknowledges the importance of their participation in any current grading and
certification system changes.
33
The next meeting, which will be a consultation in terms of the PAJA and the consultation
framework that Leaf Services has developed, will be with Corne Louw. Dr Dirk Strydom must
be included in invites for Leaf Services discussions and with Afrilogic.
The trade committees' meeting was scheduled during the week, starting on August 9 2020.
The following concerns were raised:
1. Different interpretations exist regarding the Minister of Agriculture's role and functions
regarding the grading and certification of agricultural products.
2. Members of Grain SA are sensitive to any increase in the cost of the management of
grain and oilseeds. Any proposed changes in the current grading and certification
system will be scrutinised for any increase in cost in the grain and oilseed value chains.
2.4.4 JSE
Voyo Mpumza (commodities storage inspections) and Raphael Speirs (head of commodities)
attended the Zoom meeting.
The aim of this meeting was to introduce the process that Leaf Services has embarked on to
the Agricultural Commodities division of the JSE.
The JSE supports the initiative in principle as it aims at improving the integrity of the trading
environment.
It was suggested that the JSE should join the Leaf Steering Committee. Leaf Services sent an
invitation to the JSE to join the Committee.
2.4.5 National Chamber of Milling (NCM)
The meeting with the National Chamber of Milling was attended by:
• Boikanyo Mokgatle CEO and members of the Technical Committee,
• Dwight Foster Jones
• Collette Hooper
• Kevin Clarke
The NCM said that they appreciated the introductory meeting. However, the position of the
NCM is that they will prefer to discuss the proposed model in the Leaf Working Group. The
NCM feels strongly that the consultation with Leaf Services should be on an industry basis
and not with individual industry organisations.
2.4.6 National Chamber of Baking (SACB)
SACB acknowledges the importance of their participation in any current grading and
certification system changes.
The next meeting, which will be a consultation in terms of the PAJA and the consultation
framework that Leaf Services has developed, will be arranged with Geoff Penny (GM SACB)
to include the Technical Committee of SACB.
Representatives of SACB had the following concerns and made the following comments:
34
1. Members of SACB will be sensitive to any increase in the cost of the management of
grain and oilseeds. Any proposed changes in the current grading and certification
system will be scrutinised for any increase in cost in the grain and oilseed value chains.
2. The implications of non-compliance need to be developed, which include any penalties
levied for non-compliance.
3. The confidentiality framework for industry information must be developed by Leaf
Services.
2.4.7 National Oilseeds Processors Association (NOPA)
NOPA acknowledges the importance of their participation in any current grading and
certification system changes.
The next meeting, which will be a consultation in terms of the PAJA and the consultation
framework that Leaf Services has developed, will be arranged with Peter Lovelace to include
the oilseed advisory committee of NOPA. Gerhard Keun is the chair of the oilseed advisory
committee.
Representatives of NOPA raised the following concerns and comments:
1. Members of the NOPA all comply with either HACCP, ISO or GMP quality control
systems.
2. The industry is more concerned about food safety than the grading of raw materials.
Processors will adjust prices and processes to accommodate variations in raw
materials' physical characteristics.
3. The oilseed value chain is unique and comprises a few large processors that procure
less than half of their raw material needs locally. As such, the importation of raw
materials is an essential focus for the members of the NOPA.
4. The NOPA is a fragmented organisation
2.4.8 The South African Grain Farmers Association (SAGRA)
SAGRA acknowledges the importance of their participation in any current grading and
certification system changes.
The next meeting, which will be a consultation in terms of the PAJA and the consultation
framework that Leaf Services has developed, will be with the EXCO of SAGRA.
Victor Mongoato raised the following concerns:
1. The members of SAGRA, who represent 3,400-grain farmers, are not all familiar with
the grading processes and procedure that the storage providers follow to grade the grain that
SAGRA members store at the specific silos.
2. The SAGRA members raised concerns that they do not always receive the correct
grading for the grain that they deliver.
3. Members of SAGRA welcome the possibility of an independent grain grading and
certification organisation in South Africa.
2.4.9 Entities not consulted with during the first round of consultations.
35
The beer industry and the retail sector were not formally engaged in August 2020 as Leaf
Services in consultation with Afrilogic believed that possible business models should be
documented before engagement with these entities.
• Leaf Services will formally engage with the retail sector through The Consumer Goods
Council of South Africa (CGCSA). Most retailers are members of the Chamber of
Bakers, but Shoprite Checkers and Woolworths are not.
• Leaf Services will engage directly with the two larger brewers in South Africa (AB
INBEV and Heineken).
2.5. The conclusion to Phase One
Leaf Services has consulted widely with industry role players and gained insight into these
role players' business operations. Leaf Services had to change their initial approach to
understand the grain and oilseed value chains through the consultation process. Leaf Services
is grateful for the engagements with stakeholders as this allowed Leaf Services to co-invent a
system of oversight with the grain industry.
36
E. PHASE TWO
1. Introduction to Phase Two
Leaf Services embarked on a desktop study to obtain information about the cost drivers, volumes of product produced, stored, imported, and processed in South Africa for the commodities assigned to them.
This information will be used inter alia to identify, describe and/or calculate the following:
1. The most important production areas in South Africa for the different commodities within the scope of this study.
2. The quantity of commodities produced per province.
3. The long-term production trends of the commodities and the relative volumes.
4. The production and consumption dynamics of the most important commodities in South Africa.
5. All the service points where grading of commodities is done.
6. An estimation of the volume of grains per commodity received by the different FBOs.
7. Analysis of storage providers, including:
a. a summary of the relative size of the storage providers,
b. where they are located, and
c. who is responsible for managing the different facilities.
8. Identification of the grain processors in South Africa for maize, wheat and oilseeds. These processors must be divided between processors that process commodities for animal feed and those that produce products for human consumption.
9. A description of the relative size of processors and an analysis of the production dynamics of the most important processors in South Africa.
10. Estimation of the quantities of grain that are procured by the processors directly from farmers.
11. The leading importers of commodities and the port silo operators in South Africa.
12. List all the bakers of pan baked bread in South Africa. As the APSA regulates wheat-based pan baked bread, the bakers producing pan-baked bread are also service points for Leaf Services.
2. Description of the grain and oilseed production areas in South Africa
The South African grains and oilseeds are classified as either summer or winter crops.
Summer crops include white and yellow maize, sunflowers, soya beans and sorghum. Winter
crops include wheat, barley, and canola. These commodities are frequently also being
classified as either grains or oilseeds. Grains include summer crops such as maize and
sorghum and small grains such as wheat and barley. Oilseeds are a collective name of all
plant seed that is primarily used in processes where oils are extracted from the seeds. These
commodities include sunflowers, soya beans and canola.
The graph below illustrates maize's dominance in the South African grain industry. During the last 90 years, maize production has increased annually by 13,7% while the volumes produced
37
for all other grains, except for soya beans, have decreased. Soya beans have an annual growth rate of 17,84% over the last 12 years. (BFAB, 2020)
Graph 2: Historical Production of Major Crops in SA
Source: Crop estimation committee (CEC), analysis by Afrilogic
The commercial agricultural sector in South Africa is highly mechanised and relatively large; mechanised farming operations produce 90% of the agricultural production in South Africa.
The number of farming operations decreases over time, but these farms' productivity must continually improve to ensure financial sustainability. Farming units generally tend to grow in size, while the improvement in yield per ha indicates improved production practices. However, this also implies that production moves from areas with low potential to high potential areas. (Who owns who, 2019)
The graph below illustrates the decreasing production areas and the increased yield per hectare for maize.
Graph 3 Total area planted, production and yield to maize.
Source: CEC
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Met
ric
ton
ne
PRODUCTION OF MAIZE IN THE RSA PRODUCTION OF SOYABEANS IN THE RSA
PRODUCTION OF SUNFLOWERSEED IN RSA PRODUCTION OF WHEAT IN THE RSA
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
t/h
a
Tho
usa
nd
ha
or
ton
Production Area Yield Linear (Area) Linear (Yield)
38
The 2020 BFAB baseline study predicts the following trends for summer grain production for
the next ten years. (BFAB, 2020)
▪ The area planted under white maize is expected to contract further by 12 percent by
2029 relative to the 2017-2019 base period. However, with less marginal land in
production, yield gains of 25 percent over the same period are expected.
▪ By contrast, the area cultivated to yellow maize and soya beans increases, expanding
by 9 percent and 47 percent respectively over the ten years to 2029. This increase in
production is driven by the expected rise in animal protein demand over the next ten
years.
The maize triangle incorporates the Northwest, Free state, and Mpumalanga provinces. This
area produces more than 90% of the white and yellow maize in South Africa.
Map 1: The major maize production regions in South Africa
Source: DAFF
The graph below indicates the summer crop quantity used for human and animal consumption. This analysis is relevant because the regulation in the APSA for grain products only covers grains produced for human consumption.
White maize is mainly used for human consumption, while yellow maize for animal feeds. Tongaat Hulett Starch (Pty) Ltd process most yellow maize for human consumption. The wet maize milling starch facility of Tongaat Hullet Starch produces glucose for the food, brewery, paper and pharmaceutical industries. Tongaat Hulett Starch process approximately 630,000 Mt of maize per year.
39
Graph 4: Summer crop utilisation
Source BFAB, 2020
Most of the oilseeds produced in South Africa are crushed in sophisticated crushing facilities.
The oils produced by these crushing plants are mainly used for human consumptions while
the oil cake and hulls are mostly used in the animal feed industry.
3. Quantity of commodities produced per province in South Africa.
The graph below summarises the production in Mt for white and yellow maize per province.
The Free State produces 5,035Mt of maize, which is 2,284Mt more than Mpumalanga, the
second-highest maize producing area. The dominance of maize in the SA crop mix becomes
even more apparent when considering that Mpumalanga, which has the most soya beans,
only produces 424 000 Mt of soya beans.
Graph 5: Summer grains 10-year average production ('000 Mt)
Source: CEC data, Analysis by Afrilogic
Maize is the largest and most important locally produced field crop, a dietary staple, livestock
feed source, and an export crop. The most important maize producing areas are the North
West province, the Free State, the Mpumalanga Highveld and the KZN Midlands.
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029
White Maize Yellow Maize Sorghum Soya beans Sunflowers
'00
0 M
T
Human consumption Animal Consumption Crushed Fullfat
40
Soybean is mainly grown as a rotation crop with maize.
Sunflower seed is produced in the Free State, North West, Mpumalanga Highveld, and
Limpopo. Sorghum is cultivated in Mpumalanga, Free State, Limpopo, North West and
Gauteng.
Graph 6: Oils seeds 10-year average production ('000Mt)
Source: CEC data, Analysis by Afrilogic
The USDA Grain report of 2019 summarised the trends for soya beans and sunflowers. The
report states that South Africa demonstrates a positive trend in soya bean plantings over the
past 10-years, mainly driven by an expansion in soya beans processing capacity to replace
soya bean meal imports. In the 2019/20 production year farmers planted a record of 800,000
ha of soya beans. Sunflower plantings decreased during the past four years by almost 30
percent after a record area of 719,000 hectares was planted in 2015/16 MY. Maize and soya
beans are currently more competitive compared to sunflowers.
Sorghum production is insignificant when compared to soya bean and sunflower plantings.
Graph 7: Wheat 10-year average production ('000 Mt)
Source: CEC data, Analysis by Afrilogic
Wheat is produced in the winter rainfall areas of the Western Cape, parts of the Free State
and various irrigation areas. The Western Cape is the main production region for wheat and
produces 787,000 Mt of wheat annually. The Free State and the Northern Cape are the second
and third most important wheat production areas. Wheat in the Western Cape and Free State
are planted mostly on dryland paddocks while wheat is mainly planted on irrigated land in the
0
200
400
600
800
1,000
WesternCape
Free State NorthernCape
Limpopo North West KwaZuluNatal
Mpumalanga Easten Cape
'00
0 M
t
Wheat
-
50
100
150
200
250
300
350
400
450
Free State North West Mpumalanga Gauteng KwaZuluNatal
Limpopo NorthernCape
Easten Cape Western Cape
Soya Sunflowers Sorghum
41
other production areas. South Africa typically imports around half of its domestic wheat
requirement, resulting in prices primarily based on import parity levels.
The BFAB 2020 - Baseline study expects that wheat and barley prices will remain higher than
in previous years. Higher domestic prices should stimulate the production of wheat in South
Africa.
Barley is produced mainly in the southern Western Cape, and the majority is for the malt
industry. The beer industry is by far the largest processor of malt in South Africa. The beer
industry is dominated by ABInbev, increasing the marketing risk to farmers. The BFAB 2020 -
Baseline study suggests that farmers might be more inclined to produce wheat rather than
barley in the foreseeable future.
Graph 8 Other winter grains 10-year average production ('000Mt)
Source: CEC data, Analysis by Afrilogic
The dominance of wheat over barley and canola is clear from the graph. The Western Cape
grows more wheat than all the other provinces combined. The production of barley and
canola in other areas besides the Western Cape is negligible.
Barley is mainly grown in the Western Cape for malt, in other provinces it is cultivated for feed.
4. Production and consumption dynamics for maize, wheat, sunflowers, and soya beans.
The grain and oilseed industries use so-called grain balances to illustrate the relationship
between production and importation versus the consumptions and stocks levels of grains in
South Africa. These summaries are useful tools to understand the grain market of South
Africa. This section presents the summaries for maize, wheat, soya beans, and sunflowers
and relies heavily on the December 2020 report of the National Agricultural Marketing Council
"South African Supply and Demand Estimates December 2020 Report".
The table below summarises the maize source and maize consumption in South Africa. It is
evident from the table that South Africa is a net exporter of maize as it exports approx. 2 million
Mt of maize annually. The only exceptions were 2015/16 and 2016/17 when South Africa
experienced severe drought during these two production years and produced less than what
it consumes.
0
10
20
30
40
50
60
70
80
90
100
Western Cape Northern Cape Free State Easten Cape KwaZulu Natal North West Limpopo
Barley Canola
42
Farmers are expected to deliver 8 893 033 Mt: white maize (WM) for the 2020/21 marketing year This quantity includes opening stock of 474 000 Mt and local deliveries of 8 400 000 Mt. It does not appear that white maize will be imported during the 2020/21 marketing season.
The total yellow maize supply is projected at 6 878 516 Mt for the 2020/21 marketing season. This includes opening stock of 526 637 Mt and local commercial deliveries of 6 341 870 Mt. No yellow maize imports are estimated for the new season.
The total demand (domestic plus exports) for white maize is projected at 7 770 500 Mt. The total domestic demand is projected at 6 640 500 Mt. This includes 5 200 000 Mt processed for human consumption, 1 400 000 Mt processed for animal and 11 500 Mt for gristing.
Table 3: Producer deliveries, Consumption, Imports, for maize.
Element number
Elements White Maize Final 2019/20
White Maize Projection for 2020/21
Yellow Maize Final for 2019/20
Yellow Maize Projection for 2020/21
Total Maize Final for 2019/20
Total Maize Projection for 2020/21
Mt Mt Mt Mt Mt Mt
5 Available for the commercial market
5 429 102 8 415 069 5 399 955 6 341 879 10 829 057 14 756 948
6 SUPPLY
7 Opening stock (1 May)
1 798 998 473 964 864 088 526 637 2 663 086 1 000 601
8 Producer deliveries 5 442 474 8 396 310 5 444 579 6 341 870 10 887 053 14 738 180
9 Imports 0 0 509 684 0 509 684 0
10 Early deliveries (Net)* 0 18 759 0 9 0 18 768
11 Surplus 0 4 000 27 941 10 000 22 336 14 000
12 Total Supply 7 241 472 8 893 033 6 846 292 6 878 516 14 082 159 15 771 549
13 DEMAND
14 Processed for the local market
5 449 415 6 611 500 5 656 997 4 726 500 11 106 412 11 338 000
15 - human 4 809 569 5 200 000 578 003 620 000 5 387 572 5 820 000
16 - animal and industrial
629 076 1 400 000 5 069 241 4100 000 5 698 317 5 500 000
17 - gristing 10 770 11 500 9 753 6 500 20 523 18 000
18 Withdrawn by producers
13 111 13 000 43 993 3800 57 104 51 000
19 Released to end-consumers
17 649 12 000 82166 70 000 99 815 82 000
20 Net receipts(-)/disp(+) 6 282 4 000 2372 8 000 8 654 12 000
21 Deficit 5 605 0 0 0 0 0
22 Local demand 5 492 062 6 640 500 5785528 4 842 500 11 271 985 11 483 000
23 Exports 1 275 446 1 130 000 534127 1 450 000 1 809 573 2 580 000
24 - products 236 537 170 000 124275 120 000 360 812 290 000
25 - whole maize 1 038 909 960 000 409852 1 330 000 1 448 761 2 290 000
26 Total Demand 6 767 508 7 770 500 6319655 6 292 500 13 081 558 14 063 000
27 Closing Stock (30 Apr)
473 964 1 122 533 526 637 586 016 1 000 601 1 708 549
28 - processed p/month 454 118 550 958 471 416 383 875 925 534 944 833
29 - months' stock 1,0 2,0 1,1 1,5 1,1 1,8
43
Element number
Elements White Maize Final 2019/20
White Maize Projection for 2020/21
Yellow Maize Final for 2019/20
Yellow Maize Projection for 2020/21
Total Maize Final for 2019/20
Total Maize Projection for 2020/21
30 - days' stock 32 62 34 45 33 55
*Early deliveries (Net) = Early deliveries for next season (March + April) minus Early deliveries for the current season (March + April). The actual final closing stock at the end of April is determined by the early deliveries realised in March & April.
Source: National Agricultural Marketing Council, 2019
The total demand (domestic plus exports) for yellow maize is projected at 6 292 500 Mt. The total domestic demand is projected at 4 842 500 Mt. This includes 620 000 Mt processed for human consumption, 4 100 000 Mt processed for animal 6 500 Mt for gristing.
White maize products include samp, maize grits, maize rice, and various maize meals,
including unsifted/sifted, coarse, super and special maize meal. The most popular maize meal
sold in South Africa are super, special sifted and sifted meal.
1. Super maize meal is de-germinated before milling and would be classified as the best
grade in terms of low-fat and low fibre content and has a long shelf life.
2. Special sifted is a non-de-germinated meal, slightly coarser than super and finer than
sifted and has a high-fat content and short shelf life.
3. Sifted meal has more bran and germ meal present, and while it is the healthiest maize
meal, it also has the shortest shelf life, is very coarse and is not generally preferred.
4. Maize chop is a by-product in the maize milling process and is mostly used to produce
animal feeds.
The table below summarises the most important maize products in South Africa. Please note
that maize chop is responsible for 30% of the maize products produced. See Table 1.
Table 4: Maize products manufactured in South Africa - October 2019 to September 2020
Maize Products Manufactured Oct '19 -
Sep '20
White Maize Mt
Yellow Maize Mt
Total Maize Mt
White Maize %
Yellow Maize %
Total Maize %
Maize Chop 1,753,757 190,913 1,944,670 32.80% 29.63% 32.31%
Maize Rice 8,201 - 8,201 0.15% - 0.14%
Maize Grits 62,592 - 62,592 1.17% - 1.04%
Samp 119,842 - 119,842 2.24% - 1.99%
* Total Yellow Maize Rice
- 296,848 296,848 - 46.07% 4.93%
Maize Grits / Samp - - -
Sifted Maize Meal 22,409 36,209 58,618 0.42% 5.62% 0.97%
Special Maize Meal 355,019 4,507 359,526 6.64% 0.70% 5.97%
Super Maize Meal 2,895,115 26,041 2,921,156 54.15% 4.04% 48.54%
Unsifted Maize Meal 13,001 7 13,008 0.24% 0.00% 0.22%
Other maize products intended for human consumption
116,818 89,886
2.18% 13.95% -
Total 5,346,754 644,411 5,991,165 100 100 100
Note: The product figures do not include industrial products
Source: Sagis The maize forum, 2020
44
Wheat, the second most important grain crop produced in South Africa, is mainly used for
human consumption (mainly bread) with the balance, estimated at less than 1%, used as
animal feed. South Africa produces about 1,7 million metric tonnes (Mt) of wheat annually and
imports similar volumes. The milling industry mills about 2,55 million Mt of wheat annually.
The wheat flour used by the commercial baking industry to bake bread is about 1,6 million Mt.
Table 5: Producer deliveries, Consumption, Imports, of Wheat
Element no Element
Marketing season Final for 2019/20
Marketing season Projection for
2020/21
Mt Mt
1 CEC (Crop Estimate) 1 535 000 2 147 900
2 CEC (Retention) 0 38 000
3 SUPPLY
4 Opening stock (1 Oct) 539 079 364 908
5 Prod deliveries* 1 513 300 2 109 900
6 Imports 1 889 868 1 540 000
7 Surplus 9 812 9 000
8 Total Supply 3 952 059 4 023 808
9 DEMAND
10 Processed 3 437 768 3 453 000
11 - human 3 414 602 3 450 000
12 - animal 23 166 3 000
13 - gristing 0 0
14 Withdrawn by producers 1 767 1 300
15 Released to end-consumers 1 269 1 800
16 Seed for planting purposes 16 595 18 000
17 Net receipts(-)/disp(+) 4 410 4 500
18 Deficit 0 0
19 Exports 125 342 140 000
20 - products 40 875 35 000
21 - whole wheat 84 467 105 000
22 Total Demand 3 587 151 3 618 600
23 Closing Stock (30 Sep) 364 908 405 208
24 - processed p/month 286 481 287 750
25 - months' stock 1,3 1,4
26 - days' stock 39 43
Source: National Agricultural Marketing Council, 2019
The total wheat supply is projected at 4 023 808 Mt for the 2020/21 marketing season which
includes opening stock level of 364 908 Mt. Local commercial deliveries is estimated to be 2
109 900 MT, while the expected whole wheat imports to South Africa 1 540 000 Mt. The
estimated wheat surplus is 9 000 Mt.
The total demand (domestic plus exports) for wheat is projected at 3 618 600 Mt. This includes
3 450 000 Mt processed for human consumption, 3 000 Mt processed for animal consumption.
45
The table below summarises the quantities of wheat products produced in South Africa:
Table 6: Wheat products manufactured in South Africa
Wheat Products 12 months: Aug '19 - Jul '20
Manufactured Mt % of Total manufactured
White Bread Flour 1,158,016 34.04%
Cake Flour 1,008,818 29.66%
Brown Bread Flour 393,321 11.56%
Other Flour (Industrial) 118,533 3.48%
Self-Raising Flour 20,109 0.59%
Whole Wheat Meal 8,000 0.24%
Bran 694,743 20.42%
Total 3,401,540 100.00%
Source: Sagis Wheat Forum, 2020
The volumes of white bread flour, cake flour and brown bread flour are responsible for 75%
of the wheat meal products sold in South Africa. By including the bran volumes in the four
major items, the percentage of products covered increases to 95%.
Bran, a by-product of the milling industry, is mainly consumed by the animal feed industry.
The wheat regulations only specify labelling standards for bran.
South Africa is a net importer of wheat. The quantity imported varies each year, depending
on previous years' production, current-year production expectations, and the quality and
quantities required to manufacture bread and wheat-based products. While most of the
wheat produced in South Africa is bread wheat, the small amounts of durum wheat grown in
certain areas to make pasta.
Most of the wheat flour volumes in the table above are used for baking bread. The table
below summarises the number of loaves of different pan baked loaves of bread produced in
South Africa.
Table 7: Quantity of Pan Baked bread in South Africa.
Pan baked bread manufactured Aug '19 - Jul '20
Number of Loafs % of Total
White Bread 1,148,589,572 48.27%
Brown Bread 1,201,559,883 50.50%
Whole Wheat 26,970,287 1.13%
Other 2,281,033 0.10%
Total 2,379,400,775 100.00%
Source: Sagis Wheat Forum, 2020
White and brown bread volumes are responsible for 98% of all the bread volumes in South
Africa.
