The agricultural economist, Dr Sifiso Ntombela, published an intriguing article this past weekend in News24. He argues, rightly, that the structure of the South African agricultural economy today was defined by various policy changes in the three years after the dawn of democracy.
Dr Ntombela notes, “It was during this period that the then newly elected democratic government decided to remove state subsidies for farmers and also stopped the regulation of food prices.” The fundamental policy change he refers to here is the deregulation of the agricultural markets, which removed government price controls of agricultural commodities and led to abolishing various commodity boards such as maize, wheat, and meat boards. This process occurred as the South African agricultural sector integrated into the global community; hence today, we have an export-oriented agricultural sector that is competitive, with a reach in several markets across the globe.
Dr Ntombela acknowledges this positive progress of the sector. But what he decries is that while the sector has progressed on aggregate, black farmers have mainly been the spectators of agricultural progress in South Africa and not part of it. However, this is not a new observation. Scholars such as professors Kirsten, Vink, Van Zyl and Van Rooyen have effectively documented much of these dynamics since the late 1990s. There is also no consensus if the government statistics record all commercial transactions by Black farmers to truly reflect their contribution to commercial agricultural output. We make the same argument in my co-authored chapter in the recently published Oxford Handbook of the South African Economy.
On the point about the removal of farmer subsidies, it is worth appreciating that the South African government didn’t have much financial flexibility to pour money on farmers at times, while there were mounting social demands that the African National Congress had promised the people of South Africa leading up to its election.
Still, I don’t mention this to say there shouldn’t be better-coordinated support to black farmers from that period, but in the context of the economic limitations.
It is also essential that Dr Ntombela, a student of international trade, remind the readers that the global playing field for agricultural trade was levelled by removing all trade-distorting subsidies – all in the early 1990s during the GATT negotiations.
At the same time, the young ANC government was merely following the lead globally and also arguing that it is ‘good’ to remove the subsidies from the white farmers who have benefited from the support system during Apartheid. Unfortunately, the systems introduced by the new government were ineffective, mismanaged and did not reach all black farmers.
This is unfortunate as the current government system prevents black farmers from receiving the much-needed support that helped white farmers dominate commercial agriculture in South Africa.
As I argued in my book, Finding Common Ground: Land, Equity and Agriculture, “since the formation of the Union of South Africa, the government of the day introduced various initiatives, such as the establishment of the Land Bank in 1912 and the establishment of the Farmers Assistance Board in 1925, and the introduction of co-sponsored training programmes for labour in 1929 coupled with state assistance in creating employment. This was followed by establishing irrigation schemes tenant farmer support programmes, developing the local agricultural market infrastructure, and organizing agricultural marketing arrangements. There are many lessons which the new democratic government could have learned from these programmes!
Throughout most of the post-unification period, specifically from 1913, the sustained and substantial government support to agriculture was biased towards white (mainly small-scale and impoverished) farmers to commercialize them. Lacking a proportional amount of public support, black farmers suffered as a consequence. The Land Act of 1913 and the Co-operatives Act of 1920 are two key examples of the discriminatory public policies in those years.
The Land Act confined land ownership by blacks to dedicated native reserves, while the Co-operatives Act excluded black farmers from participating in farmer co-operatives. In 1925, the Farmer Assistance Board (predecessor of the Agricultural Credit Board) was established to assist farmers with soft loans in the aftermath of the recession of the early 1920s. Black farmers were once again excluded from accessing these government-backed credit programmes, and they were also excluded from participating in the farmer settlement programmes introduced in the late 1930s.”
Many government support programmes since 1994 have largely been ineffective in driving the commercialization of black farmers. Hence, we are stuck with the challenge of “two agricultures” in South Africa. In an essay for The Conversation, Professor Johann Kirsten and I detailed the government’s shortcomings that disadvantaged black farmers progress.
Dr Ntombela further notes that “After the fall of marketing control boards in 1997, farmers grouped themselves into commodity associations, and resumed some of the functions performed by then market control boards during the apartheid era.
