ITEM 6

BOARD OF DIRECTORS’ REPORT

1.Board Members during 2011

Blignaut, CS / Appointed on 1 September 2011
De Jongh, AJB
Dowry, JJ / Appointed on 10 November 2011
Fourie, AJ / Resigned on 20 October 2011
Grobler, FA
Kleynhans, DJ
Kraamwinkel, AP
Loubser, MJ
Mphahlele, ME / Removed on 29 March 2011
Prinsloo, AW
Turner, TK / Appointed on 25 November 2011
Rathogwa, MG

2.Board meetings

The Board held six meetings in the year under review, of which one was a special meeting. Corporate Covernance and the Directors' responsibilities in terms of the new companies act, were presented to the Board by an expert on 10 November 2011.

3.Committees and Work Group meetings:

Number of meetings
held in 2011
Advisory
Committees / Work
Groups / Notes
Industry Information / 2 / 7
Customs & Market Access / 2 / 2 /
  • Work Group: Export Certification: 2
  • Work Group: Import Monitoring: 0 exchanged information and did not find a need for meetings.
  • Work Group: Customs & Market Access: 0

Dairy Regulations & Standards / 1 / n/a
Dairy Consumer Education / 3 / n/a
Transformation / 3 / n/a / A joint meeting between the subcommittees: primary & secondary was also held.
Subcommittee: Skills development - Primary Industry / 1 / n/a
Subcommittee: Skills development - Secondary Industry / 1 / n/a
Research & Development / 2 / 4

4.Other Committees:

Number of meetings
held in 2011
Executive Committee / 3
Audit Committee / 3
Remuneration Committee / 1

5.Other events:

Research & Development Forum

The Forum again drew together the dairy research community, industry leaders, academics and other stakeholders with a view to promote Milk SA’s objective to co-ordinate and promote functional research with respect to the strategic direction of the dairy industry. Research priorities within the disciplines were identified, R&D principles (e.g. regarding the drivers for R&D and communication) were agreed upon in 2010 and a Research & Development Forum was established that will meet annually to report back on progress in terms of dairy R&D and to guide Milk SA in the direction of R&D relevant to its strategic intent. The Forum meeting held in August 2011 established seven specialist work groups to identify and propose project proposals that should promote the competetiveness of the South African dairy industry.

Industry Information Workshop

An industry information workshop was called by the Members of Milk SA which was held on 24 November 2011. The Workshop was well attended and although a few adjustments were proposed, it was confirmed that the content of the information products of Milk SA were relevant. A presentation on the Relevancy of the Competition Act to Industry Organizations was also made.

6.Representation on other bodies:

Milk SA is represented on:

-The Agricultural Trade Forum by Dr Koos Coetzee (secundus: Mr AP Kraamwinkel);

-The Agro Logistics Task Team by Dr Koos Coetzee;

-SA National Committee of the International Dairy Federation by Mr N Fouché.

-Animal Health Forum by Mr De Wet Jonker and Dr Nico Schutte.

7.Detailed summary of expenditure on functions funded by levies

Function / Institution / Project title / Rand / Subtotals
Administration / Milk SA / Administration / 3 372 855 / 3 372 855
Statistical and other information re. the dairy industry / MPO (NPC) / Statistical information regarding the dairy industry / 778 016 / 2 949 600
SANCIDF
(Voluntary Association) / SA National Committee of the International Dairy Federation / 1 409 443
Dimension Data & Octoplus / Web-based information system: enhancement & support / 762 141
Empowerment of previously disadvantaged individuals / MPO (NPC) / Empowerment in the primary industry sector: Training, technology transfer, skills development with mentorship of previously disadvantaged individuals in the primary livestock/dairy sector. / 1 858 344 / 6 635 794
MPO (NPC) / Empowerment in the primary industry sector: Mentoring of developing dairy farmers in the primary sector. (Project manager: Centre for Producer Development) / 186 143
MPO (NPC) / Empowerment: Ubisi Mail / 180 000
SAMPRO
(Voluntary Association) / Empowerment in the secondary industry sector. / 3 265 107
Milk SA (NPC) / Transformation co-ordination / 1 146 200
Research & Development / MBISI (NPC) / National Milk Performance Testing Scheme of the RSA / 200 944 / 1 076 853
MBISI (NPC) / Milk Recording Programming Services / 269 040
HH Meissner & Milk SA (NPC) / Research inventory / 606 869
Improvement of the quality of milk and other dairy products / Dairy Standard Agency (NPC) / Improvement of the quality of milk and other dairy products / 4 004 739 / 4 004 739
Dairy consumer education / SAMPRO
(Voluntary Association) / Dairy Consumer Education / 12 284 157 / 12 284 157
Communication, meeting costs, management relating to projects / Milk SA (NPC) / All disciplines and projects / 1 907 548 / 1 907 548
Total levy expenditure on above functions: / 32 231 546 / 32 231 546