46
Table 8: Producer deliveries, Consumption, Imports and Exports of Sunflowers
Element no Element
Marketing season final for
2019/20 Projection for
2020/21
Mt Mt
1 CEC (Crop Estimate) 678 000 785 910
2 SUPPLY
3 Opening stock (1 Mar) 120 165 135 325
4 Prod deliveries 677 674 785 910
5 Imports 457 400
6 Surplus 6 520 5 000
7 Total Supply 804 816 926 635
8 DEMAND
9 Processed 664 027 847 350
10 - human 1 478 1 700
11 - animal 5 511 5 650
12 - crush (oil and oilcake) 657 038 840 000
13 Withdrawn by producers 783 650
14 Released to end-consumers 1 023 1 100
15 Seed for planting purposes 2 447 3 750
16 Net receipts(-)/disp(+) 635 1 300
17 Deficit 0 0
18 Exports 576 500
19 Total Demand 669 491 854 650
20 Ending Stock (28/29 Feb) 135 325 71 985
21 - processed p/month 55 336 70 613
22 - months' stock 2,4 1,0
23 - days' stock 74 31
Source: National Agricultural Marketing Council, 2019
The total sunflower seed supply is projected at 926 635 Mt for the 2020/21 marketing season.
The supply includes an opening stock level of 135 325 Mt, local commercial deliveries of 785
910 Mt sunflower seed imports of 400 Mt for South Africa and a surplus of 5 000 Mt.
The total projected demand (domestic plus exports) for sunflower seed is 854 650 Mt. The
demand includes 1 700 Mt processed for human consumption, 5 650 Mt processed for animal
consumption and 840 000 Mt for crush (oil and oilcake).
47
Table 9: Producer deliveries, Consumption, Imports and Exports of Soya Beans
Element no Element
Marketing season Final for 2019/20
Marketing season projection for 2020/21
Mt Mt
1 CEC (Crop Estimate) 1 170 345 1 245 500
2 Retention 0 33 000
3 SUPPLY
4 Opening stock (1 Mar) 502 241 138 455
5 Prod deliveries 1 135 179 1 212 500
6 Imports 9 098 150 000
7 Surplus 0 3 000
8 Total Supply 1 646 518 1 503 955
9 DEMAND
10 Processed 1 484 592 1 365 000
11 - human 23 759 25 000
12 - animal feed (full fat soya) 191 223 150 000
13 - crush (oil/oilcake) 1 269 610 1 190 000
14 Withdrawn by producers 676 800
15 Released to end-consumers 367 600
16 Seed for planting purposes 7 640 7 750
17 Net receipts(-)/disp(+) 1 355 1 200
18 Deficit 8 097 0
19 Exports 5 336 1 000
20 Total Demand 1 508 063 1 376 350
21 Closing Stock (28/29 Feb) 138 455 127 605
22 - processed p/month 123 716 113 750
23 - months' stock 1,1 1,1
24 - days stock 34 34
Source: National Agricultural Marketing Council, 2019
The total soybean supply is projected at 1 503 955 Mt for the 2020/21 marketing season.
Supply includes an opening stock level of 138 455 Mt, local commercial deliveries of 1 212
500 Mt, soybean imports of 150 000 Mt for South Africa and a surplus of 3 000 Mt.
The total demand (domestic plus exports) for soya beans is projected at 1 376 350 Mt. The
demand includes 25 000 Mt processed for human consumption, 150 000 Mt processed for
animal (full fat) feed, and 1 190 000 Mt for crush (oil and oilcake).
48
5. An estimation of the volume of commodities per service point.
The screengrab from Google maps below plots the silos and other main grain storage sites
in South Africa. The map excludes on farm storage facilities.
Map 2 The location of storage providers in South Africa
Source: Leaf Services analysis
1. The storage providers are as expected concentrated around the major grain-producing
areas in South Africa. Map 2 indicates the major maize production areas in South Africa.
By comparing Maps 2 and 3, most of the silos in South Africa were developed in the
traditional summer grain areas.
2. The winter rain areas of the Western Cape are important production areas for wheat,
barley, and canola. Map 3 confirms that storage facilities were developed in the Western
Cape.
The most important raw grain services points are identified in section 5. Grain storage
facilities are explored further in section 6 and 7 by analysing the capacities and expected
commodities receipt per silo. Section 6 summarises silo capacity per province and silo
operator.
The graph below summarises SAFEX registered silo capacity, the estimated grain receipts,
and the estimated utilisation per province. The total capacity of the silos included in this
analysis is 16,7 million MT.
49
Graph 9 Silo capacity and utilisation per province in South Africa
Source: CEC, Analysis by Afrilogic
The change in production over time in South Africa is also apparent from the silo utilisation
graph. The volumes of grain production in the North West province decreased, and the
production in the irrigation areas of the Northern Cape and KZN has increased.
Only the Free State, North West and Mpumalanga have mega silos. In this study, mega silos
are silo complexes with a capacity of 120,000 Mt or more.
Graph 10 Total silo capacity per silo owner
Source: Sagis data, Analysis by Afrilogic
South Africa has 16 companies that provide storage facilities on a commercial basis to the
grain industry. However, 85 % of the silo capacities are managed by the five large
agricultural businesses, namely. Senwes,
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Free State North West Mpumalanga Western Cape Gauteng Northern Cape Limpopo KwaZulu Natal
'00
0 M
t
Silo capacity Total grain receipts Percentage utilisation
50
Graph 11: Summary of capacities and receipts of the small silos
Source: Sagis data, Analysis by Afrilogic
Table 10 Analysis of smaller silo operators
Silo owner Number
of silos
Smallest
silo
Largest
silos
Average
silo
capacity
Average
receipts
BKB 9 17,000 50,000 32,527 20,945
Kaap Agri 14 11,328 40,000 25,036 14,486
OVK 11 8,231 90,000 35,405 35,623
SSK 6 22,700 72,000 38,417 23,856
GWK 6 10,000 50,000 27,500 34,847
TWK 3 40,000 55,000 48,333 35,957
Source: Sagis data, Analysis by Afrilogic
6. Analysis of storage providers, including estimated grain receipts:
Silos are classified for this study in three categories based on the capacity of the silo. The three categories are:
▪ Small: silos with capacities of 60,000 Mt or less
▪ Medium: silos of capacities of between 60,000 and 120,000 Mt and
▪ Large: silo complexes of storage capacities of more than 120,000 Mt.
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
BKB Kaap Agri OVK SSK GWK TWK
Smallist silos Largest silos Average silo capacity Average receipts
51
Graph 12 Silo capacities and grain receipts at SAFEX registered silos in SA
Source: Sagis data, Analysis by Afrilogic
It is clear from the table above that most of the silos in South Africa are classified as small silos, and small silos are managed on average by four employees.
The key findings are:
▪ That the sampling and grading of grain done by various individuals at large silo complexes, but many small silos are managed by one person who performs all the grain management functions, including the grading of grain.
▪ The number of silos and the number of employees at different silos are summarised in the table below. Silos are categorised in small (less than 60 000 Mt), medium (between 60 000 and 120 000 and large (more than 120 000Mt) based on the estimated quantity for grains in metric tonnes of grain received at each of the silos.
The table below summarises the number of silos in the different categories and the average workforce per silo category.
Table 11: Silo classification in small, medium and large
Silo Category
Number of silos
Number of employees
Number graders
Number of Samplers
Small 204 4 2 2
Medium 56 7 3 4
Large 7 10 4 6
Most silos in South Africa have two individuals that can grade and two individuals who take samples at intake and out loading.
-
50,000
100,000
150,000
200,000
250,000
300,000 W
estm
inst
er
Sto
ffel
sho
ek B
un
ker
Ru
sten
bu
rg S
ilo K
SM *
Bra
kfo
nte
in B
un
ker
*
Mo
dd
erri
vier
Pri
eska
Hal
fman
sho
f
Bar
kley
Wes
t
Tw
eesp
ruit
Arl
ingt
on
Vry
hei
d
Pal
mie
tfo
nte
in B
un
ker
*
Hen
dri
ksva
llei B
un
ker*
Mal
mes
bu
ry *
Hei
del
ber
g
War
mb
ad
Har
tsw
ater
Gre
ylin
gsta
d
Vaa
lkra
ntz
Bu
nke
r *
Ro
edta
n *
Pro
tem
Sta
nd
erto
n A
FG
Her
tzo
gvill
e
Du
nd
ee
Wo
nd
erfo
nte
in D
epo
t *
Pri
eska
Kar
rin
gmel
kriv
ier
Kin
gsw
oo
d
Vry
bu
rg
Dry
den
Wo
nd
erfo
nte
in
Mo
oig
elee
Go
tten
bu
rg *
Der
by
Ch
rist
ian
a
Gen
eva
Pro
tesp
an
Bra
nd
fort
Wo
lweh
oek
Car
olin
a
Ho
lmd
ene
Heu
nin
gsp
ruit
Ora
nje
rivi
er
Ko
ster
Sto
ffb
erg
Bam
bo
essp
ruit
Blo
emh
of
Nig
el
Sch
oo
nsp
ruit
Lo
sdo
orn
s
Vill
iers
Vilj
oen
skro
on
Hib
ern
ia *
*
San
nie
sho
f
Silo Capacity (Mt) 60,000 (Mt) 120,000 (Mt) Grain receipts (Mt)
52
▪ Very few, if any, silos have individuals that exclusively perform grading functions.
Most silo managers can and perform the grading of commodities received or
dispatched.
▪ More than 20% of grains produced in South Africa are not stored in traditional silos
but are shipped directly to the processor or stored in alternative storage facilities.
Most silos are operated around the year. While most of the grain at silos are received during
the harvesting-seasons, the storage and dispatch functions at silos are usually not seasonal,
and silos need their management teams on-site around the year.
7. The service point for grading of commodities.
The physical production of grain must be overlaid with the silo capacity in the relevant
provinces to understand the throughput of grains through silos.
Services points at FBOs can either be a site of one of the storage providers, or a processor
such as a maize or wheat mill that produce meal and flour for human consumption, oilseed
crushers or animal feed producer. The number of inspectors needed by Leaf Services is
calculated from the number and locations of the FBOs.
The table below summarises the number of FBOs in South Africa. The FBOs are split
between storage providers, mills, oilseed crushers and animal feed producers.
Table 12 Summary of grain intake points in South Africa
FBOs Total number of FBOs
FBOs that procure from farmers
Storage providers 311
Maize mills 136 21
Wheat mills 34 24
Oilseed crushers 23 23
Animal feed producers 37 10
Total 541 78
Source Sagis data, analysis and estimations form Leaf Services and Afrilogic
53
8. Identification of the grain processors in South Africa
The map below plots the major processors, excluding bakers, in South Africa.
Map 3 The location of mills and animal feed producers in South Africa
Source Leaf Services analysis
Most of the processors are concentrated on the Highveld of South Africa. The locations of
processing facilities are within the most important summer grain production and are
correlated with the largest investments in silos. However, the processor map also indicates
investments in all the major metropoles in South Africa.
Four players dominate the maize milling industry in South Africa. The businesses listed in
the table below produce 75% of the maize meal consumed in South Africa. The table below
lists these millers and indicates these entities' market share.
Table 13: Large millers in South Africa
Maize Millers Market Share %
Premier Foods 27%
Tiger 20%
Pioneer 18%
Pride 10%
Total 75%
Source: Who owns whom-African Business Information (2019) Manufacture of flour and grain mill products
54
The study conducted by Afrilogic has identified more than 100 maize mills that operate in South Africa. The mills vary in size and sophistication, but many smaller maize mills are associated with large agricultural businesses such as Afgri, VKB and Allem Brothers.
Smaller maize mills with well-known brands are Tuso Mill, Eendrag Meule, Bakhresa Mills and Goldrich Flour Mills, to mention a few.
Large-scale milling for wheat is conducted mainly with roller milling in highly mechanised,
specialised milling plants that can produce a wide range of high-quality products. Due to the
capital outlay, roller mills are generally for large-scale, commercial production.
There are two categories of small-scale milling in South Africa:
1. Rural custom or services mills where small amounts of local, rurally produced grain
are milled for a fee; and
2. Small production mills, where grain is purchased, milled and then sold to customers.
The industry remains highly concentrated. The five biggest millers, Pioneer Foods' Sasko
Milling, Tiger Brands' Tiger Milling, Premier Foods and Foodcorp's Ruto Mills and Pride
milling, and the Foodcorp group dominate the wheat milling market with 97% market share.
These businesses are vertically integrated into baking and producing other foods such as
pasta and cereals.
▪ Tiger Brands has four mills in South Africa, in Randfontein in Gauteng, Bellville in the
Western Cape, Pietermaritzburg in KwaZulu-Natal and in Hennenman in the Free
State.
▪ Pride has four mills, in Leslie, Ogies and Nigel in Mpumalanga, and Devon in
Gauteng.
▪ Premier has five wheat mills in Durban, East London, Pretoria, Cape Town and
Vereeniging in Gauteng, and a maize mill in Kroonstad.
▪ Pioneer has eight mills, in Gauteng, Western Cape and KwaZulu-Natal.
▪ Foodcorp has eight bakeries in Gauteng, Limpopo, Mpumalanga, and KwaZulu-
Natal.
The study performed by Afrilogic has identified 24 additional wheat mills in South Africa. A
number of these mills are associated with the large agricultural business such as VKB, SSK
and Afgri.
Table 14: Food processors per province based on their registered head offices.
Source: Who owns whom-African Business Information (2019) Manufacture of flour and grain mill products
10
1 2 2 2
1
-
2
4
6
8
10
12
Gauteng Eastern Cape KwaZulu-Natal Mpumalanga Western Cape Free state
Manufactures of flour and maize meal products
55
Map 4: The number of bakeries per region in South Africa.
Source Leaf Services analysis
The baking industry produced 2.278 billion loaves of bread from October 2017 to September
2018. White bread comprised 49.06% and brown and whole wheat bread 50.78% of total
production with other speciality bread making up the balance. Per capita consumption in
South Africa was 25.8kg (2017), considerably less than in Europe, where consumption is
approximately 59kg per person. 700-gram loaves comprise 73.2% of bread baked in South
Africa, however, there is a growing trend towards 600 grams brought about largely by
economic factors.
Four large milling companies – Tiger Brands (Albany Bakeries); Pioneer Foods (Sasko
Bakeries); Foodcorp (Sunbake); and Premier Foods (Blue Ribbon) – continue to dominate
the wheat-to-bread chain, controlling more than 90% of the milling industry. (Who Owns
Who, 2019)
56
9. The conclusion to Phase Two
Insights listed above from the study had influenced the development of the possible
solutions to the business model that are listed below as building blocks that Leaf Services
will use in future discussions with stakeholders in the grain value chains.
Some of the most important findings of the first two phases of the study are:
1. The processing environment is highly concentrated and is dominated by sizeable
integrated role players; the large food producers are vertically integrated, mill both maize
and wheat and use most wheat flour to bake bread in their bakeries.
2. The large producers dominate the maize and wheat markets with 75% market share for
maize products and more than 90% for wheat products.
3. South Africa sustains more than 100 smaller maize millers and 24 wheat millers. Many of
these producers have developed well-known brands.
4. Most supermarket brands have invested in in-store bakeries. The number of instore
bakeries is estimated to be 2200.
5. Few silos have dedicated graders, but most workers at silos are involved in either grading
or sampling.
57
F. PHASE THREE-Develop an oversight model
1. Introduction to Phase Three
Phase Three consists of the following:
1. Supply chain analysis for all the major commodities cultivated in South Africa.
2. An international study that describes the grading environments in several important grain
producing countries in the world. The analysis also draws comparisons to the current
grain grading environment in South Africa.
3. A summary of the APSA and its regulations.
4. The development of the business model for Leaf Services.
The insights gained from the first two Phases of this study and three sections of Phase
Three, enabled Leaf Services to formulate a framework that will ensure proper oversight
over the grading of commodities in South Africa. The description of the oversight framework
is included in section four of Phase Three. The last section summarises the financial model
results to test the proposed business model's feasibility in section four.
2. Supply chain analysis
2.1. Introduction
This project's value chain component does not follow the "traditional" value chain analysis. It goes a step further to touch on grading and food safety issues. The value chain analysis provides an opportunity to monitor and document the players, regulators, commodity volumes, value-adding opportunities and inspection and grading points and identify areas that require further improvements. Such an analysis is critical to ensure that the grain is handled hygienically through all supply chain stages to deliver safe and quality products. The discussion on the value chain in the current project is, therefore centred around the following key issues:
a) Follow the flow of grain at different stages of production and document volumes.
b) Assess the risk of losing ownership by the farmers (ownership change).
c) Risk of food safety.
2.2. Maize value chain analysis
The grading system ensures that the commodity that is delivered to the silo is of good quality and is free from foreign objects such as insects, metal and glass. Maize is a staple crop in South and Southern Africa and is a major dietary component for most rural subsistence farming communities (Alberts et al. 2019). With limited access to other alternative foods, maize and maize products are consumed regularly in large quantities. Moreover, food safety has necessary implications on countries' trade performance and plays a vital role in Africa for achieving food and nutritional security (Jaffee et al. 2020).
The South Africa maize industry is composed of several players at different stages of the value chain. Figure 1 presents the maize value chain of South Africa. The left-hand panel shows the different nodes of the value chain, from the farm (production), storage, trading, primary and secondary processing, distribution, all the way up to the fork (consumption). There are four categories of producers, namely:
i) pure subsistence farmers; ii) small-scale farmers (traditional surplus producers); iii) emerging farmers (small commercial orientated farmers); and iv) large-scale commercial farmers.
58
The pure subsistence farmers mainly produce for home consumption, and if they happen to sell some surplus, they sell directly to informal markets in the form of local mills which are not regulated. This informal trade is one of the nodes along the maize value chain where quality standards are compromised since there is no grain inspection and grading. Through forming and operating in cooperatives, subsistence farmers can potentially pool their grain and market to commercial markets. In this case, the grain they produce can pass through a formal inspection and grading system. The pure subsistence farmers are responsible for about 0.54 million metric ton (Mt). Pure subsistence farmers utilize informal on-farm storage facilities. As indicated by the Department of Agriculture, Forestry and Fisheries (DAFF) (2019), maize farmers have the following options in storing the grain:
i) Deliver the maize immediately to a miller; ii) Make use of the new storage method in the form of silo bags; or iii) Erect own silos
However, the maize farmers' most common method uses commercial off-farm silos. Besides the storage fee, this certainly has several advantages since most of these silos are registered, and they are well equipped to ensure that proper inspection and grading takes place, and the grain is stored correctly. It also becomes easier for the maize farmers if they cannot find buyers for the grain and the silos, as the buyer of last resort, are always available to purchase the grain.
Figure 2: South Africa's maize value chain
The remaining three farmer types (traditional surplus producers, small-scale or emerging
commercial farmers and large commercial farmers) are responsible for producing 15.5
million Mt of maize. The temporarily stored grain at the informal on-farm storage facilities is
59
quickly transported to the silos where it is inspected and graded. Some large commercial
farmers have their own formal on-farm storage facilities and can ship directly to the export
markets. However, as indicated by the Agricultural Business Chamber - AGBIZ (2020), the
grain silos that wish to export grain must meet stipulated standards and processes in line
with international food safety legislation. This requirement helps ensure that the silos are in
good condition to avoid compromising food safety.
Quality and volume controls
Of interest are the quality inspection and grading points. This information is critical because it helps identify areas where quality deteriorates, thereby posing food safety risks and flagging issues requiring further upgrading. The grain that passes from informal storage facilities to large scale millers, which amounts to 3.4 mil Mt directly from farms, do not pass through any silos. Hence, inspection and grading happen only on acceptance at the large-scale millers. Figure 1 further shows that the grain transferred from the informal on-farm storage to the silos is graded as it enters the formal storage facilities (silos). Similarly, all grain imports (with a more significant proportion coming from the Americas, Europe and Africa) are inspected and graded on acceptance at the silos and directly to the processors (local millers, large-scale millers, local food industry and animal feed industry).
The grain that passes through the silos is inspected and graded at the primary processing stage. A large proportion of the grain is channelled through to the large-scale millers, local food industry and animal feed millers. The maize flour from the local millers and the large-scale millers is further inspected and graded before it is distributed to the wholesale, chain retail stores and other retail stores. It is also used as a raw material for further production of many other maize by-products at the consumer level. The grain is shipped directly from formal on-farm storage facilities (particularly by large commercial farmers) and the silos in terms of exports.
Risks for food safety
In maize production, food safety can be compromised both at production and storage levels. Figure 1 shows some critical points where grain does not pass through the inspection and grading system. As mentioned earlier, this poses a risk to consumers' health and damages the grain sector's reputation and the agricultural industry within the local and international trading space. For instance, the pure subsistence farmers store the grain in informal on-farm storage facilities. However, as Alberts et al. (2019) pointed out, these rural storage facilities have poor pest control, poor aeration, and inadequate moisture and temperature control. All these deteriorate the grain's quality and expose it to microbiological and chemical contamination harmful to human health. The poor-quality grain means that it cannot be utilised further to process into other maize by-products.
Risks for ownership
When the farmers bring their grain to the silos, there is a change of location. Hence, the grain needs to be inspected and graded. Grading is important at the change of location because the owner needs to certify the grain at a specific grade. Farmers can bring their grain to the silos for storage while they wait to sell the produce at a certain point in time. However, the farmers lose ownership of the grain to the silo owner since the farmers will not get the same grain they brought to the silo, but they get the grain of the same grade. The silos are the buyers of last resort, meaning that when the producers fail to acquire the grain market, they can now sell to the silos at a relatively lower price.
60
2.3. Wheat value chain analysis
Grading of the wheat grain is essential to ensure that the product is free from foreign substances, heavy metals, pesticides residue, insects and birds. Similarly, wheat flour is also inspected and graded since it is an essential raw material in the baking industry. Hence, given the importance of wheat in bread baking, it is important that the wheat flour is inspected and graded. It is supposed to be free from lumps and other microbial contamination and should have the right protein and ash content. The wheat of different grades should not be mixed; hence, they are packed in separate storage containers with the grade of contents marked. Different grades of wheat fetch different prices for the producers. The graded wheat is channelled towards appropriate industrial uses, with the lower grade of wheat used for animal feed production.
The inspection and grading are a critical component of any value chain. It allows the value chain nodes posing health hazards to be singled out and appropriate remedial measures taken. Alldrick (2014) highlights that the flow of product from seed to final product introduces several risk factors at each node of the value chain, making cereal-based foods more prone to chemical food safety hazards if not properly managed.
In South Africa, wheat is mainly produced by large-scale commercial farmers and a few developing farmers. There are a limited number of new entrants from the developing farming sector owing to the high input and crop insurance costs (Department of Agriculture, Forestry and Fisheries - DAFF, 2019). Moreover, the marketing channel of wheat in South Africa is transport intensive, and it is the producers' responsibility to cover the cost of post-harvest logistical expenses (Bester, 2014). Hence, small-scale farmers' involvement in wheat production is very minimal due to high transaction and capital costs that the producer has to incur to produce and market wheat. The main producing areas are the Western Cape, Free State and the Northern Cape.
According to DAFF (2019), South Africa is not a major producer of wheat and relies on wheat imports from other regions to supplement domestic production. South Africa also exports wheat to South African Customs Union (SACU) member countries, with a larger proportion of exports to Namibia and Botswana. As a net importer of wheat, South Africa's wheat producers are price takers and face stiff competition against imports from other global producers. As Bester (2014) indicated, the local producers receive a low wheat price due to the implementation of an open market where cheap imports of subsidised wheat flood the local market. South Africa produces mainly bread wheat and small quantities of durum wheat used to produce pasta. About 70 to 80 percent of all wheat flour made in South Africa is used for bread baking (DAFF, 2019).
The wheat value chain consists of several players whose mandate ensures that quality and reliable wheat and wheat products are delivered to the end-users (consumers). Figure 2 presents South Africa's wheat value chain. The value chain's left panel indicates how the wheat and wheat derivatives pass through.
61
Figure 3: South Africa's wheat value chain
There are small commercial orientated and large-scale commercial farmers. The next along the chain are the storage facilities, followed by traders responsible for getting the wheat to the primary processors who are the millers. The milled wheat is distributed to different industries, including the pan baking, biscuits, pasta and alcohol industry responsible for baking bread. Another portion of wheat flour is distributed to the wholesalers and retail stores.
Quality and volume controls
As highlighted earlier, wheat in South Africa is produced by small commercial orientated farmers and large commercial farmers, and they are responsible for producing 1.7 million metric tons (Mt). The grain is initially stored at the informal farm storage, and no inspection and grading happen at this point. Some grain is moved directly to the local and large-scale millers from the informal farm storage, which represents the primary processing stage. At this stage, the grain is inspected and graded to ensure that quality product is approved for further processing.
