South Africa’s Logistics are Amongst the Best in the World

I generally stay clear of logistics issues but it is hard not say a word or two about this data, as I still have echoes of former President Zuma’s voice talking about Malawian roads.

OK, let’s get serious, here it is (see featured image) — South Africa’s logistics are comparatively more efficient than most industrialising countries. This is according to the World Bank’s Logistics Performance Index which ranked South Africa at number 20 out of 160 countries surveyed, with Germany leading the world.

The Logistics Performance Index is basically an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance.

The sub-indices that make up the overall Logistics Performance Index are the efficiency of customs clearance process, quality of trade and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services and competence, ability to track and trace consignments, and the frequency with which shipments reach the consignee within the scheduled time.

South Africa’s efficiency of customs clearance process is ranked 18th out of 160 countries. With regards to quality of trade and transport related infrastructure, South Africa is ranked 21st.

South Africa is ranked 23rd with respect to the ease of arranging competitively priced shipments and ranked 22nd on the quality of logistics and competence. With regards to the ability to track and trace consignments, South Africa is ranked 17th. Lastly, the country is ranked 24th with respect to the frequency with which shipments reach the consignee within the scheduled or expected time.


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These Provinces Have Unused Land Suitable For Agriculture

OK folks, since we are in the midst of ‘land’ discussions, I thought it would be useful to share this chart (see featured image). It basically shows that South Africa has the potential to explore additional, unused land that is suitable for agricultural production. This is roughly between 1.6 million and 1.8 million hectares – mainly located in Limpopo, KwaZulu Natal and Eastern Cape provinces. 

This is high potential land which, with the necessary investment and conditioning of the soil, will expand national agricultural production and increase food security.

The debate ought to shift towards how to bring this land into production and ensure that there is access to infrastructure, services and water for commercially viable farming. Two of the three regions in the chart have the potential for irrigation, making them prime locations to establish agriculture. 

Oh, these are not my numbers – I am leaning on the studies done by Bureau for Food and Agricultural Policy in 2011 and McKinsey Global Institute in 2015. 

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South Africa is the Most Food Secure Country on the Continent

I have said this before, but I will repeat it because I think it is important in highlighting the enormous contribution of South Africa’s agricultural sector.

South Africa is ranked as the most food-secure country on the continent and is 44th out of 133 countries worldwide, according to the Economist Intelligence Unit’s 2017 Global Food Security Index. The Index captures the most critical aspects of food security, namely; affordability, availability, as well as quality and safety.

South Africa’s relatively high rating has been made possible by robust agricultural output over the years, making it one of a few net exporters of agricultural products (chart below).

agri trade balance

This is, of course, a remarkable achievement considering the fact that South Africa is relatively resource-poor when compared to many other African countries. But what differentiates it from other countries is the high level of investment in the agricultural sector, which is largely driven by transparent markets, strong institutions and robust property rights capable of being enforced through the courts.

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The Rise of Eastern Cape Black Farmers

I don’t really like taking photos, as I’m sure my Instagram friends have noticed. However, I’m thankful to have taken this particular one (featured image) – not because it features my good looks and charm, but because of what it represents. It was taken four years ago on the outskirts of Matatiele in the Eastern Cape province while I was visiting a group of thriving black farmers.

Back then, black farmers in the area were producing 6 000 tonnes of maize whilst at the initial stages of their learning process with an organised agricultural group. By the 2016/17 production season, their maize harvest had increased to roughly 28 000 tonnes owing to an uptick in area planted, as well as better farming practices. From a national perspective this difference may seem insignificant, but recognising the low base from which they started, I think it’s fair to say this is a damn good achievement.

A number of these farmers benefit from the support of organised agricultural groups and private investors such as Grain SA and Masisizane Fund, amongst others. Grain SA has been actively involved in the province through its Farmer Development Program, which focuses on training and skills development. The Masisizane Fund, together with the government, invested about R46 million in farming areas around Matatiele in 2016.

Alongside these developments, there is the emergence of new agricultural firms. A notable one of these is Matatiele Grainco – a 100% black-owned grain group with a focus on agricultural mechanisation and transportation of grain across the Eastern Cape and Kwa-Zulu Natal provinces. Another of these is Afgrain – also a 100% black-owned food group which has a strong focus on farmer development and value chain activities.

These developments are refreshing, but there are still a number of challenges that hinder agricultural production in the province. These include, among others, poor infrastructure (roads and silos) across agricultural-producing zones, as well as communal land tenure (which is not recognised by many financial institutions).

Despite these hindrances, progress has been plentiful. It seems to me that there is a new crop of farmers and agricultural firms popping up in the Eastern Cape province, and I am publishing this photo (featured image) as a reminder of where it all started.

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Structural Changes in the South African Agricultural Economy between 1910 and 2010

There aren’t many academic papers that present a comprehensive picture of the change in pace of the nature of production and productivity growth in South African agriculture during the 20th century like that of the late Dr George Frederick (Frikkie) Liebenberg’s PhD thesis.

I will try to write short blog entries and highlight few interesting treats within the coming weeks. For now — here are three outstanding charts from the second chapter of the thesis – covering the structural changes in the South African agricultural economy between 1910 and 2010.