8.Summary of project reports

8.1Project title: Coordination, support and promotion of needs-driven R & D in the South

African Dairy Industry

i.Responsible person: Dr Heinz H Meissner.

ii.Background and purpose of the project

The Dairy Development Initiative (DDI) of 2000 expressed concern that dairy R&D in South Africa appears uncoordinated and is not functional with respect to the strategic direction of the industry, which has the following goals:

- Broadening of the market for milk and dairy products.

- Improvement of the international competitiveness of the industry.

- Empowerment of previously disadvantaged individuals and communities.

Since then Milk SA was mandated by statutory regulations to address these issues and, in addition, to promote the practical application of local and international research by the industry.

To give effect to the mandate one of the actions was to sign a MoU with the ARC to support capacity building for dairy R & D at this institution; a second was to launch the Dairy Inventory Project. The project objectives were:

a.To establish an inventory of published national and international research with relevance to the primary and secondary dairy industries.

b.To record research being done in South Africa in terms of relevance, contents, expertise and infrastructure.

c.To interpret and prioritize future R & D utilizing the knowledge obtained in Items i. and ii., and the experience of industry leaders and researchers.

d.To summarize and popularize R & D results with relevance to the South African industry.

e.To provide guidance to the process of developing R & D structural arrangements to accommodate, fund and legalize R & D project proposals.

f.To assist with deliberations and negotiations with government organizations to obtain support and funding for the R & D strategic directives and priorities of the industry.

iii.Summary of project’s performance

The Project has two basic goals: (1) to develop an effective yet research-friendly environment in which the R & D fraternity can operate to provide in the needs required to attain the goal of maintaining and enhancing competitiveness in the Dairy industry; and (2) to make available to the industry recent research results that can assist the primary and secondary industry to attain the competitiveness goal.

Performance i.r.o. Goal 1:

For Goal 1 the intention is to develop a structural arrangement with a responsible committee that can receive projects and make recommendations to the Board as to the acceptance and financing thereof, work groups of experts that can identify specific needs within the priority list of the particular discipline that will make a difference to competitiveness and evaluate proposals to that effect, research-friendly documentation of ToR’s, contracts and for project proposals and progress evaluation, development of centres of excellence to ensure scientific

cutting-edge and applicable research, and a coordination function by the Project Manager to ensure that the process move forward.

During the course of 2011, the Project Manager developed the documentation which will provide the basis of the legal framework to effectively administer R & D projects. During the annual Forum meeting (staged on 15/16 August) where prominent industry members and researchers interact to decide on how to take the process forward, the proposal of R & D Work Groups was accepted and seven established. These are respectively for Feed Sources & Nutrition; Dairy Products & Nutraceuticals; Genetics, Physiology & Reproduction; Environment; Markets & Techno-economics; Animal Welfare & Health, and Food Safety & Quality. At the Forum Meeting and thereafter there was also valuable interaction with the ARC which provided a basis of linking their dairy R & D approach to that of Milk SA. Apart from follow-up meetings with the ARC and other government organisations, the objectives and actions required to deal with Goal 1 have been completed, which will allow project proposal submission, evaluation and execution in 2012.

Performance i.r.o. Goal 2:

For Goal 2 a database of recent local and international research is developed on the website, research capacities in South Africa and what they are busy with are highlighted to the industry, and the most relevant research results from the international literature are interpreted and popularized by the Project Manager and put on the website.