Some grain is also shipped from the informal farm storage to the formal on-farm storage and the silos. The grain is inspected at both points. From the silos, the wheat grain can be sold to the millers where inspection and grading take place before acceptance. Wheat grain is also shipped from the commercial on-farm storage facilities and the silos to the export markets. Similar to the case of maize, these storage facilities are required to meet stipulated standards and processes that are in line with international food safety legislation. The wheat flour goes into distribution from the millers with a higher proportion channelled towards the pan baking
62
industry, which is responsible for making bread, which is the primary product for the baking industry. At this stage, the millers are required to strictly adhere to specifications stipulated by the wheat flour buyers (Alldrick, 2010). All this is done to deliver safe and hazard-free products to the consumer. The large-scale millers also channel a proportion of flour directly to the animal feed industry and the biscuits, pasta and alcohol industries.
Risks for food safety
Food safety is not much of an issue in cereals compared to other highly perishable foods. In context, the wheat value chain seems to pose less risk than the maize value chain. The producers (small commercial orientated and large-scale commercial) are better resourced to comply with the safety standards and regulation. The contamination of wheat can happen at any stage of the value chain. Hence, all players are responsible (from producers, transporters, millers and food manufacturers) to ensure that minimum safety standards are strictly adhered to. Besides numerous types of contamination that commonly appear on the kernel's surface, mill hygiene is also a significant contributing element to food safety (Alldrick, 2010). Hence, hygiene and quality control need to be observed at every stage of the value chain to ensure that no food safety hazards are posed to the consumers. Ensuring minimisation of food safety hazards in the wheat value chain is important since the baking industry is the second, preceded by maize, a major supplier of energy in the national diet (DAFF, 2019).
Risks for ownership
Most wheat farmers are not in a financial position to own formal grain storage facilities. Hence, they rely on commercial silos for storage facilities. When the farmer brings their consignment to the silos for storage, it is inspected and allocated a particular grade. However, when the wheat producers manage to secure a buyer for their grain, there is no guarantee that they will get the same grain they brought to the silo. But they will get grain which carries the same grade as the grain they brought in for storage. Nevertheless, in a way, the producers lose ownership of their grain since they do not have control over what happens from delivering the grain at the silos.
2.4. Soya bean value chain analysis
1. Introduction
Soybean (Glycine max (L.) Merr.) is an important oilseed in South Africa owing to its utilisation as an industrial raw material to produce many other by-products. The main producing areas of soya bean in South Africa are the Free State and Mpumalanga Provinces. South Africa is Africa's leading soybean producer and shows a rising soya bean production trend. This increase was brought about by the growing demand for soya bean oilcake by the domestic animal feed industry. The largest global soybean producers are the United States of America (USA), Brazil, Argentina and China. Even though China tops among the highest soya bean producers, it is also one of the highest importers of soya beans due to its increasing livestock sector (Mokone, 2017). In South Africa, the increase in soya bean production places South Africa in a self-sustenance position where the domestic production can meet the local demand of soya bean and soya bean products. According to BFAP (2018), soya beans have been the fastest-growing field crop industry in South Africa over the past decade regarding both the area under production and production itself increasing by an average of 15% and 20% per annum, respectively.
2. Why grading system is essential in the soya bean value chain
As alluded to earlier on, soya bean is a crucial and highly demanded ingredient for various products, mainly in the animal feed industry and human consumption. The grading system enables the soya beans of different classes and grades to be packed in different containers or stored separately when delivered to the silos. The other classes and grades are allocated to different uses, and they fetch different prices. The Government Gazette of April 2017
63
stipulates that a consignment or a sample of a shipment of soya beans shall be sensorially assessed or chemically analysed to determine:
(a) whether it has musty, sour, khaki bush or other undesirable odour;
(b) whether it contains soya beans in which or on which a substance is found, that renders it unfit for human or animal consumption or processing into or for utilisation as food or feed;
(c) whether it contains poisonous seeds;
(d) whether it contains glass, metal, coal or dung;
(e) whether it contains any insects; and
(f) whether it contains animal filth
The assessment criteria highlighted above is done for the whole grain to ensure that quality soybean is shipped for further processing. This graded grain is sold to crushers and millers where it is milled into flour of different textures for different uses. At this stage, inspecting the protein content is critical, whether it is used for human consumption or animal feed. The protein content is the primary nutritional component of interest with the protein meal being the main product. Hence, the soybean is graded mainly based on its protein content.
3. Soybean value chain
The soybean value chain depicts a demand and supply scenario where the supply side of soybean is satisfied by domestic production and imports. The demand side consists of domestic use and exports. Figure 3 shows that large commercial farmers mainly produce soybean in South Africa. There is no subsistence participation and emerging farmers in the sector yet since soybean is considered a commercial crop. The large-scale commercial soybean farmers supply soya beans to the soybean crushing mills.
Figure 1 illustrates South Africa's soybean value chain. The left panel shows the stages along the soybean value chain from the point of production through storage, trading, processing (primary and secondary), distribution down to the final consumption where the animal feed industry is the major consumer of soybean meal.
The soybean is processed into meal and oil at the processing stage, where one ton of soya beans typically produces 0.79 ton of soybean meal, which is mainly used for animal feed and a 0.18 ton of oil used for human consumption (National Agricultural Marketing Council - NAMC, 2011). For efficiency and profitability, the processor should have ready markets for both products, the soya bean meal and the soya oil.
South Africa imports both soya beans and soybean products such as the soya meal. In terms of imports, Argentina constitutes the highest proportion of soybean meal consumed in South Africa. As shown in Figure 3, the soya beans imported amounts to 0.1 million Mt and are shipped to the silos for storage while awaiting to secure buyers. The soybean grain is inspected and graded at this point. Some imported soybean grain is shipped directly for primary processing. South Africa imports approximately one million Mt of soya oilcake since some poultry farmers still prefer to use imported soy oilcake. South Africa is importing soya beans and soybean meal; it also exports the soya beans to other countries such as Zimbabwe, Zambia and Malawi.
64
Figure 4: South Africa's soya bean value chain
Quality and volume controls
The large commercial farmers are responsible for the production of 1.3 million Mt of soya beans. The produce is initially stored informally on the farms (point of production) which is then shipped to the formal storage facilities which are the silos. At this point, the soybean is inspected and graded before it is accepted for storage in the silos. Some soya beans are shipped from the informal farm storage to the commercial on-farm storage where the soybean is also inspected and graded. The soybean is transported to buyers who are the large-scale crushers from the storage facilities, and some proportion is shipped directly to the full-fat animal feed producers. The large crushers are responsible for producing soya oil for human consumption and soya bean meal for the animal feed industry.
Risks for food safety
The safety of the soya bean and soya bean products can be compromised at any stage of the value chain. Therefore, the soya beans are inspected and graded, and various points along the value chain as illustrated in Figure 3. The presence of foreign matter and poisonous seeds in the soya bean poses a health risk to consumers if not detected during the grading phase. Since soya bean is further processed into other by-products used for human consumption and animal feed, ensuring that food safety measures are adhered to is critical.
Risks for ownership
Soya bean producers have different options in terms of storing the soya bean seeds. Like in
any other grain, the most used are the formal storage facilities, which are the silos. The
soybean grain that is brought to the silos is inspected and graded into different classes and
65
grades and stored according. When the producers secure a buyer for the soybean grain,
they do not get the same consignment they brought to the silos but are given soybean grain
of the same grade. Hence, in a way, the farmers lose control of the grain ownership from the
very moment they bring the soybean grain to the silos.
2.5. Sunflower value chain
Introduction
In South Africa, sunflower (Helianthus annuus L.) is mainly grown in the Free State, North West, Limpopo and Mpumalanga Provinces. The Southern African Grain Laboratories - SAGL (2018) indicates that the South African climatic conditions are very conducive for sunflower seed production since the sunflower plants are drought tolerant. Sunflower is an important source of vegetable oil used for cooking and is an input for margarine, salad dressing oil and snacks.
Why is the sunflower grading system important?
Grading of sunflower grain is essential to ensure that the grain is free from foreign materials such as insects, weed seeds, undesired seeds, stones, and leaves (Department of Agriculture, Forestry and Fisheries - DAFF, 2010). Sunflower grain is also inspected for moisture content which, according to DAFF (2010), should be below 12 % moisture for temporary storage and below 10 % for long-term storage. The grading system informs the sunflower grain pricing, where the higher grade also fetches high prices. Its high protein content is an essential element considered for sunflower as its intrinsic quality components are concerned. Since South Africa also export sunflower, grading becomes crucial to ensure that the grain meets international food safety standards and maintains health trade relations.
The sunflower industry in South Africa comprises several players and actors who ensure the flow of sunflower grain and the associated by-products from the production stage right up to the point of consumption. Figure 4 presents the value chain actors and the different stages of the value chain for South Africa`s sunflower industry. The left pane shows the sunflower value chain stages, from the farm (production point) to fork (final consumption stage). In South Africa, sunflowers are produced only at large scale commercial level. There are no emerging small-scale or subsistence farmers involved.
The large-scale farmers produce approximately 0.7 million metric tonnes of sunflower grain. The grain is temporarily stored in informal farm grain storage facilities. Most of the sunflowers are stored in formal storage facilities or silos where the grain is inspected and graded for quality and consistency before acceptance. Some sunflower farmers store their grain in the commercial on-farm storage facilities. These facilities must meet the safety standards stipulated for all grain storage and handling facilities to ensure the industry's consumer safety and credibility. Since these commercial on-farm storage facilities are heavily inspected, the farmers can directly ship the sunflower grain to buyers for primary processing without passing through silos. Figure 4 shows that approximately 0.21 million metric tonnes are shipped directly from farms. Upon delivery at the primary processing stage, the sunflower grain is inspected and graded to ensure that different quality grades are channelled towards appropriate industries. The processed products are then moved down the value chain for secondary processing by large crushers. At this stage, mainly two by-products are manufactured: i) the sunflower oil which is refined from crude oil and is used for human consumption; and ii) the sunflower oilcake which is utilized in the animal feed industry owing to its high protein content.
66
Figure 5: South Africa's sunflower seed value chain
Quality and volume controls
It is essential to observe the inspection and grading points for tracing purposes in any value chain and ensuring proper quality controls. The sunflower grain in South Africa is produced only by large-scale commercial farmers. The farmers can temporarily store the grain on the farm from where the grain is shipped to silos. As mentioned earlier, some farmers have a well-equipped commercial on-farm storage facilities and can use these facilities. As can be seen from Figure 4, the sunflower grain is well inspected and graded before primary processing regardless of the storage facilities that the farmers utilize.
Some of the sunflower grain is exported (approximately 0.0062 million metric tonnes) directly from farms with commercial on-farm storage facilities or silos. The silos or commercial storage facilities who wish to export must comply with the stipulated standards and procedures that meet the international food safety legislation (Agricultural Business Chamber – AGBIZ, 2020). South Africa also imports about 0.23 million metric tonnes of sunflower.
Risks for food safety
Food safety is an essential element of the agricultural sector and the different sectors, including the sunflower industry, are obliged to comply with minimum safety standards. The risk of food safety is not expected to be a considerable challenge since the sunflower seed is produced at large-scale commercial level. These farmers are better resourced and can comply with food safety standards and regulations. However, since chemicals (pesticides and
67
herbicides) are applied to the crop at the production level, some crop residues are expected. Besides, some foreign particles may be found in the sunflower seeds at the harvesting stage. This necessitates the inspection and grading of the sunflower grain to ensure that they meet the industry's minimum standards. Moreover, as the grain must pass through several nodes of the value chain, observing quality and safety hygiene become mandatory for all value chain players from the producers, transporters, processors and distributors, to ensure that quality and safe products are delivered to the final consumer.
Risks for ownership
Since large scale commercial farmers service the sunflower sector, the risk of ownership is not likely to be much of a challenge. This is because most commercial farmers are able to own their formal storage facilities. However, probably for convenience, some commercial farmers may prefer to use the silos. Upon delivering the consignment at the silos, the sunflower grain is inspected and allocated a specific grade. If the farmer finds a buyer for the sunflower, they are not guaranteed to get their same consignment.
2.6. Barley value chain analysis
Background
Barley is South Africa`s second important small grain crop after wheat. It is mainly grown in
the Northern Cape (irrigation) and Southern Cape (dryland) Provinces. In South Africa, barley
production is primarily for malting purposes since there is no significant feed market for barley
due to oversupply of maize that is considered the main ingredient in the animal feed industry
(Van Der Vyver, 2013). South Africa is amongst the top five African countries (including
Ethiopia, Morocco, Algeria and Tunisia) that produces barley. Unlike for other agricultural
commodities, barley producers have only one major buyer in South Africa, namely ABlnBev,
which is formerly known as the South African Breweries Maltings (Pty) Ltd (SABM)
(Department of Agriculture, Forestry and Fisheries – DAFF, 2018). South Africa consumes
more barley than it produces. Hence, it relies on imports from the Americas, Europe and
Oceania to satisfy local demand. However, despite the heavy reliance on barley imports,
South Africa also exports small volumes to other countries, including Zambia, Namibia,
Lesotho, Botswana and Germany (DAFF, 2018).
Why is the barley grading system important?
According to Agbiz Grain (2021), the grading system provides a clear description of crop
quality and value, promoting an economically healthy and prosperous agricultural sector.
Grading allows uniformity in quality assessment of grain from the barley producers. Grading
of barley ensures that the grain is free from foreign materials such as insects, stones, coal,
weeds, etc. When grading, the person carrying out the grading looks at different parameters
such as the percentage of plump kernels, nitrogen levels, moisture levels, screenings, and
foreign matter (Van Der Vyver, 2013). This quality aspect informs the grader on which grade
to allocate to the grain. Barley grain is an essential ingredient for industries such as the
breweries. As the grain moves from one stage of the value chain to the next, cereal-based
food is highly prone to chemical food safety hazards (Alldrick, 2014). Hence, it requires proper
management through the grading system to ensure that consumers are not exposed to any
food safety risk.
Figure 5 shows South Africa`s barley flow analysis. The left-hand side of the seed flow analysis
shows the subsequent stages through which the barley grain is produced, stored, transported
to processors (buyers), processed into barley by-products and distributed to the final
consumers. In South Africa, barley is mainly grown by large-scale commercial farmers and
68
small-scale commercial orientated farmers. These two groups of farmers are responsible for
producing, in total, approximately 0.3million metric Mt.
Figure 6: South Africa's barley value chain
The harvested barley grain is initially stored temporarily on the informal on-farm storage
facilities. From there, the grain is shipped to the silos. The barley producers utilize the silos for
storing the barley grain. The grain is inspected and graded at the silos and allocated a specific
grade according to set quality parameters. The same grade grain is packed and sealed in the
same containers and clearly labelled. The barley grain is further shipped to the one
commercial buyer of barley in South Africa which, in this case, is the ABInBev. This company
supplies its major stakeholder, South African Breweries (SAB), with malted barley. The barley
grain that is less suitable for malting purposes is channelled towards the animal feed industry.
ABlnBev also exports about 0.002 million metric Mt of barley. South Africa`s commercial
brewer, SAB, also imports about 0.04 million metric Mt of malted barley to supplement its
locally sourced malted barley to carry out their daily operations successfully. SAB uses the
malted barley to manufacture beer of different kinds and quality, which is then distributed to
the final consumers through various outlets such as the wholesalers, and bottle stores and
pubs at different prices.
Quality and volume controls
69
Barley producers in South Africa services one major buyer, ABInBev, and, therefore, an
inspection of quality and volumes is essential. As indicated by DAFF (2018), failure to meet
ABInBev quality requirements would mean no or narrow market for their products. This means
that all the value chain players, particularly upstream players, including the barley producers
and the silo owners, should ensure that quality grain is shipped for processing to avoid
compromising their only available market. The quality controls enable decision making on the
grade of barley that can be used for producing malted barley and that which can be used for
the manufacturing of animal feed.
Risks for food safety
In the barley value chain, quality can be compromised at any node along the chain. Quality
has to be monitored from production, storage, transportation, processing and distribution to
ensure that microbial and chemical contaminations are kept very low. By monitoring the
subsequent nodes of the value chain, it becomes easier for regulators to identify points that
pose a higher risk of posing a hazard to human health.
Risks for ownership
The barley producers, both small-scale emerging commercial and large-scale commercial,
utilises the silos as shown in Figure 5. This means they sign their rights to the silo owner.
Upon delivery at the silos, the barley grain is inspected and allocated a certain grade. Barley
of the same grade is then mixed and packed in the same containers. When the producer
secures a buyer for the grain, they do not necessarily get the same consignment they shipped
to the silo but are given barley grain which carries similar grade to the grain they delivered for
storage. Despite this, the barley producers benefit by having the silo as the buyer of last resort
if they find difficulties securing a buyer.
2.7. Canola value chain analysis
Canola (Brassica Napus L.) is a relatively new crop in South Africa (Protein Research Foundation, 2018) and is mainly grown in the Western Cape Province. In South Africa, canola is produced only by large-scale commercial farmers. Canola is used primarily to produce canola oil and oil cake, a good source of protein in the animal feed industry (Department of Agriculture, Forestry and Fisheries – DAFF, 2019). To satisfy domestic demand, particularly from the animal feed industry, South Africa imports canola seed mainly from Europe and Oceania. Canola competes with other plant oils, mainly sunflower and soya oils, on the domestic market (DAFF, 2016). The crop has growth potential but needs more research and usage awareness amongst consumers.
Why grading system is important in the canola value chain
Canola seed is used for manufacturing canola oil which is used for human consumption and canola oilcake which is used as a ration in the animal feed industry. It is a versatile product from which a number of products for human consumption are derived. According to Agbiz Grain (2021), the grading system provides a range of maximum permissible levels for various important characteristics that allow various grades for a specific grain. Therefore, grading is done to ensure that the grain in question satisfies stipulated safety and hygiene standards. Grading of canola seed is important to ensure that quality batches are shipped to further process by-products. It also promotes the canola seeds' standard and transparent pricing since different grades are also priced differently.
According to DAFF (2016), canola is being graded according to different grades which are:
1) Grade 1 - should be reasonably well matured, sweet, of good natural colour
2) Grade 2 - should be fairly well matured, sweet, of reasonably good natural colour, and
70
3) Grade 3 - may have the natural odour associated with low-quality seed, but not distinctly sour, musty, rancid, nor having any odour that would indicate severe deterioration.
The canola value chain of South Africa depicted below in Figure 6 which shows that canola is produced only by large commercial farmers. This is a similar scenario with sunflower seed production where there is no involvement of small-scale or emerging commercial farmers. Figure 6 shows all the critical value chain stages from production, storage, trading, processing, distribution and to consumption.
Figure 7: South Africa's canola value chain
The large commercial farmers are responsible for the production of 0.9 million metric Mt of canola seed. The seed is temporarily stored in the informal on-farm storage facilities. Canola producers with formal on-farm storage facilities can use the facilities whereas farmers who do not have such facilities ships their consignments to the silos for formal storage. On delivery at the silos, the canola seed is inspected and graded based on set parameters. From the total production, 0.18 million metric Mt are shipped directly from the farms and the remaining 0.72 million metric Mt are shipped from the silos. This means that the silos are the most utilized form of the storage facility. The seed passes through initial processing at the primary level where the seed is graded upon receipt. The seed goes to the secondary processing level by the large crushers where it is crushed into mainly two by-products; i) canola oil which is used for human consumption, and ii) canola oil cake which is used in the animal feed industry.
71
Quality and volume controls
Observing the canola seed's quality and volume controls along the value is important since it is an important ingredient for other industries. Figure 6 shows that the canola seed is inspected and graded at different critical points along the value chain. For instance, the canola seed that is shipped to the silos for storage is inspected and graded. Different grades are packed in different containers, and they fetch different prices on the market. The seed stored in on-farm storage facilities and shipped directly to the primary processors is inspected and graded upon delivery at the processors. The different grades assigned to the canola seed informs the allocation of seed for further processing with the higher grade channelled towards manufacturing products for human consumption.
Risks for food safety
Since the agricultural sector is responsible for feeding the world, observing food safety regulations and standards is paramount. Food safety can be compromised at any stage (production, storage, transportation, processing and distribution) along the value chain. For instance, DAFF (2016) points out that as compared to cereal grains such as wheat, canola seeds are more prone to deterioration in storage and must therefore be stored at a lower moisture level to prevent moulding. This suggests that concerted efforts are required from all players and necessitates strict quality controls as the canola seed moves from one point to the other. This helps identify the nodes where quality is falling short and propose measures to remedy it to ensure that safe food is delivered to the final consumption point.
Risks for ownership
Canola producers have several options for storing the canola seed after harvesting, sorting and drying. These include formal on-farm storage facilities, commercial storage facilities and the silos. As indicated in Figure 6, the most utilized form of storage for the canola seed in South Africa are the silos. Upon delivery, the seed is inspected and allocated a specific grade based on the set criterion. The seed of the same grade is placed in similar silos. When the producer secures a buyer for their seed, they are not guaranteed to receive the exact canola seed they brought to the silos, but they get the exact same grade of seed.
72
3. International benchmarking study.
3.1. Introduction and background
Globally, 586 million of grains and by-products were traded internationally in 2016–17. The
grain contributed 419 million Mt to the total, oilseeds 167 million Mt, oilseed meal 90 million
Mt and 77 million Mt were vegetable oils.
The product grading regulations are standard practice worldwide and serve multiple purposes.
Commodity grading promotes fair business practices and a competitive marketing
environment. When the correct application of the grading regulations is in a place, fair and
competitive trading practices benefit consumers and the agricultural industry. Grading practice
can determine if products meet international food safety standards. Grading can, therefore,
be used to serve both objectives of competitiveness and food safety.
Grading regulations are set to ensure reliable and accepted crop quality descriptions.
Standardised quality descriptions support value creation, thus promoting prosperity in the
agricultural sector by contributing to the successful marketing of grain and related agricultural
products. Furthermore, it provides the guidelines for such regulations to impose impartial
handling practices.
A simplified definition of grain quality refers to the safety and hygiene of grain, the
appropriateness of quality for specific end-use and processing, and, in some cases, the
composition of grain varieties or cultivars.
Different countries grade their grain differently. Seven countries were selected to evaluate
their grain trading approaches. They are Argentina, Australia, Egypt, Russia, Ukraine and The
United States of America (US). The selection criteria included:
▪ The importance of the trading relationship with South Africa and the world, e.g. South
Africa imports significant quantities of wheat from Russia and the Ukraine and oilseeds
from Argentina.
▪ The international perception of the quality of grading regulations, e.g. Australia and the
US are seen as leaders in the development of grain grading regulation.
▪ As an influential role player on the African continent, Egypt is an important grain
producer in Africa.
3.2. Comparison with international standards
Some of the areas of comparing across the selected countries include approaches and
objectives of grading, the system of grading, influential stakeholders, dispute resolution,
funding, and regulatory framework. While not all elements may apply to all countries, this study
can identify some international best practice.
Principles of classification and grading for most grains are basically the same in all the
countries. Classification is conducted in accordance with hardness, and the colour of the seed
coat. Grading is conducted per test weight, defected kernel and impurity (Asia-Pacific
Economic Cooperation (APEC), 2016). Thus, the main goal becomes standardisation of all
these factors across the country or various institutions within a country. Uniformity is central
to grading, to ensure that it was classified as a particular grade by one institution or testing
station, is not classified differently by another.
Most countries specify varieties for each or unique class to achieve this uniformity. This is
done to ensure that classification can reflect end use of the grain. Some countries revise the
standards and grades every harvest season, while others do it only in certain conditions or
73
after a set number of years (Asia-Pacific Economic Cooperation (APEC), 2016). Requirements
for quality differ for every grain commodity. Definitions and test methods of the classification
vary in every country. This report reviews grain grading and standardisation of Argentina,
Australia, Egypt, Russia, Ukraine, and the US.
3.2.1. Argentina
Argentina is one of the major producers of feed grains and oilseeds globally and produces 5%
of the world's grains and share 15% share of the world's grain and by-products trading
(Kingswell & White, 2018). It is also a significant consumer of grains and processed products.
1) Standards setting processes in Argentina
Grain grading and inspection in Argentina fall under the direct control of the inspection
department of the Junta Nacional de Granos (JNG) or the National Board of Grains (US
Congress, Office of Technology Assessment, 1989). Grades are established and administered
through the JNG Laboratory. JNG is also responsible for approving, testing, checking and
calibrating test equipment. Inspections and analysis must be done by the inspectors trained
and licensed by the JNG.