Specifically, the new farmer associations started collecting industry data, conducting technical research, driving market development, determining the rate, and collecting statutory levies. Parallel to the rise of farmer associations is the downfall of state institutions supposed to service the sector.
For example, institutional challenges at the Land Bank encouraged farmer associations to develop their funding tools such as the HortFin in the fruit and wine industries. The concerns of operational inefficiencies and low budget allocation to the Agricultural Research Council (ARC) and Onderstepoort Biological Products (OBP) have inspired farmer associations to establish their own research houses to produce new varieties, animal vaccines and private product standards.
Effectively, these developments imply that black farmers are facing new barriers to entry in agriculture.”
The reality here is that mainly white farmers organized groups took control of their destiny because all government support was removed. They started to collect essential data that enabled market operations and invested in research because the government institutions didn’t fulfil this task efficiently. Some crucial data used to be collected by the marketing boards, and when they were demolished, the government didn’t efficiently assume this task. In the case of institutions such as the Agricultural Research Council (ARC) and Onderstepoort Biological Products (OBP), corruption and inefficiency, specifically on the OBP, is widely covered in the news. And is partially blamed for the ‘broken agricultural system. Strangely, Dr Ntombela says nothing about the problems with Fertilizers, Farm Feeds, Seeds and Remedies Act 36 of 1947 (registrations of new technology, medicines) and the critical issues related to animal health that destroys all commercial ambitions of black farmers.
Therefore, had the government institutions increased their capabilities and kept up with the changing global agriculture environment, we wouldn’t have had this void which resulted in new companies providing solutions in areas that the government’s institutions predominantly serviced.
Dr Ntombela also notes that “Noticing a need to achieve inclusive growth, the private farmer associations have initiated a variety of programmes, some in partnership with government to drive transformation. Unfortunately, these efforts have yielded limited success because the output from black farmers remains negligible at the sector level.
Ironically, the government continues to heavily rely on partnerships with farmer associations to transform the sector, and less focus or vigour is given to restoring technical capacity, operational efficiency and funding constraints to State-Owned Institutions such as the ARC, OBP, Land Bank, National Agricultural Marketing Council (NAMC) and state departments.”
This is an incorrect observation of the current realities as there are very few demonstratable programmes that the government has deliberately partnered with the private sector and taken a ride. Consider chapter six of the National Development Plan, which urged partnerships and the National Treasury’s 2019 economic policy paper which argued for a joint venture approach to agricultural development. None of these programmes was fully implemented, and therefore, one can not argue that the demise of government institutions is because the attention has unfairly been given to the private sector. We have seen quite the opposite.
Ntombela ends his piece with a key policy question. He notes, “With the ruling government party preparing for its policy conference that will likely shape and affect the state policies in the next administration, it is crucial that the existing modalities and partnerships meant to drive inclusive growth in the sector are reviewed to bring in fresh and progressive ideas.
Some of the questions to be attended to during the review process include: Are private farmer associations the ideal model to drive meaningful transformation, given the potential competition and conflicting interests in the market? Is the transformation progress achieved to date through partnerships with private farmer associations justifies the amount government has spent?”
These are all critical points, but focusing on whether partnerships are the right model for agricultural development is a distraction. The government institutions are weak and have failed to help black farmers on no fault of organized agriculture.
We should be asking how to scale up the better-delivering partnerships for the broad commercialization of black farmers. We can do this by leveraging not only on private-sector talent but also leveraging on their resources.
As we argued in The Conversation, this should be supported by also properly delivering (1) a land reform programme where there is a release of land already on the government’s book to beneficiaries with tradable land rights; (2) new beneficiary selection criteria. This should be appropriately applied to select the correct jockeys for the land on the land question; (3) improvements in efficiency in various regulations in the livestock industry and animal hygiene. This would help boost exports and improve the market access for farmers on communal land; (4) improvements in the efficiency in registering new agrochemicals and vaccines that can help make agriculture more efficient.
The current dualism in South Africa’s agriculture is not desirable. Still, agricultural development and progress of black farmers will likely be achieved through a social compact approach, as we demonstrated here.
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