A total of 415 international publications were posted on the website, the local research capacities, their respective R & D focus and publications were updated, and 12 relevant international publications were interpreted and popularized by the Project Manager for the purpose of making available to the industry research results that can assist in maintaining and enhancing competitiveness. The targets were met, except that a total of 600 international publications were set, but only 415 achieved.

8.2Project title: National Milk Performance Testing Scheme of the RSA

i.Responsible institution: Milk Business Information Systems Incorporated (MBISI)

ii.Goals of the project

a.The main goal of the project is to run a cost efficient and effective milk performance scheme in such a manner that participating animals will grow at more than 5% per annum. MBISI must also ensure that no duplication takes place in order to cut costs to all participants, namely the milk producer, Taurus, ARC, Intergis and laboratories.

b.The available data is used for the determination of breeding values for animals, and the values obtained from Artificially Inseminated dairy bulls (local and imported) have a huge impact on the genetic progress of South African dairy cattle.

c.The data generated from the National Milk Recording Scheme is utilised for both production and milk quality information as well as for any research done on e.g. feed and production methods. The data lends itself for research on the evaluation of production methods, evaluation of different rations (feeding additives) or even fertilizer trials on pastures.

d.In addition to breeding values, milk recording data is utilised for management information such as somatic cell counts and milk urea nitrogen (MUN) information per animal/herd. The Somatic Cell Count information is used to monitor the udder health per animal but also to determine and monitor the status of the herd and accordingly give an indication of milk machine function, be it correct or incorrect. By addressing the problems early on, higher quality milk can be delivered to milk buyers, which in turn reduces processing costs. MUN results are utilised to balance rations and is effectively utilised in addressing conception problems.

iii.Summary of project performance

Statistics

a.For commercial producers, a total of 230 477 samples were analyzed, which is decline of 14% over 2010. For emerging producers, 3 430 samples were tested.

b.Participating herds of commercial producers have decreased from 1 205 in 2010 to 1 014 in 2011, representing a decline of 16%. Emerging producers had 48 herds participating in the scheme (51 herds in 2010).

c.Animals participating in the scheme was 129 691 in 201 – a decline of 7% over 2010. For emerging producers, 1 803 animals participated – an increase of 8%.

Other developments

a.As from 2010, a general subsidy (R2,00 per cow / first lactation) was not be granted. Instead, substantial subsidies were paid to new commercial participants (new herds) joining the scheme, for the first participating year.

b.In addition, black producers were be fully subsidized in year one which was be scaled down in years two (66% subsidy) and three (33% subsidy).

8.3Project title: National Milk Performance Testing Scheme of the RSA: Programming Services

i.Responsible person: Milk Business Information System (MBISI)

ii.Background and purpose of the project:

On 10 November 2010, the Advisory Committee took note of a project proposal which was aimed at uniting the current expertise in different aspects of dairy production and products, in order to utilize available data to develop innovative products that would enhance the efficiency of the industry.

The principles of the research and development needed were:

a.Average and variation of production and productivity levels as well as milk quality based on regional level, breed, bio-region and season. Current technologies for the merger or super-imposing of bio-regions with cattle distribution would be used.

b.Usage of current predictions based on the fitting of mathematical models to fit lactation curves for each cow to assist in predictions of milk production on a regional and seasonal basis.

c.Setting up of benchmarks for primary producers based on similar herds or within production systems and regions.

d.Assisting the secondary industry to mitigate future risks by merging historical information and trends with the predictions emanating from lactation predictions.

e.Using genetic merit information in analyzing decisions to fit appropriate animals to production systems and milk buyer needs.

f.Extending the recording base of the current system (INTERGIS) to also include bio-economic information as well as management practices.

g.Integrating animal science principles in the enhancement of production efficiency with interactive reports from INTERGIS.

iii.Summary of project results:

a.A web-based programme was developed which provides management reports that competes with the best in the world. It is scientific based and can practically be put to use on most dairy farms. It enables participants to create their own reports or to make use of the standard reports that are produced by the programme. Producers can provide access to the web-based programme to experts of their choice to advise them according to – for example – nutritional, health and milking aspects.

b.Most interfaces to communicate with on-farm milk recording programmes were in place. Further discussions were taking place to ensure that all on-farm software could communicate with the web-based programme.

c.Some examples of the more than thirty management reports are:

-Average milk production per cow/day in relation to herd composition (i.t.o. number of days in milk).

