Written for and first appeared in the Sunday Times.
Towards the end of 2021, when Covid offered a slight reprieve, my colleagues and I travelled across a few provinces of SA, meeting agribusiness bosses. Our visits were aimed purely at connecting, and understanding business conditions after various waves of the pandemic and the disruptions that followed. At the time, the agricultural sector was having a “sunshine” moment, with bumper harvests and higher commodity prices boosting profitability for those farming grains and oilseeds.
Even the wine producers we met in Paarl were somewhat optimistic, focusing on rebuilding the industry following the devastation caused by the bans on alcohol sales. Conversations focused on sustainably growing the agricultural sector and ensuring the vibrancy of rural economies. These noble goals align well with the government’s vision, which we had been championing through the Agriculture and Agro-processing Master Plan. The master plan aims to create a competitive and inclusive agricultural economy, expand the area under cultivation and create more jobs in various commodities.
Fundamentally, the challenges facing agricultural industry role players, aside from significant policy issues such as land reform, boil down to two factors. First, there is a dire need to improve network industries, primarily roads, rail and shipping ports.
This is not a new issue, but it is worth emphasising as the recent heavy rains have exacerbated the already poor quality of roads in rural SA. Agribusinesses in the Eastern Cape and Free State told stories of the rising costs they have to incur on road improvements and maintenance of their equipment due to bad roads infrastructure.
For smallholder farmers, who are supposed to be part of the “inclusion” story, it is even more challenging to connect, cost-efficiently, with markets for their produce. Essentially, we aim to ensure that agriculture plays a meaningful role in SA’s rural economy and job creation in general. To that end, the government has to pay attention to deteriorating infrastructure.
This ties in with the need for improvement in governance in small towns that are in financial distress and poorly managed. In May 2021, then finance minister Tito Mboweni shocked the nation when he stated that, of the 278 municipalities in SA, 163 were in financial distress, 40 were battling to deliver basic services, and 102 had adopted budgets for 2021/2022 that they could not fund.
This poor performance means businesses are constrained. Money that would have been invested in expansion and job creation is diverted to perform services that, in a properly functioning society, municipalities would deliver.
In terms of ports, SA’s agricultural sector is export-orientated, and its growth strategy is dependent on efficient ports. In 2021, at the peak of the citrus harvest and export season, congestion at the port of Durban and problematic Transnet infrastructure were major challenges for the industry. Still, collaboration among all role players ensured a continuous flow of exports.
This co-operation ensured SA’s agriculture, food and beverage exports for the first three quarters of 2021 reached $9.6bn (R149.6bn), up 23% on the same period in 2020. The full-year data will most likely show generally good performance for 2021. The ample agricultural harvest was the main boost for exports.
But as the year progressed, numerous reports of infrastructure destruction in the rail system surfaced, posing a risk to agriculture and other export-orientated sectors. The government should increase the security focus on the vandalising of Transnet infrastructure. Collaboration between business and Transnet in investing in ports should also be prioritised.
Second, trade dominated all discussions we had with agribusinesses. Many acknowledged the great work of the government in integrating the agricultural sector into the global community since 1994, as exports have grown significantly since then.
We have trade agreements including the Southern African Development Community (Sadc), the Sadc-EU economic partnership agreement (EPA), the South African Customs Union (Sacu)/Mozambique-UK EPA, the African Continental Free Trade Area and the Sacu/Mercosur Preferential Trade Agreement.
All have been achieved in the past 15 years, which is a considerable feat in itself, given the technical and institutional demands of negotiating and successfully implementing trade agreements. It is through the benefits of these agreements that SA now exports nearly half of its products in value terms — just over $10bn in a typical agricultural season.
The fruit, wine, grains, wool and beef industries have been the key drivers of this export effort. In the past few years, the success of trade also attracted increased investment in agriculture, which has led to expansion, specifically in fruits.
Agribusinesses and primary agriculture groups would like to increase their access in Japan, China, Saudi Arabia, Bangladesh and India. SA has had some success in some of these markets; for example, South African pears can now be exported to China.
But we have more fruit in the country, larger wine volumes, and meat. At this point, the government, through the department of trade, industry & competition, along with the department of agriculture, land reform & rural development, should work collaboratively with the industry to urgently open as many markets as possible.
I am not naïve about the time frames and trade-offs that policymakers should balance in the quest for export markets. Importantly, we will be attempting to widen the export market while domestically focusing on localisation. Other countries that wish for reciprocity could find the South African approach unfriendly. Still, if we view this sector as one of the critical sources of growth and job creation, we should be as agile as the likes of Peru and Chile in ensuring access for our agricultural products to key markets.
Essentially, the agricultural sector holds great potential for boosting the rural economy. But there are various prerequisites that the government and its state-owned entities should focus on to ensure that the environment is favourable for investment.
For an extended period, we focused the public debate on agriculture primarily on land reform —rightly so, as it’s an essential policy for enhancing black South African participation in this sector. Still, it is not the only issue that deserves our attention. The export drive deserves attention too, as do the network industries that enable export activity. The government should take the lead in all these areas but encourage partnerships with agribusinesses and various private sector role-players where business conditions permit.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