Argentine grain quality is influenced by several regulations, agencies, and incentives,
beginning with variety approval, and carrying through inspection at the point of export. The
quality definition is considered more simplified than countries such as the US.
Emphasis is placed on the application of uniformity of grades and inspection procedures.
These applications are made from farmer deliveries to handlers, and analysis of samples
taken by loading export vessels (US Congress, Office of Technology Assessment, 1989).
Other departments of JNG do quality control. These departments include those responsible
for fiscal, commercial purchases, and milling and exports.
2) Objectives of Setting Standards
The JNG has full responsibility for establishing grading standards, conducting educational
programs, licensing inspectors, and grading all export grain. It has the authority to enforce
regulations and levy penalties for violations.
3) Argentinian institutional arrangements
The main player in grain grading and standardisation in Argentina is the JNG (US Congress,
Office of Technology Assessment, 1989). It is responsible for export registration, pricing
policies, support prices, and credit programs. It provides considerable Government influence
on Argentine production and marketing. Combined with the Office of the Secretary of
Agriculture's power to control seed varieties, the Government has the authority to maintain
quality and value of Argentine maize, soya beans, and wheat from the development of new
varieties to final exports.
4) Dispute resolution of the Argentina system
On the matters of conflicts and perceived bridge of contract related to grain grading, these
matters will be referred to the JNG. This is where the arbitration and resolutions of such
matters will be handled.
5) Funding for the system
Argentina’s grains industry has largely self-funded its functions. The grain industry has
established and supported its own set of industry-good organisations (Kingswell & White,
74
2018). The industry does not rely on the government for funding and other activities.
However, the government still finds a way to influence this funding or revenue stream.
The Argentinian government has an indirect influence on marketing and quality. It has a
policy of taxing agriculture to provide public revenue—those taxes on imports and exports
(US Congress, Office of Technology Assessment, 1989). Before 1976, export taxes on
wheat, corn, and sorghum were as high as 50 percent, although these have been gradually
reduced.
The JNG is funded mainly by the proceeds from a tax on grain exports. These are changed
on free on board (FOB) prices (US Congress, Office of Technology Assessment, 1989).
Other revenue is from surcharges on the value of grain processed for domestic consumption
or fees charged on using its port elevators, silos, and other services provided by the JNG.
6) Regulatory framework
Grades are established and administered through the JNG Laboratory. Test equipment is
approved, tested, checked, and calibrated by JNG (US Congress, Office of Technology
Assessment, 1989). Inspectors licensed and trained by JNG must do all inspections and
analyses. This provides uniformity in applying grades and inspection procedures from farmer
deliveries to first handlers through analysis of samples taken during the loading of export
vessels.
3.2.2. Australia
The wheat grading system in Australia has seven classes that are produced and marketed. They include Prime Hard (APH), Hard (AH), Australian Standard White (ASW), Soft, Durum, General Purpose (GP), and Feed. Each to some extent, is further segregated by protein level or by the level of non-mill able materials. The Australian Wheat Board publishes crop quality data for wheat entering the marketing system for APH, AH, ASW, and GP.
Wheat quality inspection and grading within the class in Australia are conducted based on 30 factors with every factor described in detail (Asia-Pacific Economic Cooperation (APEC), 2016). For example, there are seven types of foreign seed particularly specified in the standard. The limit of some parameters is stringent; the specification is zero for the following: sprouted grains (unless a falling number test is conducted), all smuts except loose smut, over-dried damaged grains, type 2 foreign seed, pickling compounds, chemicals not approved for wheat, stored grain insects and pea weevil-live, and objectionable material.
1) Standards setting processes in Australia
Australia's grain standard body is Grain Trade Australia (GTA). It was formed in 1991 to facilitate grain trade across the Australian grain industry (Grain Trade Australia (GTA), 2018). The grain industry was deregulated, and there was increasing involvement of private trading operations alongside the existing statutory boards. As grain commercial activities increased, it also led to variability in standards. This increase in commercial activity was negatively affected by the lack of clarity on the varying grain standards that each state had developed. Questions arose as to the appropriate grain standard and contract terms.
GTA is a self-regulatory body that works on behalf of its members and industry to deliver core products and services. It is the focal point for the commercial grain industry within Australia. The government recognises this self-regulatory framework as an essential part of the grain industry. The GTA's framework consists of:
▪ Trading standards; ▪ Standard form contracts; ▪ Trade Rules; ▪ Arbitration and dispute resolution;
75
▪ Establishment of common industry practices, data and transactional processes; ▪ Training and development; and ▪ International and domestic advocacy to improve trade and market access
The first grain trading standards were developed in 1999 by the GTA. The release of GTA trade rules followed these. The Standards are reviewed annually by the GTA Standards Committee and circulated to industry for comment on at least two separate occasions before being adopted in the coming season.
The standards intend to create a level playing field regarding the quality of grain being traded, which facilitates transparency in pricing and crop quality. However, there are often different interpretations of the meaning of the standards. This could be due to a lack of training and misinterpretation of the standard rules.
2) Objectives of GTA Setting Standards
GTA has several objectives when developing Standards on behalf of the industry. They include:
• industry inclusivity, i.e., formulation and use of standards with input from all sectors of the industry including plant breeders, producers, storage providers, domestic consumers, traders and exporters
• dissemination of standards by providing a mechanism for all sectors of the industry to have free and ready access to the standards
• simplification and formulation of standards which are easy to interpret and to apply
• commonality across grains, through the provision of standards which can be applied across all sectors of the industry
• meeting needs of commercial trade through the provision of standards which comply with the changing requirements of the trade, including changing customer requirements, state and regulatory requirements
• maximize objective testing by providing standards which facilitate the adoption of new technologies.
3) Institutional arrangements
The GTA has a committee responsible for generating standards and related issues (Grain Trade Australia (GTA), 2018). The activities of the committee include the following:
• review of and recommendations for updates of commodity standards in cooperation with industry participants,
• review of issues relating to quality assurance and recommendations for action by GTA,
• development of protocols for accreditation of laboratories involved in testing to support GTA contracts,
• development of industry codes of practice,
• advise on the adoption and implementation of the GTA standards by individuals and by relevant sectors of the industry
• foster communication between the GTA Board, management and the standards committee on industry matters,
• report and make recommendations to industry on all matters of relevance addressed by the standards committee
Upon developing the standards, recommendations are made to the GTA Board for adoption.
76
The members of the committee come from industry organisations and membership is reviewed annually according to GTA policy.
4) Dispute resolution of the GTA
GTA has dispute resolution processes for all grain-related transactions, be they grain contracts, financial products or storage agreements. GTA's dispute resolution service and arbitrations aim to instil commercial confidence that underpins and provides sanctity of grain contracts in the grain industry. When contract performance is in dispute or delinquent, there is a recognised process to seek financial compensation, ensuring contract integrity.
The GTA follows the dispute resolution rules and has an arbitration tribunal. The tribunal has a list of approved arbitrators called to review a case (Grain Trade Australia(GTA), 2020). In the case of a dispute, the process works to avoid litigation. The Process will be conducted to promote saving time and expense while providing an efficient, fair and equitable means to settle disputes related to commercial transactions.
The process starts when a claimant complains with the GTA. Their dispute resolution fees are payable by each party involved. The Tribunal is given 60 days to conclude the process (Grain Trade Australia(GTA), 2020). The process ends with the award to one party. And the award is binding, according to the GTA dispute resolution rules. Then corrections may be required from the party which the award was against.
5) Funding for the system
The GTA is funded from membership fees (Grain Trade Australia (GTA)a, 2020). GTA members come from all grain value chain sectors from production to domestic end-users and exporters. GTA members are involved in grain trading activities, grain storage, human and stock feed milling. GTA also attracts membership from organisations to the side of the value chain in related commercial activities such as financial services, communications, grain advisory and professional services.
6) Regulatory framework around the GTA
The GTA mainly sets the regulatory framework that exists in Australia. Government tends to
have very little direct and indirect influence on matters of the industry. However, it does play
an oversight role.
3.2.3. Egypt
Egypt partially liberalised wheat production and marketing in 1987. This resulted in a reduction in wheat production taxes, allowing more private sector traders to participate in the domestic wheat market. However, the government continued to get involved in trading and processing, leaving the private sector limited to small-scale activity.
Egypt is the largest importer of wheat and the largest wheat consumer and bread eater per capita globally. In this regard, a key component of government policy is providing low-priced bread to the population. This is achieved through several government subsidies at the various stages of the value chain. The bread program's reform is a high priority for the Egyptian government. However, there is a strong sense of entitlement to subsidized bread in Egypt, and reforms are very politically sensitive.
1) Standards setting processes in Egypt
The standards that exist and used in Egypt are not necessarily linked to grading specifically. They conform to the assessment of services, metrology, accreditation and market surveillance (International Trade Centre(ITC), 2017). So, these are general standards, and not necessarily aimed it differentiating product quality and set various grades.
2) Objectives of Setting Standards
77
A system of commodity grading and standards is applied to facilitate marketing. (Kherallah, Lofgren, Gruhn, & Reeder, 2000). Government is responsible for setting up the system. However, the private sector uses the system to conduct their business (International Trade Centre(ITC), 2017). Setting such a system aims to provide clarity, predictability, and uniformity in procedures.
So, Egypt’s general standards are developed with the aims of:
• Upgrading local production,
• Enhancing Egypt’s participation in international standards,
• Increasing productivity and product quality,
• Facilitating harmonisation of national standards with international standards,
• Improving safety, health, protection of life and environment,
• Ensuring consumer and producer protection,
• Increasing competitiveness,
• Reducing costs and complete savings in human effort, and
• Facilitating trade.
3) Egyptian institutional arrangements
Although Egypt has taken some major steps towards liberalisation, the state still plays a significant role in some of the agricultural sector activities (Kherallah, Lofgren, Gruhn, & Reeder, 2000). Again, in the case of grain grading, the government is the leading player when it comes to most of the arrangements. It sets rules and regulations regarding the conduct of the private sector participants. There is a high percentage of direct sales between producers and millers. It implies that such sales do not go through the government's formal grading system.
4) Dispute resolution of the Egyptian system
The grading system in Egypt has not been really applied. In as far as grain, mainly wheat is concerned, it can be attributed to Egypt being the main importer. And thus, as an importer, it relies on other countries' standards, i.e., exporters. Disputes can seem to be resolved on a case-by-case basis. There is no system of resolving conflicts arising from grading or standardisation.
5) Funding for the system
The funding of the grading system is mainly through the government budgetary process. Since the government is overseeing all the grading activities, it is responsible for funding the operations. The government aims to improve the state's efficiency to agriculture by establishing the simplified and targeted support system (Kingwell, Elliott, White, & Carter, 2016). Furthermore, it aims to enhance state revenues by modernising the taxation system transparently and equitably. It will then use the tax revenue to support activities which the industry would have self-funded to develop and run the grain grading system.
6) Regulatory framework
The Ministry of Trade and Industry in Egypt is the lead authority in grain inspections. This was declared in the Prime Ministerial Decree No 2992 of 2016 (Global Agricultural Information Network (Gain), 2017). The inspection is done by the General Organisation for Export and Import Control (GOEIC) on behalf of the ministry. So, this makes the government the sole entity responsible for import inspection.
78
3.2.4. Russia
Wheat is the primary grain produced in Russia, constituting 60% of total grain production. Russia is the world’s largest wheat exporter (Still, 2019). It surpassed the US in 2015. In 2017 Russia accounted for 20% of global wheat exports. This was from a position where it was a net importer of wheat at the end of the century.
1) Standards setting processes in Russia
Russia has five quality grades of wheat.
▪ First class has 14.5% protein / 32% wet gluten,
▪ Second class has 13.5% protein / 28% wet gluten,
▪ Third class has 12.5% protein / 23% wet gluten,
▪ Fourth class has 11% protein / 18% wet gluten, and
▪ Fifth class is feed wheat.
Most of the exported wheat is from the third class and higher. Besides protein and gluten, other factors considered in classifying wheat grades include flavour, colour, moisture, glassiness and contaminants (Asia-Pacific Economic Cooperation (APEC), 2016).
2) Objectives of Setting Standards
One of the main objectives of grading and classification is to allow price discrimination of a product. While the product will be the same, different grades will have different prices (Asia-Pacific Economic Cooperation (APEC), 2016) as the grades also distinguish products according to quality. Such heterogeneity allows different grades of the same commodity to be assigned different uses.
Russia is also purported not to apply these standards widely and consistently (Kingwell, Carter, & White, 2016). Therefore, it does not strategically promote its grains based on the world market's grades. Russia already acknowledges its need to promote better and market its grain.
3) Russian institutional arrangements
The government is central to most of the grading activities (Asia-Pacific Economic Cooperation (APEC), 2016). While the product classifications are very clear, the government oversees activities, reviews, and changes the system.
4) Dispute resolution of the Russian system
Government is also in charge of arbitration and dispute resolution in cases of misunderstanding between parties. There are no dedicated grain grading resolutions, and therefore the general procedure of dealing with breaches is followed.
5) Funding for the system
Government funds the grading system, mainly through fiscal budgetary allocations (Kingswell & White, 2018). A range of government programs, including subsidies on inputs and interest rates, supports Russia's grain production.
6) Regulatory framework
Government decisions greatly affect many aspects of Russia’s economic and social life. Grain production and export are not immune. The Russian government is known to interfere in the grain market though taxes and export bans (Kingwell, Carter, & White, 2016). These decisions reveal the power of the Russian government and the crucial importance of self-sufficiency and food affordability in Russia. It means grain exports from Russia are not merely the product of climate, but also can be the outcome of deliberate government action.
79
3.2.5. Ukraine
Ukraine is the largest European country by land size (Kingwell, Elliott, White, & Carter, 2016).
About 41 million hectares or more than 70% of the total land area in Ukraine is classified as agricultural. This landmass is endowed with humus-rich soils.
Ukraine is a major producer of maize, wheat, barley, rapeseed (canola) and sunflowers. The total grain production is around 60–80 million Mt per annum (Kingwell, Elliott, White, & Carter, 2016). Since the 2009/10 season, maize production has increased significantly. It is now almost 10 times greater than it was in 2003. This increase has been driven by a fast-growing domestic feed industry and the strong demand from nearby markets such as Egypt, Spain and Iran. The feed industry's demand is driven primarily by growth in poultry production.
In contrast to maize, Ukrainian wheat production has increased by a more modest 30% during the past decade (Kingwell, Elliott, White, & Carter, 2016). It increased by around 430 000 Mt each year. The increase in wheat volumes is mainly due to productivity improvements as the wheat area remained relatively unchanged.
1) Standards setting processes in Ukraine
The country’s grains industry is still modernising (Kingwell, Elliott, White, & Carter, 2016). It remains largely dependent on a steady in-flow of foreign capital, at a time when the country is perceived globally as a risky place in which to do business. As a result, the grain grading and standard are not well-developed or fully functional.
The other factor delaying grading progress is the presence of agro-holdings in the country (Kingwell, Elliott, White, & Carter, 2016). These are large, centrally managed corporate farming enterprises. They have a threshold of 10 000 ha and are also vertically integrated. Because of their size, they tend to address all grading related issues, particularly when dealing with exports. Domestically, they can meet the required product characteristics as they are highly vertically integrated.
Ukraine has six primary wheat graders, but individual grain elevators typically have about three different segregations and feed (Kingwell, Elliott, White, & Carter, 2016). Most exported wheat is sold at 13.1% on a dry matter basis.
Wheat with less than 11.4 % protein is graded as feed. This is irrespective of any functional traits. So, some wheat classified as ‘feed’ can be suitably used for human consumption (Kingwell, Elliott, White, & Carter, 2016). Indeed, much of Ukraine’s exported feed wheat is consumed as food, mostly by the Middle East and North Africa (MENA) countries. This is with the protein levels below 11.4 %, creating staple foods throughout the MENA region.
2) Objectives of Setting Standards
The objectives of the grading system are not so clear. This is because the industry is not free to make an initiative without government intervention. Through the Ministry of Agrarian Policy and Food, some government interventions do not support attractive investment environment and industry initiatives that cede powers within market participants (Kingwell, Elliott, White, & Carter, 2016).
Absence of wheat of differentiated quality or specific functional advantages implies that Ukrainian farmers are dependent on prevailing global prices (Kingwell, Elliott, White, & Carter, 2016). Therefore, their wheat is perceived as lower quality, yet attractive to mills due to its relatively low price. Ukrainian wheat is regularly among the cheapest origin in MENA markets, where Ukraine’s proximity to regional buyers further advantages its low free-on-board (FOB) price.
3) Ukraine institutional arrangements
80
Ukraine has not established the typical representative organisations necessary for the effective, co-ordinated action, which benefits all farming operations (Kingwell, Elliott, White, & Carter, 2016). Besides the Ukrainian Grains Association, which represents the interests of the large agro-holdings and trading companies, lobbying functions are lacking.
The Ukrainian government must always attempt to balance its Soviet-influenced quasi-socialist desire to control grain prices' natural volatility (Kingwell, Elliott, White, & Carter, 2016). The Ministry of Agrarian Policy and Food controls all aspects of the government’s various programs and policies, with close linkage to the Finance Ministry in instances where government funding is required. In 2010 government gained the majority of export quotas to the detriment of private companies and ultimately to the detriment of a competitive grain trading market. These kinds of interventions discourage industry from creating a grading system in Ukraine.
4) Dispute resolution of the Ukrainian system
Ukraine’s agricultural sector started developing and reforming about three decades ago following the collapse of the Soviet Union. As a result, there are still remnants of the socialistic approach. This means that the government still wishes to have a stronghold on some of the activities that the private sector could do better. As a result, such an approach delays the formation of a proper grading and standardisation system.
5) Funding for the system
While the system is still not well-developed, the government remains responsible for funding the activities related to grading and standardisation.
6) Regulatory framework
The Ukraine government has been active in at least attempting to create a modernised legislative framework to encourage the prosperity of its agriculture sector. This policy creates a framework and foundation for the various policies underpinning the recent growth in Ukraine’s agriculture sector. However, not all these policies are fully funded, well enacted, or effective as they could be.
3.2.6. USA
The US developed the grain grading system early in the 20th century. The grain grading and
standardisation are an essential source of merchandise food and feed in interstate and
global markets. The broad goals of the policy on grain grading are to protect and promote
producers, merchandisers, warehouses, processors, and consumers of grain. The grain
grading and standards are regulated through the US Grain Standards Act (USGSA) of 1916
and the Agricultural Marketing Act (AMA) of 1946. Under the USGSA.
The industry attempted to adopt grain industry voluntarily (Shields, 2015). However, this was
unsuccessful. This then led to the enactment of the UDGSA in 1916. The main objective was
to coordinate efforts to improve the grading system. The first standards were developed for
corn (maize) and became effective the same year. The act also required certain export and
interstate shipments of grain to be officially inspected if sold by grade. The United States
Department of Agriculture (USDA) was directed to issue licenses to state inspectors and
private inspection agencies and supervise their activities. Only licensed inspectors could
issue official grade certificates. There were several amendments over a century that led to
the current USGSA.
1) Standards setting processes in the United States
The USGSA authorises the Federal Grain Inspection Services (FGIS) of the USDA to establish official marketing standards for grains and oilseeds (Shields, 2015). The crops included are
81
barley, canola, corn (maize), flaxseed, oats, rye, sorghum, soya beans, sunflower seed, triticale, wheat and mixed grain. The official grain standards define each grain, classes of grain and numerical grades. The standards facilitate the marketing of grain, serving as contract language. This enables buyers and sellers to determine these commodities' quality and value easily.
FGIS oversees the inspection of more than half of the grain produced in the United States. The average annual amount of grain that was officially inspected in 2014 was 273 million Mt. This is equivalent to 56% of total US grain production. From the inspected amount, 62% was for domestic shipment and the remainder for export. Grain that was not officially inspected did not require official inspection. This is the grain used domestically. The other grain is reviewed by unofficial entities and exports by companies shipping less than 15,000 metric Mt. These companies and exports are not covered by the USGSA. Exporters who buy, handle, weigh or transport at least 15 000 Mt must register with USGSA.
2) Objectives of Setting Standards
The objectives of standards-setting as stipulated in the United States Grain Standards Act (USGSA) are two-fold. There are domestic standards goals and international objectives. The domestic grain grading and standardisation objectives are as follows:
▪ To promote the marketing of grain,
▪ To certify the quality of grain as accurately as practicable,
▪ To define a uniform and accepted descriptive terms to facilitate commerce in grain,
▪ To provide information to aid in determining grain storability,
▪ To offer users of such standards the best possible information,
▪ To provide the framework necessary for markets to establish grain quality improvement incentives,
▪ To reflect the economic value-based characteristics, in the end, uses of grain, and
▪ To accommodate scientific advances in testing and new knowledge concerning factors related to, or positively correlated with, grain's end use performance.
Other grain grading goals focus mostly on the international markets in addition to the domestic objective. These objectives include:
▪ To enhance the competitiveness of grain exports,
▪ To expand the US export market share,
▪ To increase the US producer incomes, and
▪ To overcome global trade challenges.
The US is one of the few countries that distinguish between domestic grain grading objectives and international. This is primarily since the US is a major player globally in some of the grains' trade. This prioritisation and focus help the country respond to the changing global environment in terms of grains and various regulatory measures.
Export inspections are carried out by either federal inspectors or federally supervised state inspection agencies (Shields, 2015). Domestically marketed grain and oilseeds may be, but are not required to be, officially inspected. Federally supervised state agencies do official inspections of domestically traded grain, and private companies called designated official inspection agencies.
3) The US institutional arrangements
Several institutions are involved in the grain standards and the inspection process. To promote greater uniformity in commercial grain inspection results, the Secretary of Agriculture
82
(United States Department of Agriculture- USDA) may work in conjunction with the National Institute for Standards and Technology, the National Conference on weights and measures, or other appropriate governmental, scientific, or technical organizations (Shields, 2015). The Federal Grain Inspection Service (FGIS) administers grading programmes on policies, procedures and violations.
The USDA is responsible for ensuring that commercial grain inspections are standardised. This is done by:
▪ encouraging and promoting uniform testing equipment,
▪ ensuring that producers are treated uniformly and fairly when they deliver grain,
▪ inspecting services and information, and
▪ standardising aflatoxin equipment and procedures.
Under the USGSA, USDA needs to ensure that grain standards are uniform across the country. USDA establishes performance criteria, identifies inspection instruments, develops a national program, and develops standard reference materials or other means for calibration of approved instruments.
4) Dispute resolution of the United States system
The AMA of 1946 has provisions for dispute settlement mechanisms (United States Congress, 2000). However, this still gives powers to the FGIS to mediate and arbitrate disputes arising from parties in connection with transactions of agricultural products. The policy which is reliant upon is the Grain Standards and Warehouse Improvement Act of 2000. This regulation on the use of Alternative Dispute Resolution (ADR) techniques is designed to prevent and resolve.
5) Funding for the system
User fees authorised by the USGSA finances all official inspections. The fees are set for a given period. The federal portion of the fee revenue is maintained in the trust fund. The total user fees were about $32 million for the 2019 fiscal year. The FGIS activities such as developing grain standards and improving grain quality techniques are financed by the US Congress budget or appropriated funds. The FGIS was allocated about two-thirds of the user fee revenue, i.e., $20 million.
6) Regulatory framework
The grain grading and standards in the US are regulated through the United States Grain Standards Act (USGSA) and the Agricultural Marketing Act (AMA) of 1946. The two Acts deal with violation of statutes, policies, procedures and/or instructions regarding grain grading. These programs are administered by the Federal Grain Inspection Service (FGIS), a program area within the Agricultural Marketing Service (AMS).
3.3. The general implications
There is more information on Australia, Egypt and the United States at this stage while the grading system's formation for Argentina, Russia, and Ukraine is a bit lacking. The three countries with information follow distinct and varying grading and standardisation systems.
▪ Australia has taken a voluntary industry approach. The industry formed the Grain Trade Australia three decades ago and have not looked back. The system is almost independent of government, except for regulatory and policy measures. The funding is from members and has a very precise dispute settlement mechanism that is clear regarding steps to be followed and timelines.
▪ Egypt, on the other hand, has a government reliant system. One may even argue that the grading system is part of the government. The grading system was amended following some partial liberalisation of markets. However, the government intervenes
83
regularly with a firm hand. Inspections of grain grading and standardisation are done by an agency of state representing the Minister of Agriculture.