-Kg of solids per day in relation to herd composition.

-Profile of milk production per cow in relation to days in milk; and herd averages for first, second and third lactations.

8.4Project title: Empowerment in the primary industry sector: Training, technology transfer, skills development with mentorship of previously disadvantaged individuals in the primary livestock/dairy sector.

i.Responsible institution: Milk Producers’ Organization

ii.Objective of the project:

Skills development of previously disadvantaged individuals (farm workers and emerging milk producers) through training and technology transfer.

iii.Description of the project:

The project addresses animal health, udder health, milk production, financial management, milk harvesting, milk quality, milk recording, milk hygiene, vaccines and immunisation, nutrition, breeding, reproduction, animal husbandry, goat farming, productivity and free market system, motivation and work ethics, milk harvesting, training and technology transfer.

Training that addresses cost-effectiveness is indispensable where milk producers are battling high input costs and low margins. Effective dairy management has a direct influence on milk quality and safety.

iv.Number of beneficiaries:

663 students were trained in five-day courses.

v.Summary of project performance:

The following courses were presented during 2011:

  • Technical courses:
  • Dairy production
  • Artificial Insemination
  • Care of farm animals (dairy husbandry)
  • Strategic courses:
  • Socio-economic empowerment
  • Business skills
  • Safety in the workplace

Due to a higher demand for five day courses, no two day or one day courses have been presented during 2011. The presentation of the courses is based on the principle of 30% theory and 70% practical demonstration. The Strategic courses accommodate appropriate exercises to achieve the course outcomes.

The courses were presented in language of preference ie indigenous languages (Tswana, Xhosa, Zulu) or English or Afrikaans.

The following documentation were provided to the students/workers during the presentation of a course:

  • Learner guides
  • Formative and summative assessments according to SAQA requirements and procedures
  • Certificates

The total number of students that have been trained during 2011 are 663. The approved budget allowed for the training of 631 students. An extra number of 32 students have thus been trained without additional funding. Last mentioned reflects the MPO/Institute for Dairy Technology’s commitment to transformation and the capacity building though training.

The training requests from emerging farmers were beyond expectation. It can thus be stated with clarity that 50% emerging farmers and 50% workers of commercial farmers were trained by Milk SA during 2011.

Courses have been presented throughout South Africa in the following provinces: Orange Free State, Gauteng, Limpopo, Mpumalanga, North West, Western Cape and Kwa-Zulu-Natal.

A proper data base including the following information is available: student name and surname, ID no, address, nearest town, province, name of owner, name and date of course completed.

8.5Project title: Empowerment in the primary industry sector: Mentoring of developing dairy farmers in the primary sector.

i.Responsible institution: Milk Producers’ Organization

ii.General information

a.The Elim dairy project started in September 2007, milking 47 cows and producing 700 litres of milk per day. By the end of 2008 there were 80 cows in milk producing 17.5 litres per cow per day (±1 400 litres of milk per day). Milk SA has been funding the mentorship since 2007.

b.Mr Dèan Kleynhans (project mentor) is chairman of an advisory committee that meets on a monthly basis to discuss the entire operation. The first cows were milked in September 2007.

c.The project enjoyed generous support from the Provincial Department of Agriculture, Western Cape in the form of financial and technical assistance.

d.The project is managed by an advisory committee under the chairmanship of the mentor, Mr Dèan Kleynhans.

e.In addition to its supply of milk to the industry, the dairy provides milk for 450 households in the Elim Missionary settlement.

iii.The main objectives of the project are to become a profitable unit ad to supply milk to the settlement at a reduced price. In order to achieve this, the following goals were set:

a.Expand the herd to at least 150 cows in milk.

b.Establish more pastures to support the cows.

c.Facilitate ownership of the cows to members of the community through a cow sharing scheme.