Gross value of South African agricultural production
Gross value of South African agricultural production (Liebenberg, 2013)

 

Trends in South African agricultural trade
Trends in South African agricultural trade (Liebenberg, 2013)
Number, tatal area and average size of farms in South Africa between 1980 and 2010
Number, tatal area and average size of farms in South Africa between 1980 and 2010 (Liebenberg, 2013)

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Clear Course of Action Needed for Youth Participation in Farming

The fact that the farming community of South Africa is ageing is quite concerning. The average age of a farmer in South Africa is 62 years. Meanwhile, in other countries such as the United States the average age is 55 years, and in Australia, it is just 53 years.

With the agricultural sector increasingly being viewed an epicentre of growth and development across the African continent, the aforementioned statistics are disappointing. Some agricultural leaders and policymakers have placed the onus on young people, arguing that they show little interest in the sector – preferring office jobs that are perceived as sophisticated.

At face value, this is plausible. However, over the years I have actually met a good number of young South Africans who are motivated and interested in joining the agricultural sector. They all generally ask the same questions though, such as: “Where do we start? Is it possible to access productive land and some mentorship? How do I access potential funding and financing?” Some have already started small operations and are now struggling to enter the formal market.

These questions arise because South African policymakers have not clearly articulated the path to follow for young people who are interested in joining the sector.  For agricultural professionals, though, the road is clear – you obtain a tertiary qualification, then join an agricultural institution or government agency. In fact, this seems to be the path that most industry leaders have taken and have emphasized. That said, there is still much obscurity about support measures for those who are interested in joining the production side of the sector, such as being a farmer.

To be a farmer, one needs good productive land. There are young people willing to leave their ‘sophisticated’ careers in other industries and enter agriculture but are encountering funding challenges, which in turn means no access to land. So no matter how ambitious they are, without capital their options are limited.

Accompanying these challenges is an abundance of underutilised land in the rural areas from Eastern Cape, Limpopo to Kwa-Zulu Natal provinces. One solution would be to give these youth title deeds for unutilized land or a tradeable long-term lease. This will allow them to acquire capital and it will be crucial to also link them to organised agriculture for mentorship and access to global export opportunities.

Most unemployed young people are from rural communities in these provinces. By giving them an opportunity to work the land, it will not only uplift them but it will also benefit the entire society by ameliorating the triple challenges of poverty, unemployment and inequality. Fortunately, about 45 percent of sub-Saharan Africa’s population is below the age of 15, so we must make a concerted effort to get these young people into the agricultural pipeline, as the farming population is ageing.

A study by agricultural economists Thomas Jayne and Lulama Ndibongo Traub have championed the potential role that youth could play in the sector. Interestingly, with the current youth unemployment rate of South Africa and the region at large, the study notes that over the next two decades 330 million young Africans will be entering the job market looking for work. In order to prepare for this influx, governments will need to urgently grow and develop their agricultural sectors and maximize the potential to absorb the youth.

In closing, I must emphasise that it is not enough to merely promote the sector and its major potential to absorb the youth and grow the African economies without creating clear paths and opportunities for effective youth participation.

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Redistribution of South African Agricultural Land: expropriation without compensation debate*

Over the past couple of days, we’ve heard what political leaders think about the ‘expropriation without compensation’ policy approach that the African National Congress (ANC) announced at its 54th National Conference in December 2017.

However, it is still unclear exactly what such a policy approach would look like and what the implications thereof will be as the ANC hasn’t released any detailed documents on the subject. One encouraging thing that ANC leaders have been consistent in emphasizing that ‘expropriation without compensation’ will only happen in a manner that is sustainable and does not harm the agricultural sector or the economy.

Against this backdrop, we have drafted a discussion paper which attempts to unpack the ‘expropriation without compensation’ decision, as well as the economic and legal consequences of the various forms that the decision may take.

From a legal point of view, there is great uncertainty about what compensation is payable in select circumstances under the current constitutional provisions. Likewise, it is still unclear exactly what the scope and extent will be of the mooted amendments. As such, it should be understood that our paper is not based on settled law, but rather explores alternative legal theory regarding expropriation and compensation.

From an economic point of view, a key point to highlight is that property rights are inherently required to establish capital investment across the entire economy. If one set of property rights is to be affected by ‘expropriation without compensation’, the expectation will be that other forms of property might also be affected.

Therefore, a programme of mass expropriation will result in a protracted period in which there is no net new investment in agriculture, which means no growth in agricultural output as well as no growth in the agribusiness sector. This is because commercial farmers, regardless of race, who have not (yet) been expropriated, are hardly likely to start new investments with the threat of expropriation without compensation looming and because the new farmers would not have the necessary means to invest as financial institutions may adopt a more cautious approach to lending.

Overall, we have crafted four possible scenarios based on specific policy decisions that may be taken to give effect to the decision of the ANC. The paper sketches various policy trajectories that the ruling party could follow to give effect to its decision, and from these four potential scenarios are envisaged.

The first scenario is a self-help scenario in which the rule of law has collapsed; the second scenario involves one of gradual economic decline; the third scenario is the economic sustainability (business-as-usual) scenario; and the fourth scenario involves a hybrid approach.

You can access the full paper here. More importantly, this paper is intended to give rise to a robust discussion on the topic with the intention of finding a common solution that benefits all. So, we welcome any thoughts or comments.

*Theo, Wandile and Sifiso (Researchers at the Agricultural Business Chamber (Agbiz))

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