▪ The US grading system is the oldest of the three countries. It was formed in 1916, following an attempt to set up an industry system. Once that voluntary system failed, the the USDA coordinated the formation of the grain grading system and presided over it. However, the industry has a role to play, and there are various independent and private inspectors. The federal state's role is thus to ensure that the grading system is uniform, i.e., from the testing equipment, fair treatment of producers when they deliver grains, and dissemination of information. The US system is funded through user fees, that are charged per unit of grain going through the system. The US also has one of the unique characters in terms of the purpose and the use of grain grading and standardisation. It has domestic and international objectives. This then allows the country to respond to changing global or partner systems, and to remain one of the world leaders in the international grain trade.
Table 15: Comparison of international grain grading and standardisation systems.
Criteria/country Argentina Australia Egypt Russia Ukraine USA
Objectives Government oversight
Support the free market
Support the domestic wheat market
Central government control over quality and price
Un developed a system that leans towards central control
Support the free market through the standardisation of grain grades
Key Institutions JNG (Board)
GTA Government Government Government USDA, FGIS
Dispute resolution
Through the JNG
GTA mediates disputes
Contractual specified in the import contacts
Through the courts
Through the courts
FGIS mediates disputes
Funding Various fees including taxes
Industry Government Government budget
Government budget
User fees
Standards change
JNG GTA and members
Government Government Government Congressional
3.4. Conclusions
Various countries use grain grading to achieve different outcomes. However, the grading
systems are mostly applied is to improve commodity performance in the market. The central
pillar of that application remains uniformity, particularly within the country.
The governance structures of the grading system vary between countries as well. There are
extreme sides, from the government taking over the system to an industry-led and designed
system. The former system is applied by countries such as Egypt and former Soviet Union
members. In the other extreme: Australia’s whole system is entirely operated and funded by
the industry. The US has a hybrid system managed and facilitated by the government, but
industry plays a significant role and funds the system through levies. While there is no perfect
system, each system depends on the pursued outcomes.
84
4. Legal review
4.1 Agricultural Products Standards Act (119 OF 1999) (“APSA”)
APSA was enacted to provide for control over the sale and export of certain agricultural products, control over the sale of certain imported agricultural products and control over other related products; and for matters connected therewith.
The following sections of the Act are relevant to the current project:
▪ Section 2: Designation of an executive officer and assignees. ▪ Section 3: Control over the sale of products ▪ Section 3A: Inspection, grading and sampling for quality control ▪ Section 4A: Control over the sale of imported products ▪ Section 7: Powers of entry, investigation, and sampling ▪ Section 8: Seizures
Leaf Products was appointed as an assignee under section 2(3) of APSA for the application of the provisions of sections 3(1)(a) & (b), 3A(1), 4A(1)(a), 7 and 8 of the Act in respect of the agricultural products listed in Government Gazette 40075 of 17 June 2016 destined for sale in the South African market. In essence, it entails ensuring that those products are graded adequately according to the prescribed classes, grades and standards as regulated by the Minister.
4.2 Regulations Issued in Terms of APSA
The provisions of the various regulations issued in terms of APSA relating to classes and grades and the standards for the grading, packing and marking of grain and grain products in terms of the assignment are listed in Annexure A – Summary regulations APSA.
The products' sampling and grading processes are provided in Annexure B – Summary of grading processes.
The Regulations issued in terms of APSA also provides for permissible deviations on certain standards and requirements relating to different products. Particulars of the permissible deviations and minimum requirements relating to specific standards are tabled in Annexure C – Grading tables APSA regulations. Those permissible deviations and minimum requirement form an intricate part of the grading of grain and grain products.
When Annexure B's procedures have been followed, the products are graded according to Annexure A's requirements read with the minimum standards and permissible deviations tabled in Annexure C.
4.3 Other Legislation
Other legislation that applies to the grading process is referenced in the APSA Regulations and include:
1.1 Foodstuffs Cosmetics and Disinfectants Act (54 of 1972)
▪ Poisonous seeds
1.2 Agricultural Pests Act (36 of 1983)
▪ Organisms of phytosanitary importance
85
5. The operational remit of Leaf Services
The Department of Agriculture mandated Leaf Services to develop a system or model to
become the custodian for grain and oilseed quality control and analysis in South Africa.
Leaf Services considered various models to become an effective custodian of grain and grain
products' grading and analysis. The models considered included the taking over of all grading
functions in South Africa to a pure auditing model.
Throughout the fact-finding and model development period it became clear that the industry
developed natural and informal processes that are, with some exceptions, working relatively
well, but are not providing for the application of the Minister's statutory responsibility of
oversight.
Against this background, the Leaf Services modelling team changed its approach from
developing a specific model to a building block model that forms a holistic oversight
model. These building blocks were discussed and debated with various industry role-players
and reformulated after industry input.
Eventually, through the development of a collection of possible building blocks, the team
believes that, if utilised in a synchronised way, Leaf Services will effectively conduct its
custodian role and ensure that the Minister's regulatory responsibility is fulfilled.
The building block modelling approach put Leaf Services in a position to tap into all existing
processes and current infrastructure, leveraging an effective system that the grain industry
developed over the past 30 years. Leaf Services does not want to be reinventing the wheel.
The building blocks are modular, allowing for phased implementation in line with Leaf's
capacity and allowing for the opportunity of testing and experimenting to ensure the successful
final performance of the plan and model.
5.1. Building blocks developed by Leaf Services
The functions assigned to Leaf Services in terms of the APSA are restrictive and limited to a
quality control function over grains, oilseeds (including grading and sampling) and grain
products as defined in the APSA regulations. Leaf Services has developed a series of actions,
called building blocks, to meet its obligations under the APSA.
Leaf Services as an assignee will, therefore, not attract any of the operational risks that
providers of storage facilities or the processes of commodities take in their regular operations.
Leaf Services do not aim to be involved in the everyday operations at silos and storage
facilities.
Leaf Services aims only to improve the grading processes, grading quality and grading
legitimacy of grains and grain products in SA.
Due to the difference in the handling and storage of raw grain compared to the processed
products, it was necessary to develop separate building blocks for raw grain and grain
products.
5.2. Building blocks for raw grains
Various collection points exist in South Africa, and large agricultural operations manage
most of these storage facilities. Alternative forms of bulk grain storage to traditional silos
have been developed by traditional agriculture businesses and new role players. A number
of these alternative bulk storage facilities are operated by companies not traditionally
involved in grain storage.
86
It is also not uncommon for grain processors to buy grain directly from farmers.
Intermediaries typically facilitate these transactions loading on the farm and transports the
grain to their processing facility, thus bypassing the traditional storage infrastructure. South
Africa also imports significant quantities of wheat and rice. South Africa is a net exporter of
maize. Still, during drought years the processors and traders of grain can import as much as
2 million Mt of maize. The APSA requires that the imported grain be graded where the APSA
stipulate grading regulations.
In the development of a system to oversee the grading of grains and oilseeds in South
Africa, Leaf Services considered the following principles:
1. Grains must be graded when the grain is delivered to storage locations or processors intake point and/or when there is a change in physical grain ownership.
2. Leaf Services must develop a robust system that ensures that grains and oilseeds are graded correctly in the grain value chain.
To support the development of the grading system Leaf Services has developed a series of building blocks to form the new system.
The Leaf System's overriding principle is that Leaf Services will be the custodian of the grading function of grains and oilseeds in South Africa. To this end, Leaf Services will:
1 Develop minimum standards for graders,
2 Create minimum standards for grading instruments,
3 Maintain a database of authorised graders,
4 Enforce sanctions for non-compliance,
5 Develop standard operating procedures for the various activities described in the building blocks below,
6 Perform inspections services.
The table below defines the Leaf system of control's building blocks over raw commodities
grading.
87
Table 16 Building blocks over raw commodities grading
Leaf Services Building Blocks
Risk to address Expected outcome Actions
1 Authorisation of graders and samplers
Commodities are graded to different standards resulting in suppliers or processors being treated inconsistently and unfairly.
Standardise the grading performance of graders in South Africa.
Establish a register of authorised graders that will be allowed to officially grade grains and oilseeds in South Africa.
1.1 Define the minimum standards for graders and samplers of commodities
Un-qualified graders and samplers perform official grading functions.
Establish the framework of minimum qualifications to register as a grader for the commodities defined in the APSA
Authorisation implies that Leaf Services will vet the graders' current qualifications and competencies before the graders are added to authorised graders' register.
1.2 Registration needs to be renewed annually
Graders and samplers lose their competency.
Graders and samplers do not lose their competencies.
The authorisation will be granted for a limited period. The exact period will be determined.
1.3 Graders and Samplers need to practice their competencies.
Graders and samplers lose their competency due to a lack of grading and sampling opportunities
That graders and samplers perform enough grading actions to ensure that they stay proficient as graders and samplers.
Graders will need to demonstrate continues competency in the grading of grains and oilseeds to maintain their authorisation through:
1) logging the number of samples graded during
the prior 12-month period,
2) report of comparison between Leaf Services
graded samples and samples graded by the grader
seeking registration
1.4 Continues education of graders and samplers
Graders and samplers lose their competency due to changes in legislation or technology.
Graders and samplers need to keep abrase with legislation and or technologies changes.
Proof of refresher grading courses attended over the previous 12-months
2 Standardisation of training
Technical quality of courses of services providers is not consistent.
Ensure consistency over the training material available to graders and samplers.
Work with the Agri SETA to ensure that the technical standardisation of training courses and material meet the minimum standards required by Leaf Services for authorisation of graders and samplers.
2.1 Set minimum technical standards for training material
Technical quality of service providers' courses does not meet the minimum technical standards to ensure that grading is done correctly.
All training material will meet the minimum technical standard.
Set the minimum technical standards for training material.
88
Leaf Services Building Blocks
Risk to address Expected outcome Actions
3 Standardisation of grading and sampling equipment
Grain delivery points use variable quality equipment that leads to inconsistent and or inaccurate grading.
Ensure that the grading equipment used in the industry meet the minimum functional requirements.
Leaf Services will develop and prescribe the minimum operational functionality for grading equipment.
3.1 Design minimum requirement of the sampling equipment used at grain intake points.
Sampling equipment does not meet the minimum requirements set by Leaf Services to ensure accurate and consistent sampling of commodities.
A variety of sampling equipment and procedures are available. Ensure consistency of sampling through the standardisation of equipment and procedures
Leaf Services will prescribe minimum requirements for samplings' equipment and define the sampling procedures.
3.2 Develop minimum functionality and quality of equipment for sieves and other non-electronic equipment.
The equipment used at collection points does not meet the minimum functional requirements necessary to ensure the correct and consistent grain grading.
Ensure consistency and accuracy of grading through the standardisation of equipment and procedures.
Leaf Services will prescribe minimum requirements for the equipment used during the sifting of commodities during grading.
3.3 Ensure minimum functionality and quality of electronic equipment.
The equipment used to determine moisture and protein content and the falling number of commodities do not meet the minimum functional requirements necessary to ensure correct and consistent grain grading.
Ensure consistency and accuracy of grading through the standardisation of equipment and procedures
Leaf Services will prescribe minimum requirements for the equipment used in the chemical analysis necessary during the commodities grading.
3.4 Maintenance of equipment used
Sensitive equipment is not maintained correctly. The lack of maintenance could harm the consistency and accuracy of the grading of commodities.
Ensure consistency and accuracy of grading through the correct maintenance of grading equipment of equipment.
Leaf Services' Inspectors will inspect the maintenance schedules of equipment on the grading sites.
4 Calibration of grading equipment
The calibrations of sensitive equipment are not done correctly. The lack of calibration could harm the consistency and accuracy of the grading of commodities.
Ensure consistency and accuracy of grading through the consistent calibration of grading equipment.
Leaf Services will oversee the preparation of the reference samples used by grain collection points to calibrate the equipment at collection points. Leaf Services will work closely with accredited laboratories to ensure the use of that standard calibration samples in South Africa.
5 Retention samples Samples are not graded correctly at the collection points.
The accuracy of grading at collection points will be confirmed through the grading
Managers of FBOs will keep retention samples for grain samples tested. Leaf Services will develop a sampling protocol to identify retention samples' to be
89
Leaf Services Building Blocks
Risk to address Expected outcome Actions
of retention samples by Leaf Services.
called. Leaf Services will grade the retention samples at their central grading facility.
5.1 Retention samples are selected randomly to be graded independently by Leaf Services' inspectors.
Samples are not graded correctly at the collection points or by Leaf Inspectors
The accuracy of grading at collection points will be confirmed by grading retention samples by a reference laboratory.
Collection points will keep retention samples for all grain samples tested. The retention samples will be randomly selected to be graded at the accredited lab of appointed by Level Services
6 Independent grading of grain by Leaf appointed graders at collection points if requested by the FBO. However, leaf Services will not assume any operational risks of grain management.
Samples are not graded correctly at the collection points.
Independent graders will eliminate biases or perceived biases of grading at collection points
Leaf Services will, where possible, take over graders from the storage providers. The grading of commodities will be done by Leaf Services and not by the service provider under the auspices of Leaf Services.
7 Independent Ring Tests administered by an accredited laboratory as a quality control measure for all graders, including the Leaf appointed graders, and the equipment used in grading
Any evidence of bias, lack of objectivity or non-independence of graders and assignees will erode confidence in the grading environment
The ring tests of an independent proficiency scheme will confirm the competencies of the Leaf roaming inspectors and graders
Leaf Services will participate in the annual independent ring test programme.
8 Roaming Leaf Inspectors
Samples are not graded correctly at the collection points.
Roaming inspectors will confirm the accuracy of grading at collection points
Roaming Leaf inspectors will inspect the grading process at collection points. The grading process includes the sampling of grain, the sifting of grain to identify foreign objects, poisons seeds, deformed kernels and the chemical analysis required for the specific grain that is being graded. Leaf inspectors will visit collection sites based on a sampling protocol developed by Leaf Services.
9 Leaf inspectors on site Samples are not graded correctly at the collection points.
On-site inspectors will confirm the accuracy of grading at collection points
Leaf Services will identify individuals at the collection points to oversee grading operations. The on-site inspector might be seconded to Leaf Services by the
90
Leaf Services Building Blocks
Risk to address Expected outcome Actions
storage provider. While performing inspections services, the inspector is responsible for Leaf Services to ensure the grading standards' compliance.
10 Dispute resolution processes
Smaller producers and processors do not have access to dispute resolution processes due to the dominant size of the processors and most of the grain storage providers.
Implementing a dispute resolution process will also protect smaller farmers and processors.
When a grading dispute arises, the farmer can ask Leave Services to intervene. Leaf Services will request the sample's retention sample under dispute and grade the retention sample at Leaf Service’s central grading facility.
11 Training of producers and consumers of raw grains
Farmers and processors might dispute the grading of grain merely because they do not understand the current grading regulations.
Disputes in grading should not arise because of a lack of insight into the grading process by some role players in the value chain.
Leaf Services will develop training material and a training plan to improve the understanding of role players of the grading regulations, their rights under the APSA act, and dispute resolution processes available to role players. Current training providers will, as far as possible, provide the training.
12 Information collation That Leaf Service does not have access to the information needed to correctly invoice the various collection points.
Leaf Services will receive accurate information on volumes of commodities received at all collection points.
The FBOs will provide Leaf Services with the information needed to allow Leaf Services to fulfil its mandate. Leaf Service will provide an electronic platform to collect the data.
91
5.3. Retention samples, calibration and quality control through ring tests
The oversight and control system described above relies heavily on the concept of retention samples, calibration of equipment and quality control. This section explains the practical implementations of these building block.
Retention samples allow Leaf Services to reperform the grading of commodities and check the quality of grading that the FBO performs. In the building blocks the calibration of equipment and quality control systems.
Ring Tests are part of an independent proficiency scheme and are impartial to evaluate graders.
5.3.1. Critical control points for retention samples
This section discusses the critical success factors to ensure the effective implementation for retention samples.
1. Logging of samples
Quality Control can be defined as part of quality management focused on fulfilling quality requirements. Quality Assurance relates to how a process is performed, whereas Quality Control is more the inspection aspect of quality management.
Retention samples form part of the Quality Control system where specific quality standards have to be adhered to when assigning a grade to a particular consignment. It is not part of the Quality Assurance system, which is the approach used to ensure the quality of its results. Retention samples are kept so that the evidence for a particular grading event is retained together with the corresponding grading record.
The length of time samples and the associated record to be retained will depend on the frequency of the auditing process. However, it is also influenced by food safety issues, traceability of samples and other factors, such as available space.
The retention sample should comprise the same sample as representative of a particular consignment and was used for the original grading process. The results have been recorded on the log sheet. That means all defects, screenings etc. should be recombined and stored in the sample container.
All grading results of selected samples should be recorded on the log sheet, where one sample per commodity per day is retained as described above. Each sample that must be retained should be stored in a sealed container and labelled properly with grader’s name, the commodity, date and time e.g. PJ/M 20200524-14h40. This means the Maize (M) sample was analysed by Pete Jones (PJ) on the 24th of May at 40 minutes after 2 o’clock.
The log sheet can be drawn to inspect the retention samples, and one or several entries selected, each together with its corresponding sample. The retention sample is regraded at the central grading facility. Leaf Service's grader will compare the grading result with that on the log sheet and either note the difference in the grading result or confirm zero difference.
Therefore, this process checks the repeatability of the grading results received from the FBOs.
2. Storage and labelling
This applies to calibration reference samples, verification check samples and retention samples.
Samples must be adequately labelled to be traced and results assigned to the correct samples. Provide appropriate detail, printed or written legibly with a pen that will not fade or be rubbed off. Place labels on the side of containers. Avoid labelling lids; they can be swapped between samples.
92
This includes the test samples and samples stored for reference or subsequent use. Short term and long-term requirements may differ.
Samples should be stored in suitable conditions, ideally cool, dry and not in direct sunlight. Sample containers must limit moisture loss and avoid cross-contamination with other samples. For storage, containers should be full. Samples must be stored in airtight containers after running each test to prevent samples from drying out.
5.3.2. Improvement opportunities
Performance Calibrating instruments at all facilities before the new crop arrives is essential. The performance in terms of timely provision of samples to the agents will be measured according to the set timeline for summer and winter crops.
Instrument service and calibration records should be available on-demand to LEAF.
Daily check control sheets for verifying instruments should be available on-demand to LEAF.
Retention samples should be available on-demand to LEAF, together with their corresponding log sheets.
Submit the outcome of ring test for all commodities to LEAF.
Processes Cycle time is critical. The series of processes involved in preparing reliable, accurate samples for summer and winter crops, has been documented.
The process for reference samples, check samples and retention samples should be well documented and adhered to.
Planning A timeline has been prepared for the various steps to provide the samples well in advance of the new season so that calibrations can be completed before the new crop is received.
Daily check control sheets.
Retention samples log sheets.
People The industry should participate in a strategic planning exercise to identify all critical success factors, KPIs and strategic objectives.
This will lead to commitment and a change of value chain role players' culture. Communication is essential and should be focused on continuous improvement of all processes and activities.
5.3.3. Proposed building blocks of the integrated quality control and quality
assurance system
Quality assurance is a proactive process that starts even before the deliverable work has begun. As described in this document, it comprises Defining Process; Tool Identification and Selection; Training of Quality Standards and Processes.
93
Quality control is a reactive process, and its activity starts as soon as you start working on the deliverable. There are four types of Quality Control - Acceptance sampling; Process protocol; Process control; Control charts.
Quality Assurance Building Blocks
• Calibration
• Pre-season ring test
Quality Control Building Blocks
• Retention sample
LEAF audit inspection
The Quality Audit is conducted at regular intervals. Once acceptable results have been achieved (i.e. Repeatability* and Reproducibility** criteria have been satisfied) the Quality Audit is completed, the analyst is deemed trained and competent, and the instruments are appropriately calibrated.
The following three flow diagrams below summarise the process over quality the calibration, pre-season ring testing and retention samples.
It is necessary to have a flow diagram per page due to the flow diagrams' size.
94
5.3.4. Control building blocks - retention sample
Figure 8 Retention sample control building blocks
95
5.3.5. Assurance building blocks – calibration
Figure 9 Calibration assurance building blocks
96
5.3.6. Assurance building blocks - pre-season Ring Test
Figure 10 Pre-Season Ring Test assurance building blocks
97
5.4. Building blocks for grain products
The Leaf System's overriding principle is that Leaf Services will be the custodian of the grading
function to grade grains and oilseeds and wheat and maize products in South Africa. The
concepts listed below propose an oversight regime for grain products:
▪ Stratify the processors according to their risk profiles, which will be dependent on the size of the operation, the level of food safety management procedures developed and the strength of the brands of the processor.
▪ Develop a specific compliance and inspection strategy for each of the groups identified above.
▪ Develop a different strategy to ensure compliance at smaller bakeries and in-store bakeries.
▪ Enforce sanctions for non-compliance.
▪ Develop standard operating procedures for the various activities described in the building blocks below.
▪ Perform inspections services.
Classify food processors in three tiers based on the quality of the control environment. The
tiers are defined as follows:
▪ Tier 1 has an internationally recognised and externally audited food quality systems such as Good Manufacturing Practice (GMP) or ISO 22000. The implemented food safety system must include the grading requirements specified in APSA in the food safety system matrix.
▪ Tier 2 processors are processors that process throughout the year and have at least a regional presence and toll produced for large brands or have own brands.
▪ Tier 3 processors are processors that do not qualify as a Tier 1 or 2 processor. Tier 3 processors are typically smaller processors with a limited reach and not strong brands. Tier 3 processors will naturally adjust production based on the milling margins they can realise.
The oversight over compliance approach will differ significantly between the three defined
tiers. The salient principles are:
Tier 1:
▪ Rely on the internal food safety control environment and the annual external audit of the implemented food safety system to calculate the extent of external testing necessary to ensure compliance with the regulations.
▪ The extent of testing will be based on the residual risk for each of the operations in this tier and calculate the appropriate sample size of the product tested by Leaf Services.
▪ Identify reference outlets to source samples effectively. The reference outlets must cover many brands and the different mills that produced a specific brand. As these operations typically have a comprehensive distribution area Leaf Services will identify a retailer that stock most of the products produced by Tier 1 producers. The aim is to develop an efficient and cost-effective system for collecting samples to cover all production plant's products.
▪ Develop a statistically sound sampling matrix to ensure sufficient coverage of all products in various packaging sizes for each processor.
98
Tier 2:
▪ Rely on regular testing at the entities' production plants in this group.
▪ Onsite Leaf Services inspectors and roaming inspectors will take samples, test the meal and flour products in either the Leaf Services laboratory or an accredited laboratory depending on the needed analysis.
▪ Test these operations frequently based on the risk profile of the processor.
▪ All tests related to the grading specifications of South Africa.
Tier 3:
▪ Rely on regular testing at the entities' production plants in this group.
▪ Not possible to appoint onsite Leaf Services inspectors. Roaming inspectors will take samples, test the meal and flour products in either the Leaf Services laboratory or an accredited laboratory, depending on the needed analysis.
▪ Test these operations frequently based on the risk profile of the processor.
The table below defines the Leaf system of control's building blocks over the grading of wheat and maize products.
99
Table 17 Building blocks over the grading of wheat and maize products
Leaf Services Building Blocks
Risk to address Expected outcome Actions
1 Develop a testing and inspection regime for grain millers
Milled products do not meet the requirements of the grading regulation.
Milled maize and wheat products and pan baked wheat bread meet the requirements of APSA
Develop a testing regime that will ensure the identification of non-compliance with the regulations of APSA.
1.1 Stratify millers in three groups based on the effectiveness of quality control processes to mitigate the risk of non-compliance to the grading regulations of APSA.
The risk assessment based on food quality control systems is incorrect. Therefore, the sample sizes are not large enough to ensure compliance or are too large, and testing becomes unnecessary costly.
Accurate risk assessments will result in proper stratification of the processors.
Develop a testing regime based on the residual risk of non-compliance after evaluating processors' internal control environment.
2 Tier 1: identify and list Tier 1 food processors
2.1 Evaluate the effectiveness of the internal food safety control process.
Ineffective food safety system increases the risk of wheat and maize products that do not meet the quality requirements stipulated in APSA.
Practical evaluation of the food safety system will allow Leaf Services to rely on internal controls and decrease the number of samples required for analysis.
