To understand the real challenges of farmers, it is necessary to spend a considerable amount of time on the ground talking to farmers and getting a better feel of the markets. In such engagements in the last week of August 2022, one theme that came up time and again in most discussions with role players in the sector is the need for the diversification of the export markets to non-traditional regions while retaining the sector’s foothold in key markets such as the European Union.
Other issues that keep farmers sitting up and scratching their heads at night are the need to improve logistics – roads, rail and ports; expansion of agricultural finance, particularly developmental finance or flexible finance products for the new entrant farmers, and strengthening of trust between government and the industry. Let us look at these themes in turn.
Firstly, the need to export markets has become even more urgent as agricultural output consistently improves and the country has limited capacity to absorb new produce. South Africa already exports half of its produce, in value terms. Therefore, the efforts of the Agriculture and Agro-processing Master Plan to boost production have to emphasize the expansion of the export markets.
Japan, China, India, Saudi Arabia, Bangladesh, the Philippines and South Korea are among some of the key markets in which South African agribusinesses are interested in expanding their presence. Recent actions from the EU and China (two of the largest export destinations currently) to place non-tariff barriers, hurting South Africa’s interests and export activities, highlight the importance of diversifying destination markets.
Resolving the non-tariff barriers challenge or expansion to new markets is not a job of the private sector or organized agriculture alone. The government should work hand-in-hand with the industry stakeholders in creating a “South Africa Inc.” plan for widening exports. The building blocks for such a plan are already in the agriculture and agro-processing master plan. Still, given the urgency of this matter, South Africa needs a dedicated working group that will champion the expansion of the country’s agriculture exports and work towards servicing the existing markets to avoid challenges such as the constraints faced by the citrus industry in the EU or wool in China.
Secondly, the need for network industries’ improvements was highlighted as there haven’t been material improvements, particularly on roads. The agricultural sector role-players are in regular conversations with Transnet regarding the effectiveness and efficiency of the ports. So far, Transnet has been open to engagements and efficient in resolving challenges such as rebuilding the port of Durban following the destructive floods.
Going forward, private sector role players want to explore possibilities of better partnerships in the various nodes of the ports, which could help improve efficiencies, not only for agriculture but a range of industries such as mining and automobile, amongst others.
Thirdly, agricultural finance is another topic that has received attention in various engagements. This encompasses the Blended Finance programme led by the Department of Agriculture, Land Reform and Rural Development, which should be open to all agribusinesses and financial institutions, and separately, the Land Bank, which could also play a key role in supporting the new entrant farmers to the sector, as well as the existing commercial farmers. This area will require increased focus during phase two of implementing the agriculture and agro-processing master plan. Still, the Blended Finance instrument from the government should include all agribusinesses and financial institutions in the sector.
At the same time, the government should also support the reform of a critical developmental finance institution i.e., the Land Bank, which has a long history in the sector. The goal should be to build agricultural finance instruments that help grow the agriculture and agribusiness sectors of “South Africa Inc.”.
Fourthly, the broad issue of “trust”, “accountability”, as well as “monitoring and evaluation” are all key to building credibility. This is trust amongst the sector role-players and with the government. The first step in building trust will be to deliver on promises or various aspects affecting the sector.
The government can lead in this effort by implementing reforms outlined in the agriculture and agro-processing mater plan, particularly the parts that do not require capital spending but legislative amendments.
These could be aspects of Agricultural Product Standards Act 119 of 1990 (around the thorny issue of assignees that the industry does not desire or view as value adding to the sector) and aspects of the need for the modernization of the Fertilizers, Farm Feeds, Seeds and Remedies Act 36 of 1947 (there is already work underway, which could be accelerated), and intensify efforts to open more export markets for South African agriculture, as a few examples. One can summarize this as the following, which are points we made sometime in 2021:
What should the government/DALRRD do in the near term?
- Implement all the regulatory interventions that require less capital and provide consistent updates to social partners.
- Reprioritise the DALRRD budget in line with the master plan interventions. This will signal the government’s commitment to ensuring the plan’s success.
- Support state entities such as Transnet to improve the effectiveness at the ports.
- Work closely with the National Treasury to resolve the Land Bank’s financial challenges so that the bank can play an influential role as outlined in the master plan.
- Intensify efforts to open more export markets for South African agriculture.
- Release land in the government’s hands to new beneficiaries with long-term tradable land rights or title deeds.
- Root out corruption at various levels within the department to ensure the effectiveness and efficiency of staff.
What should the private sector do?
- Build trust amongst various farmer organizations and agribusiness to have a unanimous private sector voice that speaks to the government.
- Recognize the need for collaborative efforts in rebuilding South Africa and expanding the agriculture and agribusiness sector. This could be through a partnership with new entrant farmers in the development programmes of various commodity organizations.
- Showcase and expand partnership programmes that have proven successful in various commodities and parts of the country.
These are not exhaustive but we believe are interventions that could move the needle in terms of translating the ideas on paper in various plans into tangible projects that could contribute to the growth and job creation in South Africa’s agriculture.
In sum, South Africa’s agricultural sector faces numerous challenges, which are now well understood by both the government and various industry stakeholders. South Africa needs a plan of action, particularly on the four areas of interventions that were consistently outlined in various farmer and agribusiness engagements we had this past week.
Notably, these haven’t changed from aspects that bothered sector role-players a year ago, which means we haven’t moved the needle. As agriculture is one of the sectors that will help grow the economy, there needs to be increased attention to the reforms necessary to unlock inclusive growth, and consequently job creation.
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