Wandile Sihlobo, Johann Kirsten and Sifiso Ntombela[i]
From the Reconstruction and Development Programme of President Mandela to the Accelerated and Shared Growth Initiative of President Mbeki, the National Development Plan of President Zuma and recently the Reconstruction and Economic Recovery Plan of President Ramaphosa, agriculture has always been tipped as a key generator of jobs and economic activity in rural South Africa.
For agriculture to live up to its expectations, it requires a stable, predictable and conducive policy environment. It is not always clear that South African agriculture is blessed with this situation. Therefore, it is remarkable that the value of South Africa’s agricultural output has more than doubled in real terms since 1994, although employment trended downwards slightly. This has been achieved amidst decreasing support to commercial agriculture and various inconsistencies in implementing policies and programmes. Government inefficiencies, delays, and failures, particularly at the provincial and local levels, have made farmers’ lives challenging.
Nevertheless, farmers’ ingenuity, ability to adopt new technology, and find new markets have helped the sector survive and grow despite the government’s induced constraints (the depreciating exchange rate also helped export earnings). On the other hand, new entrant farmers are suffering due to the poor coordination and implementation of basic government functions at all three tiers of government. As a result, the output growth, employment growth and transformation are not at the levels it could have been, had we had an efficient government system. Market failures and cases of anti-competitive behaviour in some value chains have also contributed to slow progress in transformation and agricultural development.
The start of every year presents an opportunity for business to review strategies, and some governments departments to review policies. In 2020, the Department of Agriculture, Land Reform and Rural Development focused on four broad policy guiding themes for driving agricultural expansion, inclusive growth, job creation and integrated rural areas and eradicating hunger, namely;
- Transformation and redistribution;
- Addressing inefficiencies;
- Growth and expansion.
- Coordinating policies and investments for the integrated rural economy
First, after limited action in 2019 the land reform programmes showed some notable progress in 2020 with the release of 700 000 hectares of state-owned land to beneficiaries. While this is not all new land, and some are already occupied, the decision nevertheless shows a small step towards the fast release of all land acquired by the state for land reform purposes – more than 2 million hectares! This should all be released in 2021 to bring about much more substantive progress on the pillar of transformation and redistribution. Our criticism of the recent release of land has been that the government should have released the land with tradable leases or offered the beneficiaries an option to buy the land after a minimum of five years working the land. On the tradable lease option, the government could include a “first right of refusal” clause to guard against reversing gains already attained in the redistribution of land. Moreover, the land release should simultaneously go with a farmer support programme to ensure newly settled farmers have access to working capital.
Another significant development on the land reform front was the new Expropriation Bill which was gazette in 2020, outlining a uniform process for all expropriations to take place and a uniform means to calculate just and equitable compensation. The National Policy on Comprehensive Producer Development Support and Blended Finance were other programmes that saw some progress in 2020 and should be completed and launched this year. The effectiveness of the programmes, however, is yet to be seen. The development of the Land Donation Policy, which encourages private landowners to participate in the redistribution of land voluntarily, is one of the policy changes that could accelerate the redistribution of agricultural land if all the incentives are properly aligned as detailed in the report of the Presidential Advisory Panel on Land Reform and Agriculture.
This “transformation and redistribution” pillar is likely to gain momentum in 2021 as the majority of these land policies will be introduced to parliament for endorsement. We are likely to see progress on the release of the land, and this will be an essential area to watch as it promised transparency this time around and that there will be bias towards the youth, women and other vulnerable groups; unlike the past where a disproportionally higher number of older men benefited on land reform. Another critical area worth keeping an eye on is the broader discussion about the amendment of Section 25 of the Constitution to enable land expropriation without compensation. There was little discussion on this point in 2020 as the work of the committee that was tasked to “make explicit what is implicit” in the current wording of the Constitution was interrupted by the pandemic. This year there will likely be momentum on this discussion. We are however of the view that the new Expropriation Bill already covers what is hoped the amendment of Section 25 would have achieved.
Second, the government promised to address the inefficiencies that exist in its processes and systems as well as with government infrastructure needed to support the sector. Addressing the inefficiencies will mean better management and efficiency in all divisions within the Department of Agriculture, Land Reform and Rural Development. There should also be a much stronger political will to work closely with the private sector and broader social partners. Such a relationship would entail leveraging the private sector networks, capital, know-how and goodwill to bring about the growth and transformation of the sector. The interventions to address the inefficiencies will differ from subsector by subsector. For example, some subsectors might require improvements on export-related and water efficiency matters, while others might need increased efficiencies on the registration of certain input products to increase productivity. For the export of red meat products to fix animal health and meat, the hygiene system will be an urgent priority. An essential requirement for the government is to be proactive in engaging with the private sector and broader social partners about their specific needs and commitments to agricultural development. On the infrastructural matters, we are less optimistic that there will be notable progress in the near term given the fiscal constraints and continued pressure to contain the spread of the pandemic and secure vaccines. Importantly, this is not a task carried out by the Department of Agriculture, Land Reform and Rural Development per se, but by other line departments.
Lastly, the anticipated launch of the Agricultural Master Plan in 2021 should effectively deal with the issues raised above and provide direction to the Department of Agriculture, Land Reform and Rural Development’s approach to broader farmer development initiatives this year. There is a danger that the Master Plan might primarily focus on the problems and the diagnosis by looking back and not effectively plan what should be done. The drafters should not aim to be to “Build Back Better”; but to “Build Forward Differently”. The plan should spell out clearly what will be done to address inefficiencies, engage with the private sector, and modernize and streamline the support system and improve access to markets and finance.
Trade will also continue to be a part of the policy discussions as the South African agricultural sector will seek more markets than the existing ones. Moreover, an increase in production will need to be anchored on increased export potential and domestic agro-processing capacity to replace food imports, where it is feasible.
Other essential points that did not dominate the policy discussion in 2020, but are likely to surface in 2021 are agricultural finance and commercialization of black farmers. The agricultural finance discussion will immediately have to deal with the Land Bank’s current crisis and include the search for new and efficient financing methods. Perhaps the Land Reform Fund raised in the Presidential Advisory Panel for Land Reform, and Agriculture report could offer a solution in creating an affordable blended finance instrument.
Agriculture still has the potential to boost employment, transformation and economic activity in rural South Africa. But this hinges on the stable, predictable and conducive policy environment, along with dedicated and driven officials at all spheres of government.
[i] Sihlobo is Chief Economist of the Agricultural Business Chamber of SA. Kirsten is Professor in Agricultural Economics at Stellenbosch University and Director of the Bureau of Economic Research. Ntombela is Chief Economist of the National Agricultural Marketing Council.
The essay first appeared on Business Day on 24 January 2021
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