Evaluate the food safety system of the processor under review. The review will confirm that the product requirements of APSA are incorporated in the food safety system and that the food safety system is annually audited internally and externally.
2.2 For processor: develop a testing schedule for processor
The implemented food safety system may not include the grading requirements specified in APSA.
Ensure food safety systems include the grading requirements of APSA in the matrix of their food safety system.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
2.3 Calculate the residual risk of non-compliance
Ineffective testing regime due to incorrect calculation of the residual risk of non-compliance
Perform the correct statistically the number of tests to ensure compliance of products produced
Use statistical models to determine the right number of samples of products to test
2.4 Calculate the correct sample size for each of the processors in tier 1
Ineffective testing regime due to incorrect calculation of the residue risk of non-compliance which could result in inadequate testing to confirm compliance
Perform the statistically representative number of tests to ensure compliance of products produced
Use statistical models to determine the correct number of samples of products to test
100
Leaf Services Building Blocks
Risk to address Expected outcome Actions
2.5 Identify reference retail outlets that will allow practical sampling of products.
The development of an expensive and inefficient testing regime.
Testing will be done most cost-effectively.
Develop a cost-effective testing regime that will ensure identifying non-compliance with the regulations of APSA.
3 Tier 2: identify and list tier 2 food processors
3.1 Rely on residential inspectors to mitigate the risk of non-compliance
Milled products are not graded correctly, resulting in non-compliance with the grading regulation.
Milled maize and wheat products and paned baked wheat bread meet the requirements of APSA
Develop an oversight system through onsite inspectors that can monitor the risk of non-compliance and support the administration of sampling at the processing facilities.
3.2 Consider the appropriate employee level at the entity to appoint as Leaf Services inspector
The appointed Leaf Services inspector does not have the required processing and food quality knowledge.
Ensure Leaf Services inspector is duly authorised and registered as a sampler and grader with Leaf Services to ensure proper inspection.
Focus on employees in the processor's quality control department to be seconded to Leaf Services as a residential inspector.
3.3 Develop rigorous testing and inspection regime for each of the tier 2 processors.
Ineffective food safety system increases the risk of wheat and maize products that do not meet the quality requirements stipulated in APSA.
The food safety system's evaluation will allow Leaf Services to rely on internal controls and decrease the number of samples required for Leaf Services analysis to ensure compliance.
Leaf Services will inspect tier 2 processors' food safety system to ensure compliance with grading requirements specified in APSA.
3.4 Regular sampling of products
Sampling and grading are not done often enough, resulting in processors incorrectly grading their grain. Or Leaf services do not inspect the sampling and grading process often enough, resulting in processors getting away with incorrect grading.
The appropriate frequency and sample sizes are collected based on a statistical sound methodology.
The Leaf Services representative should do sampling according to an appropriate sampling plan.
3.5 Calculate the correct sample size for each of the processors in tier 2
Ineffective testing regime due to incorrect calculation of the residual risk of non-compliance which could result in inadequate testing to confirm compliance
The statistically correct number of tests are performed to ensure compliance of products produced
Use statistical models to determine the correct number of samples of products to test
101
Leaf Services Building Blocks
Risk to address Expected outcome Actions
3.6 Analysis of products Products of inferior quality are produced.
Wheat and maize products produced in South Africa meet the standards set by APSA.
Consider the appropriate analysis for products selected and the correct lab to perform the analysis.
3.7 Inspection of operations by Leaf roaming inspector
Food processors may not have the appropriate internal food safety control procedures.
Food processors which have been assessed by Leaf Services as high risk of having inappropriate internal food safety control procedures are dealt with accordingly.
The inspection will be mainly to perform a risk assessment of the processing plan and consider whether any changes in the testing program are necessary.
4 Tier 3: identify and list tier 3 food processors
4.1 For processor: develop a testing schedule for processor
The tier 3 processors' implemented food safety system may not include the grading requirements specified in APSA.
Ensure tier 3 processors include the grading requirements specified in APSA in their food safety system matrix.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
4.2 For tier 3 processors develop a random selection schedule that is based on statistical principles
Haphazard selection is used to draw a sample that is not an appropriate statistical sampling method.
Random selection or systematic selection is used for sampling, resulting in statistical sampling.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
5 Develop a testing and inspection regime for grain millers pan baked wheat bread
Wheat bread is not baked according to the grading regulations' requirements, resulting in non-compliance with the grading regulation.
Wheat bread baked in South Africa will meet the requirements of APSA
Develop a testing regime that will identify non-compliance with the regulations of APSA.
Stratify bakers in three groups based on the risk the quality control process implemented by the processors to endure compliance the relevant.
Wheat bread products do not meet the requirements of the grading regulation
Wheat bread baked in South Africa will meet the requirements of APSA
Develop a testing regime based on the residual risk of non-compliance after the internal control environment of processors have been evaluated
5.1 Large integrated processors that are listed in the tier 1 list
Ineffective food safety system increases the risk of wheat and maize products that do not meet
Practical evaluation of the food safety system will allow Leaf Services to rely on internal
Evaluate the food safety system of the processor under review. The review will confirm that the product requirements of
102
Leaf Services Building Blocks
Risk to address Expected outcome Actions
the quality requirements stipulated in APSA.
controls and decrease the number of samples required for Leaf Services analysis to ensure compliance.
APSA are incorporated in the food safety system and that the food safety system is annually audited internally and externally.
5.2 For processors: develop a testing schedule for processor
The implemented food safety system may not include the grading requirements specified in APSA.
Ensure food safety system include the grading requirements of APSA in the matrix of their food safety system.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
5.3 Take samples to test compliance to APSA by processors by calculating the correct sample size for each of the processors in tier 1
Infective testing regime due to incorrect calculation of the residual risk of non-compliance which could result in inadequate testing to confirm compliance
The statistically correct number of tests are performed to ensure compliance of products produced
Use statistical models to determine the right number of samples of products to test
5.4 Identify reference retail outlets that will allow effective sampling of products to be tested.
The development of an expensive and inefficient testing regime.
Testing will be done most cost-effectively.
Develop a testing regime that will ensure that non-compliance with the regulations of APSA are identified cost-effectively.
5.5 Bakers that are not part of an integrated business, but it is possible, appoint a Leaf Inspector are listed as tier 2 bakers
Ineffective food safety system increases the risk of wheat and maize products that do not meet the quality requirements stipulated in APSA.
Practical evaluation of the food safety system will allow Leaf Services to rely on internal controls and decrease the number of samples required for Leaf Services analysis to ensure compliance.
Evaluate the food safety system of the processor under review. The review will confirm that the product requirements of APSA are incorporated in the food safety system and that the food safety system is annually audited internally and externally.
5.6 Take samples to test compliance to APSA by processors by calculating the correct sample size for each of the processors in tier 2
Ineffective testing regime due to incorrect calculation of the residue risk of non-compliance which could result in inadequate testing to confirm compliance
The statistically correct number of tests are performed to ensure compliance of products produced
Use statistical models to determine to correct number of samples of products to test
5.7 Consider the most efficient way to collect samples.
The development of an expensive and inefficient testing regime.
Testing will be done in the most cost-effective manner.
Develop a testing regime that will ensure that non-compliance with the regulations of APSA are identified cost-effectively.
103
Leaf Services Building Blocks
Risk to address Expected outcome Actions
6 For tier 3 bakers: develop a testing schedule
The tier 3 bakers may implement a food safety system that does not include the grading requirements specified in APSA.
Ensure tier 3 processors include the grading requirements specified in APSA in their food safety system matrix.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
6.1 For tier 3 bakers develop a random selection schedule that is based on statistical principles
Haphazard selection is used to draw a sample that is not an appropriate statistical sampling method.
Random selection or systematic selection is used for sampling, resulting in statistical sampling.
Roaming inspectors will inspect operations, food safety processors, take samples, and send samples to the Leaf lab network's appropriate lab.
6.2 Consider the most efficient way to collect samples.
The development of an expensive and inefficient testing regime.
Testing will be done most cost-effectively.
Develop a testing regime that will ensure that non-compliance with the regulations of APSA are identified cost-effectively.
7 Define minimum functionality and quality of electronic equipment requirements.
The equipment used to determine moisture and protein content and the falling number of commodities do not meet the minimum functional requirements necessary to ensure correct and consistent grain grading.
Ensure consistency and accuracy of grading through the standardisation of equipment and procedures
Leaf Services will prescribe minimum requirements for the equipment used in the chemical analysis necessary during the commodities grading.
8 Maintenance of equipment used
Sensitive equipment is not maintained correctly. The lack of maintenance could harm the consistency and accuracy of the grading of commodities.
Ensure consistency and accuracy of grading through the correct maintenance of grading equipment of equipment.
Leaf Services' Inspectors will inspect the maintenance schedules of equipment on the grading sites.
9 Information collation That Leaf Service does not have access to the information needed to correctly invoice the various collection points.
Leaf Services will receive accurate information on volumes of commodities received at all collection points.
The FBOs will provide Leaf Services with the information needed to allow Leaf Services to fulfil its mandate. Leaf Service will provide an electronic platform to collect the data.
104
Building block overview for grain products
For methodology purposes, Leaf Services distinguish between small, medium, and large
FBOs, dependent on whether their impact is local, regional, or national.
▪ Small FBOs are single site production and sales centres, such a bakery that produces
bread on-site and sell from that site only.
▪ Medium FBOs may have one or more sites and sell regulated products regionally via
multiple sites or retailers.
▪ Large FBOs are those that have a national footprint.
Classification by Quality Management systems
FBOs are classified by whether they have a reliable, auditable quality management system
that can consistently demonstrate quality control procedures to meet the regulations'
requirements.
Classification by risk profile
Based on the previous period's (one year) inspection and lab testing, FBOs will be classified
into high, medium, and low-risk categories. According to the guidelines from DALRRD, the
criteria for the risk level of the FBO is defined as follows:
a) The FBO that recorded incidence of non-conformities (non-compliances) not
exceeding one (1) per all inspections conducted per the first year shall be categorised
as Low Risk (L)
b) The FBO that recorded incidence of non-conformities (non-compliances) not
exceeding three (3) per all inspections conducted per the first year shall be categorised
as Medium Risk (M)
c) The FBO that recorded incidence of non-conformities (non-compliances) not
exceeding five (5) per all inspections conducted per the first year shall be categorised
as High Risk (H)
The Standard Operating Procedure for the risk profiling of FBOs in the grain industry can be
found at:
https://www.dalrrd.gov.za/doaDev/sideMenu/foodSafety/doc/Standards%20Operating%20Pr
ocedure%20-%20Risk%20Profiling.pdf
Inspection frequencies
The inspection frequencies given the criteria above will be as follows:
Figure 11: Inspection frequencies
FBO Size / Impact Quality management
system Risk assigned Inspection
Single site Regional National Y / N Low Medium High No / year
x Y x 4
x Y x 6
x Y x 12
x N x 4
x N x 8
x N x 12
105
FBO Size / Impact Quality management
system Risk assigned Inspection
x Y x 4
x Y x 6
x Y x 12
x N x 4
x N x 8
x N x 12
x Y x 4
x Y x 6
x Y x 12
x N x 4
x N x 8
x N x 12
In the first year of assessment, all FBOs will be considered as 'Medium Risk'.
Sampling methodology
During inspections, inspectors will collect product samples according to the prescriptions of
the relevant regulations, and subject to the required laboratory testing.
5.5. The conclusion on the model for oversight
The building blocks provide a robust framework for the oversight function assigned to Leaf
Services. The flow diagram below summarises the oversight and service process as an
inspection protocol for Leaf Services.
Figure 12 Building block overview for raw grain
106
Building block overview for grain products
The testing protocols for grain products follow a risk-based approach. The risk of non-
compliance will be determined by assessing the internal food quality control environment
and prior year testing results. The number of samples taken is based on the Standard
Operating Procedure for FBOs' risk profiling in the grain industry that DAFF issued in 2017.
107
5.6. Assumptions to the business model
The building blocks defined in the previous section form the bases of the model for oversight
that Leaf Services is implementing. The operational implications of the building blocks must
be defined, and the financial implications the new model must be calculated. This section
summarises the assumptions that underline the business model.
5.6.1. Volume assumptions for commodities
The volume assumptions for commodities are the model's main income and cost driver. The
invoicing model assumes that Leaf Services will invoice a fee per Mt of raw grain handled
whether the FBO is a storage provider or a processor. The fee recovered is fixed and
therefore, capped per Mt irrespective of the grain flow.
Table 18 Summer grain volume assumptions
Assumptions for summer grains WM YM Soya Suns Sorghum
Total volumes produced (‘000 Mt) 8,000 7,000 1,000 720 142
Import volumes (‘000 Mt) 250 250 100 - -
Retained on farms (‘000 Mt) 200 300 - - -
Stock carry out (‘000 Mt) 950 550 - - -
Industrial leakage (‘000 Mt) - 650 - - -
Volumes through formal silos (%) 60.00% 60.00% 80.00% 80.00% 80.00%
Average through put rate at formal silos (Months)
8 9 4 8 4
Harvesting month begin 01 May 21 31 May 21 30 Apr 21 31 Mar 21 30 Apr 21
Collection period (Months) 4 2 2 2 1
Table 19 Winter grain volume assumptions
Assumptions for winter grains Wheat Barley Canola Rice importation volumes
Total volumes produced (‘000 Mt) 1,720 100 93
Import volumes (‘000 Mt) 1,200 - - 1,000
Retained on farms (‘000 Mt) - - - -
Stock carry out (‘000 Mt) 365 - - -
Industrial leakage (‘000 Mt) - - - -
Volumes through formal silos (%) 70.00% 80.00% 80.00% -
Average through put rate at formal silos (Months)
8 6 4 12
Harvesting month begin 30 Sep 21
30 Sep 21 01 Oct 21 -
Collection period (Months) 3 2 2 -
The reference to dates and collection periods are used to calculate the time flag for grain receipts and dispatches.
108
Table 20: Proposed fee structure.
Commodity or product Units Fee per unit
Raw grains including imported grains Mt R4 per Mt
Maize meal and other products kg 0,6 c per kg
Wheat flour excluding bread kg 0,6 c per kg
Wheat bread products Loaf of bread 4 c per loaf
5.6.2. Number of Samples and sample analysis cost to SAGL
The principles in the document, Standard operating procedure (SOP): risk-profiling food
business operators of regulated grains, oilseeds and grain products for the purpose
of inspection by the designated assignee that was issued by DAFF in 2017 was used to
inform the frequency of sampling in the model.
Table 21 Sampling for analysis assumptions
Tier producers’ percentage of production Wheat Flour Bread Maize Meal
Tier 1 75.00% 75.00% 75.00%
Tier 2 12.00% 12.00% 12.00%
Tier 3 13.00% 5.00% 13.00%
Producers percentage samples
Tier 1 0.06% 0.0004% 0.00019%
Tier 2 0.26% 0.0278% 0.00042%
Tier 3 0.46% 0.0091% 0.00073%
Products sampling expenses per tier
Tier 1 559 370 1,271
Tier 2 559 370 1,271
Tier 3 559 370 1,271
The analysis fees are based on a quotation from SAGL.
5.6.3. Sample costs central grading facility
The central grading facility's cost includes rental, personnel cost, and the depreciation cost
on grading machinery.
5.6.4. Personnel
The number of roaming and residential inspectors was calculated from the analysis of
location and throughput or expected FBOs production. Current salaries paid by silo
operators form the bases of the remuneration budget.
109
Table 22 Leaf Services personnel assumptions
Human resource planning Quantum Units
Roaming Inspectors
Number of roaming inspectors 30 number
Phasing in of roaming inspectors 25.00% % increase per quarter
Residential inspectors
Number of residential inspectors 380 number
Phasing in of residential inspectors 25.00% % increase per quarter
Central grading facility
Number of Lab Employees 10 number
Phasing in of Lab personnel 25.00% % increase per quarter
Management
Number of Senior managers 5 Number
Phasing in of Senior managers 25.00% % increase per quarter
Admin Staff Numbers
Accounts receivable supervisor 1 Number
Accounts receivable clerks 7 Number
Accounts payable 3 Number
Cashbook 2 Number
HR supervisor 1 Number
HR clerks 6 Number
Receptions and PA 2 Number
Training manager 1 Number
Training officers 5 Number
Phasing in of Admin Staff 100.00% % increase per quarter
The supporting personnel is appropriate for the size of the operations.
5.6.5. Office rentals
Office rental is based on a quotation obtained from the management of the Grain building.
Table 23 Office space assumptions
Space allocation per department Quantum Units
Senior management 100 m2
Inspectors open plan 50 m2
Debtors 100 m2
Creditors 25 m2
Board room 30 m2
HR and general admin Finance 25 m2
Reception & PA 15 m2
Ablution 20 m2
Central grading facility 115 m2
Total floor area 480 m2
Parking 15 units
Tarif per m2 198 R per m2
Tarif per parking unit 630 unit
110
Space allocation per department Quantum Units
Utilities (Elect, Cleaning, Security) 10 R per m2
5.6.6. Initial CAPEX
The grading equipment for the central grading facility is the main CAPEX item. Leaf
Services, however, need to also invest in IT infrastructure.
Table 24 Leaf Services CAPEX assumptions
Asset description Amount Unit
Grading asset book value 20,000 R 000s
Total IT assets 1,303 R 000s
Total asset value 21,303 R 000s
111
G. FINANCIAL ANALYSIS
The expected annual Income, Operating expense and Net income for Leaf Services’ business model are estimated to be:
Income R 197,0 mil
Sampling Cost R 67,1 mil
HR and Admin Expenses R 104,2 mil
Depreciation R4,4 mil
Net Income R 15,1 mil
The main cost allocations for Leaf Services are presented in the two graphs below:
Graph 13 Analysis of the main cost allocations for the business.
Graph 14: Cost allocation per industry
30%
12%
58%
Raw grains Mills Bakeries
112
H. FINANCIAL FEASIBILITY OF THE PROJECT
Table 25: The financial results normalised per year
PROFIT AND LOSS
Fee income 196,881
Total Sampling Cost (67,135)
Total HR and Admin expenses (104,226)
EBITDA 25,519
Depreciation of non-current assets (4,434)
EBIT 21,085
Profit before tax 21,085
Corporate income tax expense (5,904)
Profit after tax 15,181
Net income 15,181
CASH FLOW
Cash received from invoices 196,881
Cash paid for Sampling costs (67,135)
Cash paid for HR and Admin costs (104,226)
Provisional Tax Payments (7,052)
Cash flow available for senior debt service 18,467
Cash flow available for refinancing facility 18,467
Cash flow available for revolving credit facility 18,467
Cash available for shareholders 18,467
Cash flow available for dividends 18,467
The projected normalised profit and lost statement and cash flow statement for Leaf
Services project net profit of R15 million per year and net cash flow of R18,5 million per year.
Hallmark will support the business by arranging financing for the fixed and working capital
requirements for Leaf Services.
The financial analysis above indicates that the business model for Leaf Services is feasible.
113
A. CONCLUSIONS
The product grading regulations are standard practice worldwide as they serve multiple
purposes. Agricultural commodity grading in South Africa is regulated by the Agricultural
Products Standards Act (Act no 119 of 1990). Commodity grading promotes fair business
practices and a competitive marketing environment. When the correct application of the
grading regulations is in a place, fair and competitive trading practices are promoted to the
overall benefit of consumers and the agricultural industry.
The grading regulations are set to ensure reliable and accepted crop quality descriptions. This is associated with the value, promoting economic health and prosperity in the agricultural sector. Indirectly, the regulations contribute to the successful marketing of grain and related agricultural products by creating standards for quality requirements. It, furthermore, provides the guidelines for such regulation to impose impartial handling practices.
The report highlighted the complexities of grain grading and the importance of graders to be well trained and have access to high quality and well-maintained equipment. The oversight system must address all the complexities highlighted in this section.
Leaf Services has consulted widely with industry role players and gained insight into these
role players' business operations. Leaf Services had to change their initial approach to
understand the grain and oilseed value chains through the consultation process.
Leaf Service has performed a comprehensive study to gain an understanding of the
commodity value chains in South Africa, to gain insight into the operating realities of FBOs
and to understand the international grading environment. The study highlighted the following:
1. The processing environment is highly concentrated and is dominated by sizeable
integrated role players; the large food producers are vertically integrated, mill both maize
and wheat and use most wheat flour to bake bread in their bakeries.
2. The large producers dominate the maize and wheat markets with 75% market share for
maize products and more than 90% for wheat products.
3. South Africa sustains more than 100 smaller maize millers and 24 wheat millers. Many
of these producers have developed well-known brands.
4. Most supermarket brands have invested in in-store bakeries. The number of instore
bakeries is estimated to be 2200.
5. Few silos have dedicated graders, but most workers at silos are involved in either grading or sampling.
Insights from the study influenced the development of possible solutions to the business
model. The solutions are presented as building blocks that Leaf Services will use in future
discussions with stakeholders in the grain value chains.
The building blocks provide a robust framework for the oversight function assigned to Leaf
Services.
The projected normalised profit and loss statement and cash flow statement for Leaf
Services projects a net profit of R15 million per year and net cash flow of R18,5 million per
year.
Hallmark will support the business by arranging the funding required for the fixed and
working capital requirements for Leaf Services.
The financial analysis indicates that the business model for Leaf Services is feasible.
114
Reference
Agricultural Business Chamber (AGBIZ). (2020). SA Grain Quality: Grading Regulations. Retrieved on 10/11/2020 from https://agbizgrain.co.za/en/sa-grain-quality/grading-regulations.
Alberts, J., Rheeder, J., Gelderblom, W., Shephard, G & Burger, H. (2019). Rural Subsistence Maize Farming in South Africa: Risk Assessment and Intervention models for Reduction of Exposure to Fumonisin Mycotoxins. Toxins 2019, 11, 334; doi:10.3390/toxins11060334.
Alldrick, A.J., (2014). Chemical safety of cereal-based foods: risk management considerations. Quality Assurance and Safety of Crops & Foods, March 2014; 6 (1): 3-14. DOI 10.3920/QAS2013.0325
Alldrick, A. J. (2010). Food Safety Aspects of Grain and Cereal Product Quality. In: Wrigley, C.W. and Batey, I.L. (eds.) Cereal grains: assessing and managing quality. Woodhead Publishing Limited, Oxford, UK, pp. 342-366.
Asia-Pacific Economic Cooperation (APEC). (2016). Research report on connectivity of APEC grain standards. Beijing: APEC Secretariat.
The Bureau for Food and Agricultural Policy (BFAP), (2018). BFAP Baseline. Agricultural
Outlook 2018 – 2027.
The Bureau for Food and Agricultural Policy BFAP, (2019). BFAP Baseline. Agricultural
Outlook 2019 – 2028. Pretoria.
The Bureau for Food and Agricultural Policy BFAP, (2020). BFAP Baseline. Agricultural
Outlook 2020 – 2029. Pretoria.
Bester, M. (2014). Dominant factors which influence wheat production in South Africa. Master of Commerce Thesis, Stellenbosch University.
Crop Estimation Committee Production reports available at https://www.grainsa.co.za/pages/industry-reports/production-reports
Department of Agriculture, Forestry and Fisheries (DAFF). 2018. A Profile of the South African Barley Market Value Chain. Pretoria.
Department of Agriculture, Forestry and Fisheries – DAFF. (2019). A Profile of the South African Canola Market Value Chain. Pretoria, South Africa.
Department of Agriculture, Forestry and Fisheries (DAFF). (2019). A Profile of the South African Maize Market Value Chain. Pretoria.
Department of Agriculture, Forestry and Fisheries (DAFF). (2010). Sunflower — Production guideline —. Pretoria, South Africa.
Department of Agriculture, Forestry and Fisheries (DAFF). (2019). A Profile of the South African Wheat Market Value Chain. Pretoria.
DAFF. (2016). Production Guideline for Canola. Pretoria, South Africa.
Global Agricultural Information Network (Gain). (2017). Egypt: Grain and Feed Annual.
Grain Trade Australia (GTA). (2018). Guide to the the GTA Grain Trading Standards: 2017/2018 season. New South Wales: GTA. Retrieved from https://www.graintrade.org.au/About_GTA
115
Grain Trade Australia (GTA)a. (2020). Grain Trade Australia - Annual report 2019 - 2020. Sidney: GTA.
Grain Trade Australia(GTA). (2020). Dispute resolution rules. New South Wales: GTA Ltd. Retrieved from https://www.graintrade.org.au/fact-sheets-publications
International Trade Centre(ITC). (2017). Managing quality in Egypt: A directory of services
for SMEs. Geneva: ITC.
Jaffee, S., Henson, S., Grace, D., Ambrosio, M & Berthe, F. (2020). Why Food Safety Matters to Africa: Making the Case for Policy Action. In Resnick, D., Diao, X., &
Kherallah, M., Lofgren, H., Gruhn, P., & Reeder, M. M. (2000). Wheat Policy Reform in
Egypt: Adjustment of local markets and options for future reforms. Washington DC:
International Food Policy Research Institute (IFPRI).
Kingwell, R., Carter, C., & White, P. (2016). Russia's wheat industry: Implications for
Australia. Researchgate. Retrieved from
https://www.researchgate.net/publication/307981864_Russia%27s_wheat_industry_I
mplications_for_Australia?enrichId=rgreq-0b71d4e6db11541b055bf0b56efbc740-
XXX&enrichSource=Y292ZXJQYWdlOzMwNzk4MTg2NDtBUzo0MDUyOTYyNDY3M
zg5NDRAMTQ3MzY0MTU2NDA0Mg%3D%3D&el=1_x_2&
Kingswell, R., & White, P. F. (2018). Argentina's grain industry: Implications for Australia. Researchgate. doi:DOI: 10.13140/RG.2.2.27164.33929
Kingwell, R., Elliott, P., White, P., & Carter, C. (2016). Ukraine: An emerging challenge for
Australian wheat exports. South Perth: Australia Export Grains Innovation Centre
(AEGIC).
Mokone M, (2017). The rise of global soybean production. Retrieved 5 December 2020 from
https://www.grainsa.co.za/the-rise-of-global-soybean-production
National Agricultural Marketing Council (NAMC), (2011). The South African Soybean Value
Chain. Markets and Economic Research Centre, Pretoria.
National Agricultural Marketing Council (NAMC), (2019). The South African Supply and
Demand Estimates. Markets and Economic Research Centre, Pretoria.
Protein Research Foundation. (2018). Development plan for canola 2018. Protein Research Foundation. Accessed on 18/01/2021 from https://www.proteinresearch.net/index.php?page=development-plan-for-canola-2018#:~:text=Canola%20can%20be%20grown%20in,ha%20to%2085%20000%20ha.
SAGIS The Maize Forum (2020) compiled by Nico Hawkins. Retrieved from
https://www.sagis.org.za/Forum_Maize_20201120.pdf
SAGIS Wheat Forum (2020) compiled by Nico Hawkins Retrieved from
https://www.sagis.org.za/Forum_Wheat_20200923.pdf
Shields, D. A. (2015). US Grain Standards Act: Potential Reauthorisation in 114th Congress.
Congressional Research Services 7-5700. R43803. Washinton DC: Congressional
Research Services (CRS). Retrieved from www.crs.gov
Still, S. (2019). Russian wheat: the new reference for cash wheat worldwide. Solaris
Commodities SA.
116
Tadesse, G. (Eds.) (2020). Sustaining Africa's Agrifood System Transformation: The Role of Public Policies. ReSAKSS 2020 Annual Trends and Outlook Report. Washington, DC, and Kigali: International Food Policy Research Institute (IFPRI) and AKADEMIYA2063.
The Southern African Grain Laboratories (SAGL), ( 2018). South African Sunflower Crop
Quality Report 2017/2018 Season. Accessed on 16 Jan 2021 from https://sagl.co.za/wp-content/uploads/Reports/Sunflower/2017.2018/Sunflower-page-1-2.pdf
USDA Foreign Agricultural services GAIN Report Number: SA1911, (2019).South Africa - Republic of Oilseeds and Products Annual The Supply and Demand for Soybeans and Sunflower Seed in South Africa
United States Congress. (2000). Grain Standards and Warehouse Improvement Act of 2000.
Washington DC: US congress.
US Congress, Office of Technology Assessment. (1989). Grain Quality in International Trade: A comparison of Major UD Competitors. Washington, DC: US Government Printing Office.
Van Der Vyver, A. (2013). The relative value between barley and wheat from a production point of view: Northern Cape irrigation areas. Accessed on 18/01/2021 from https://www.grainsa.co.za/the-relative-value-between-barley-and-wheat-from-a-production-point-of-view:-northern-cape-irrigation
Who Owns Who (2019) Manufacture Of Flour And Grain Mill Products available at www.whoownswhom.co.za
117
ANNEXURE A SUMMARY REGULATIONS APSA
LEAF PROJECT
SUMMARY OF REGULATIONS: MAIZE
MAIZE REGULATIONS - Government Notice R473 in Government Gazette 32190 dated 8 May 2009. Commencement date: 8 May 2009
CLASSES (reg 4 & 5) WHITE MAIZE YELLOW MAIZE OTHER MAIZE
GRADES (reg 6) WM1 WM2 WM3 YM1 YM2 YM3
STANDARDS FOR GRADES (reg 7)
Defective maize kernels X X X X X X
Discoloured maize kernels X X X X X X
Foreign matter X X X X X X
Pinked maize kernels X X X
Poisonous seeds X X X X X X
Insects X X X X X X
Glass X X X X X X
Metal X X X X X X
Coal X X X X X X
Dung X X X X X X
Stones X X X X X X
Unacceptable Odours X X X X X X
Substance that renders it unfit for human consumption or for processing into or utilisation thereof as food or feed
X X X X X X X
Moisture content 14% max X X X X X X
The Regulations does not include maize in retail quantities or maize intended for sale as seed
Regulation 3 provides that no person shall sell maize unless according to the standards, classes and grades.
Regulation 4 provides for the classes of maize (as above)
Regulation 5 provides for the standards of classes of maize
Regulation 6 provided for the grades of maize (as above)
Regulation 7: Standards for grades of maize
Regulation 8: Packing: Maize of different classes and grades shall be packed in different containers
Regulation 9: Marking requirements
Regulations 10 - 12: Sampling requirements
Regulation 13: Determination of undesired odours and harmful substances
Regulation 14: Determination of glass, metal, coal, dung, stone, poisonous seed and insect content
118
Regulation 15: Determination of percentage foreign matter
Regulation 16: Determination of percentage of defective maize kernels
Regulation 17: Determination of percentage other colour maize kernels
Regulation 18: Determination of the percentage pinked maize kernels
Regulation 19: Determination of moisture content
LEAF PROJECT
SUMMARY OF REGULATIONS: SUNFLOWER
SUNFLOWER REGULATIONS - Government Notice 45 in Government Gazette 39613 dated 22 January 2016. Commencement date: 22 January 2016
CLASSES (reg 3) FH FS OTHER
GRADES (reg 5) 1 1 None
STANDARDS FOR GRADES (reg 4) - determined per consignment
Damaged sunflower seeds X X
Foreign matter X X
Sclerotia X X
Poisonous seeds X X X
Insects X X
Glass X X X
Metal X X X
Coal X X X
Dung X X X
Stones X X X
Undesirable Odours X X X
Moisture content 10% max X X
Animal filth X X X
Unfit for human or animal consumption or processing into food or feed X X X
Regulation 2 provides that no person shall sell sunflower seeds unless according to the standards, classes and grades.
Regulation 3 provides which classes (FH, FS and other)
Regulation 4 provides for standards for grades (as above)
Regulation 5 provides for grades: Only grade 1 for FH and FS. Other is not graded
Regulation 6 provides that a consignment of sunflower shall be classified as Grade 1 only if it meets the criteria for maximum deviations in the annexure, else it will be classified as Other.
Regulation 7: Packing requirements
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesired odour, harmful substances, poisonous seeds, stones, glass, metal, coal, dung, insect and animal filth
Regulation 13: Determination of moisture content
119
Regulation 14: Determination of percentage screenings
Regulation 15: Determination of percentage foreign matter
Regulation 16: Determination of percentage sclerotia
Regulation 17: Determination of percentage sunflower seed of another class
Regulation 18: Determination of the percentage damaged sunflower seed
LEAF PROJECT
SUMMARY OF REGULATIONS: SOYA BEANS
SOYA BEANS REGULATIONS: Government Notice R370 in Government Gazette 40794 dated 21 April 2017. Commencement date: 21 April 2017
CLASSES (reg 3) SB OTHER
GRADES (Reg 5 & 6) SB1 None
STANDARDS FOR CLASSES (Reg 4)
Foreign matter X
Sclerotia X
Poisonous seeds X X
Insects X
Glass X X
Metal X X
Coal X X
Dung X X
Stones X
Musty, sour, khaki bush or other undesirable smell or odour X X
Moisture content 13% max X
Animal filth X X
Defective soya beans X
Unfit for human or animal consumption or processing into food or feed X X
Wet pods X
Other grain X
Sunflower seed X
Soiled beans X
Harmful substances X
Regulation 2 provides that no person shall sell soya beans unless according to the standards, classes and grades.
Regulation 3 provides which classes (SB and other)
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades: Only grade SB1. Other is not graded
Regulation 6 provides that a consignment of soya beans shall be classified as Grade SB1 only if it meets the criteria for maximum permissible deviations, else it will be classified as Other.
120
Regulation 7: Packing requirements
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesired odour, harmful substances, poisonous seeds, glass, metal, coal, dung, insects and animal filth
Regulation 13: Determination of moisture content
Regulation 14: Determination of wet pods
Regulation 15: Determination of percentage other grain, sunflower seed, stones, sclerotia and foreign matter
Regulation 16: Determination of percentage defective soya beans
Regulation 18: Determination of the percentage soiled beans
LEAF PROJECT
SUMMARY OF REGULATIONS: BREAD WHEAT
BREAD WHEAT REGULATIONS - GNR 1547 in Government Gazette 42862 dated 29 November 2019. Commencement date: 29 November 2019
CLASSES (reg 3) BREAD WHEAT
OTHER
GRADES (Reg 5) Super Grade 1 Grade 2 Grade 3
None
STANDARDS FOR CLASSES (Reg 4) - consignment
Foreign matter X X
Sclerotia X X
Poisonous seeds and ergot sclerotia X X
Grain insects X
Glass X X
Metal X X
Coal X X
Dung X X
Moisture content 13% max X
Animal filth X X
Damaged and Heat damaged kernels X
Heavily frost-damaged kernels X
Other grains and unthreshed ears X
Field fungi infected kernels X
Storage fungi infected kernels X
Stinking smut infection X
Gravel stones and turf X
Free from substances that make it unfit for human or animal consumption X X
Organisms of phytosanitary importance - Agricultural Pest Act 36 of 1983 X X
Mould infected, sour and rancid other grain X X
Undesired odour, taste or colour X X
Consignment bread wheat shall consist of at least 95 percent (m/m) of one or more of the bread wheat seeds
121
Regulation 2 provides that no person shall sell bread wheat unless according to the standards, classes and grades.
Regulation 3 provides for the classes of bread wheat (as above)
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades (as above)
Regulation 6 provides that a consignment of wheat shall be graded according to the standards and permissible percentage deviations as prescribed
Regulation 7: Packing requirements - different containers or stored separately
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesirable odours and harmful substances
Regulations 13 - 17: Determination of Class, Hectolitre Mass, Moisture Content, Protein Content and Falling Number
Regulations 18 - 25: Determination of Percentage Deviations
LEAF PROJECT
SUMMARY OF REGULATIONS: DURUM WHEAT
DURUM WHEAT REGULATIONS: Government Notice 43 in Government Gazette 39613 dated 22 January 2016. Commencement date: 22 January 2016 January 2016
CLASSES (reg 3) DURUM WHEAT OTHER
GRADES (Reg 5) Grade 1 Grade 2 Grade 3 Grade 4
None
STANDARDS FOR CLASSES (Reg 4) - consignment
Foreign matter X X
Sclerotia X X
Poisonous seeds X X
Insects X
Stones X X
Glass X X
Metal X X
Coal X X
Dung X X
Harmful substances X
Damaged and Heat damaged wheat X
Heavily frost damaged wheat X
Other grains and unthreshed ears X
Field fungi infected wheat X
Storage fungi infected wheat X
Stinking smut infection X
Gravel stones and turf X
Moisture content 13% max X
122
Animal filth X X
Stinking smut infection X
Free from substances that make it unfit for human consumption or processing or utilisation as food or feed
X X
Organisms of phytosanitary importance - Agricultural Pest Act 36 of 1983 X X
Mould infected, sour and rancid other grain X X
Undesired odour, taste or colour X X
Consignment durum wheat shall consist of at least 95 percent (m/m) of one or more of the durum wheat seeds
Regulation 2 provides that no person shall sell durum wheat unless according to the standards, classes and grades.
Regulation 3 provides for the classes of durum wheat
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades (as above)
Regulation 6 provides that a consignment of durum wheat shall be graded according to the standards and permissible percentage deviations as prescribed
Regulation 7: Packing requirements - different containers or stored separately
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesirable odours and harmful substances
Regulations 13 - 17: Determination of Class, Hectolitre Mass, Moisture Content, Protein Content and Falling Number
Regulations 18 - 25: Determination of Percentage Deviations
LEAF PROJECT
SUMMARY OF LEGISLATION: SOFT WHEAT
SOFT WHEAT REGULATIONS GN 44 in Government Gazette 39613 dated 22 January 2016. Commencement date: 22 January 2016
CLASSES (reg 3) SOFT WHEAT OTHER
GRADES (Reg 5) Grade 1 Grade 2
None
STANDARDS FOR CLASSES (Reg 4) - consignment
Foreign matter X X
Poisonous seeds and ergot sclerotia X X
Grain insects X
Glass X X
Metal X X
Coal X X
Dung X X
Moisture content 13% max X
Animal filth X X
Damaged and Heat damaged wheat X
Heavily frost damaged wheat X
Other grains and unthreshed ears X
Field fungi infected wheat X
Storage fungi infected wheat X
123
Stinking smut infection X
Gravel stones and turf X
Free from substances that make it unfit for human or animal consumption or processing into food or feed -aflatoxins, toxins, chemicals and other
X X
Organisms of phytosanitary importance - Agricultural Pest Act 36 of 1983 X X
Mould infected, sour and rancid other grain X X
Undesired odour, taste or colour X X
Consignment soft wheat shall consist of at least 95 percent (m/m) of one or more of the soft wheat seeds
Regulation 2 provides that no person shall sell a consignment of soft wheat unless according to the standards, classes and grades.
Regulation 3 provides for the classes of soft wheat (as above)
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades (as above)
Regulation 6 provides that a consignment of wheat shall be graded according to the standards and permissible percentage deviations as prescribed
Regulation 7: Packing requirements - different containers or stored separately
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesirable odours and harmful substances
Regulations 13 - 15: Determination of Class, Hectolitre Mass and Moisture Content
Regulations 16 - 23: Determination of Percentage Deviations
LEAF PROJECT
SUMMARY OF REGULATIONS: CANOLA
CANOLA REGULATIONS: Government Notice R622 in Government Gazette 32282 dated 5 June 2009. Commencement date: 5 June 2009
CLASSES (reg 3) CLASS C OTHER
GRADES (Reg 5) Grade 1 Grade 2
None
STANDARDS FOR CLASSES (Reg 4) - consignment
Musty, sour, khaki bush, other undesired odour X X
Sclerotia X X
Poisonous seeds X X
Insects and snails X
Glass X X
Metal X X
Coal X X
Dung X X
Moisture content 8% max X
Free from substances that make it unfit for human or animal consumption or processing into or utilisation as food or feed
X X
Harmful substances X
Foreign matter X
Sprouted kernels X
Damaged and heat-damaged or distinctly green seeds X
124
Consignment canola may consist of any cultivar of canola
Regulation 2 provides that no person shall sell canola unless according to the standards, classes and grades.
Regulation 3 provides for the classes of canola
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades (as above)
Regulation 6 provides that a consignment of canola shall be graded according to the standards and permissible percentage deviations as prescribed
Regulation 7: Packing requirements: different containers or store separately
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesired odour, harmful substances, poisonous seeds, glass, metal, coal, dung, snails and insect content
Regulation 13: Determination of moisture content
Regulation 14: Determination of percentage heat damaged seed and distinctly green seed
Regulation 15: Determination of percentage foreign matter
Regulation 16: Determination of percentage sclerotinia
Regulation 17: Determination of percentage sprouted kernels
Regulation 18: Determination of percentage ergot sclerotia
LEAF PROJECT
SUMMARY OF REGULATIONS: MALTING BARLEY
MALTING BARLEY REGULATIONS: GNR 443 in Government Gazette 36587 dated 21 June 2013. Commencement date: 21 June 2013
CLASSES (reg 3) MALTING BARLEY OTHER BARLEY
GRADES (Reg 5) MALTING BARLEY OTHER BARLEY
STANDARDS FOR CLASSES (Reg 4) - consignment
Foreign matter (stones, wheat, maize, wild oats, spear grass) X X
Ergot Sclerotia X X
Poisonous seeds X X
Insects X
Germinative capacity X
Germinative energy X
Weather damaged barley X
Split barley, immature barley, insect damaged barley X
Pre-germinated barley X
Sprouted barley X
Black-end barley X
Mechanical damage X
Badly discoloured and heat damaged barley X X
Moisture content 13% max X
Animal rests X X
Unthreshed ears X
Black-hulled barley X
125
Six-row barley X
Smut infection X
Residue levels prescribed for agricultural remedies - Foodstuffs, Cosmetics and Disinfectants Act
X X
Badly mould infected (rotten) barley X
Free from toxins, chemicals and other substances that make it unfit for human consumption or processing into food or feed
X X
Organisms of phytosanitary importance - Agricultural Pest Act 36 of 1983
X X
Musty, extreme mould infected, sour and rancid foreign matter X X
Undesired odour, taste or colour X X
Consignment malting barley shall consist of at least 95 per cent (m/m) of one of the malting barley cultivars specified in the cultivar list
Regulation 2 provides that no person shall sell a consignment of barley unless according to the standards, classes and grades.
Regulation 3 provides for the classes of barley (as above)
Regulation 4: Standards for classes (as above)
Regulation 5 provides for grades (as above)
Regulation 6 provides that a consignment of barley shall be graded according to the standards and permissible percentage deviations as prescribed
Regulation 7: Packing requirements - different containers or stored separately
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of undesirable odours and harmful substances
Regulations 13 - 17: Determination of Class, Moisture Content, Nitrogen Content, germination capacity and germination energy
Regulations 18 - 25: Determination of Percentage Deviations
LEAF PROJECT
SUMMARY OF REGULATIONS: RICE
RICE REGULATIONS: Government Notice R44 in Government Gazette 42968 dated 24 January 2020. Commencement date: 24 July 2020
CLASSES (reg 5) - Classified according to:
(a) Kernel length/width ratio and/or combination of both; Table 1
(b) Colour of the rice; White & Brown
(c) Parboiling Treatment where applicable; and Reg 5
(d) Speciality rice where applicable The classification shall include descriptions related to aroma, texture, usage, composite rice, starch/Amylose content, ecological regions, colour (other than brown and white) and any other characteristics
126
GRADES (reg 6) Premium grade
Value grade
Standard grade
GENERAL REQUIREMENTS FOR QUALITY STANDARDS (Reg 4)
Abnormal flavours and unacceptable odours X X X
Poisonous seeds X X X
Clean, uniform in size and colour X X X
Maximum residue levels - Foodstuffs Cosmetics and Disinfectants Act X X X
Insects and storage pests X X X
Animal filth X X X
Glass X X X
Metal X X X
Coal X X X
Stones and sand X X X
Moisture content 14% max X X X
Foreign matter X X X
Regulation 3 provides that no person shall sell a consignment of rice unless it complies with the prescribed standards, classes and grades as well as the requirements in respect of packing, marking and prohibited substances
Regulation 4 provides for the general requirements for quality standards (as above)
Regulation 5 provides for the different classes of rice
Regulation 6 provided for the grades of rice (as above)
Regulation 7: Standards for grades of rice and permissible deviations
Regulations 8 - 11: Containers, packing and detailed marking requirements
Regulations 12 - 15: Sampling requirements and sampling plan (Table 2)
Determination of other substances and grain composition:
Regulation 16: Determination of undesirable odours and harmful substances
Regulation 17: Determination of poisonous seeds and insects
Regulation 18: Determination of foreign matter, stones and sand
Regulation 19: Determination of the kernel length/width
Regulation 20: Determination of head rice and whole kernel
Regulation 21: Determination of large broken and small broken rice kernels
Determination of defective kernels:
Regulation 22: Determination of percentage heat damaged kernels, damaged kernels, immature, chalky kernels, red kernels, red-streaked kernels and waxy rice in all rice types
Regulation 23: Determination of percentage of pecks in milled (white) parboiled rice
Regulation 24: Determination of percentage of waxy rice in parboiled rice
Regulation 25: Determination of moisture content
127
LEAF PROJECT
SUMMARY OF REGULATIONS: DRY BEANS
DRY BEANS REGULATIONS: GNR 112 in Government Gazette 37330 dated 14 February 2014. Commencement date: 14 February 2014
GRADES (Reg 3)
RETAIL QUANTITIES BULK QUANTITIES
Grade1 Grade 2
Grade 3
Split Canning grade
Grade 1
Grade 2
Grade 3
Grade 4
Undergrade
STANDARDS FOR GRADES (reg 4)
Particular size group X X X X X X X X
Particular colour group X X X X X X X X
Particular type group X X X X X X X X
Musty or unacceptable odours X X X X X X X X X
Dangerous objects X X X X X X X X X X
Substance that renders it unfit for human consumption or for processing into or utilisation thereof as food or feed
X X X X X X X X X X
Noxious seeds (Foodstuffs Cosmetics and Disinfectants Act)
X X X X X X X X X X
Insects X X X X X X X X X X
Organisms of phytosanitary importance (Agricultural Pest Act, 1983)
X X X X X X X X X X
Moisture content % max 14 14 14 12 14 14 14 14 14
Regulation 2 provides that no person shall sell dry beans unless it complies with the prescribed standards, classes and grades as well as the requirements in respect of packing, marking and prohibited substances
Regulation 3 provides for the grades for dry beans (as above)
Regulation 4 provides for the standards for grades (as above)
Regulation 6 provides for the size groups of dry beans: large, medium and small
Regulation 7: provides for the colour groups of dry beans
Regulation 8: provides for the type groups of dry beans
Regulation 9 prescribes the requirements for containers
Regulation 10: Packing requirements
Regulations 11 - 14: Marking requirements
128
Regulations 15 - 18: Sampling requirements
Regulation 19: Determination of colour group, smell, dangerous objects, harmful substances, noxious seeds and insect content
Regulation 20: Determination of size group
Regulation 21: Determination of type group
Regulation 22: Determination of foreign matter content and stones and sand content
Regulation 23: Determination of defective dry bean and broken or split dry bean content
Regulation 24: Determination of not-true-to type dry bean content
Regulation 25: Determination of dry bean content with a broken and wrinkled or cracked testa
Regulation 26: Determination of moisture content
129
LEAF PROJECT
SUMMARY OF REGULATIONS: SORGHUM
SORGHUM REGULATIONS: GNR 15 in Government Gazette 39580 dated 8 January 2016. Commencement date: 8 January 2016
CLASSES (reg 3) GM GH OTHER
GRADES (reg 5) GM1 GM2 GM3
GH1 GH2
None
STANDARDS FOR GRADES (reg 6)
Dark testa X
Dark smearing due to smut X X X
Smut balls X X X
Musty, sour or undesirable smell X X X
Unthreshed sorghum X X
Defective sorghum X X
Foreign matter X X
Small kernel sorghum X X
White sorghum (except GM3 and GH2) X X
Sorghum of another group (except GH2) X X
Poisonous seeds X X X
Insects X X
Glass X X X
Metal X X X
Coal X X X
Dung X X X
Stones X X X
Weather stained sorghum X X X
Moisture content 14% max X X
Animal filth X X X
Unfit for human or animal consumption or processing into food or feed
X X X
The presence of purple anthocyanic blotches in or on the pericarp shall not be taken into consideration when determining the grade of a consignment of sorghum
Regulation 2 provides that no person shall sell sorghum unless according to the standards, classes and grades.
Regulation 3 provides which classes (FH, FS and other)
Regulation 4 provides for standards for classes
Regulation 5 provides for grades (as above)
Regulation 6 provides the standards for grades (above)
Regulation 7: Packing requirements
Regulation 8: Marking requirements
Regulations 9 - 11: Sampling requirements
Regulation 12: Determination of class and presence of smut, undesirable smells, harmful substances, poisonous seeds, insects and animal filth
Regulation 13: Determination of percentage foreign matter
Regulation 14: Determination of percentage unthreshed sorghum
130
Regulation 15: Determination of percentage defective sorghum content and percentage small kernel sorghum
Regulation 16: Determination of percentage sorghum of another group
Regulation 17: Determination of percentage white sorghum
Regulation 18: Determination of the percentage weather-stained sorghum
Regulation 19: Determination of moisture content
LEAF PROJECT
SUMMARY OF REGULATIONS: MAIZE PRODUCTS
MAIZE PRODUCT REGULATIONS - Government Notice R63 in Government Gazette 39627 dated 29 January 2016. Commencement date: 29 January 2017
GRADES (Reg 3) There are 19 grades of maize products for sale in the Republic of South Africa, namely:
(a) Samp;
(b) Maize rice;
(c) Maize grits; (brewing, snacks and cereal grits)
(d) Maize flour;
(e) Super fine maize meal;
(f) Super maize meal;
(g) Special maize meal;
(h) Sifted maize meal;
(i) Unsifted maize meal;
(j) No. 1 straightrun maize;
(k) No. 2 straightrun maize;
(I) Sifted crushed maize;
(m) Unsifted crushed maize;
(n) Fine crushed maize;
(o) Maize germ meal;
(p) Fine maize bran;
(q) Coarse maize bran; and
(r) Unspecified maize product.
SPECIFICATIONS FOR ALL GRADES (Reg 4)
Free from a mouldy, sour or rancid smell or taste
Free from wet and caked patches
Have a moisture content not exceeding 14 percent with the exception of Maize Germ Meal, Fine and Coarse Maize Bran
Maize Bran and Maize Germ have a moisture content not exceeding 18 percent
Free from foreign matter
Free from insects
131
Not exceed the permissible deviations regarding toxins, chemical or other substance that renders it unfit for human or animal consumption as prescribed in terms of Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act No. 54 of 1972).
The grades super maize meal; special maize meal; Super fine maize meal; sifted maize meal and unsifted maize meal shall be fortified in terms of Foodstuffs, Cosmetics and Disinfectants Act, 1972 (Act No. 54 of 1972).
All grades of maize products shall comply with the specifications for fibre contents, fat content and fineness or granulation
Regulation 5: Packing requirements
Regulation 6: Marking requirements
Regulations 8 - 9: Sampling requirements
Regulation 10: Determination of Fineness or Granulation
Regulation 11: Determination of the percentage of whole maize kernels
Regulation 12: Determination of the percentage of whole maize kernels
Regulation 13: Determination of the moisture content
Regulation 14: Determination of Fibre Content
Regulation 15: Determination of Fat Content
132
ANNEXURE B SUMMARY OF GRADING PROCESSES
133
134
135
136
137
138
139
140
ANNEXURE C GRADING TABLES APSA REGULATIONS
STANDARDS FOR GRADES OF CLASS WHITE MAIZE AND CLASS YELLOW MAIZE
Maximum permissible deviation: Percentage (%)
Deviation White maize Yellow maize
WM1 WM2 WM3 YM1 YM2 YM3
1 Foreign matter 150 grams
0.3 0.5 0.75 0.3 0.5 0.75
2 Defective maize kernels above and below 6,35 mm round-hole sieve 150 grams
7 13 30 * * *
3 Defective maize kernels below the 6,35 mm round-hole sieve * * * 4 10 30
4 Defective maize kernels above the 6,35 mm round-hole sieve * * * 9 20 30
5 Other colour maize kernels 150 grams
3 6 10 2 5 5
6 Stones below 6,35 mm round-hole sieve (10 kg)
1 gram 1 gram 1 gram 1 gram 1 gram 1 gram
7 Deviation in 1,2,3,4 and 5 collectively: Individually each within the specified limits
8 16 30 9 20 30
8 Pinked maize kernels 12 12 12 * * *
* Not specified
141
PERMISSIBLE PERCENTAGE DEVIATIONS IN SORGHUM
Maximum percentage deviation allowed
Deviation Grade Grade Grade Grade Grade
GM1 GM2 GM3 GH1 GH2
Foreign matter (100 grams) 1.5 2.0 3.0 1.5 3.0
Unthreshed sorghum (50 grams) 4.0 6.0 12.0 4.0 20.0
Defective sorghum (50 grams) 3.0 10.0 20.0 3.0 20.0
Small kernel sorghum (50 grams) 8.0 10.0 20.0 8.0 20.0
Total of defective sorghum and small kernel sorghum 10.0 10.0 20.0 10.0 20.0
Sorghum of another group (25 grams) 4.0 6.0 10.0 4.0 *
White sorghum (25 grams) 4.0 6.0 * 4.0 *
Total of Sorghum of another group and White Sorghum 6.0 10.0 * 6.0 *
Weather-Stained sorghum (10 grams) 50.0 50.0 75.0 50.0 75.0
* Not specified * * * * *
STANDARDS FOR GRADES OF SUNFLOWER SEEDS
Maximum permissible deviations
Classes FH and FS
Grade 1
1 Damaged sunflower seed 10%
2 Screenings 50 grams 4%
3 Sclerotia 20 grams 4%
4 Foreign matter 20 grams 4%
5 Deviation in 2, 3 and 4 collectively: Individually each within the specified limits 6%
Deviation
142
STANDARDS FOR GRADES OF SOYA BEANS
Maximum percentage
DEVIATION deviation allowed
GRADE SB1
a Wet pods 0.2%
b Foreign matter, including stones, other grain and sunflower
seeds: Provided that such deviations are individually within
the limits specified in itmes (c), (d) and (e)
5.0%
c Other grain 200 grams 0.50%
d Sunflower seeds 0.10%
e Stones 1.0%
f Sclerotia 4.0%
g Soya beans and parts of soya beans above the 1,8 mm
slotted screen which pass through the 4,75 mm round-
hole screen 100 grams
10.0%
h Defective soya beans on the 4,75 mm round-hole screen 10.0%
i Soiled soya beans 10.0%
j Deviation in (b) and (f) collectively: Provided that such deviations are individually within the limits of said items 7.0%
30 Strokes
143
A B C D E F G H I J
Combined
deviations
(D+E+G+I)
Super Grade 13 76 220 12.5 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 1 13 76 220 11.5 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 2 13 76 220 10.5 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 3 13 74 220 9.5 5 2 0.5 3 1 0.5 1 0.5 2 5
Class other wheat - <74 <220 <9.5 >5 >2 >0.5 >3 >1 >0.5 >1 >0.5 >2 >5
Sample size (minimum) 1 – 2kg 300g clean Instructions 25g screened 25g screened 100g screened 500g un-screened 50g screened 100g screened 100g screened 100g screened 25g screened -
Field fungi
infected wheat
BREAD WHEAT GRADING TABLE
MinimumMaximum percentage permissible deviation (m/m)
Grade HLM in kg FN in sec.Protein content
in percentage
Heavily frost-
damaged wheat
Damaged wheat
plus H
Maximum percentage
permissible moisture content
Storage fungi
infected wheatScreenings
Other grain and
unthreshed ears
Gravel, stones
and turf
Foreign matter
plus F
Heat damaged
wheat
A B C D E F G H I J
Combined
deviations
(D+E+G+I)
Grade 1 13 79 300 85 12 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 2 13 77 300 75 11 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 3 13 76 300 60 10 5 2 0.5 3 1 0.5 1 0.5 2 5
Grade 4 13 72 300 50 9 5 2 0.5 3 1 0.5 1 0.5 2 5
Class other
wheat- <72 <300 >50 >9 >5 >2 >0.5 >3 >1 >0.5 >1 >0.5 >2 >5
Sample size
(minimum)1 – 2kg 300g clean Instructions 25g screened 25g screened 100g screened 500g un-screened 50g screened 100g screened 100g screened 100g screened 25g screened -
Foreign matter
plus F
MinimumMaximum percentage permissible deviation (m/m)
Grade
Maximum
percentage
permissible
moisture content
HLM in kg FN in sec.Protein content
in percentage
Heavily frost-
damaged wheat
Minimum
percentage
amber glossy
and flinty
kernels
Heat damaged
wheat
Damaged wheat
plus H
Field fungi
infected wheat
Storage fungi
infected wheatScreenings
Other grain and
unthreshed ears
Gravel, stones
and turf
144
STANDARDS FOR GRADES OF SOFT WHEATNature of deviation
(a) Heavily frost-damaged kernels
(b) Field fungi infected kernels
(c) Storage fungi infected kernels
(d) Screenings
(e) Other grain and unthreshed ears
(f) Gravel, stones and turf
(g) Foreign matter including gravel, stones and turf:
Provided that such deviations are individually within the
limits specified in item (f)
(h) Heat-damaged kernels
(i) Damaged kernels, including heat- damaged kernels:
Provided that such deviations are individually within the
limit specified in item (h) and provided further that the
minimum falling number value prescribed in regulation
6(3) for the grade concerned is at least complied with
(j) Deviations in items (d), (e), (g) and (i) collectively:
Provided that such deviations are individually within the
limits of the said items
5 5
2 2
5 5
1 1
5 5
1 1
2 2
5 5
3 3
Maximum percentage
Grade 1 Grade 2
5 5
145
Value
grade
1.
1.1 Milling degree Min % Well-
milled
1.2 Head Rice Min % 90
1.3 Whole Kernel Min % 80
1.4 Large Broken Kernel Max % 7.0
1.5 Small Broken Kernel Max % 0.5
2. Impurities Max %
2.1 Underdeveloped, immature kernels,
other seeds and Foreign matter
individually or combined
Max % 0.2
2.2 Stones and sand Max % 0.2
3.
3.1 Damaged kernels Max % 1.0
3.2 Yellow kernels/Heat damage Max % 0.50
3.3 Paddy (grains/kg) Max 5.0
3.4 Chalky kernels Max % -
3.5 Red and/or undermilled kernels Max % 1.0
3.6 Total Pecks/partly black kernels Max % 2.0
3.7 Waxy rice/Glutinous rice kernels Max % 1.5
Black kernels Min % 0.15
Explanatory note: - means not applicable * means no limit -
MAXIMUM AND MINIMUM PERCENTAGE (%) PERMISSIBLE DEVIATIONS FOR WHITE RICE
NATURE OF DEFECTS
STANDARDS FOR GRADES OF WHITE RICE
WHITE RICE WHITE PARBOILED RICE
Premium
grade
Value
grade
Standard
grade
Premium
grade
Standard
grade
Grain Composition
Extra-well-
milled
Well-
milled
Well-
milled
Extra-well-
milled
Well-
milled
95 90 80 95 80
60 60 60 80 75
4.0 4.5 5.0 4.0 12.0
0.1 0.5 0.5 0.5 0.7
0.2 0.2 0.2 0.2 0.4
0.1 0.2 0.4 0.1 0.4
Defective kernels
0.25 0.25 0.50 1.0 1.5
0.1 0.2 0.2 0.25 0.75
3.0 5.0 5.0 3.0 5.0
3.0 6.0 6.0 - -
0.5 0.5 0.5 0.5 2.0
1.0 2.0 2.0 1.5 2.5
1.5 1.5 1.5 1.5 1.5
- - - 0.1 0.2
146
Premium
grade
Value
grade
Standard
grade
Premium
grade
Value
grade
Standard
grade
1.
1.1 Min % 95 90 80 95 90 80
1.2 Min % 80 80 80 80 80 80
1.3 Max % 4.0 5.0 7.0 2.0 5.0 7.0
1.4 Max % 0.7 0.7 0.9 0.5 0.5 0.7
2.
2.1 Max % 0.5 1.0 1.0 0.1 0.5 1.0
2.2 Max % 0.1 0.2 0.4 0.1 0.2 0.4
3.
3.1 Max % 1.0 2.5 3.0 1.0 2.0 4.0
3.2 Max % 0.1 0.2 0.6 1.5 1.5 2.0
3.3 Max % 2.0 2.5 2.5 1.0 2.0 2.5
3.4 Max % 2.0 3.0 5.0 2.0 4.0 6.0
3.5 Max % 1.0 2.5 3.5 1.0 4.0 12.0
3.6 Max % 1.5 1.5 1.5 1.5 1.5 1.5
Explanatory note: - means not applicable * means no limit -
MAXIMUM AND MINIMUM PERCENTAGE (%) PERMISSIBLE DEVIATIONS FOR BROWN RICENATURE OF
DEFECTS
STANDARDS FOR GRADES OF BROWN RICE
BROWN PARBOILED RICEBROWN RICE
Waxy/glutinous rice kernels
Red kernels and/or undermilled kernels
Chalky kernels
Paddy grains/kg
Yellow kernels
Defective kernels
damaged kernels
Stones and sand
Impurities
Under developed, immature kernels, other
seeds and Foreign matter individually or
combined
Small Broken Kernel
Large Broken Kernel
Whole Kernel
Grain Composition
Head Rice (Min %)
147
STANDARDS FOR GRADES OF MALTING BARLEYNature of deviation Minimum and maximum
percentage
permissible deviation (m/m)
Grade Malting Barley
Purity of variety 95 (min)
Germinative capacity 98 (min)
Germinative energy 95 (min)
Plump barley > 2.50mm 70 (min)
Screenings < 2.20mm 5 (max)
Total Nitrogen (dry basis) Min. 1.50
Max. 2.00
Weather damaged barley 3 (max)
Ergot sclerotia 0.001 or 10mm /1000g (max)
Foreign matter of which specifically:
- stones
- wheat
- maize
- wild oats
- sunflower seeds
- spear grass
2 (max)
0.5 (max)
0.5 (max)
0.4 (max)
0.5 (max)
0,1 (max)
30 seeds per 100g (max)
Split barley
Immature barley
Insect damaged barley
Total damaged barley
1 (max)
1 (max)
1 (max)
2 (max)
Pre-germinated barley 1 (max)
Sprouted barley 2/1000g (max)
Black-end barley 20 (max)
Mechanical damage 6 (max)
Badly discoloured and heat damaged 3 (max)
Un-threshed ears 2 (max)
Smut 6 masses per 100g/ (max)
Black-hulled barley 0.5 (max)
Six-row barley 2 (max)
Badly mould infected (rotten) barley Nil
Moisture content 12.5% (max)
Datura 1 seed/1000 gr
Crotalaria 1 seed/1000 gr
Ricinus 1 seed/1000 gr
Ander gifsade 7 seeds/1000 gr
Aflatoxin (totaal) 10 microgram/kg
Aflatoxin B1 5 microgram/kg
Agrochemical usage Complies with all relevant Acts
148
Canning
Grade
Grade 1 Grade 2 Grade 3 Grade 4 Split
beans
Under
grade
0.10% 0.25% 0,7% 1,5% 2.00% - *
None None 0,2% 0,6% 0,8% - *
0,1% 0,25% 0,7% 1,5% 2,0% - *
1,5% 3,0% 10,0% 20,0% 25,0% - *
1,0% 5,0% 7,0% 10,0% 15,0% - *
2,0% 5,0% 15,0% 25,0% 25,0% - *
0,2% 1,0% 2,5% 5,0% 7,5% - *
- 8,0% 12,5% 20,0% 25,0% - *
5,0% 5,0% 7,5% 10,0% 10,0% - *
- 30,0% 50,0% 60,0% 75,0% - *
5,0% 20,0% 30,0% 40,0% 45,0% - *
- 30,0% 50,0% 60,0% 60,0% - *
5,0% 20,0% 30,0% 40,0% 45,0% - *
Explanatory note:
- means not applicable
* means no limit
1. Foreign matter [Reg 22]
EXTENT TO WHICH CERTAIN DEVIATIONS MAY OCCUR IN DRY BEANS WHICH ARE SOLD IN BULK QUANTITIESNATURE OF DEVIATION Maximum extent to which deviations may occur in dry beans
intended for grading as
6. Total of defective and broken or split dry beans and in
the case of Canning Grade also include foreign matter, stones and sand:
Provided that such deviations are within the specified limits.
5. Broken or split dry beans [Reg 23]
4. Defective dry beans [Reg. 23]
3. Total of foreign matter, stones and sand: Provided that
such deviations are within the specified limits.
2. Stones and sand [Reg 22]
9. Dry beans with a wrinkled or cracked testa [Reg 25]
(b) Other dry beans in bulk quantities
(a) Phaseolus coccineus L. (Kidney beans in bulk quantities):
8. Dry beans with a broken testa [Reg 25]
7. Not true to type dry beans (not applicable to type group Mixed dry
beans) [Reg 24]
(b) Other dry beans.
(a) Phaseolus coccineus L. (Kidney beans)
10. Total of dry beans with a broken and a wrinkled or cracked testa:
Provided that such deviations are within the specified limits.
(b) Other dry beans
(a) Phaseolus coccineus L. (Kidney beans)
149
Grade 1 Grade 2 Grade 3 Split beans Under grade
0,25% 0,7% 1,5% 1,5% 1,5%
None 0,2% 0,6% 0,6% 0,6%
0,25% 0,7% 1,5% 1,5% 15
3,0% 10,0% 20,0% 20,0% *
5,0% 12,0% 15,0% 15% only broken
dry beans
*
5,0% 15% 20% 20% *
1,0% 2,5% 5,0% * *
10,0%
5,0%
15,0%
10,0%
20,0%
15,0%
-
-
*
*
35,0%
20,0%
60,0%
35,0%
75,0%
45,0%
-
-
*
*
35,0%
20,0%
60,0%
35,0%
75,0%
45,0%
-
-
*
*
Explanatory note:
- means not applicable
* means no limit
NATURE OF DEVIATION Maximum extent to which deviations may occur in dry beans intended for sale grading as -
EXTENT TO WHICH CERTAIN DEVIATIONS MAY OCCUR IN DRY BEANS WHICH ARE SOLD IN RETAIL QUANTITIES
5. Broken or split dry beans [Reg. 23]
4. Defective dry beans [Reg. 23]
3. Total of foreign matter, stones and sand: Provided that such deviations are within the specified
limits.
2. Stones and sand [Reg 22]
1. Foreign matter [Reg 22]
10. Total of dry beans with a broken and a wrinkled or cracked testa: Provided
that such deviations are within the specified limits. (a) Phaseolus coccineus L. (Kidney beans)
(b) Other dry beans.
9. Dry beans with a wrinkled or cracked testa [Reg 25]
(a) Phaseolus coccineus L. (Kidney beans) (b) Other dry beans
8. Dry beans with a broken testa [Reg 25]
(a) Phaseolus coccineus L. (Kidney beans) (b) Other dry beans
7. Not-true-to type dry beans (not applicable to type group Mixed dry beans)
[Reg 24]
6. Total of defective and broken or split dry beans and in the case of Canning
Grade also include foreign matter, stones and sand: Provided that such deviations are within the
specified limits.
150
Minimum Maximum Minimum Maximum
A Samp * 1.5 * 0.8 Not more than 5% shall be whole grain, and not more than 5%
shall pass through a 2.36 mm sieve.
B Maize Rice * 1.5 * 0.8 At least 90% shall pass through a 4.0 mm sieve, and not
more than 5% shall pass through a 1.18 mm sieve.
C Maize Grits
* 1.5 * 0.8 At least 90% shall pass through a 2.0 mm sieve and not more
than 5% shall pass through a 0.850 mm sieve.
* 1.5 * 0.8 At least 90% shall pass through a 4.0 mm sieve and not more
than 5% shall pass through a 0.50 mm sieve.
* 1.5 * 0.8 Not more than 5% shall be whole grain and at least 90% shall
pass through a 6.35 mm sieve and not more than 5% shall pass
through a 0.50 mm sieve.
D Maize Flour * <2.0 * 0.8 At least 90% shall pass through a 0.3 mm sieve.
E Super Fine Maize Meal * <2.0 * 0.8 At least 80% shall pass through a 0.3 mm sieve.
F Super Maize Meal * <2.0 * 0.8 At least 90% shall pass through a 1.4 mm sieve, and less than
90% shall pass through a 0.3 mm sieve.
G Special Maize Meal 2.0 <3.0 * 1.2 At least 90% shall pass through a 1.4 mm sieve.
H Sifted Maize meal 3.0 <4.0 * 1.2 At least 90% shall pass through a 1.4 mm sieve.
I Unsifted Maize
Meal
3.5 <4.5 >1.2 2.5 At least 90% shall pass through a 1.4 mm sieve.
Class of Maize
Products
Fat content by
mass (%)
Fibre content by
mass (%)
Fineness or Granulation by
mass
COMPOSITION OF MAIZE PRODUCTS
Class of Maize
Products
Fat content by
mass (%)
Fibre content by
mass (%)
Fineness or Granulation by
mass
151
COMPOSITION OF MAIZE PRODUCTS CONTINUE
Class of Maize
Products
Fat content by
mass (%)
Fibre content by
mass (%)
Fineness or Granulation by
mass
Minimum Maximum Minimum Maximum
J No.1 Straightrun Maize Meal 3.7 * 18 2.5 At least 90% shall pass through a 2.36 mm sieve.
K No.2 Straightrun Maize Meal 3.7 * >2.5 6.5 At least 90% shall pass through a 2.36 mm sieve.
L Sifted crushed Maize 1.5 * * 2.0 Not more than 5% shall be whole grain, and not more than 5%
shall pass through a 1.18 mm sieve.
M Unsifted crushed
Maize
3.2 * * 2.5 Not more than 5% shall be whole grain, and not more than 40%
shall pass through a 2.36 mm sieve.
N Fine crushed Maize 1.5 * * 2.0 At least 90% shall pass through a 2.36 mm sieve, and not
more than 10% shall pass through a 1.0 mm sieve.
O Maize Germ Meal 10.0 * * * *
P Fine Maize Bran * * * * At least 90% shall pass through a 2.00 mm sieve, and not
more than 50% shall pass through a 1.4 mm sieve.
Q Coarse Maize Bran * * * * *
R Unspecified Maize
Product
* * * * *
Class of Maize
Products
Fat content by
mass (%)
Fibre content by
mass (%)
Fineness or Granulation by
mass
152
SUMMARY OF REGULATIONS: WHEAT PRODUCTS
WHEAT PRODUCTS REGULATIONS: Government Notice R405 in Government Gazette 40828 dated 5 May 2017. Commencement date: 5 November 2017
(a)
CLASSES (Reg 3)
White wheat flour, divided into the following classes:
(i) white bread wheat flour
(ii) cake wheat flour
(iii) soft wheat flour (iv) industrial wheat flour
(v) all–purpose wheat flour
Standards for wheat products (reg 4)
moisture content not exceeding 14 percent
ash content not exceeding 0,65 percent
white wheat flour milled from a soft wheat
ash content of not less than 0,85 percent maximum of 1,0 percent wheat bran with a particle size greater than 212 micron
shall have an ash content of not less than 0,55 percent and not exceeding 0,75 percent
shall contain the fraction of the milled wheat below the standard sieve when sieved through a 212 micron wire mesh sieve, and therefore shall contain no separated wheat semolina
shall not contain separated wheat bran, wheat germ or wheat semolina
shall not contain separated wheat bran, wheat germ or wheat semolina
shall not contain separated wheat germ or wheat semolina.
shall contain no separated wheat bran, wheat germ or wheat semolina
153
shall contain a fraction of wheat bran above the 212-micron standard sieve in the case of flour classes with a defined wheat bran content
shall be pure, sound, and free from rancid or off- flavour, odours and insects
shall be fortified in terms of the Foodstuffs, Cosmetics Disinfectants Act, 1972 (Act No. 54 of 1972)
may contain flour improvers
shall have an ash content of not less than 0,60 percent and not exceeding 1,0 percent
shall contain no separated wheat bran, wheat germ or wheat semolina
Regulation 2 provides that no person shall sell a wheat product unless it complies with the prescribed classes and standards for classes as well as the requirements in respect of containers, packing, marking, samples and inspection
Regulation 3 provides for the classes of wheat products Regulations 4 - 8 provide for the quality standards for wheat products (as above) Regulation 9 prescribes the requirements in relation to containers used for packing wheat products Regulations 10 - 13 prescribes the marking requirements
154
Regulations 14 - 15: Sampling requirements Regulations 16 - 22: Methods for analyses of wheat products
![DATED LI PROFIT LIMITED and [name of First Assignee] and ...](https://static.fdocuments.in/doc/165x107/6294aabe618bb373ed077278/dated-li-profit-limited-and-name-of-first-assignee-and-.jpg)
